ý
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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o
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Minnesota
(State or other jurisdiction of incorporation or organization)
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41-1454591
(I.R.S. Employer Identification No.)
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7400 Excelsior Boulevard, Minneapolis, Minnesota
(Address of principal executive offices)
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55426-4517
(Zip Code)
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Common Stock, without par value
Title of each class
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NASDAQ Capital Market
Name of each exchange on which registered
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
x
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ITEM 1.
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BUSINESS
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1.
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Retail sales of appliances at our ApplianceSmart stores.
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2.
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Fees charged for collecting and recycling appliances for utilities and other sponsors of energy efficiency programs.
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3.
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Fees charged for recycling and replacing old appliances with new ENERGY STAR
®
appliances for energy efficiency programs sponsored by electric and gas utilities.
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4.
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Selling byproduct materials, such as metals, from appliances that we recycle, including appliances collected through our ApplianceSmart stores and processed at AAP.
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5.
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Sale of carbon offsets created by the destruction of ozone-depleting refrigerants acquired through various recycling programs.
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Refrigerators
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Washers
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Freezers
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Dryers
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Ranges/ovens
|
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Room air conditioners
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Dishwashers
|
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Dehumidifiers
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Microwave ovens
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Humidifiers
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1.
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Polychlorinated biphenyls (“PCBs”), which have toxic effects on humans and animals. Although the U.S. Environmental Protection Agency (“EPA”) banned the production of PCBs in 1979, it allowed manufacturers to use their remaining inventories of PCB-containing components. Consequently, some old room air conditioners and microwave ovens have capacitors that contain PCBs, which can contaminate groundwater when released.
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2.
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Mercury, which easily enters the body through absorption, inhalation or ingestion, potentially causing neurological damage. Mercury-containing components may be found in freezers, washers and ranges.
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3.
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Chlorofluorocarbon, hydrochlorofluorocarbon, and hydrofluorocarbon (collectively, “CFC”) refrigerants, which cause long-term damage to the earth’s ozone layer and may contribute to global climate change. Refrigerators, freezers, room air conditioners and dehumidifiers commonly contain CFC refrigerants.
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4.
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CFCs having a very high ozone-depletion potential that may also be used as blowing agents in the polyurethane foam insulation of refrigerators and freezers.
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5.
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Other materials, such as oil and sulfur dioxide, that are harmful when released into the environment.
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1.
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Southern California Edison, to handle refrigerator and freezer recycling operations in 75 percent of their service territory.
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2.
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San Diego Gas & Electric, to provide refrigerator and freezer recycling services for their residential and small commercial customers.
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3.
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Southern California Public Power Authority (“SCPPA”), which sponsors a program to replace and recycle old, inefficient refrigerators for a certain segment of their customers. We currently perform these services for participating members of SCPPA, including the Los Angeles Department of Water and Power.
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4.
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Ontario Power Authority (“OPA”) in Ontario, Canada, to recycle refrigerators, freezers and room air conditioners throughout the province. The program is administered by OPA and managed by approximately seventy local electric distribution companies.
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1.
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Bosch
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2.
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Electrolux
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3.
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General Electric
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4.
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Samsung
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5.
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Whirlpool
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1.
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We have no guarantees for the number or type of appliances that we have to purchase.
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2.
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The agreements may be terminated by either party with 30 days’ prior written notice.
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3.
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We have agreed to indemnify certain manufacturers for certain claims, allegations or losses concerning the appliances we sell.
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1.
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Total number of appliances expected to be processed and/or replaced.
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2.
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Length of the contract term.
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3.
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Specific services the utility selects us to provide.
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4.
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Market factors, including labor rates and transportation costs.
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2012
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2011
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||
Retail
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62.3
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%
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57.5
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%
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Recycling
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22.1
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|
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26.1
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Byproduct, including carbon offsets
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15.6
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16.4
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|
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100.0
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%
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100.0
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%
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1.
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Existing recycling companies.
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2.
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Entrepreneurs entering the appliance recycling business.
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3.
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Management consultants.
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4.
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Major waste hauling companies.
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5.
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Scrap metal processors.
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6.
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National and regional new-appliance retailers.
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1.
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32% of our employees, including management, provide customer service, appliance collection, transportation and processing services at our recycling centers.
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2.
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60% of our employees, including management, work in our retail stores.
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3.
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8% of our employees are corporate management and support staff.
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ITEM 1A.
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RISK FACTORS
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ITEM 2.
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PROPERTIES
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Market
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Opening Date
|
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Retail
Space
(Sq. Ft.)
|
|
|
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Minnesota
|
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June 1998
|
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33,000
|
|
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January 2001
|
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24,000
|
|
|
|
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October 2001
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49,000
|
|
|
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February 2003
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33,000
|
|
|
|
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December 2004
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30,000
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|
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(Also has 29,000 square feet of warehouse space)
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|
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May 2008
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23,000
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December 2008
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31,000
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|
|
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November 2011
|
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24,000
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|
|
|
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August 2012
|
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28,000
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|
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Ohio
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June 1997
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20,000
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|
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May 2001
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32,000
|
|
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March 2002
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30,000
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|
|
|
|
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December 2007
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30,000
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Georgia
|
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November 2004
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30,000
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|
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(Also has 58,000 square feet of production/warehouse space)
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December 2006
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46,000
|
|
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|
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December 2008
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33,000
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|
|
|
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November 2009
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28,000
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|
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Texas
|
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October 2005
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37,000
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|
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(Includes production/recycling space)
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September 2008
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30,000
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ITEM 3.
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LEGAL PROCEEDINGS
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ITEM 4.
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MINE SAFETY DISCLOSURES
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ITEM 5.
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MARKET FOR OUR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
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High
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Low
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||||
2012
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|
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First Quarter
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$
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6.25
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$
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4.34
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Second Quarter
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4.69
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3.80
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||
Third Quarter
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4.39
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3.20
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Fourth Quarter
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3.34
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1.15
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||
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||||
2011
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|
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First Quarter
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$
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4.61
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$
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3.18
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Second Quarter
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4.74
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3.84
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Third Quarter
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4.72
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3.72
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Fourth Quarter
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6.57
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4.40
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ITEM 6.
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SELECTED FINANCIAL DATA
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Fiscal Years
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2012
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2011
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2010
(a)
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2009
(a)
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2008
(a)
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||||||||||
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||||||||||
Statements of Operations:
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|||||
Total revenues
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$
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114,313
|
|
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$
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126,669
|
|
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$
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108,162
|
|
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$
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101,269
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|
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$
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110,971
|
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Gross profit
|
$
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27,955
|
|
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$
|
36,735
|
|
|
$
|
32,899
|
|
|
$
|
28,377
|
|
|
$
|
35,610
|
|
Operating income (loss)
|
$
|
(3,222
|
)
|
|
$
|
7,244
|
|
|
$
|
3,069
|
|
|
$
|
(2,161
|
)
|
|
$
|
4,035
|
|
Income (loss) from continuing operations
|
$
|
(3,852
|
)
|
|
$
|
4,461
|
|
|
$
|
2,009
|
|
|
$
|
(3,338
|
)
|
|
$
|
1,864
|
|
Net income (loss) attributable to controlling interest
|
$
|
(3,852
|
)
|
|
$
|
4,461
|
|
|
$
|
2,009
|
|
|
$
|
(3,338
|
)
|
|
$
|
360
|
|
Basic income (loss) from continuing operations per common share
|
$
|
(0.69
|
)
|
|
$
|
0.81
|
|
|
$
|
0.38
|
|
|
$
|
(0.73
|
)
|
|
$
|
0.41
|
|
Basic income (loss) per common share
|
$
|
(0.69
|
)
|
|
$
|
0.81
|
|
|
$
|
0.38
|
|
|
$
|
(0.73
|
)
|
|
$
|
0.08
|
|
Diluted income (loss) from continuing operations per common share
|
$
|
(0.69
|
)
|
|
$
|
0.77
|
|
|
$
|
0.37
|
|
|
$
|
(0.73
|
)
|
|
$
|
0.41
|
|
Diluted income (loss) per common share
|
$
|
(0.69
|
)
|
|
$
|
0.77
|
|
|
$
|
0.37
|
|
|
$
|
(0.73
|
)
|
|
$
|
0.08
|
|
Basic weighted average number of common shares outstanding
|
5,551
|
|
|
5,497
|
|
|
5,267
|
|
|
4,578
|
|
|
4,571
|
|
|||||
Diluted weighted average number of common shares outstanding
|
5,551
|
|
|
5,821
|
|
|
5,491
|
|
|
4,578
|
|
|
4,612
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Working capital
|
$
|
7,631
|
|
|
$
|
11,445
|
|
|
$
|
1,331
|
|
|
$
|
3,719
|
|
|
$
|
5,772
|
|
Total assets
|
$
|
41,804
|
|
|
$
|
46,809
|
|
|
$
|
39,864
|
|
|
$
|
31,450
|
|
|
$
|
37,415
|
|
Long-term liabilities
|
$
|
7,643
|
|
|
$
|
8,979
|
|
|
$
|
3,841
|
|
|
$
|
4,481
|
|
|
$
|
5,412
|
|
Shareholders’ equity
|
$
|
11,638
|
|
|
$
|
15,180
|
|
|
$
|
10,208
|
|
|
$
|
5,643
|
|
|
$
|
7,989
|
|
Total equity
|
$
|
13,234
|
|
|
$
|
17,380
|
|
|
$
|
12,147
|
|
|
$
|
5,643
|
|
|
$
|
7,989
|
|
(a)
|
The financial information for fiscal years 2010, 2009 and 2008 have been derived from our audited consolidated financial statements which are not contained in this filing.
