ý
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
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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Registrant’s telephone number, including area code:
952-930-9000
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Common Stock, without par value
Title of each class
|
|
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.
|
BUSINESS
|
1.
|
Retail sales of appliances at our ApplianceSmart stores.
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2.
|
Fees charged for collecting and recycling appliances for utilities and other sponsors of energy efficiency programs.
|
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.
|
4.
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Selling byproduct materials, such as metals, from appliances that we recycle, including appliances processed at our joint venture, AAP, and collected through our ApplianceSmart stores.
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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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Clothes washers
|
Freezers
|
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Clothes dryers
|
Ranges/ovens
|
|
Room air conditioners
|
Dishwashers
|
|
Dehumidifiers
|
Microwave ovens
|
|
Humidifiers
|
1.
|
Polychlorinated biphenyls (“PCBs”), which have toxic effects on humans and animals. Although the U.S. Environmental Protection Agency (“EPA”) banned 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.
|
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, that are harmful when released into the environment.
|
1.
|
Bosch
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2.
|
Electrolux
|
3.
|
General Electric
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4.
|
Samsung
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5.
|
Whirlpool
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1.
|
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.
|
Total number of appliances expected to be processed and/or replaced.
|
2.
|
Length of the contract term.
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3.
|
Specific services the utility selects us to provide.
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4.
|
Market factors, including labor rates and transportation costs.
|
|
2013
|
|
2012
|
||
Retail
|
53.1
|
%
|
|
62.4
|
%
|
Recycling
|
32.7
|
|
|
22.1
|
|
Byproduct, including carbon offsets
|
14.2
|
|
|
15.5
|
|
|
100.0
|
%
|
|
100.0
|
%
|
1.
|
Existing recycling companies.
|
2.
|
Entrepreneurs entering the appliance recycling business.
|
3.
|
Management consultants.
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4.
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Major waste hauling companies.
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5.
|
Scrap metal processors.
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6.
|
National and regional new-appliance retailers.
|
1.
|
33% of our employees, including management, provide customer service, appliance collection, transportation and processing services at our recycling centers.
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2.
|
61% of our employees, including management, work in our retail stores.
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3.
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6% of our employees are corporate management and support staff.
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ITEM 1A.
|
RISK FACTORS
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ITEM 2.
|
PROPERTIES
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Market
|
|
Opening Date
|
|
Retail
Space
(Sq. Ft.)
|
|
Additional Information
|
|
Minnesota
|
|
June 1998
|
|
33,000
|
|
|
|
|
|
January 2001
|
|
24,000
|
|
|
|
|
|
October 2001
|
|
49,000
|
|
|
|
|
|
February 2003
|
|
33,000
|
|
|
|
|
|
December 2004
|
|
30,000
|
|
|
(Also has 29,000 square feet of warehouse space)
|
|
|
December 2008
|
|
31,000
|
|
|
|
|
|
November 2011
|
|
24,000
|
|
|
|
|
|
August 2012
|
|
28,000
|
|
|
|
Ohio
|
|
June 1997
|
|
20,000
|
|
|
|
|
|
May 2001
|
|
32,000
|
|
|
|
|
|
March 2002
|
|
30,000
|
|
|
|
|
|
December 2007
|
|
30,000
|
|
|
|
Georgia
|
|
November 2004
