Appliance Recycling Centers of America I (ARCI, Financial) filed Annual Report for the period ended 2011-12-31.
Appliance Recyc has a market cap of $25.4 million; its shares were traded at around $4.77 with a P/E ratio of 6 and P/S ratio of 0.2.
Recycling Revenues. Our recycling revenues of $33.1 million for 2011 increased $10.2 million or 44.7% from $22.9 million in 2010. Recycling revenues are comprised of two components: (1) appliance recycling revenues generated by collecting and recycling appliances for utilities and other sponsors of energy efficiency programs and (2) replacement program revenues generated by recycling and replacing old appliances with new energy efficient models for programs sponsored by utility companies. Appliance recycling revenues decreased 4.4% to $18.6 million in 2011 compared to $19.4 million in 2010, due primarily to lower average per-unit recycling fees. As a result of intense competition in the marketplace, price has become a critical factor in winning and renewing recycling contracts. In 2011, recycling volumes were up 7.9% but the average per-unit recycling fees were down 11.4% compared to 2010. Replacement program revenues increased 320.6% to $14.5 million in 2011 compared to $3.5 million in 2010. The increase was primarily the result of a summer refrigerator replacement initiative from a California utility program that resulted in replacing over 10,000 refrigerators, along with the impact of a new Washington utility refrigerator replacement program. The Company does not expect the California utility summer initiative refrigerator replacement volumes again in 2012. We are aggressively pursuing new appliance recycling and replacement programs throughout North America but cannot predict if we will be successful in signing new contracts or renewing existing contracts.
Byproduct Revenues. Our byproduct revenues of $20.8 million for 2011 increased $7.1 million or 51.5% from $13.7 million in 2010. The increase in byproduct revenues was primarily the result of recycling more units, carbon offset revenues and higher revenues generated at AAP. In 2011, we recognized $1.2 million in carbon offset revenues, of which $0.4 million was generated at AAP, which did not occur in 2010. Byproduct revenues include all of the revenues generated by AAP. Revenues from AAP of $11.3 million increased 49.9% or $3.7 million compared to revenues of $7.6 million for 2010. The remainder of the increase was related to the combination of higher per-unit byproduct material prices and more byproduct materials recaptured from recycling more units in 2011 compared to 2010. In 2011, the average per-unit price of recaptured byproduct materials at ARCA increased to $35.10 per unit compared to $29.13 per unit in 2010. We cannot predict byproduct material prices, but do not expect significant fluctuations in 2012 as compared to 2011 levels.
Gross Profit. Our gross profit of $36.7 million in 2011 increased $3.8 million or 11.7% compared to $32.9 million in 2010. Gross profit as a percentage of total revenues decreased to 29.0% in 2011 compared to 30.4% in 2010. Gross profit for the retail segment decreased to 27.2% in 2011 compared to 28.6% in 2010. The year-over-year decrease was due primarily to a shift in sales mix and to a lesser extent price compression and higher product costs. In 2011, our product sales consisted of 58% new (in-the-box) product compared to 54% new (in-the-box) product in 2010. New (in-the-box) product typically has lower profit margins than special buy (out-of-the-box) product. Our recycling segment gross profit decreased to 31.6% in 2011 compared to 34.2% in 2010, driven primarily by lower average per-unit recycling fees and a higher mix of replacement revenues that typically generate lower profit margins.
Selling, General and Administrative Expenses. Our selling, general and administrative (SG&A) expenses of $29.5 million for 2011 decreased $0.3 million or 1.1% compared to $29.8 million in 2010. Our SG&A expenses as a percentage of total revenues decreased to 23.3% in 2011 compared to 27.6% in 2010. Selling expenses decreased $0.8 million to $18.6 million in 2011 compared to $19.4 million in 2010. The decrease in selling expenses was due primarily to reducing advertising expense to promote our ApplianceSmart stores. General and administrative expenses increased $0.5 million to $10.9 million in 2011 compared to $10.4 million in 2010. The increase in general and administrative expenses was due primarily to higher operating expenses at AAP along with the impact of restoring employee compensation reductions that were still in place during 2010. We do not expect a significant change in our SG&A expenses in 2012 as a percentage of total revenues compared to 2011.
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Appliance Recyc has a market cap of $25.4 million; its shares were traded at around $4.77 with a P/E ratio of 6 and P/S ratio of 0.2.