|
|
Fiscal 2012
|
||||||||||||||
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
||||||||
Total revenues
|
$
|
29,432
|
|
|
$
|
29,342
|
|
|
$
|
28,976
|
|
|
$
|
26,563
|
|
Gross profit
|
$
|
7,612
|
|
|
$
|
7,571
|
|
|
$
|
6,723
|
|
|
$
|
6,049
|
|
Operating income (loss)
|
$
|
84
|
|
|
$
|
(193
|
)
|
|
$
|
(734
|
)
|
|
$
|
(2,379
|
)
|
Net loss
|
$
|
(77
|
)
|
|
$
|
(551
|
)
|
|
$
|
(1,159
|
)
|
|
$
|
(2,669
|
)
|
Net loss attributable to controlling interest
|
$
|
(66
|
)
|
|
$
|
(641
|
)
|
|
$
|
(1,082
|
)
|
|
$
|
(2,063
|
)
|
Basic loss per common share
|
$
|
(0.01
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.37
|
)
|
Diluted loss per common share
|
$
|
(0.01
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.37
|
)
|
Basic weighted average number of common shares outstanding
|
5,537
|
|
|
5,555
|
|
|
5,556
|
|
|
5,556
|
|
||||
Diluted weighted average number of common shares outstanding
|
5,537
|
|
|
5,555
|
|
|
5,556
|
|
|
5,556
|
|
|
Fiscal 2011
|
||||||||||||||
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
||||||||
Total revenues
|
$
|
29,926
|
|
|
$
|
32,891
|
|
|
$
|
35,857
|
|
|
$
|
27,995
|
|
Gross profit
|
$
|
8,989
|
|
|
$
|
9,647
|
|
|
$
|
10,091
|
|
|
$
|
8,008
|
|
Operating income
|
$
|
1,528
|
|
|
$
|
2,253
|
|
|
$
|
2,928
|
|
|
$
|
535
|
|
Net income
|
$
|
737
|
|
|
$
|
2,076
|
|
|
$
|
1,706
|
|
|
$
|
203
|
|
Net income attributable to controlling interest
|
$
|
674
|
|
|
$
|
2,028
|
|
|
$
|
1,756
|
|
|
$
|
3
|
|
Basic income per common share
|
$
|
0.12
|
|
|
$
|
0.37
|
|
|
$
|
0.32
|
|
|
$
|
—
|
|
Diluted income per common share
|
$
|
0.12
|
|
|
$
|
0.35
|
|
|
$
|
0.30
|
|
|
$
|
—
|
|
Basic weighted average number of common shares outstanding
|
5,493
|
|
|
5,493
|
|
|
5,493
|
|
|
5,510
|
|
||||
Diluted weighted average number of common shares outstanding
|
5,769
|
|
|
5,820
|
|
|
5,821
|
|
|
5,876
|
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
2012
|
|
2011
|
||
Revenues:
|
|
|
|
|
|
Retail
|
62.3
|
%
|
|
57.5
|
%
|
Recycling
|
22.1
|
|
|
26.1
|
|
Byproduct
|
15.6
|
|
|
16.4
|
|
Total revenues
|
100.0
|
|
|
100.0
|
|
Cost of revenues
|
75.5
|
|
|
71.0
|
|
Gross profit
|
24.5
|
|
|
29.0
|
|
Selling, general and administrative expenses
|
26.3
|
|
|
23.3
|
|
Impairment charge
|
0.9
|
|
|
—
|
|
Operating income (loss)
|
(2.7
|
)
|
|
5.7
|
|
Other income (expense):
|
|
|
|
|
|
Interest expense, net
|
(1.0
|
)
|
|
(0.9
|
)
|
Other income (expense), net
|
—
|
|
|
—
|
|
Income (loss) before income taxes and noncontrolling interest
|
(3.7
|
)
|
|
4.8
|
|
Provision for income taxes
|
0.1
|
|
|
1.1
|
|
Net income (loss)
|
(3.8
|
)
|
|
3.7
|
|
Net loss (income) attributable to noncontrolling interest
|
0.5
|
|
|
(0.2
|
)
|
Net income (loss) attributable to controlling interest
|
(3.3
|
)%
|
|
3.5
|
%
|
|
2012
|
|
2011
|
|
% Change
|
|||
Revenues:
|
|
|
|
|
|
|
|
|
Retail
|
72.4
|
|
|
74.5
|
|
|
(2.8
|
)%
|
Recycling
|
41.9
|
|
|
52.2
|
|
|
(19.6
|
)%
|
Total revenues
|
114.3
|
|
|
126.7
|
|
|
(9.8
|
)%
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
Retail
|
(2.7
|
)
|
|
(0.3
|
)
|
|
(997.5
|
)%
|
Recycling
|
(0.2
|
)
|
|
6.9
|
|
|
(103.5
|
)%
|
Unallocated corporate costs
|
(0.3
|
)
|
|
0.6
|
|
|
(160.1
|
)%
|
Total operating income (loss)
|
(3.2
|
)
|
|
7.2
|
|
|
(144.4
|
)%
|
1.
|
A 27% decline in utility recycling volumes compared with 2011, resulting in lower revenues of approximately $6.3 million.
|
2.
|
A summer refrigerator replacement initiative in 2011 from a California utility program that resulted in replacing over 10,000 refrigerators that did not occur in 2012, resulting in lower revenues of approximately $2.9 million.
|
3.
|
A decline in carbon offset revenues of $1.1 million compared with 2011.
|
1.
|
The combination of lower retail segment revenues and gross profit percentage compared with 2011 resulted in a $1.8 million decline in operating income.
|
2.
|
An increase in retail segment sales, general and administrative expenses of $1.0 million related to operating two new ApplianceSmart stores that did not exist in 2011, offset by $0.4 million in lower advertising expenses.
|
3.
|
The combination of lower recycling segment volumes, lower scrap metal prices and higher transportation costs per unit compared with 2011 resulted in a $5.8 million decline in operating income.
|
4.
|
A $1.1 million decline of carbon offset revenues in our recycling segment that drop directly to operating income.
|
5.
|
A $1.1 million non-cash goodwill impairment charge related to AAP in our recycling segment.