|
|
30,000
|
|
|
(Also has 58,000 square feet of production/warehouse space)
|
|
|
December 2006
|
|
46,000
|
|
|
|
|
|
December 2008
|
|
33,000
|
|
|
|
|
|
November 2009
|
|
28,000
|
|
|
|
Texas
|
|
October 2005
|
|
37,000
|
|
|
(Includes production/recycling space)
|
|
|
September 2008
|
|
30,000
|
|
|
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR OUR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
High
|
|
Low
|
||||
2013
|
|
|
|
|
|
||
First Quarter
|
$
|
1.60
|
|
|
$
|
1.20
|
|
Second Quarter
|
2.63
|
|
|
1.35
|
|
||
Third Quarter
|
3.04
|
|
|
2.30
|
|
||
Fourth Quarter
|
3.63
|
|
|
2.86
|
|
||
|
|
|
|
||||
2012
|
|
|
|
|
|
||
First Quarter
|
$
|
6.25
|
|
|
$
|
4.34
|
|
Second Quarter
|
4.69
|
|
|
3.80
|
|
||
Third Quarter
|
4.39
|
|
|
3.20
|
|
||
Fourth Quarter
|
3.34
|
|
|
1.15
|
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
Fiscal Years
|
2013
|
|
2012
|
|
2011
(a)
|
|
2010
(a)
|
|
2009
(a)
|
||||||||||
|
|
|
|
|
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|
|
|
|
||||||||||
Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenues
|
$
|
129,061
|
|
|
$
|
114,235
|
|
|
$
|
126,669
|
|
|
$
|
108,162
|
|
|
$
|
101,269
|
|
Gross profit
|
$
|
33,874
|
|
|
$
|
29,320
|
|
|
$
|
36,735
|
|
|
$
|
32,899
|
|
|
$
|
28,377
|
|
Operating income (loss)
|
$
|
4,579
|
|
|
$
|
(3,222
|
)
|
|
$
|
7,244
|
|
|
$
|
3,069
|
|
|
$
|
(2,161
|
)
|
Net income (loss) attributable to controlling interest
|
$
|
3,318
|
|
|
$
|
(3,852
|
)
|
|
$
|
4,461
|
|
|
$
|
2,009
|
|
|
$
|
(3,338
|
)
|
Basic income (loss) per common share
|
$
|
0.60
|
|
|
$
|
(0.69
|
)
|
|
$
|
0.81
|
|
|
$
|
0.38
|
|
|
$
|
(0.73
|
)
|
Diluted income (loss) per common share
|
$
|
0.58
|
|
|
$
|
(0.69
|
)
|
|
$
|
0.77
|
|
|
$
|
0.37
|
|
|
$
|
(0.73
|
)
|
Basic weighted average number of common shares outstanding
|
5,562
|
|
|
5,551
|
|
|
5,497
|
|
|
5,267
|
|
|
4,578
|
|
|||||
Diluted weighted average number of common shares outstanding
|
5,742
|
|
|
5,551
|
|
|
5,821
|
|
|
5,491
|
|
|
4,578
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Working capital
|
$
|
10,629
|
|
|
$
|
7,631
|
|
|
$
|
11,445
|
|
|
$
|
1,331
|
|
|
$
|
3,719
|
|
Total assets
|
$
|
44,979
|
|
|
$
|
41,804
|
|
|
$
|
46,809
|
|
|
$
|
39,864
|
|
|
$
|
31,450
|
|
Long-term liabilities
|
$
|
6,539
|
|
|
$
|
7,643
|
|
|
$
|
8,979
|
|
|
$
|
3,841
|
|
|
$
|
4,481
|
|
Shareholders’ equity
|
$
|
15,051
|
|
|
$
|
11,638
|
|
|
$
|
15,180
|
|
|
$
|
10,208
|
|
|
$
|
5,643
|
|
Total equity
|
$
|
16,962
|
|
|
$
|
13,234
|
|
|
$
|
17,380
|
|
|
$
|
12,147
|
|
|
$
|
5,643
|
|
(a)
|
The financial information for fiscal years 2011, 2010 and 2009 has been derived from our audited consolidated financial statements, which are not contained in this filing.
|
|
Fiscal 2013
|
||||||||||||||
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
||||||||
Total revenues
|
$
|
30,424
|
|
|
$
|
32,273
|
|
|
$
|
33,538
|
|
|
$
|
32,826
|
|
Gross profit
|
$
|
7,910
|
|
|
$
|
8,495
|
|
|
$
|
9,093
|
|
|
$
|
8,376
|
|
Operating income
|
$
|
425
|
|
|
$
|
1,200
|
|
|
$
|
1,802
|
|
|
$
|
1,152
|
|
Net income
|
$
|
129
|
|
|
$
|
726
|
|
|
$
|
1,262
|
|
|
$
|
1,516
|
|
Net income attributable to controlling interest
|
$
|
184
|
|
|
$
|
768
|
|
|
$
|
1,134
|
|
|
$
|
1,232
|
|
Basic income per common share
|
$
|
0.03
|
|
|
$
|
0.14
|
|
|
$
|
0.20
|
|
|
$
|
0.22
|
|
Diluted income per common share
|
$
|
0.03
|
|
|
$
|
0.13
|
|
|
$
|
0.20
|
|
|
$
|
0.21
|
|
Basic weighted average number of common shares outstanding
|
5,556
|
|
|
5,556
|
|
|
5,564
|
|
|
5,571
|
|
||||
Diluted weighted average number of common shares outstanding
|
5,678
|
|
|
5,709
|
|
|
5,777
|
|
|
5,832
|
|
|
Fiscal 2012
|
||||||||||||||
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
||||||||
Total revenues
|
$
|
29,444
|
|
|
$
|
29,543
|
|
|
$
|
28,728
|
|
|
$
|
26,520
|
|
Gross profit
|
$
|
7,944
|
|
|
$
|
7,937
|
|
|
$
|
7,094
|
|
|
$
|
6,345
|
|
Operating income (loss)
|
$
|
84
|
|
|
$
|
(193
|
)
|
|
$
|
(734
|
)
|
|
$
|
(2,379
|
)
|
Net loss
|
$
|
(77
|
)
|
|
$
|
(551
|
)
|
|
$
|
(1,159
|
)
|
|
$
|
(2,669
|
)
|
Net income 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
|
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
1.
