Exhibit
99.1
|
|
|
Appliance Recycling Centers of America, Inc.
7400 Excelsior Boulevard, Minneapolis MN 55426 (952) 930-9000
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FOR
IMMEDIATE RELEASE
Appliance Recycling Centers of America Reports Profitable Second
Quarter
Operating Results
Minneapolis,
MN—August 12, 2010—Appliance Recycling Centers of America, Inc.
(NASDAQ: ARCI) today reported operating results for the second quarter ended July 3,
2010.
Highlights
of the second quarter included:
· Reported a profitable quarter with net income
attributable to controlling interest of $0.7 million compared to a net loss of
$0.4 million in the second quarter of 2009.
· Generated operating income of $1.1 million
compared to an operating loss of $0.1 million in the second quarter of 2009.
· Grew revenues from appliance recycling fees
by 47.9% over the second quarter of 2009.
· Increased overall revenues for the second
quarter by 11.1% over the second quarter of 2009.
· Signed four new multi-year recycling
contracts servicing utilities in New York, Minnesota and Texas.
Second
Quarter Financial Overview
Total
revenues for the second quarter of 2010 increased 11.1% to $28.2 million from
$25.4 million in the second quarter of 2009. Comparable store revenues from
ApplianceSmart Factory Outlets operating during the entire second quarters of
2010 and 2009 decreased 2.3%, and total retail revenues decreased 4.0% to $18.6
million from $19.3 million during the second quarter of 2009. The decrease in
comparable store revenues was due primarily to softer sales in Ohio. The
decline in total retail revenues was primarily the result of closing two
underperforming factory outlet stores in August 2009 combined with lower
comparable store revenues. Recycling revenues, which include appliance
recycling fees and low-income appliance replacement program revenues, increased
17.7% to $6.3 million in the second quarter of 2010 compared to revenues of
$5.4 million in the second quarter of 2009. Appliance recycling fees increased
47.9% to $5.3 million for the second quarter of 2010
- more -
compared
to $3.6 million in the second quarter of 2009 due primarily to the new
recycling contracts added during the past twelve months. Replacement program
revenues decreased $0.8 million, primarily as the result of lower volumes for a
California utility customer’s replacement program. Even though the California
utility sponsoring the replacement program reduced its marketing outreach to
potential participants in the second quarter of 2010, resulting in an overall
decrease in customer enrollment and corresponding revenues, the program
generated $1.0 million in revenues for the Company in the second quarter of
2010. Byproduct revenues increased 382.5% to $3.3 million in the second quarter
of 2010 compared to revenues of $0.7 million in the second quarter of 2009. The
increase in byproduct revenues was primarily the result of higher scrap metal
prices compared to the second quarter of 2009 and revenues from the Company’s
joint venture, ARCA Advanced Processing, LLC (AAP). AAP generated $1.9 million of revenues during
the second quarter of 2010.
Overall
gross profit as a percentage of total revenues increased to 30.7% for the
second quarter of 2010 compared to 29.9% for the second quarter of 2009. The
increase was due to several factors, including, higher recycling revenues from
new contracts, the closure of two underperforming factory outlet stores in August 2009,
better pricing from manufacturers and improved operational efficiencies. Gross
profit for the retail segment was 28.9% in the second quarter of 2010 compared
to 28.5% in the same quarter of 2009. The year-over-year increase was related
primarily to the closure of two underperforming factory outlet stores in August 2009,
better pricing from manufacturers and operational efficiencies. Gross profit
for the recycling segment increased to 34.5% for the second quarter of 2010
compared to 34.3% for the second quarter 2009, primarily as a result of
improved operational efficiencies and the economic model related to some of the
new recycling contracts. The second
quarter 2010 improvement in the recycling segment gross profit was partially
offset by start-up costs related to AAP.
Selling
expenses decreased $0.3 million to $5.1 million or 18.2% of total revenues in
the second quarter of 2010 compared to $5.4 million or 21.2% of total revenues
for the second quarter of 2009. The decrease in selling expenses was due
primarily to lower retail store operating costs as a result of closing two underperforming
factory outlet stores in August 2009 and streamlining the Company’s retail
management structure. General and administrative expenses increased $0.1
million to $2.5 million or 8.8% of total revenues in the second quarter of 2010
compared to $2.4 million or 9.3% of total revenues for the second quarter of
2009. The increase was primarily related
to AAP.