|
|
2012
|
|
2011
|
|
% Change
|
|||||
Retail
|
$
|
71.2
|
|
|
$
|
72.8
|
|
|
(2.1
|
)%
|
Recycling
|
25.3
|
|
|
33.1
|
|
|
(23.5
|
)%
|
||
Byproduct
|
17.8
|
|
|
20.8
|
|
|
(14.6
|
)%
|
||
|
$
|
114.3
|
|
|
$
|
126.7
|
|
|
(9.8
|
)%
|
|
2012
|
|
2011
|
|
% Change
|
|||||
Quarter 1
|
$
|
19.7
|
|
|
$
|
19.2
|
|
|
2.8
|
%
|
Quarter 2
|
19.0
|
|
|
18.4
|
|
|
3.1
|
%
|
||
Quarter 3
|
17.3
|
|
|
18.8
|
|
|
(7.8
|
)%
|
||
Quarter 4
|
15.2
|
|
|
16.4
|
|
|
(7.3
|
)%
|
||
|
$
|
71.2
|
|
|
$
|
72.8
|
|
|
(2.1
|
)%
|
|
2012
|
|
2011
|
|
% Change
|
|||||
Quarter 1
|
$
|
5.3
|
|
|
$
|
5.7
|
|
|
(8.2
|
)%
|
Quarter 2
|
6.2
|
|
|
9.6
|
|
|
(36.0
|
)%
|
||
Quarter 3
|
7.0
|
|
|
11.4
|
|
|
(38.1
|
)%
|
||
Quarter 4
|
6.8
|
|
|
6.4
|
|
|
7.6
|
%
|
||
|
$
|
25.3
|
|
|
$
|
33.1
|
|
|
(23.5
|
)%
|
|
2012
|
|
2011
|
|
% Change
|
|||||
Quarter 1
|
$
|
4.4
|
|
|
$
|
5.0
|
|
|
(11.2
|
)%
|
Quarter 2
|
4.2
|
|
|
4.9
|
|
|
(13.5
|
)%
|
||
Quarter 3
|
4.7
|
|
|
5.7
|
|
|
(18.9
|
)%
|
||
Quarter 4
|
4.5
|
|
|
5.2
|
|
|
(13.8
|
)%
|
||
|
$
|
17.8
|
|
|
$
|
20.8
|
|
|
(14.6
|
)%
|
|
2012
|
|
2011
|
||||
Total cash and cash equivalents provided by (used in):
|
|
|
|
|
|
||
Operating activities
|
$
|
0.5
|
|
|
$
|
1.4
|
|
Investing activities
|
(0.8
|
)
|
|
(1.1
|
)
|
||
Financing activities
|
(1.0
|
)
|
|
1.1
|
|
||
Effect of exchange rates on cash and cash equivalents
|
0.1
|
|
|
(0.1
|
)
|
||
Increase (decrease) in cash and cash equivalents
|
$
|
(1.2
|
)
|
|
$
|
1.3
|
|
|
December 29, 2012
|
|
December 31, 2011
|
||||
Line of credit
|
$
|
10.6
|
|
|
$
|
10.7
|
|
PNC term loan
|
2.0
|
|
|
2.3
|
|
||
Susquehanna bank term loans
(1)
|
4.2
|
|
|
4.5
|
|
||
Other financing obligations and loans
(1)
|
0.9
|
|
|
1.1
|
|
||
Capital leases and other financing obligations
|
0.2
|
|
|
0.3
|
|
||
|
17.9
|
|
|
18.9
|
|
||
Less: current portion of debt
|
11.5
|
|
|
11.7
|
|
||
|
$
|
6.4
|
|
|
$
|
7.2
|
|
•
|
The Credit Agreement requires that we meet a minimum fixed charge coverage ratio of 1.10 to 1.00, measured on a trailing twelve-month basis. The fixed charge coverage ratio for the twelve months ended September 29, 2012, and
December 29, 2012
, was -1.55 to 1.00, and -2.06 to 1.00, respectively. The fixed charge coverage ratio for the fiscal year ended
December 31, 2011
, was 10.10 to 1.00.
|
•
|
The Credit Agreement provides that the outstanding balance of loans from us to AAP will not exceed specified amounts ($800,000 until June 30, 2012, $550,000 from July 1, 2012, through December 31, 2012, and $300,000 thereafter). The outstanding balance of loans to AAP exceeded the permitted amount as of July 27, 2012, and at certain dates thereafter. As of December 29, 2012, and March 20, 2013, the outstanding balance of such loans were $749,000 and $669,000, respectively.
|
•
|
We must meet monthly minimum EBITDA requirements set forth in the amendment through 2013.
|
•
|
The affiliate loan balance must be reduced by $40,000 per month in 2013 and the affiliate loan balance will be capped at $300,000 on January 25, 2014, and thereafter.
|
•
|
Starting on December 28, 2013, we must meet a minimum fixed charge coverage ratio of 1.10 to 1.00 for the nine months then ended and on a trailing twelve-month basis beginning with the period ending March 30, 2014, and each quarter thereafter.
|
•
|
The interest rate spread on our Revolving Loan and Term Loan increased 100 basis points for both PNC Base Rate loans and PNC LIBOR Rate loans. We are not eligible to borrow under PNC LIBOR Rate loans until certain Interest Rate Reduction conditions are met as set forth in the amendment. If these Interest Rate Reduction conditions are met, we will also be able to remove the 100 basis point increase for both PNC Base Rate loans and PNC LIBOR Rate loans. The earliest the Interest Rate Reduction conditions could be met is January 31, 2014.
|
•
|
A prepayment penalty will be assessed at 3% during the first year of the third amendment to our Credit Agreement, 2% during the second year and 1% during the third year.
|
Contractual Obligations
|
|
Total
|
|
Less Than
One Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More Than
Five Years
|
||||||||||
PNC line of credit
|
|
$
|
10.6
|
|
|
$
|
10.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
PNC term loan
|
|
2.0
|
|
|
0.2
|
|
|
0.5
|
|
|
1.3
|
|
|
—
|
|
|||||
Long-term debt obligations
|
|
4.8
|
|
|
0.6
|
|
|
1.1
|
|
|
1.0
|
|
|
2.1
|
|
|||||
Capital lease and other financing obligations
|
|
0.4
|
|
|
0.1
|
|
|
0.2
|
|
|
0.1
|
|
|
—
|
|
|||||
Operating lease obligations
(1)
|
|
22.3
|
|
|
5.6
|
|
|
8.2
|
|
|
5.0
|
|
|
3.5
|
|
|||||
Total
|
|
$
|
40.1
|
|
|
$
|
17.1
|
|
|
$
|
10.0
|
|
|
$
|
7.4
|
|
|
$
|
5.6
|
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
Description
|
|
Page
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
/s/ Baker Tilly Virchow Krause, LLP
|
|
Minneapolis, MN
|
March 22, 2013
|
|
December 29,
2012 |
|
December 31,
2011 |
||||
ASSETS
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
3,174
|
|
|
$
|
4,401
|
|
Accounts receivable, net of allowance of $8 and $18, respectively
|
6,256
|
|
|
7,445
|
|
||
Inventories, net of reserves of $682 and $85, respectively
|
17,274
|
|
|
18,456
|
|
||
Income taxes receivable
|
522
|
|
|
392
|
|
||
Other current assets
|
1,332
|
|
|
1,028
|
|
||
Deferred income tax assets
|
—
|
|
|
173
|
|
||
Total current assets
|
28,558
|
|
|
31,895
|
|
||
Property and equipment, net
|
12,248
|
|
|
12,535
|
|
||
Goodwill
|
38
|
|
|
1,120
|
|
||
Other assets
|
935
|
|
|
1,232
|
|
||
Deferred income tax assets
|
25
|
|
|
27
|
|
||
Total assets (a)
|
$
|
41,804
|
|
|
$
|
46,809
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
4,957