|
Fees charged for collecting and recycling appliances for utilities and other sponsors of energy efficiency programs.
|
2.
|
Fees charged for recycling and replacing old appliances with new ENERGY STAR
®
appliances for energy efficiency programs sponsored by utilities.
|
3.
|
Income generated through the processing of recyclable appliances purchased at our RPCs by selling the raw material separated during the recycling process.
|
|
2013
|
|
2012
|
||
Revenues:
|
|
|
|
|
|
Retail
|
53.1
|
%
|
|
62.4
|
%
|
Recycling
|
32.7
|
|
|
22.1
|
|
Byproduct
|
14.2
|
|
|
15.5
|
|
Total revenues
|
100.0
|
|
|
100.0
|
|
Cost of revenues
|
73.8
|
|
|
74.3
|
|
Gross profit
|
26.2
|
|
|
25.7
|
|
Selling, general and administrative expenses
|
22.7
|
|
|
27.5
|
|
Impairment charge
|
—
|
|
|
0.9
|
|
Operating income (loss)
|
3.5
|
|
|
(2.7
|
)
|
Other income (expense):
|
|
|
|
|
|
Interest expense, net
|
(0.9
|
)
|
|
(1.0
|
)
|
Other income (expense), net
|
(0.1
|
)
|
|
—
|
|
Income (loss) before income taxes and noncontrolling interest
|
2.5
|
|
|
(3.7
|
)
|
Provision for (benefit of) income taxes
|
(0.3
|
)
|
|
0.1
|
|
Net income (loss)
|
2.8
|
|
|
(3.8
|
)
|
Net loss (income) attributable to noncontrolling interest
|
(0.2
|
)
|
|
0.5
|
|
Net income (loss) attributable to controlling interest
|
2.6
|
%
|
|
(3.3
|
)%
|
|
2013
|
|
2012
|
|
% Change
|
|||||
Revenues:
|
|
|
|
|
|
|
|
|
||
Retail
|
$
|
69.7
|
|
|
$
|
72.3
|
|
|
(3.7
|
)%
|
Recycling
|
59.4
|
|
|
41.9
|
|
|
41.9
|
%
|
||
Total revenues
|
$
|
129.1
|
|
|
$
|
114.2
|
|
|
13.0
|
%
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
||
Retail
|
$
|
(1.1
|
)
|
|
$
|
(2.7
|
)
|
|
59.8
|
%
|
Recycling
|
6.3
|
|
|
(0.2
|
)
|
|
2,701.7
|
%
|
||
Unallocated corporate costs
|
(0.6
|
)
|
|
(0.3
|
)
|
|
(86.6
|
)%
|
||
Total operating income (loss)
|
$
|
4.6
|
|
|
$
|
(3.2
|
)
|
|
243.8
|
%
|
•
|
Appliance replacement program revenues increased by $18.3 million compared with the prior year.
|
•
|
Recycling-only program revenues declined $1.4 million compared with the prior year.
|
•
|
Byproduct revenues included $0.6 million in carbon offset sales compared with $0.2 million in the prior year.
|
•
|
AAP revenues, excluding carbon offsets increased by $0.2 million compared with the prior year.
|
•
|
Same-store sales declined by $0.2 million compared with the prior year.
|
•
|
The full-year impact of one new store only operating for the last five months of 2012 was $1.6 million.
|
•
|
The impact of closing three stores that operated during 2012 but not 2013 was $4.0 million. We closed two stores during the fourth quarter of 2012 and one store during the second quarter of 2013.
|
•
|
The impact of higher appliance replacement volumes and better pricing for recyclable appliances by AAP resulted in a $4.1 million improvement in gross profit during 2013.
