Appliance Recycling Centers of America Reports Third Quarter Earnings

    Appliance Recycling Centers of America Reports Third Quarter Earnings

PR Newswire

MINNEAPOLIS, Nov. 4, 2013

MINNEAPOLIS, Nov. 4, 2013 /PRNewswire/ -- Appliance Recycling Centers of
America, Inc. (Nasdaq: ARCI), a leading provider of appliance retailing and
recycling services, today announced financial results for its third quarter
ended September 28, 2013. Revenues for the quarter were $33.5 million, up 17%
over last year due mainly to increased appliance replacement program activity
for energy efficiency programs. During the quarter, one client accelerated its
2014 appliance replacement program into 2013, adding $3.8 million to third
quarter revenues. Net earnings for the third quarter were $1.1 million, or
$0.20 per diluted share, compared with a net loss of $1.1 million, or $0.19
per diluted share, reported during the same period last year.

Improved third quarter earnings were mainly the result of the increased
appliance replacement program revenues generated in the Company's appliance
recycling business unit, improved performance in the ARCA Advanced Processing
(AAP) appliance recycling joint venture, and reduced retail store operating
expenses and advertising.

For the nine months ended September 28, 2013, total revenues increased 10% to
$96.2 million, compared with revenues of $87.7 million for the same period in
the prior year. Overall, the Company reported year-to-date net income of $2.1
million, or $0.36 per diluted share, compared with a net loss of $1.8 million,
or $0.32 per diluted share, in the nine-month period ended September 29, 2012.

Third Quarter Highlights

  oThe Company renegotiated its line of credit agreement with PNC Bank,
    lowering its interest rate.
  oThe Company announced a plan to relocate its recycling business-related
    customer service function from California to Minnesota by December 1,
    recording a $30,000 restructuring charge accordingly.
  oAfter the third quarter ended, the Company and AAP collectively received
    $0.5 million in cash related to the issuance and sale of carbon offsets in
    the California Cap-and-Trade Program, which will favorably impact the
    fourth quarter pre-tax earnings by the same amount.

"We're pleased with our third quarter results, especially considering the
significant operational and financial challenges we faced the past year,"
commented Edward R. (Jack) Cameron, president and chief executive officer of
ARCA, Inc. "At the same time, we remain cautious since our business relies
significantly on winning contracts, fluctuating market prices for materials
recovered in our appliance recycling efforts, and a highly competitive retail
appliance market."

Retail Appliance Sales

ApplianceSmart sales of $17.0 million for the third quarter declined $0.3
million, or 2%, compared with the same period of 2012. The decline was due
mainly to the effect of store closures. Same-store sales increased $0.8
million or 5%. The combination of a 100-basis-point improvement in gross
margin and lower operating expenses improved operating income by $0.8 million
compared with the third quarter of 2012.

Brad Bremer, president of ApplianceSmart, commented, "Competition from
national chains such as The Home Depot, Lowes and others remains strong. At
the same time, consumer purchasing behavior is affected by lingering
uncertainty about the economy and governmental policy." Bremer added, "Despite
these factors, I'm pleased we grew ApplianceSmart's profitability this quarter
through the same store sales increase, lower store operating costs and a
better product mix."

Recycling Revenues

Recycling revenues, which consist of appliance recycling fees and appliance
replacement revenues, increased $4.8 million, or 68%, to $11.8 million in the
third quarter of 2013. Appliance replacement revenues increased $5.2 million,
while appliance recycling fees declined $0.4 million. Sales of appliance
replacement units in the third quarter of 2013 approximately tripled from the
same period last year, due mainly to one utility's desire to accelerate
appliance installations into its 2013 program year.

Mark Eisenschenk, president of ARCA Recycling, Inc. and chief operating
officer of ARCA, said, "ApplianceSmart's manufacturer relationships and
product familiarity enable us to offer responsive, cost-effective solutions
for appliance replacement programs." He added, "It's noteworthy that appliance
replacement program revenues, which were significant to the third quarter's
revenue and earnings, are not predictable. However, we are confident in our
ability to competitively bid on new replacement programs and maintain current
programs as integral elements of our business strategy moving forward."

Byproduct Revenues

The Company's byproduct revenues, excluding AAP, remained flat at $1.4 million
compared with the third quarter of 2012. The Company's overall increase in
recycling volumes was offset by a 16% decline in scrap metal revenues per unit
compared to the third quarter of 2012.

Revenues from the AAP joint venture in Philadelphia, reported in byproduct
revenues, increased $0.6 million, or 20%, to $3.0 million, compared with $2.5
million in the third quarter of 2012. The improvement was due mainly to higher
scrap volumes. AAP's gross margin improved to 27% compared with 5% in the same
period of 2012 as a result of a reduction in the cost of appliance purchases
under contract and increased labor efficiencies. AAP's operating income for
the third quarter was $331,000 compared with an operating loss of $311,000
during the same period of 2012. The improvements in gross margin and operating
income were primarily the result of higher volumes and lower acquisition costs
per gross ton of recyclable appliances compared with the third quarter of
2012, partially offset by higher maintenance and depreciation expense related
to the material recovery systems.

Liquidity and Capital Resources

Cash and cash equivalents were $2.1 million as of September 28, 2013, compared
with $3.2 million as of December 29, 2012. As of September 28, 2013, the
Company had excess available borrowing capacity under its revolving line of
credit of $6.8 million compared with $2.5 million as of December 29, 2012. Net
working capital of $8.9 million increased $1.3 million as of September 28,
2013, compared with net working capital of $7.6 million as of December 29,
2012, due primarily to a lower outstanding balance under the Company's
revolving line of credit.

