Exhibit 99.1
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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 Third Quarter
Operating Results
Minneapolis,
MN—November 9, 2010—Appliance Recycling Centers of America, Inc.
(NASDAQ: ARCI) today reported operating results for the third quarter ended October 2,
2010.
Highlights
of the third quarter included:
· A 113% increase in net income attributable to
controlling interest to $0.9 million compared to $0.4 million in the third
quarter of 2009.
· A 54% increase in operating income to $1.3
million compared to $0.9 million in the third quarter of 2009.
· Signing of three new multi-year
recycling contracts servicing utilities in Missouri, Indiana and
Washington along with a new appliance replacement program in California.
Third
Quarter Financial Overview
Total
revenues for the third quarter of 2010 increased 5.1% to $27.3 million from
$26.0 million in the third quarter of 2009. Comparable store revenues from
ApplianceSmart Factory Outlets operating during the entire third quarters of
2010 and 2009 decreased 6.8%, and total retail revenues decreased 6.6% to $16.8
million from $18.0 million during the third quarter of 2009. The decrease in
comparable store revenues and total retail revenues was due primarily to slower
sales in the Minnesota and Ohio markets. Recycling revenues, which are
comprised of appliance recycling fees and low-income appliance replacement
program revenues for utility customers, decreased 6.6% to $6.5 million in the
third quarter of 2010 compared to revenues of $7.0 million in the third quarter
of 2009. Appliance recycling fees increased 13.4% to $6.0 million for the third
quarter of 2010 compared to $5.3 million in the third quarter of 2009, due
primarily to the new recycling contracts added during the past twelve months.
Replacement program revenues decreased $1.2 million, primarily as the result of
lower volumes, which were expected, for a California utility customer’s
replacement program. Byproduct
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revenues
increased 287.9% to $4.0 million in the third quarter of 2010 compared to
revenues of $1.0 million in the third quarter of 2009. The increase in
byproduct revenues was primarily the result of higher scrap metal prices
compared to the third quarter of 2009 and revenues from the Company’s joint
venture, ARCA Advanced Processing, LLC (AAP). AAP generated $2.3 million of
revenues during the third quarter of 2010.
Overall
gross profit as a percentage of total revenues remained flat at 32.4% for the
third quarter of 2010 compared to 32.7% for the third quarter of 2009. The
overall gross profit was partially offset by higher operating costs related to
the ramp-up of production at AAP. We
expect the gross profit at AAP to improve over the next few quarters. Excluding
AAP, overall gross profit as a percentage of total revenues increased to 34.7%
in the third quarter of 2010 compared to 32.7% in the third quarter of 2009.
The increase, excluding AAP, was due to several factors, including higher
recycling revenues from new contracts, strong management of operating costs,
higher scrap metal prices, 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 29.7% in the
third quarter of 2010 compared to 28.4% in the third 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 decreased to 37.0% for the third quarter of 2010 compared to 42.5% for
the third quarter 2009, primarily related to the impact of AAP. Excluding AAP,
gross profit for the recycling segment increased to 45.6% in the third quarter
of 2010 compared to 42.5% in the third quarter of 2009. The increase is attributed
to a combination of factors, including adding new recycling contracts, managing
operating costs, operational efficiencies and higher scrap metal prices.
Selling
expenses decreased $0.3 million to $4.8 million or 17.5% of total revenues in
the third quarter of 2010 compared to $5.1 million or 19.6% of total revenues
for the third 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 $0.2 million to $2.8 million or 10.1% of total revenues in the third
quarter of 2010 compared to $2.6 million or 9.8% of total revenues for the
third quarter of 2009. The increase was related primarily to the addition of
AAP’s administrative infrastructure as it ramped up production.
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ARCA
reported third quarter 2010 operating income of $1.3 million compared to $0.9
million in the third quarter of 2009. The Company reported net income
attributable to controlling interest of $0.9 million or $0.16 per diluted share
for the third quarter of 2010 compared to net income attributable to
controlling interest of $0.4 million or $0.09 per diluted share for the third
quarter of 2009. Net income attributable to controlling interest included
$37,500 of income from AAP. This
represents 50% of the net income from AAP for the third quarter of 2010. AAP reported net income of $75,000 for the
third quarter of 2010.
Year-to-Date
Financial Overview
The
Company’s year-to-date highlights are as follows:
· Achieved significant improvement in net
income attributable to controlling interest, improving net income by $3.7
million from a loss of $2.0 million for the nine months ended October 3,
2009 to net income of $1.7 million for the nine months ended October 2,
2010.
· Signed twelve contracts in fiscal 2010 to
provide refrigerator and freezer recycling services for the following utilities
and their customers:
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1.