|
|
|
$
|
4,323
|
|
Accrued expenses
|
4,310
|
|
|
4,453
|
|
||
Line of credit
|
10,559
|
|
|
10,685
|
|
||
Current maturities of long-term obligations
|
955
|
|
|
989
|
|
||
Deferred income tax liabilities
|
146
|
|
|
—
|
|
||
Total current liabilities
|
20,927
|
|
|
20,450
|
|
||
Long-term obligations, less current maturities
|
6,357
|
|
|
7,251
|
|
||
Deferred gain, net of current portion
|
365
|
|
|
853
|
|
||
Deferred income tax liabilities
|
921
|
|
|
875
|
|
||
Total liabilities (a)
|
28,570
|
|
|
29,429
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
—
|
|
|
—
|
|
||
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
|
|
||
Common Stock, no par value; 10,000 shares authorized; issued and outstanding: 5,556 shares and 5,527 shares, respectively
|
20,577
|
|
|
20,338
|
|
||
Accumulated deficit
|
(8,649
|
)
|
|
(4,797
|
)
|
||
Accumulated other comprehensive loss
|
(290
|
)
|
|
(361
|
)
|
||
Total shareholders’ equity
|
11,638
|
|
|
15,180
|
|
||
Noncontrolling interest
|
1,596
|
|
|
2,200
|
|
||
|
13,234
|
|
|
17,380
|
|
||
Total liabilities and shareholders’ equity
|
$
|
41,804
|
|
|
$
|
46,809
|
|
|
For the fiscal year ended
|
||||||
|
December 29,
2012 |
|
December 31,
2011 |
||||
Revenues:
|
|
|
|
|
|
||
Retail
|
$
|
71,234
|
|
|
$
|
72,773
|
|
Recycling
|
25,280
|
|
|
33,062
|
|
||
Byproduct
|
17,799
|
|
|
20,834
|
|
||
Total revenues
|
114,313
|
|
|
126,669
|
|
||
Cost of revenues
|
86,358
|
|
|
89,934
|
|
||
Gross profit
|
27,955
|
|
|
36,735
|
|
||
Selling, general and administrative expenses
|
30,095
|
|
|
29,491
|
|
||
Impairment charge
|
1,082
|
|
|
—
|
|
||
Operating income (loss)
|
(3,222
|
)
|
|
7,244
|
|
||
Other expense:
|
|
|
|
|
|||
Interest expense, net
|
(1,139
|
)
|
|
(1,133
|
)
|
||
Other expense, net
|
(12
|
)
|
|
(22
|
)
|
||
Income before provision for income taxes and noncontrolling interest
|
(4,373
|
)
|
|
6,089
|
|
||
Provision for income taxes
|
83
|
|
|
1,367
|
|
||
Net income (loss)
|
(4,456
|
)
|
|
4,722
|
|
||
Net (income) loss attributable to noncontrolling interest
|
604
|
|
|
(261
|
)
|
||
Net income (loss) attributable to controlling interest
|
$
|
(3,852
|
)
|
|
$
|
4,461
|
|
|
|
|
|
||||
Income (loss) per common share:
|
|
|
|
|
|
||
Basic
|
$
|
(0.69
|
)
|
|
$
|
0.81
|
|
Diluted
|
$
|
(0.69
|
)
|
|
$
|
0.77
|
|
|
|
|
|
||||
Weighted average common shares outstanding:
|
|
|
|
|
|||
Basic
|
5,551
|
|
|
5,497
|
|
||
Diluted
|
5,551
|
|
|
5,821
|
|
||
|
|
|
|
||||
Net income (loss)
|
$
|
(4,456
|
)
|
|
$
|
4,722
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
||
Effect of foreign currency translation adjustments
|
71
|
|
|
(87
|
)
|
||
Total other comprehensive income (loss), net of tax
|
71
|
|
|
(87
|
)
|
||
Comprehensive income (loss)
|
(4,385
|
)
|
|
4,635
|
|
||
Comprehensive (income) loss attributable to noncontrolling interest
|
604
|
|
|
(261
|
)
|
||
Comprehensive income (loss) attributable to controlling interest
|
$
|
(3,781
|
)
|
|
$
|
4,374
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
Other
|
|
|
|
|
|
|
|||||||||||
|
Common Stock
|
|
Comprehensive
|
|
Accumulated
|
|
Noncontrolling
|
|
|
|||||||||||||
|
Shares
|
|
Amount
|
|
Income (Loss)
|
|
Deficit
|
|
Interest
|
|
Total
|
|||||||||||
Balance at January 1, 2011
|
5,493
|
|
|
$
|
19,740
|
|
|
$
|
(274
|
)
|
|
$
|
(9,258
|
)
|
|
$
|
1,939
|
|
|
$
|
12,147
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
4,461
|
|
|
261
|
|
|
4,722
|
|
|||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
(87
|
)
|
|
—
|
|
|
—
|
|
|
(87
|
)
|
|||||
Issuance of Common Stock
|
34
|
|
|
117
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
117
|
|
|||||
Share-based compensation
|
—
|
|
|
428
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
428
|
|
|||||
Excess tax benefits related to share-based compensation
|
—
|
|
|
53
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53
|
|
|||||
Balance at December 31, 2011
|
5,527
|
|
|
20,338
|
|
|
(361
|
)
|
|
(4,797
|
)
|
|
2,200
|
|
|
17,380
|
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,852
|
)
|
|
(604
|
)
|
|
(4,456
|
)
|
|||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
71
|
|
|||||
Issuance of Common Stock
|
29
|
|
|
86
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
86
|
|
|||||
Share-based compensation
|
—
|
|
|
153
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
153
|
|
|||||
Balance at December 29, 2012
|
5,556
|
|
|
$
|
20,577
|
|
|
$
|
(290
|
)
|
|
$
|
(8,649
|
)
|
|
$
|
1,596
|
|
|
$
|
13,234
|
|
|
For the fiscal year ended
|
||||||
|
December 29,
2012 |
|
December 31,
2011 |
||||
Operating activities
|
|
|
|
||||
Net income (loss)
|
$
|
(4,456
|
)
|
|
$
|
4,722
|
|
Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
1,221
|
|
|
1,303
|
|
||
Impairment charge
|
1,082
|
|
|
—
|
|
||
Share-based compensation
|
153
|
|
|
428
|
|
||
Amortization of deferred financing costs
|
197
|
|
|
193
|
|
||
Amortization of deferred gain
|
(488
|
)
|
|
(487
|
)
|
||
Reversal of deferred income tax valuation allowance
|
—
|
|
|
(917
|
)
|
||
Deferred income taxes
|
367
|
|
|
1,621
|
|
||
Excess tax benefits from share-based compensation
|
—
|
|
|
(53
|
)
|
||
Other
|
38
|
|
|
(4
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable
|
1,178
|
|
|
(2,417
|
)
|
||
Inventories
|
1,182
|
|
|
(1,863
|
)
|
||
Other current assets
|
(434
|
)
|
|
(896
|
)
|
||
Other assets
|
20
|
|
|
224
|
|
||
Accounts payable and accrued expenses
|
491
|
|
|
(471
|
)
|
||
Income taxes payable
|
—
|
|
|
(7
|
)
|
||
Net cash flows provided by operating activities
|
551
|
|
|
1,376
|
|
||
|
|
|
|
||||
Investing activities
|
|
|
|
|
|
||
Purchases of property and equipment
|
(818
|
)
|
|
(1,757
|
)
|
||