- more -
ARCA
reported second quarter 2010 operating income of $1.1 million compared to an
operating loss of $0.1 million during the second quarter of 2009. The Company
reported net income attributable to controlling interest of $0.7 million or
$0.13 per diluted share for the second quarter of 2010 compared to a net loss
attributable to controlling interest of $0.4 million or $0.09 per diluted share
for the second quarter of 2009.
Year-to-Date
Financial Overview
The
year-to-date highlights are as follows:
· Achieved significant improvement in net
income attributable to controlling interest, improving net income by $3.2
million from a loss of $2.4 million for the six months ended July 4, 2009
to net income of $0.8 million for the six months ended July 3, 2010.
· Awarded eight multi-year contracts in fiscal
2010 to provide refrigerator and freezer recycling services for the following
utilities and their customers:
1. Progress Energy to provide
services in North and South Carolina beginning in April 2010 and running
through 2014.
2. National Grid to support
Long Island Power Authority’s program in New York from March 2010 through December 2013.
3. Southern Maryland Electrical
Cooperative to provide services beginning in January 2010 and continuing
through December 2011.
4. Puget Sound Energy in
Washington beginning early in the second quarter of 2010 and running through December 2011.
5. CPS Energy in Texas to begin
providing services in the third quarter of 2010 and running through May 2013.
6. Central Hudson Gas &
Electric in New York from April 2010 through March 2012.
7. Xcel Energy in Minnesota,
Colorado and New Mexico through December 2010.
8. Great River Energy in
Minnesota for a summer program from April through September 2010.
Total
revenues for the six months ended July 3, 2010 increased 7.6% to $55.5
million compared to $51.5 million for the same period of 2009. Comparable store
revenues from ApplianceSmart Factory Outlets operating during the same
year-to-date periods of 2010 and 2009 increased 2.0% and total retail revenues
decreased 1.3% to $39.8 million from $40.3 million during the same period of
2009.
- more -
The
increase in comparable store revenues was due primarily to stronger sales in
the Company’s Minnesota, Texas and Georgia markets. The decline in total retail
revenues as was primarily the result of closing two underperforming factory
outlet stores in August 2009. Recycling revenues for the six months ended July 3,
2010 increased 6.8% to $10.6 million compared to revenues of $9.9 million in
the same period of 2009. Appliance recycling fees increased 33.7% to $8.5
million for the six months ended July 3, 2010 compared to $6.4 million in
the same period of 2009, due primarily to the new recycling contracts added
during the past twelve months.
Replacement program revenues decreased $1.5 million, primarily as the
result of lower volumes for a California utility customer’s replacement
program. Even though the California utility sponsoring the replacement program
reduced its marketing outreach to potential participants in 2010, resulting in
an overall decrease in customer enrollment and corresponding revenues, the
program generated $2.1 million in revenues for the Company for the six months
ended July 3, 2010. Byproduct revenues increased 280.5% to $5.1 million
for the six months ended July 3, 2010 compared to revenues of $1.3 million
in the same period of 2009. The increase in byproduct revenues was primarily
the result of higher scrap metal prices and revenues from AAP compared to the
same period of 2009. Since the inception of AAP on February 8, 2010, AAP
has generated $2.6 million of revenues.
Overall
gross profit as a percentage of total revenues increased to 30.1% for the six
months ended July 3, 2010 compared to 27.0% for the same period of 2009.
The increase was due to several factors, including, stronger sales volumes in
both segments, better pricing from manufacturers and improved operational
efficiencies. Gross profit for the retail segment was 28.5% for the six months
ended July 3, 2010 compared to 26.1% in the same period of 2009. The
year-over-year increase was related primarily to higher sales volumes, the
closure of two underperforming factory outlet stores and better pricing from
manufacturers. Gross profit for the recycling segment increased to 34.5% for
the six months ended July 3, 2010 compared to 30.4% to the same period of
2009, primarily as a result of improved operational efficiencies and the
economic model related to some of the new recycling contracts. The year-to-date improvement in the recycling
segment gross profit was partially offset by start-up costs related to AAP.
