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Appliance Recycling Centers of America Reports Fourth Quarter and Fiscal Year EarningsMINNEAPOLIS, March 30, 2015 /PRNewswire/ -- Appliance Recycling Centers of America, Inc. ( "ARCA" or the "Company") (Nasdaq: ARCI), a leading provider of appliance recycling and retailing services, today announced results for its financial reporting periods ended January 3, 2015. Key highlights are as follows:
ARCA's financial results shown in the attached table and in the Company's Form 10-K, which was filed with the Securities and Exchange Commission today, reflect adjustment in all applicable reporting periods for the previously communicated California sales tax accrual. Discussion regarding the Company's financial results follows: Full Year For the year, the Company reported profitable results on record sales. Total revenues in 2014 were $130.9 million, up 2.3% compared with 2013 revenue of $127.9 million. The Company's reported net income in 2014 was $0.8 million, or $0.13 per diluted share. This compares with net income in 2013 of $3.1 million, or $0.55 per diluted share, which included the impact of a deferred tax asset valuation allowance adjustment that added $2.2 million, or $0.37 per diluted share, to 2013 net income. Fourth Quarter Revenues for the fourth quarter of 2014 were $31.8 million, which is $0.8 million or 2.4% less than the same period in 2013 due mainly to the receipt of $0.7 million in carbon offsets in the fourth quarter of 2013; no carbon offsets were received in the fourth quarter of 2014. The fourth quarter of 2014 was also impacted by lower byproduct revenues due to a decline in scrap prices. For the quarter, the Company reported a loss before taxes and non-controlling interests of $0.9 million, compared with income of $0.5 million during the same period of the prior year. The net after-tax loss for the fourth quarter of 2014 was $0.6 million, or $0.10 per diluted share, compared with net after-tax income of $2.0 million, or $0.34 per diluted share, reported during the same period in the prior year. This variance was caused by the deferred tax asset valuation allowance adjustment mentioned above, timing of carbon offset income, scrap price erosion, and the impact of promotional retail pricing in our ApplianceSmart division. Retail Appliance Sales ApplianceSmart, the Company's retail division, posted sales of $16.2 million for the fourth quarter, an increase of $0.6 million, or 3.6%, compared with the same period of 2013. The increase was due mainly to an extra week in the fourth quarter of fiscal 2014 compared with fiscal 2013. ApplianceSmart reported an operating loss of $1.2 million for the fourth quarter of 2014, compared with an operating loss of $0.8 million in the same period of the prior year. This was due to aggressive pricing in 2014 especially for extended Black Friday promotions in November. Recycling Revenues Recycling revenues, which consist of appliance recycling fees and appliance replacement revenues generated through the Company's recycling division, ARCA Recycling, Inc., decreased $0.3 million, or 2.4%, to $11.2 million in the fourth quarter of 2014. Appliance replacement revenues decreased $0.6 million, while appliance recycling fees increased $0.3 million. Although sales of appliance replacement units in the fourth quarter of 2014 were significant, the Company did not experience the same volume as in the prior year when one utility accelerated appliance installations into its 2013 program year. Byproduct Revenues The Company's byproduct revenues, which also include revenue from AAP operations, decreased $1.0 million to $4.3 million, compared with the fourth quarter of 2013. The Company recognized $0.7 million in revenues from the sale of carbon offsets during the fourth quarter of 2013 with no corresponding carbon offset revenue in the fourth quarter of 2014. Overall recycling volumes increased during the fourth quarter of 2014 but revenues were impacted by declines in the selling price of scrap steel, non-ferrous metals and plastics when compared with the fourth quarter of 2013. Commentary Commenting on the Company's strategic and operational progress, Mark Eisenschenk, ARCA's President and Chief Executive Officer, said, "Since I've been in my role as CEO, our team has achieved significant strategic and operational accomplishments, some of which are as follows:
Commenting on the business, Mr. Eisenschenk continued, "The decline in scrap prices that affected ARCA in the fourth quarter of 2014 continued into 2015. The United States has experienced across-the-board declines in virtually all commodity prices, from grain to oil to lumber to metals. These declines are due in large part to the strength of the U.S. dollar, which makes it expensive for countries such as China and Turkey to purchase scrap metal from suppliers located in the United States. Consequently, foreign buyers have shifted their purchases from the U.S. to European countries and elsewhere. At the same time, U.S. steel mills have been finding it more advantageous to import high-quality billets of steel made from virgin iron ore than to purchase U.S.-generated scrap. As a result, in the near term, ARCA's scrap revenues per ton have declined further in 2015. It is unclear when scrap prices will recover and what the impact will be on our byproduct revenues. On another note, the carbon offset markets that had been frozen a large part of 2014 have freed up. We expect to receive $450,000 to $650,000 for carbon offsets by late April." Mr. Eisenschenk concluded by saying, "We're continuing to implement initiatives set out in our working strategic plan. Important activities include, among other things, conducting a national search for a high-level appliance replacement and recycling sales leader; that search is underway. Also, and this is important, I believe ARCA will be a beneficiary of Section 111(d) of the Clean Air Act, which mandates reductions in greenhouse gas emissions on a national basis . ARCA's business model includes eliminating energy-guzzling refrigerators and other inefficient appliances from the grid; this is specifically addressed by Building Block 4 of Section 111(d) of the Act. Effects of this mandate could positively and substantially transform our business. We're determined to capitalize on this significant opportunity." About ARCA ARCA's 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 twelve regional centers process appliances at end of life to remove environmentally damaging substances and produce material byproducts for recycling for utilities in the U.S. and Canada. Eighteen company-owned stores under the name ApplianceSmart 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.
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