Decrease in restricted cash
|
—
|
|
|
701
|
|
||
Proceeds from sale of property and equipment
|
—
|
|
|
11
|
|
||
Net cash flows used in investing activities
|
(818
|
)
|
|
(1,045
|
)
|
||
|
|
|
|
||||
Financing activities
|
|
|
|
|
|
||
Checks issued in excess of cash in bank
|
—
|
|
|
(42
|
)
|
||
Net borrowings (payments) under line of credit
|
(126
|
)
|
|
546
|
|
||
Payments on debt obligations
|
(990
|
)
|
|
(8,315
|
)
|
||
Proceeds from issuance of debt obligations
|
—
|
|
|
9,400
|
|
||
Payment of deferred financing costs
|
—
|
|
|
(669
|
)
|
||
Proceeds from issuance of Common Stock
|
86
|
|
|
117
|
|
||
Excess tax benefits related to share-based compensation
|
—
|
|
|
53
|
|
||
Net cash flows (used in) provided by financing activities
|
(1,030
|
)
|
|
1,090
|
|
||
|
|
|
|
||||
Effect of changes in exchange rate on cash and cash equivalents
|
70
|
|
|
(85
|
)
|
||
|
|
|
|
||||
Increase (decrease) in cash and cash equivalents
|
(1,227
|
)
|
|
1,336
|
|
||
Cash and cash equivalents at beginning of year
|
4,401
|
|
|
3,065
|
|
||
Cash and cash equivalents at end of year
|
$
|
3,174
|
|
|
$
|
4,401
|
|
|
For the fiscal year ended
|
||||||
|
December 29
2012 |
|
December 31
2011 |
||||
Supplemental disclosures of cash flow information
|
|
|
|
|
|
||
Cash payments for interest
|
$
|
935
|
|
|
$
|
931
|
|
Cash payments (refunds) for income taxes, net
|
$
|
(154
|
)
|
|
$
|
1,055
|
|
|
|
|
|
||||
Non-cash investing and financing activities
|
|
|
|
|
|
||
Equipment acquired under financing obligations and capital leases
|
$
|
159
|
|
|
$
|
253
|
|
Repayment of debt from trade-in of equipment
|
$
|
87
|
|
|
$
|
—
|
|
|
December 29,
2012 |
|
December 31,
2011 |
||||
Appliances held for resale
|
$
|
17,768
|
|
|
$
|
18,291
|
|
Processed metals to be sold from recycled appliances
|
188
|
|
|
250
|
|
||
Less provision for inventory obsolescence
|
(682
|
)
|
|
(85
|
)
|
||
|
$
|
17,274
|
|
|
$
|
18,456
|
|
|
Useful Life (Years)
|
|
December 29,
2012 |
|
December 31,
2011 |
||||
Land
|
—
|
|
$
|
1,140
|
|
|
$
|
1,140
|
|
Buildings and improvements
|
18-30
|
|
3,429
|
|
|
3,303
|
|
||
Equipment (including computer software)
|
3-15
|
|
20,158
|
|
|
19,472
|
|
||
Projects under construction
|
—
|
|
63
|
|
|
35
|
|
||
|
|
|
24,790
|
|
|
23,950
|
|
||
Less accumulated depreciation and amortization
|
|
|
(12,542
|
)
|
|
(11,415
|
)
|
||
|
|
|
$
|
12,248
|
|
|
$
|
12,535
|
|
|
Recycling
Segment
|
||
Balance as of January 1, 2011
|
$
|
1,120
|
|
Impairment charge
|
—
|
|
|
Balance as of December 31, 2011
|
1,120
|
|
|
Impairment charge
|
(1,082
|
)
|
|
Balance as of December 29, 2012
|
$
|
38
|
|
|
For the fiscal year ended
|
||||||
|
December 29,
2012 |
|
December 31,
2011 |
||||
Beginning Balance
|
$
|
71
|
|
|
$
|
36
|
|
Standard accrual based on units sold
|
43
|
|
|
97
|
|
||
Actual costs incurred
|
(16
|
)
|
|
(16
|
)
|
||
Periodic accrual adjustments
|
(51
|
)
|
|
(46
|
)
|
||
Ending Balance
|
$
|
47
|
|
|
$
|
71
|
|
|
For the fiscal year ended
|
||||||
|
December 29,
|
|
December 31,
|
||||
|
2012
|
|
2011
|
||||
Numerator:
|
|
|
|
||||
Net income (loss) attributable to controlling interest
|
$
|
(3,852
|
)
|
|
$
|
4,461
|
|
Denominator:
|
|
|
|
|
|||
Weighted average common shares outstanding - basic
|
5,551
|
|
|
5,497
|
|
||
Employee stock options
|
—
|
|
|
112
|
|
||
Stock warrants
|
—
|
|
|
212
|
|
||
Weighted average common shares outstanding - diluted
|
5,551
|
|
|
5,821
|
|
||
|
|
|
|
||||
Income (loss) per common share:
|
|
|
|
|
|
||
Basic
|
$
|
(0.69
|
)
|
|
$
|
0.81
|
|
Diluted
|
$
|
(0.69
|
)
|
|
$
|
0.77
|
|
|
December 29, 2012
|
|
December 31, 2011
|
||||
Assets
|
|
|
|
||||
Current assets
|
$
|
787
|
|
|
$
|
1,134
|
|
Property and equipment, net
|
9,109
|
|
|
9,419
|
|
||
Goodwill
|
—
|
|
|
1,082
|
|
||
Other assets
|
149
|
|
|
136
|
|
||
Total assets
|
$
|
10,045
|
|
|
$
|
11,771
|
|
Liabilities
|
|
|
|
|
|||
Accounts payable
|
$
|
826
|
|
|
$
|
858
|
|
Accrued expenses
|
204
|
|
|
250
|
|
||
Current maturities of long-term debt obligations
|
635
|
|
|
593
|
|
||
Long-term debt obligations, net of current maturities
|
4,437
|
|
|
5,022
|
|
||
Other liabilities (a)
|
749
|
|
|
647
|
|
||
Total liabilities
|
$
|
6,851
|
|
|
$
|
7,370
|
|
|
For the fiscal year ended
|
||||||
|
December 29, 2012
|
|
December 31, 2011
|
||||
Revenues
|
$
|
11,241
|
|
|
$
|
11,337
|
|
Gross profit
|
584
|
|
|
1,373
|
|
||
Operating income (loss) (b)
|
(847
|
)
|
|
869
|
|
|
December 29, 2012
|
|
December 31, 2011
|
||||
Deposits
|
376
|
|
|
$
|
400
|
|
|
Recycling contract, net
|
259
|
|
|
339
|
|
||
Deferred financing costs, net
|
279
|
|
|
476
|
|
||
Patent costs
|
21
|
|
|
17
|
|
||
|
$
|
935
|
|
|
1,232
|
|
2013
|
$
|
80
|
|
2014
|
80
|
|
|
2015
|
80
|
|
|
2016
|
19
|
|
|
December 29,
2012 |
|
December 31,
2011 |
||||
Compensation and benefits
|
$
|
963
|
|
|
$
|
1,023
|
|
Accrued rebate and incentive checks
|
563
|
|
|
728
|
|
||
Accrued rent
|
1,383
|
|
|
1,336
|
|
||
Warranty expense
|
47
|
|
|
71
|
|
||
Accrued payables
|
307
|
|
|
408
|
|
||
Current portion of deferred gain on sale-leaseback of building
|
487
|
|
|
487
|
|
||
Deferred revenue
|
157
|
|
|
96
|
|
||
Other
|
403
|
|
|
304
|
|
||
|
$
|
4,310
|
|
|
$
|
4,453
|
|
|
December 29, 2012
|
|
December 31, 2011
|
||||
PNC term loan
|
2,040
|
|
|
2,295
|
|
||
Susquehanna term loans
|
4,154
|
|
|
4,537
|
|
||
2.75% note, due in monthly installments of $3, including interest, due October 2024, collateralized by equipment
|
411
|
|
|
440
|
|
||
10.00% note, due in monthly installments of $10, including interest, due December 2014
|
280
|
|
|
400
|
|
||
Capital leases and other financing obligations
|
427
|
|
|
568
|
|
||
|
7,312
|
|
|