Selling
expenses decreased $0.7 million to $10.3 million or 18.6% of total revenues for
the six months ended July 3, 2010 compared to $11.0 million or 21.3% of
total revenues for the same period of 2009. The decrease in selling expenses
was due primarily to lower retail store operating costs as a result of
- more -
closing
two underperforming factory outlet stores in August 2009 and streamlining
the Company’s retail management structure.
ARCA
reported operating income of $1.5 million for the six months ended July 3,
2010 compared to an operating loss of $1.8 million during the same period of
2009. The Company reported net income attributable to controlling interest of
$0.8 million or $0.16 per diluted share for the six months ended July 3,
2010 compared to a net loss attributable to controlling interest of $2.4
million or $0.52 per diluted share for the same period of 2009.
Edward
R. (Jack) Cameron, President and Chief Executive Officer, commented “We are
very pleased with the significant turnaround in our 2010 results to date
compared to 2009. We are continuing to focus on growing our recycling business
through new utility contracts and our joint venture business, ARCA Advanced
Processing, LLC, which we expect to become profitable in the second half of
2010. In both operating segments, we made significant strides in improving our
gross margins during the first two quarters of 2010. Additionally, we are continuing our efforts
to review and revise our retail advertising and branding message for the
ApplianceSmart business and expect to roll out some new programs during the
balance of 2010.”
About ARCA
ARCA
(www.ARCAInc.com), one of the nation’s largest recyclers of major household
appliances for the energy conservation programs of electric utilities,
currently provides services for 150 utility programs in the U.S. and Canada.
Toxic chemicals and environmentally harmful materials such as ozone-depleting
refrigerants, PCBs, mercury and oil are carefully recovered in the
decommissioning process for destruction or disposal, preventing them from
contaminating soil, air and water resources. The Company is also the exclusive
North American distributor for UNTHA Recycling Technology (URT), one of the
world’s leading manufacturers of technologically advanced refrigerator
recycling systems and recycling facilities for electrical household appliances
and electronic scrap. Through its ApplianceSmart operation
(www.appliancesmart.com), ARCA also is one of the nation’s leading retailers of
special-buy household appliances, primarily those manufactured by General
Electric, Electrolux and Whirlpool. These special-buy appliances, which include
close-outs, factory overruns and discontinued models, typically are not
integrated into the manufacturer’s normal distribution channel. ApplianceSmart
sells these new appliances at a discount to full retail, offers a 100%
money-back guarantee and provides warranties on parts and labor. As of August 2010,
ApplianceSmart was
- more -
operating
19 factory outlets: six in the Minneapolis/St. Paul market; one in the
Rochester, Minn., market; four in the Columbus, Ohio, market; six in the
Atlanta market; and two in San Antonio, Texas.
This
press release contains statements that are forward-looking statements as
defined within the Private Securities Litigation Reform Act of 1995, including
statements regarding ARCA’s future success. These forward-looking statements
are subject to risks and uncertainties that could cause actual results to
differ materially from the statements made, including the risks associated with
general economic conditions, competition in the retail and recycling industries
and regulatory risks. Other factors that could cause operating and financial
results to differ are described in ARCA’s periodic reports filed with the
Securities and Exchange Commission. Other risks may be detailed from time to
time in reports to be filed with the SEC.