|
•
|
A goodwill impairment charge of $1.1 million was recorded in 2012 and not in 2013.
|
•
|
Operating expenses in 2013 declined by $0.9 million compared with 2012.
|
•
|
Carbon offset revenues in 2013 increased by $0.4 million compared with 2012.
|
•
|
Operating expenses declined by $1.5 million compared with 2012.
|
•
|
Gross profit increased by $0.1 million compared with 2012.
|
|
2013
|
|
2012
|
|
% Change
|
|||||
Retail
|
$
|
68.6
|
|
|
$
|
71.2
|
|
|
(3.8
|
)%
|
Recycling
|
42.2
|
|
|
25.3
|
|
|
66.9
|
%
|
||
Byproduct
|
18.3
|
|
|
17.7
|
|
|
3.4
|
%
|
||
|
$
|
129.1
|
|
|
$
|
114.2
|
|
|
13.0
|
%
|
|
2013
|
|
2012
|
|
% Change
|
|||||
Quarter 1
|
$
|
18.1
|
|
|
$
|
19.7
|
|
|
(8.6
|
)%
|
Quarter 2
|
17.8
|
|
|
19.0
|
|
|
(6.1
|
)%
|
||
Quarter 3
|
17.0
|
|
|
17.3
|
|
|
(1.6
|
)%
|
||
Quarter 4
|
15.7
|
|
|
15.2
|
|
|
3.0
|
%
|
||
|
$
|
68.6
|
|
|
$
|
71.2
|
|
|
(3.8
|
)%
|
|
2013
|
|
2012
|
|
% Change
|
|||||
Quarter 1
|
$
|
8.3
|
|
|
$
|
5.3
|
|
|
57.6
|
%
|
Quarter 2
|
10.3
|
|
|
6.2
|
|
|
66.8
|
%
|
||
Quarter 3
|
11.8
|
|
|
7.0
|
|
|
68.3
|
%
|
||
Quarter 4
|
11.8
|
|
|
6.8
|
|
|
72.4
|
%
|
||
|
$
|
42.2
|
|
|
$
|
25.3
|
|
|
66.9
|
%
|
•
|
Revenues related to carbon offset sales increased $0.4 million to $0.6 million in 2013 compared with 2012.
|
•
|
Byproduct revenues include all revenues generated by AAP. AAP revenues, excluding $0.4 million in carbon offset sales mentioned above, increased $0.2 million in 2013 to $11.4 million compared with 2012. The increase was due primarily to an 8% increase in recyclable appliances that was partially offset by a 5% decline in average steel scrap prices per gross ton.
|
|
2013
|
|
2012
|
|
% Change
|
|||||
Quarter 1
|
$
|
4.1
|
|
|
$
|
4.4
|
|
|
(8.1
|
)%
|
Quarter 2
|
4.2
|
|
|
4.4
|
|
|
(5.0
|
)%
|
||
Quarter 3
|
4.7
|
|
|
4.4
|
|
|
6.3
|
%
|
||
Quarter 4
|
5.3
|
|
|
4.5
|
|
|
20.1
|
%
|
||
|
$
|
18.3
|
|
|
$
|
17.7
|
|
|
3.4
|
%
|
4.
|
The volume of appliances we receive through our recycling contracts.
|
5.
|
The volume and price of byproduct materials.
|
6.
|
The volume and price of carbon offset sales created by the destruction of ozone-depleting refrigerants.
|
•
|
Increase in appliance replacement volumes, which partially offset a decline in appliance recycling volumes and price compression; the net impact was a gross profit increase of $3.7 million.
|
•
|
Increase in carbon offset revenues of $0.4 million.
|
•
|
Increase in AAP gross profit of $0.4 million due primarily to lower acquisition costs of recyclable appliances and improved labor efficiency.
|
|
2013
|
|
2012
|
||||
Total cash and cash equivalents provided by (used in):
|
|
|
|
|
|
||
Operating activities
|
$
|
1.8
|
|
|
$
|
0.5
|
|
Investing activities
|
(1.0
|
)
|
|
(0.8
|
)
|
||
Financing activities
|
(1.8
|
)
|
|
(1.0
|
)
|
||
Effect of exchange rates on cash and cash equivalents
|
(0.2
|
)
|
|
0.1
|
|
||
Decrease in cash and cash equivalents
|
$
|
(1.2
|
)
|
|
$
|
(1.2
|
)
|
•
|
We must meet monthly minimum EBITDA requirements set forth in the amendment through 2013. We reported EBITDA as defined by the Revolving Credit Agreement of $4,507,000 for fiscal year 2013 compared with the minimum covenant of $1,005,000.