8,240
|
|
||
Less current maturities
|
955
|
|
|
989
|
|
||
|
$
|
6,357
|
|
|
$
|
7,251
|
|
|
ARCA
|
|
AAP
|
|
Total
|
||||||
2013
|
$
|
320
|
|
|
$
|
635
|
|
|
$
|
955
|
|
2014
|
316
|
|
|
679
|
|
|
995
|
|
|||
2015
|
311
|
|
|
538
|
|
|
849
|
|
|||
2016
|
1,293
|
|
|
547
|
|
|
1,840
|
|
|||
2017
|
—
|
|
|
564
|
|
|
564
|
|
|||
Thereafter
|
—
|
|
|
2,109
|
|
|
2,109
|
|
|||
|
$
|
2,240
|
|
|
$
|
5,072
|
|
|
$
|
7,312
|
|
|
ARCA
|
|
AAP
|
|
Total
|
||||||
2013
|
$
|
82
|
|
|
$
|
76
|
|
|
$
|
158
|
|
2014
|
72
|
|
|
76
|
|
|
148
|
|
|||
2015
|
61
|
|
|
51
|
|
|
112
|
|
|||
2016
|
18
|
|
|
30
|
|
|
48
|
|
|||
2017
|
—
|
|
|
15
|
|
|
15
|
|
|||
Total minimum lease and other financing obligation payments
|
233
|
|
|
248
|
|
|
481
|
|
|||
Less amount representing interest
|
33
|
|
|
21
|
|
|
54
|
|
|||
Present value of minimum payments
|
200
|
|
|
227
|
|
|
427
|
|
|||
Less current portion
|
65
|
|
|
66
|
|
|
131
|
|
|||
Capital lease and other financing obligations, net of current portion
|
$
|
135
|
|
|
$
|
161
|
|
|
$
|
296
|
|
|
ARCA
|
|
AAP
|
|
Total
|
||||||
2013
|
$
|
5,171
|
|
|
$
|
385
|
|
|
$
|
5,556
|
|
2014
|
4,355
|
|
|
400
|
|
|
4,755
|
|
|||
2015
|
3,100
|
|
|
404
|
|
|
3,504
|
|
|||
2016
|
2,246
|
|
|
425
|
|
|
2,671
|
|
|||
2017
|
1,903
|
|
|
427
|
|
|
2,330
|
|
|||
Thereafter
|
2,188
|
|
|
1,334
|
|
|
3,522
|
|
|||
|
$
|
18,963
|
|
|
$
|
3,375
|
|
|
$
|
22,338
|
|
|
For the fiscal year ended
|
||||||
|
December 29, 2012
|
|
December 31, 2011
|
||||
Current tax expense:
|
|
|
|
|
|
||
Federal
|
$
|
(248
|
)
|
|
$
|
266
|
|
State
|
26
|
|
|
140
|
|
||
Foreign
|
(62
|
)
|
|
257
|
|
||
Current tax expense
|
$
|
(284
|
)
|
|
$
|
663
|
|
Deferred tax expense — domestic
|
365
|
|
|
702
|
|
||
Deferred tax expense — foreign
|
2
|
|
|
2
|
|
||
Provision for income taxes
|
$
|
83
|
|
|
$
|
1,367
|
|
|
For the fiscal year ended
|
||||||
|
December 29, 2012
|
|
December 31, 2011
|
||||
Income tax expense at statutory rate
|
$
|
(1,282
|
)
|
|
$
|
1,981
|
|
State tax expense, net of federal tax effect
|
(130
|
)
|
|
303
|
|
||
Permanent differences
|
194
|
|
|
360
|
|
||
Change in valuation allowance
|
1,154
|
|
|
(15
|
)
|
||
Recognition of tax effect for the cumulative undistributed earnings from Canada
|
114
|
|
|
—
|
|
||
Reversal of deferred tax asset valuation allowance
|
—
|
|
|
(917
|
)
|
||
Adjustment of deferred tax assets
|
58
|
|
|
—
|
|
||
Utilization of foreign tax credit
|
—
|
|
|
(256
|
)
|
||
Foreign income tax payable true-up
|
(57
|
)
|
|
—
|
|
||
Foreign rate differential
|
—
|
|
|
(47
|
)
|
||
Other
|
32
|
|
|
(42
|
)
|
||
|
$
|
83
|
|
|
$
|
1,367
|
|
|
December 29, 2012
|
|
December 31, 2011
|
||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss carryforwards
|
$
|
689
|
|
|
$
|
290
|
|
Federal and state tax credits
|
464
|
|
|
—
|
|
||
Reserves
|
414
|
|
|
191
|
|
||
Accrued expenses
|
254
|
|
|
203
|
|
||
Share-based compensation
|
286
|
|
|
227
|
|
||
Deferred gain
|
331
|
|
|
521
|
|
||
Investments
|
—
|
|
|
103
|
|
||
Property and equipment
|
25
|
|
|
201
|
|
||
Total deferred tax assets
|
2,463
|
|
|
1,736
|
|
||
Deferred tax liabilities:
|
|
|
|
|
|
||
Prepaid expenses
|
(146
|
)
|
|
(69
|
)
|
||
Property and equipment
|
(50
|
)
|
|
(262
|
)
|
||
Investments
|
(1,124
|
)
|
|
(1,049
|
)
|
||
Total deferred tax liabilities
|
(1,320
|
)
|
|
(1,380
|
)
|
||
Valuation allowance
|
(2,185
|
)
|
|
(1,031
|
)
|
||
Net deferred tax liabilities
|
$
|
(1,042
|
)
|
|
$
|
(675
|
)
|
|
December 29, 2012
|
|
December 31, 2011
|
||||
Current assets
|
$
|
—
|
|
|
$
|
173
|
|
Non-current assets
|
25
|
|
|
27
|
|
||
Current liabilities
|
(146
|
)
|
|
—
|
|
||
Non-current liabilities
|
(921
|
)
|
|
(875
|
)
|
||
|
$
|
(1,042
|
)
|
|
$
|
(675
|
)
|
|
For the fiscal year ended
|
||||
|
December 29, 2012
|
|
December 31, 2011
|
||
Expected dividend yield
|
—
|
|
|
—
|
|
Expected stock price volatility
|
95.46
|
%
|
|
97.46
|
%
|
Risk-free interest rate
|
1.80
|
%
|
|
2.93
|
%
|
Expected life of options (years)
|
10.00
|
|
|
8.85
|
|
|
Options
Outstanding |
|
Weighted
Average Exercise Price |
|||
Balance at January 1, 2011
|
552
|
|
|
$
|
3.87
|
|
Granted
|
73
|
|
|
4.45
|
|
|
Exercised
|
(34
|
)
|
|
3.38
|
|
|
Cancelled/expired
|
(3
|
)
|
|
4.76
|
|
|
Balance at December 31, 2011
|
588
|
|
|
3.99
|
|
|
Granted
|
38
|
|
|
4.04
|
|
|
Exercised
|
(29
|
)
|
|
3.03
|
|
|
Cancelled/expired
|
(59
|
)
|
|
5.25
|
|
|
Forfeited
|
(5
|
)
|
|
4.25
|
|
|
Balance at December 29, 2012
|
533
|
|
|
$
|
3.88
|
|
Range of Exercise Prices
|
Options
Outstanding |
|
Weighted Average Remaining Contractual Life
|
|
Weighted
Average Exercise Price |
|
Aggregate Intrinsic Value
|
|||||
$5.05 to $6.41
|
169
|
|
|
2.57
|
|
$
|
5.40
|
|
|
|
||
$3.55 to $4.69
|
191
|
|
|
6.72
|
|
4.01
|
|
|
|
|||
$2.22 to $2.80
|
138
|
|
|
3.28
|
|
2.35
|
|
|
|
|||
$1.87
|
35
|
|
|
5.95
|
|
1.87
|
|
|
|
|||
|
533
|
|
|
4.47
|
|
3.88
|
|
|
$
|
—
|
|
Range of Exercise Prices
|
Options Exercisable
|
|
Weighted
Average Exercise Price |
|
Aggregate Intrinsic Value
|
|||||
$5.05 to $6.41
|
169
|
|
|
$
|
5.40
|
|
|
|
||
$3.55 to $4.69
|
184
|
|
|
4.01
|
|
|
|
|||
$2.22 to $2.80
|
138
|
|
|
2.35
|
|
|
|
|||
$1.87
|
35
|
|
|
1.87
|
|
|
|
|||
|
526
|
|
|
3.88
|
|
|
$
|
—
|
|
|
For the fiscal year ended
|
||||||
|
December 29, 2012
|
|
December 31, 2011
|
||||
Revenues:
|
|
|
|
||||
Retail
|
$
|
72,360
|
|
|
$
|
74,478
|
|
Recycling
|
41,953
|
|
|
52,191
|
|
||
Total revenues
|
$
|
114,313
|
|
|
$
|
126,669
|
|
|
|
|
|
||||
Operating income (loss):
|
|
|
|
|
|
||
Retail
|
$
|
(2,645
|
)
|
|
$
|
(241
|
)
|
Recycling
|
(241
|
)
|
|
6,926
|
|
||
Unallocated corporate costs
|
(336
|
)
|
|
559
|
|
||
Total operating income (loss)
|