FOR MORE INFORMATION, CONTACT:
Edward R. (Jack) Cameron, CEO, or
Peter Hausback, EVP and CFO
(952) 930-9000
- more -
APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
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Three Months Ended
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Six Months Ended
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July 3,
2010
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July 4,
2009
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July 3,
2010
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July 4,
2009
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Revenues:
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Retail
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$
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18,552
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$
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19,327
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$
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39,737
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$
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40,267
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Recycling
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6,324
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5,374
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10,615
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9,936
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Byproduct
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3,334
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691
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5,125
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1,347
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|
|
Total revenues
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28,210
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25,392
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55,477
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|
51,550
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|
|
|
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|
|
|
|
|
|
|
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Costs of revenues
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19,542
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|
17,807
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|
38,773
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|
37,636
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|
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Gross profit
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|
8,668
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|
7,585
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16,704
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13,914
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|
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Selling, general and administrative expenses
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7,605
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7,729
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15,247
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15,740
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Operating income (loss)
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|
1,063
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|
(144
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)
|
1,457
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|
(1,826
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)
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|
|
|
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|
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Other income (expense):
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|
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|
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Interest expense, net
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|
(231
|
)
|
(256
|
)
|
(497
|
)
|
(575
|
)
|
|
Other expenses, net
|
|
(36
|
)
|
(95
|
)
|
(10
|
)
|
(71
|
)
|
|
Income (loss) before income taxes and
noncontrolling interest
|
|
796
|
|
(495
|
)
|
950
|
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(2,472
|
)
|
|
Provision for (benefit of) income taxes
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|
155
|
|
(84
|
)
|
229
|
|
(99
|
)
|
|
Net income (loss)
|
|
641
|
|
(411
|
)
|
721
|
|
(2,373
|
)
|
|
Plus: net loss attributable to noncontrolling
interest
|
|
78
|
|
—
|
|
100
|
|
—
|
|
|
Net income (loss) attributable to controlling
interest
|
|
$
|
719
|
|
$
|
(411
|
)
|
$
|
821
|
|
$
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(2,373
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)
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|
|
|
|
|
|
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|
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Income (loss) per share:
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|
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|
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|
|
|
|
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Basic
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|
$
|
0.13
|
|
$
|
(0.09
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)
|
$
|
0.16
|
|
$
|
(0.52
|
)
|
|
Diluted
|
|
$
|
0.13
|
|
$
|
(0.09
|
)
|
$
|
0.16
|
|
$
|
(0.52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
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Basic
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|
5,493
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|
4,578
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|
5,040
|
|
4,578
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|
|
Diluted
|
|
5,718
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|
4,578
|
|
5,246
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|
4,578
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APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
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July 3,
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January 2,
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2010
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2010
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(unaudited)
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Assets
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Current assets:
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Cash and cash equivalents
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$
|
3,156
|
|
$
|
2,799
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|
|
Accounts receivable, net of allowance of $40 and
$41, respectively
|
|
5,117
|
|
4,252
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|
|
Inventories, net of reserves of $379 and $519,
respectively
|
|
14,293
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|
16,785
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|
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Other current assets
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|
1,156
|
|
532
|
|
|
Deferred income taxes
|
|
677
|
|
677
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|
|
Total current assets
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|
24,399
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|
25,045
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|
|
Property and equipment, net
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8,603
|
|
4,139
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Restricted cash
|
|
701
|
|
700
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|
|
Other assets
|
|
1,696
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|
1,566
|
|
|
Total assets (a)
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|
$
|
35,399
|
|
$
|
31,450
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|
|
|
|
|
|
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Liabilities and Shareholders’
Equity
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
4,152
|
|
$
|
3,364
|
|
|
Checks issued in excess of cash in bank
|
|
—
|
|
410
|
|
|
Accrued expenses
|
|
5,533
|
|
4,401
|
|
|
Line of credit
|
|
9,808
|
|
12,419
|
|
|
Current maturities of long-term obligations
|
|
795
|
|
544
|
|
|
Income taxes payable
|
|
119
|
|
188
|
|
|
Total current liabilities
|
|
20,407
|
|
21,326
|
|
|
|
|
|
|
|
|
|
Long-term obligations, less current maturities
|
|
2,469
|
|
1,963
|
|
|
Deferred gain, net of current portion
|
|
1,583
|
|
1,827
|
|
|
Deferred income tax liabilities
|
|
691
|
|
691
|
|
|
Total liabilities (a)
|
|
25,150
|
|
25,807
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
Common stock, no par value; 10,000 shares
authorized; issued and outstanding: 5,493 shares and 4,578 shares,
respectively
|
|
19,192
|
|
17,278
|
|
|
Accumulated deficit
|
|
(10,446
|
)
|
(11,267
|
)
|
|
Accumulated other comprehensive loss
|
|
(397
|
)
|
(368
|
)
|
|
Total shareholders’ equity
|
|
8,349
|
|
5,643
|
|
|
Noncontrolling interest
|
|
1,900
|
|
—
|
|
|
Total equity
|
|
10,249
|
|
5,643
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
35,399
|
|
$
|
31,450
|
|
(a) Assets and liabilities of the consolidated variable interest
entity were $5,756 and $1,656, respectively, as of July 3, 2010.
###