Conference Call Information

In conjunction with this release, Appliance Recycling Centers of America, Inc.
will host a conference call tomorrow, November 5, 2013, at 10:00 a.m. CST. To
participate in the conference call, please dial the following number ten
minutes prior to the scheduled time: 800-406-5162. A replay of the conference
call will be available on the Company's website,,
approximately 24-48 hours after the completion of the call.

About ARCA

ARCA's three business components are uniquely positioned in the industry to
work together to provide a full array of appliance-related services. ARCA
Advanced Processing, LLC employs advanced technology to refine traditional
appliance recycling techniques to achieve optimal revenue-generating and
environmental benefits. ARCA 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. ARCA's
regional centers process appliances at end of life to remove environmentally
damaging substances and produce material byproducts for recycling for
approximately 150 utilities in the U.S. and Canada. Eighteen company-owned
stores under the name ApplianceSmart, Inc.^® sell new appliances directly to
consumers and provide affordable ENERGY STAR^® options for energy efficiency
appliance replacement programs.

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.

(In Thousands)
                                             September 28,        December 29,

                                             2013                 2012
ASSETS                                       (unaudited)
Current assets:
Cash and cash equivalents                    $       2,131 $     
Accounts receivable, net of allowance of $10 10,796               6,256
and $8, respectively
Inventories, net of reserves of $149 and     15,249               17,274
$682, respectively
Income taxes receivable                      263                  522
Other current assets                         1,473                1,332
Total current assets                         29,912               28,558
Property and equipment, net                  11,686               12,248
Restricted cash                              500                  –
Other assets                                 976                  973
Deferred income taxes                        24                   25
Total assets (a)                             $      43,098  $    
Current liabilities:
Accounts payable                             $       7,277 $     
Accrued expenses                             5,328                4,310
Line of credit                               6,823                10,559
Current maturities of long-term obligations  1,217                955
Income taxes payable                         229                  –
Deferred income tax liabilities              146                  146
Total current liabilities                    21,020               20,927
Long-term obligations, less current          5,706                6,357
Deferred gain, net of current portion        -                    365
Deferred income tax liabilities              921                  921
Total liabilities (a)                        27,647               28,570
Commitments and contingencies                –                    –
Shareholders' equity:
Common Stock, no par value; 10,000 shares
authorized; issued and outstanding:5,571    20,773               20,577
shares and 5,556 shares, respectively
Accumulated deficit                          (6,563)              (8,649)
Accumulated other comprehensive loss         (386)                (290)
Total shareholders' equity                   13,824               11,638
Noncontrolling interest                      1,627                1,596
                                             15,451               13,234
Total liabilities and shareholders' equity   $      43,098  $    

    Assets of ARCA Advanced Processing, LLC (AAP), ARCA's consolidated
    variable interest entity (VIE), which can only be used to settle
    obligations of AAP were $9,856 and $10,045 as of September 28, 2013, and
(a) December 29, 2012, respectively. Liabilities of AAP for which creditors do
    not have recourse to the general credit of Appliance Recycling Centers of
    America, Inc. were $2,140 and $1,948 as of September 28, 2013, and
    December 29, 2012, respectively.

(In Thousands, Except Per Share Amounts)
                        Three Months Ended           Nine Months Ended
                        September 28, September 29,  September   September 29,
                        2013          2012                       2012
 Retail               $       $        $      $     
                        17,018        17,286         52,878      56,006
 Recycling            11,823        7,025          30,383      18,435
 Byproduct            4,697         4,417          12,974      13,274
Total revenues          33,538        28,728         96,235      87,715
Costs of revenues       24,445        21,634         70,737      64,740
Gross profit            9,093         7,094          25,498      22,975
Selling, general and    7,291         7,828          22,071      23,818
administrative expenses
Operating income (loss) 1,802         (734)          3,427       (843)
Other income (expense):
 Interest expense,    (320)         (299)          (925)       (832)
 Other income         7             (13)           (13)        (22)
(expense), net
Income (loss) before
income taxes and        1,489         (1,046)        2,489       (1,697)
noncontrolling interest
Provision for income    227           113            372         90
Net income (loss)       1,262         (1,159)        2,117       (1,787)
Net (income) loss
attributable to         (128)         77             (31)        (2)
noncontrolling interest
Net income (loss)       $       $        $      $      
attributable to         1,134        (1,082)         2,086     (1,789)
controlling interest
Income (loss) per
common share:
Basic                   $       $        $      $      
                          0.20       (0.19)         0.38     (0.32)
Diluted                 $       $        $      $      
                          0.20       (0.19)         0.36     (0.32)
Weighted average common
shares outstanding:
Basic                   5,564         5,556          5,559       5,549
Diluted                 5,777         5,556          5,723       5,549
Net income (loss)       $       $        $      $      
                        1,262        (1,159)         2,117     (1,787)
Other comprehensive
income (loss), net of
Effect of foreign
currency translation    40            120            (96)        109
Total other
comprehensive income    40            120            (96)        109
(loss), net of tax
Comprehensive income    1,302         (1,039)        2,021       (1,678)
Comprehensive loss
(income) attributable   (128)         77             (31)        (2)
to noncontrolling
Comprehensive income                  $        $      $      
(loss) attributable to  $1,174         (962)        1,990     (1,680)
controlling interest

SOURCE Appliance Recycling Centers of America, Inc.

Contact: Edward R. (Jack) Cameron, CEO, (952) 930-9000
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