$
|
(3,222
|
)
|
|
$
|
7,244
|
|
|
|
|
|
||||
Assets:
|
|
|
|
|
|||
Retail
|
$
|
18,476
|
|
|
$
|
20,100
|
|
Recycling
|
18,658
|
|
|
20,537
|
|
||
Corporate assets not allocable
|
4,670
|
|
|
6,172
|
|
||
Total assets
|
$
|
41,804
|
|
|
$
|
46,809
|
|
|
|
|
|
||||
Cash capital expenditures:
|
|
|
|
|
|
||
Retail
|
$
|
228
|
|
|
$
|
181
|
|
Recycling
|
332
|
|
|
1,335
|
|
||
Corporate
|
258
|
|
|
241
|
|
||
Total cash capital expenditures
|
$
|
818
|
|
|
$
|
1,757
|
|
|
|
|
|
||||
Depreciation and amortization expense:
|
|
|
|
|
|
||
Retail
|
$
|
226
|
|
|
$
|
331
|
|
Recycling
|
609
|
|
|
524
|
|
||
Corporate
|
386
|
|
|
448
|
|
||
Total depreciation and amortization expense
|
$
|
1,221
|
|
|
$
|
1,303
|
|
|
|
|
|
||||
Interest expense:
|
|
|
|
|
|||
Retail
|
$
|
377
|
|
|
$
|
299
|
|
Recycling
|
468
|
|
|
589
|
|
||
Corporate
|
298
|
|
|
250
|
|
||
Total interest expense
|
$
|
1,143
|
|
|
$
|
1,138
|
|
|
2012
|
|
2011
|
||||
Cash and cash equivalents
|
$
|
3,174
|
|
|
$
|
4,401
|
|
Working capital
|
7,631
|
|
|
11,445
|
|
||
Available borrowing under our line of credit
|
2,531
|
|
|
3,505
|
|
•
|
The Credit Agreement requires that we meet a minimum fixed charge coverage ratio of
1.10
to
1.00
, measured on a trailing
twelve
-month basis. The fixed charge coverage ratio for the twelve months ended September 29, 2012, and
December 29, 2012
, was -
1.55
to
1.00
, and -
2.06
to
1.00
, respectively. The fixed charge coverage ratio for the fiscal year ended
December 31, 2011
, was
10.10
to
1.00
.
|
•
|
The Credit Agreement provides that the outstanding balance of loans from us to AAP will not exceed specified amounts (
$800
until June 30, 2012,
$550
from July 1, 2012, through December 31, 2012, and
$300
thereafter). The outstanding balance of loans to AAP exceeded the permitted amount as of July 27, 2012 and at certain dates thereafter. As of December 29, 2012, and March 20, 2013, the outstanding balance of such loans were
$749
and
$669
, respectively.
|
•
|
We must meet monthly minimum EBITDA requirements set forth in the amendment through 2013.
|
•
|
The affiliate loan balance must be reduced by
$40
per month in 2013 and the affiliate loan balance will be capped at
$300
on January 25, 2014, and thereafter.
|
•
|
Starting on December 28, 2013, we must meet a minimum fixed charge coverage ratio of
1.10
to
1.00
for the nine months then ended and on a trailing
twelve
-month basis beginning with the period ending March 30, 2014, and each quarter thereafter.
|
•
|
The interest rate spread on our Revolving Loan and Term Loan increased 100 basis points for both PNC Base Rate loans and PNC LIBOR Rate loans. We are not eligible to borrow under PNC LIBOR Rate loans until certain Interest Rate Reduction conditions are met as set forth in the amendment. If these Interest Rate Reduction conditions are met, we will also be able to remove the 100 basis point increase for both PNC Base Rate loans and PNC LIBOR Rate loans. The earliest the Interest Rate Reduction conditions could be met is January 31, 2014.
|
•
|
A prepayment penalty will be assessed at
3%
during the first year of the third amendment to our Credit Agreement,
2%
during the second year and
1%
during the third year.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
(a)
|
|
Financial Statements, Financial Statement Schedules and Exhibits
|
|||
|
|
1
|
|
|
Financial Statements
|
|
|
|
|
See Index to Financial Statements under Item 8 of this report.
|
|
|
|
2
|
|
|
Financial Statement Schedules
|
|
|
|
|
None.
|
|
|
|
3
|
|
|
Exhibits
|
|
|
|
|
See Index to Exhibits on page 58 of this report.
|
March 22, 2013
|
APPLIANCE RECYCLING CENTERS OF AMERICA, INC. (Registrant)
|
|
|
|
|
|
By
|
/s/ Edward R. Cameron
|
|
|
Edward R. Cameron
|
|
|
President and Chief Executive Officer
|
|
|
|
|
By
|
/s/ Jeffrey A. Cammerrer
|
|
|
Jeffrey A. Cammerrer
|
|
|
Chief Financial Officer
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Edward R. Cameron
|
|
Chairman of the Board, President and
|
|
March 22, 2013
|
Edward R. Cameron
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
/s/ Jeffrey A. Cammerrer
|
|
Chief Financial Officer
|
|
March 22, 2013
|
Jeffrey A. Cammerrer
|
|
|
|
|
|
|
|
|
|
/s/ Duane S. Carlson
|
|
Director
|
|
March 22, 2013
|
Duane S. Carlson
|
|
|
|
|
|
|
|
|
|
/s/ Stanley Goldberg
|
|
Director
|
|
March 22, 2013
|
Stanley Goldberg
|
|
|
|
|
|
|
|
|
|
/s/ Steve Lowenthal
|
|
Director
|
|
March 22, 2013
|
Steve Lowenthal
|
|
|
|
|
|
|
|
|
|
/s/ Randy Pearce
|
|
Director
|
|
March 22, 2013
|
Randy Pearce
|
|
|
|
|
|
|
|
|
|
/s/ Dean R. Pickerell
|
|
Director
|
|
March 22, 2013
|
Dean R. Pickerell
|
|
|
|
|
Exhibit
No.
|
|
Description
|
3.1
|
|
Restated Articles of Incorporation of Appliance Recycling Centers of America, Inc. [filed as Exhibit 3.1 to the Company’s Form 10-K for the fiscal year ended January 2, 1999 (File No. 0-19621) and incorporated herein by reference].
|
3.2
|
|
Bylaws of Appliance Recycling Centers of America, Inc. as amended December 26, 2007 [filed as Exhibit 3.2 to the Company’s Form 8-K filed on January 2, 2008 (File No. 0-19621) and incorporated herein by reference].
|
10.1*
|
|
Amended and Restated 1997 Stock Option Plan, effective April 25, 2002 [filed as Exhibit 28.1 to Post-Effective Amendment to the Company’s Registration Statement on Form S-8 (File No. 333-28571) and incorporated herein by reference].
|
10.2*
|
|
2006 Stock Option Plan [filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No. 333-163804) and incorporated herein by reference].
|
10.3*
|
|
2011 Stock Compensation Plan [filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No. 333-176591) and incorporated herein by reference].