Highlight of Business Operations:
Our total revenues of $126.7 million for 2011 increased $18.5 million or 17.1% from $108.2 million in 2010. Our operating income of $7.2 million for 2011 increased $4.1 million or 136.0% compared to $3.1 million in 2010. The increases in revenues and operating income were driven primarily by three factors that did not occur in 2010: (1) a summer refrigerator replacement initiative from a California utility program that resulted in replacing over 10,000 refrigerators, (2) recognition of $1.2 million in carbon offset revenues that drop directly to the bottom line and (3) generating revenue and operating income growth of approximately $3.8 million and $0.9 million, respectively, at AAP. We do not expect the summer refrigerator replacement initiative from the California utility program to reoccur in 2012. We expect to generate carbon offset revenues in 2012 but cannot predict the amount or frequency of carbon offset sales. We also expect continued growth at AAP in 2012 but not at the same rate as 2011. Retail segment revenues accounted for 59% of total revenues in 2011 compared to 67% in 2010. Recycling segment revenues and retail segment revenues each include a portion of byproduct revenues. The growth of refrigerator replacement and AAP revenues along with carbon offset revenues impacted the overall mix of revenues between the retail and recycling segments in 2011 compared to 2010.Recycling Revenues. Our recycling revenues of $33.1 million for 2011 increased $10.2 million or 44.7% from $22.9 million in 2010. Recycling revenues are comprised of two components: (1) appliance recycling revenues generated by collecting and recycling appliances for utilities and other sponsors of energy efficiency programs and (2) replacement program revenues generated by recycling and replacing old appliances with new energy efficient models for programs sponsored by utility companies. Appliance recycling revenues decreased 4.4% to $18.6 million in 2011 compared to $19.4 million in 2010, due primarily to lower average per-unit recycling fees. As a result of intense competition in the marketplace, price has become a critical factor in winning and renewing recycling contracts. In 2011, recycling volumes were up 7.9% but the average per-unit recycling fees were down 11.4% compared to 2010. Replacement program revenues increased 320.6% to $14.5 million in 2011 compared to $3.5 million in 2010. The increase was primarily the result of a summer refrigerator replacement initiative from a California utility program that resulted in replacing over 10,000 refrigerators, along with the impact of a new Washington utility refrigerator replacement program. The Company does not expect the California utility summer initiative refrigerator replacement volumes again in 2012. We are aggressively pursuing new appliance recycling and replacement programs throughout North America but cannot predict if we will be successful in signing new contracts or renewing existing contracts.
Byproduct Revenues. Our byproduct revenues of $20.8 million for 2011 increased $7.1 million or 51.5% from $13.7 million in 2010. The increase in byproduct revenues was primarily the result of recycling more units, carbon offset revenues and higher revenues generated at AAP. In 2011, we recognized $1.2 million in carbon offset revenues, of which $0.4 million was generated at AAP, which did not occur in 2010. Byproduct revenues include all of the revenues generated by AAP. Revenues from AAP of $11.3 million increased 49.9% or $3.7 million compared to revenues of $7.6 million for 2010. The remainder of the increase was related to the combination of higher per-unit byproduct material prices and more byproduct materials recaptured from recycling more units in 2011 compared to 2010. In 2011, the average per-unit price of recaptured byproduct materials at ARCA increased to $35.10 per unit compared to $29.13 per unit in 2010. We cannot predict byproduct material prices, but do not expect significant fluctuations in 2012 as compared to 2011 levels.
Gross Profit. Our gross profit of $36.7 million in 2011 increased $3.8 million or 11.7% compared to $32.9 million in 2010. Gross profit as a percentage of total revenues decreased to 29.0% in 2011 compared to 30.4% in 2010. Gross profit for the retail segment decreased to 27.2% in 2011 compared to 28.6% in 2010. The year-over-year decrease was due primarily to a shift in sales mix and to a lesser extent price compression and higher product costs. In 2011, our product sales consisted of 58% new (in-the-box) product compared to 54% new (in-the-box) product in 2010. New (in-the-box) product typically has lower profit margins than special buy (out-of-the-box) product. Our recycling segment gross profit decreased to 31.6% in 2011 compared to 34.2% in 2010, driven primarily by lower average per-unit recycling fees and a higher mix of replacement revenues that typically generate lower profit margins.
Selling, General and Administrative Expenses. Our selling, general and administrative (SG&A) expenses of $29.5 million for 2011 decreased $0.3 million or 1.1% compared to $29.8 million in 2010. Our SG&A expenses as a percentage of total revenues decreased to 23.3% in 2011 compared to 27.6% in 2010. Selling expenses decreased $0.8 million to $18.6 million in 2011 compared to $19.4 million in 2010. The decrease in selling expenses was due primarily to reducing advertising expense to promote our ApplianceSmart stores. General and administrative expenses increased $0.5 million to $10.9 million in 2011 compared to $10.4 million in 2010. The increase in general and administrative expenses was due primarily to higher operating expenses at AAP along with the impact of restoring employee compensation reductions that were still in place during 2010. We do not expect a significant change in our SG&A expenses in 2012 as a percentage of total revenues compared to 2011.
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