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Progress
Energy to provide services in North and South Carolina beginning in
April 2010 and running through 2014.
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2.
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National
Grid to support Long Island Power Authority’s program in New York from
March 2010 through December 2013.
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3.
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Southern
Maryland Electrical Cooperative to provide services beginning in
January 2010 and continuing through December 2011.
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4.
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Puget
Sound Energy in Washington beginning early in the second quarter of 2010 and
running through December 2011.
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5.
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CPS
Energy in Texas to begin providing services in the third quarter of 2010 and
running through May 2013.
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6.
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Central
Hudson Gas & Electric in New York from April 2010 through
March 2012.
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7.
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Xcel
Energy in Minnesota, Colorado and New Mexico through December 2010.
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8.
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Great
River Energy in Minnesota for a summer program from April through
September 2010.
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9.
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Ameren Missouri (formerly
Ameren UE) from August 2010 through September 2011.
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10.
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Northern Indiana Public
Service from August 2010 through December 2013.
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11.
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Southern California Gas
Company for a clothes washer low-income household replacement program.
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12.
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Tanner Electric
Cooperative in Washington from July 2010 through June 2013.
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Total
revenues for the nine months ended October 2, 2010 increased 6.8% to $82.8
million compared to $77.6 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 decreased 1.9%, and total retail revenues
decreased 3.0% to $56.5 million from $58.2 million during the same period of
2009. The decrease in comparable store revenues was due primarily to slower
sales in the Company’s Minnesota, Ohio and Georgia markets. The decline in
total retail revenues was primarily the result of closing two underperforming
factory outlet stores in August 2009 and the slower sales mentioned above.
Recycling revenues for the nine months ended October 2, 2010 increased
1.3% to $17.2 million compared to revenues of $16.9 million in the same period
of 2009. Appliance recycling fees increased 24.6% to $14.5 million for the nine
months ended October 2, 2010 compared to $11.6 million in the same period
of 2009, due primarily to the new recycling contracts added during the past
twelve months. Replacement program revenues decreased $2.6 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 $2.7 million in revenues for the Company for the nine months
ended October 2, 2010. In October 2010, the Company re-signed a
three-year contract with its major appliance replacement customer and expects
to start building revenues from that program in 2011.
Byproduct
revenues increased 283.7% to $9.1 million for the nine months ended October 2,
2010 compared to revenues of $2.4 million in the same period of 2009. The
increase in byproduct revenues was primarily the result of higher scrap metal
prices along with an increase in volume from new customers over the past year.
The Company also added revenues from AAP, which, since its inception on February 8,
2010 has generated $4.8 million of revenues.
Overall
gross profit as a percentage of total revenues increased to 30.9%, or 32.7%
excluding AAP, for the nine months ended October 2, 2010 compared to 28.9%
for the same period of 2009. The increase, excluding AAP, was due to several
factors, including stronger byproduct revenues, better pricing from
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manufacturers
and improved operational efficiencies. Gross profit for the retail segment was
28.8% for the nine months ended October 2, 2010 compared to 26.8% in the
same period of 2009. The year-over-year increase was related primarily to the
closure of two underperforming factory outlet stores and better pricing from
manufacturers. Gross profit for the recycling segment remained flat at 35.5%
for the nine months ended October 2, 2010 compared to 35.4% in the same
period of 2009. The year-to-date recycling segment gross profit was partially
offset by higher operating costs related to AAP as it has ramped up production
since starting business in the first quarter. Excluding AAP, the year-to-date
recycling segment gross profit was 43.4%. The increase in recycling gross
profit, excluding AAP, was primarily the result of improved operational
efficiencies and the economic model related to some of the new recycling
contracts.
Selling
expenses decreased $0.9 million to $15.1 million or 18.2% of total revenues for
the nine months ended October 2, 2010 compared to $16.0 million or 20.7%
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 closing
two underperforming factory outlet stores in August 2009 and streamlining
the Company’s retail management structure. General and administrative expenses
increased $0.4 million to $7.7 million or 9.3% of total revenues for the nine
months ended October 2, 2010 compared to $7.3 million or 9.5% of total
revenues for the same period of 2009. The increase was related primarily to the
addition of AAP.
ARCA
reported operating income of $2.8 million for the nine months ended October 2,
2010 compared to an operating loss of $1.0 million during the same period of
2009. The Company reported net income attributable to controlling interest of
$1.7 million or $0.32 per diluted share for the nine months ended October 2,
2010 compared to a net loss attributable to controlling interest of $2.0
million or $0.43 per diluted share for the same period of 2009. The net income
attributable to controlling interest included a $62,500 loss, or 50% of AAP’s
net loss for the nine months ended October 2, 2010.