|
10.4
|
|
Lease Agreement for Leaseback of St. Louis Park Building [filed as Exhibit No. 10.37 to the Company’s Form 10-Q for the quarter ended October 3, 2009 (File No. 0-19621) and incorporated herein by reference].
|
10.5
|
|
Appliance Sales and Recycling Agreement dated October 21, 2009, between General Electric Company and the Company [filed as Exhibit No. 10.38 to the Company’s Form 10-K for the year ended January 2, 2010 (File No. 0-19621) and incorporated herein by reference].
|
10.6
|
|
Warrant to Purchase Common Stock of the Company for the Purchase of 248,189 shares of Common Stock in favor of General Electric Company, dated October 21, 2009 [filed as Exhibit No. 10.39 to the Company’s Form 10-K for the year ended January 2, 2010 (File No. 0-19621) and incorporated herein by reference].
|
10.7
|
|
Revolving Credit, Term Loan and Security Agreement dated January 24, 2011, between PNC Bank, National Association and the Company [filed as Exhibit No. 10.11 to the Company’s Form 10-K for the year ended January 1, 2011 (File No. 0-19621) and incorporated herein by reference].
|
10.8
|
|
Amendment No. 1, dated December 30, 2011, to Revolving Credit, Term Loan and Security Agreement dated January 24, 2011, between PNC Bank, National Association and the Company [filed as Exhibit No. 10.8 to the Company's Form 10-K for the year ended December 31, 2011 (File No. 0-19621) and incorporated herein by reference].
|
10.9
|
|
Amendment No. 2, dated March 22, 2012, to Revolving Credit, Term Loan and Security Agreement dated January 24, 2011, between PNC Bank, National Association and the Company [filed as Exhibit No. 10.1 to the Company's Form 10-Q for the quarter ended March 31, 2012 (File No. 0-19621) and incorporated herein by reference].
|
10.10+
|
|
Amendment No. 3, dated March 14, 2013, to Revolving Credit, Term Loan and Security Agreement dated January 24, 2011, between PNC Bank, National Association and the Company.
|
10.11
|
|
Term Loan dated January 24, 2011, between PNC Bank, National Association and ARCA Advanced Processing, LLC [filed as Exhibit No. 10.12 to the Company’s Form 10-K for the year ended January 1, 2011 (File No. 0-19621) and incorporated herein by reference].
|
10.12
|
|
Term Loan facility dated March 10, 2011, between Susquehanna Bank and ARCA Advanced Processing, LLC, pursuant to the guidelines of the U.S. Small Business Administration 7(a) Loan Program, including $2,100,000 term loan, $1,400,000 term loan and $1,250,000 term loan, guaranties by the Company and others, and security agreements [filed as Exhibit No. 10.13 to the Company’s Form 10-Q for the quarter ended April 2, 2011 (File No. 0-19621) and incorporated herein by reference].
|
21.1+
|
|
Subsidiaries of Appliance Recycling Centers of America, Inc.
|
23.1+
|
|
Consent of Baker Tilly Virchow Krause, LLP, Independent Registered Public Accounting Firm.
|
31.1+
|
|
Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2+
|
|
Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1†
|
|
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2†
|
|
Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101**
|
|
The following materials from our Annual Report on Form 10-K for the fiscal year ended December 29, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Shareholders’ Equity, (v) the Notes to Consolidated Financial Statements, and (vI) document and entity information.
|
*
|
|
Items that are management contracts or compensatory plans or arrangements required to be filed as an exhibit pursuant to Item 14(a)3 of this Form 10-K.
|
+
|
|
Filed herewith.
|
†
|
|
Furnished herewith.
|
|
|
Portions of this exhibit have been omitted pursuant to a request for confidential treatment.
|
**
|
|
Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filings.
|
Time Period
|
Maximum amount of loans to
AAP Joint Venture
|
From the Third Amendment Date
through and including March 29, 2013
|
$709,000
|
From March 30, 2013, through and
including April 26, 2013
|
$669,000
|
From April 27, 2013, through and
including May 24, 2013
|
$629,000
|
From May 25, 2013, through and
including June 28, 2013
|
$589,000
|
From June 29, 2013, through and
including July 26, 2013
|
$549,000
|
From July 27, 2013, through and
including August 23, 2013
|
$509,000
|
From August 24, 2013, through and
including September 27, 2013
|
$469,000
|
From September 28, 2013, through
and including October 25, 2013
|
$429,000
|
From October 26, 2013, through
and including November 22, 2013
|
$389,000
|
From November 23, 2013, through
and including December 27, 2013
|
$349,000
|
From December 28, 2013, through
and including January 24, 2014
|
$309,000
|
From January 25, 2014, and at all
times thereafter
|
$300,000
|
1.
|
Claim of Joseph Berta/ARCA-Canada:
In 2007, the Company entered into an agreement with AMTIM Capital for AMTIM to act as ARCA’s representative to market ARCA’s recycling services in Canada under an arrangement which pays AMTIM for revenue generated by recycling services in Canada all as more fully set forth in the agreements between the parties. A dispute has arisen between AMTIM and the Company with respect to the calculation of amounts due AMTIM pursuant to said agreements. AMTIM claims a discrepancy in the calculation of fees due to AMTIM by ARCA of more than $600,000 as of mid 2010. ARCA commenced an action in the US District Court for a determination of the parties’ rights under the agreements. AMTIM started its own action, in Ontario, against ARCA for amounts it claims it is due pursuant to the agreements. ARCA moved the Ontario Court for a stay of that action pending the US action. AMTIM requested the US District Court to stay the US action pending resolution of the Ontario action. AMTIM’s motion was denied by the US District Court and the Company thereafter obtained a default judgment against AMTIM approving the manner in which ARCA has historically calculated fees due to AMTIM. Shortly thereafter the Ontario Court dismissed ARCA’s pending motion to stay the Canadian action. ARCA is currently pursuing a motion to dismiss this Canadian action on the grounds that the issues between the parties have already been determined by the U.S. District Court precluding any further litigation thereof.
|
2.
|
Class Action Lawsuit Involving Energy Star Designations:
In February 2012, various individuals commenced a class action lawsuit against Whirlpool Corporation and various distributors of Whirlpool products, including Sears, Home Depot, Lowes and ARCA, alleging that certain appliances sold by Whirlpool through its distributorship chain, which includes ARCA, were improperly designated with the “Energy Star” qualification rating established by the U.S. Department of Energy and the Environmental Protection Agency. The claims against the Company include breach of warranty claims, as well as various State Consumer Protection claims. The amount of the claim is, as yet, undetermined. Whirlpool has offered to fully indemnify and defend its distributors in this lawsuit including ARCA, and has engaged defense counsel to defend itself, and its distributors, including ARCA. ARCA is monitoring Whirlpool’s defense of the claims.
|
3.
|
Claim of Georgia Landlord involving Conyers Lease
: Civil Action File Number 2013CV227687, in the Superior Court of Fulton County, Georgia. Claim for breach of settlement agreement regarding lease dated 10/24/08 by and between Centro GA Conyers
|
4.
|
Claim of Georgia Landlord Involving Norcross Lease
. Claim for breach of lease dated 8/11/03 by and between Shaheen & Company (Landlord) and ARCA (Tenant), as amended, regarding property located at 6588 Dawson Blvd., Norcross, Georgia. This lease runs through October 31, 2013, and the remaining rent due is approximately $165,000.00. If suit is filed, ARCA would also be responsible for payment of Landlord’s attorney’s fees, in the amount of approximately $25,000.00. No litigation has yet been filed.
|
Name
|
Jurisdiction of Incorporation
|
ApplianceSmart, Inc.
|
Minnesota
|
ARCA Recycling, Inc
|
California
|
ARCA Canada Inc
|
Ontario, Canada
|
ARCA Advanced Processing, LLC
|
Minnesota
|
1.
|
I have reviewed this Annual Report on Form 10-K of Appliance Recycling Centers of America, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;
|
4.
|
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
1.
|
I have reviewed this Annual Report on Form 10-K of Appliance Recycling Centers of America, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;
|
4.
|
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|