Edward
R. (Jack) Cameron, President and Chief Executive Officer, commented, “We are
very pleased with the continued improvement in our operating results for 2010
compared to 2009. We will continue to focus on growing our recycling business
and our joint venture business, ARCA Advanced Processing, LLC. As for the
retail segment, while we are happy with the improvement we made in gross
margins, we are continuing to concentrate on rebuilding our sales at our
ApplianceSmart stores.
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We
are focusing on revisions in our advertising and branding messages for
ApplianceSmart and expect the roll out some new marketing 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 November 2010,
ApplianceSmart was 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.
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FOR
MORE INFORMATION, CONTACT:
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Edward
R. (Jack) Cameron, CEO, or
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Peter
Hausback, EVP and CFO
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(952)
930-9000
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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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Nine Months Ended
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October 2,
2010
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October 3,
2009
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October 2,
2010
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October 3,
2009
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Revenues:
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Retail
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$
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16,771
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$
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17,962
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$
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56,508
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$
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58,229
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Recycling
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6,544
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7,006
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17,159
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16,942
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Byproduct
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4,023
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1,037
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9,148
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2,384
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Total revenues
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27,338
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26,005
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82,815
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77,555
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Costs of revenues
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18,477
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17,512
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57,250
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55,148
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Gross profit
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8,861
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8,493
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25,565
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22,407
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Selling, general and administrative expenses
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7,543
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7,638
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22,790
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23,378
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Operating income (loss)
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1,318
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855
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2,775
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(971
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)
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Other income (expense):
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Interest expense, net
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(245
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)
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(325
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)
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(742
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)
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(900
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)
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Other income (expense), net
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15
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36
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5
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(35
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)
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Income (loss) before income taxes and
noncontrolling interest
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1,088
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566
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2,038
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(1,906
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)
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Provision for income taxes
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166
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150
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395
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51
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Net income (loss)
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922
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416
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1,643
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(1,957
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)
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Net (income) loss attributable to noncontrolling
interest
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(37
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)
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—
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63
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—
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Net income (loss) attributable to controlling
interest
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$
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885
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$
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416
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$
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1,706
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$
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(1,957
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)
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Income (loss) per common share:
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Basic
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$
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0.16
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$
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0.09
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$
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0.33
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$
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(0.43
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)
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Diluted
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$
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0.16
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$
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0.09
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$
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0.32
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$
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(0.43
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)
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Weighted average number of common shares
outstanding:
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Basic
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5,493
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4,578
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5,191
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4,578
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Diluted
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5,686
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4,578
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5,400
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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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October 2,
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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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$
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3,945
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$
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2,799
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Accounts receivable, net of allowance of $41 at
each period
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6,048
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4,252
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Inventories, net of reserves of $343 and $519,
respectively
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16,573
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16,785
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Other current assets
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1,217
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532
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Deferred income taxes
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677
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677
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Total current assets
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28,460
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25,045
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Property and equipment, net
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9,772
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4,139
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Restricted cash
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701
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700
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Other assets
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1,819
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1,566
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Total assets (a)
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$
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40,752
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$
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31,450
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Liabilities and Shareholders’
Equity
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Current liabilities:
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Accounts payable
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$
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5,495
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$
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3,364
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Checks issued in excess of cash in bank
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—
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410
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Accrued expenses
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5,908
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4,401
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Line of credit
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12,692
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12,419
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Current maturities of long-term obligations
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586
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544
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Income taxes payable
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94
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188
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Total current liabilities
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24,775
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21,326
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Long-term obligations, less current maturities
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2,444
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|
1,963
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Deferred gain, net of current portion
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1,461
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|
1,827
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Deferred income tax liabilities
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|
691
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|
691
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Total liabilities (a)
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29,371
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|
25,807
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Commitments and contingencies
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|
—
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—
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Shareholders’ equity:
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|
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Common stock, no par value; 10,000 shares authorized;
issued and outstanding: 5,493 shares and 4,578 shares, respectively
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19,335
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|
17,278
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Accumulated deficit
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(9,561
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)
|
(11,267
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)
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Accumulated other comprehensive loss
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(330
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)
|
(368
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)
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Total shareholders’ equity
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9,444
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5,643
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Noncontrolling interest
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|
1,937
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|
—
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|
Total equity
|
|
11,381
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|
5,643
|
|
|
Total liabilities and shareholders’ equity
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|
$
|
40,752
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|
$
|
31,450
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|
(a) Assets and liabilities of the consolidated
variable interest entity were $7,419 and $1,850, respectively, as of October 2,
2010.
###