|
•
|
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. See below for further details under the fourth amendment to the Revolving Credit Agreement.
|
•
|
Starting on December 28, 2013, we must meet a minimum fixed charge coverage ratio of
1.1
to 1.0 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. For the nine months ended December 28, 2013, we reported a fixed charge coverage ratio of 4.7 to 1.0.
|
•
|
The interest rate spread on our Revolving Loan and Term Loan increased
100
basis points for both
PNC Base Rate
loans and
1-, 2- or 3-month PNC LIBOR Rate
loans. We were not eligible to borrow under
1-, 2- or 3-month PNC LIBOR Rate
loans until certain interest rate reduction conditions were met as set forth in the amendment, which included meeting all financial covenants during 2013. 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
1-, 2- or 3-month PNC LIBOR Rate
loans. We met the interest rate reduction conditions on January 31, 2014.
|
•
|
A prepayment penalty will be assessed at
3%
during the first year of the third amendment to our Revolving Credit Agreement,
2%
during the second year and
1%
during the third year.
|
•
|
The affiliate loan balance will be held at
$469,100
until January 24, 2014, and starting in January 2014 and each month thereafter the affiliate loan balance must be reduced by
$14,100
per month until December 31, 2014. The affiliate loan balance will be capped at
$300,000
on December 31, 2014, and thereafter.
|
•
|
We were eligible to borrow under
1-, 2- or 3-month PNC LIBOR Rate
loans on November 1, 2013, if ARCA and AAP received at least
$300,000
in cash related to selling carbon offsets. On October 9, 2013, the combination of ARCA and AAP received
$516,000
in cash related to selling carbon offsets.
|
|
December 28, 2013
|
|
December 29, 2012
|
||||
Line of credit
|
$
|
9.7
|
|
|
$
|
10.6
|
|
PNC term loan
|
1.8
|
|
|
2.0
|
|
||
Susquehanna bank term loans
(1)
|
3.8
|
|
|
4.2
|
|
||
Other financing obligations and loans
(1)
|
0.7
|
|
|
0.9
|
|
||
Capital leases and other financing obligations
|
0.2
|
|
|
0.2
|
|
||
|
16.2
|
|
|
17.9
|
|
||
Less: current portion of debt
|
10.8
|
|
|
11.5
|
|
||
|
$
|
5.4
|
|
|
$
|
6.4
|
|
Contractual Obligations
|
|
Total
|
|
Less Than
One Year
|
|
1-2 Years
|
|
3-5 Years
|
|
More Than
Five Years
|
||||||||||
PNC line of credit
|
|
$
|
9.7
|
|
|
$
|
9.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
PNC term loan
|
|
1.8
|
|
|
0.3
|
|
|
0.5
|
|
|
1.0
|
|
|
—
|
|
|||||
Long-term debt obligations
|
|
4.2
|
|
|
0.5
|
|
|
1.0
|
|
|
1.1
|
|
|
1.6
|
|
|||||
Capital lease and other financing obligations
|
|
0.5
|
|
|
0.3
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|||||
Operating lease obligations
(1)
|
|
17.2
|
|
|
5.0
|
|
|
6.5
|
|
|
4.3
|
|
|
1.4
|
|
|||||
Total
|
|
$
|
33.4
|
|
|
$
|
15.8
|
|
|
$
|
8.2
|
|
|
$
|
6.4
|
|
|
$
|
3.0
|
|
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 14, 2014
|
|
December 28,
2013 |
|
December 29,
2012 |
||||
ASSETS
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
1,948
|
|
|
$
|
3,174
|
|
Accounts receivable, net of allowance of $27 and $8, respectively
|
12,278
|
|
|
6,256
|
|
||
Inventories, net of reserves of $175 and $682, respectively
|
16,654
|
|
|
17,274
|
|
||
Income taxes receivable
|
82
|
|
|
522
|
|
||
Other current assets
|
622
|
|
|
1,332
|
|
||
Deferred income tax assets
|
523
|
|
|
—
|
|
||
Total current assets
|
32,107
|
|
|
28,558
|
|
||
Property and equipment, net
|
11,424
|
|
|
12,248
|
|
||
Restricted cash
|
500
|
|
|
—
|
|
||
Other assets
|
927
|
|
|
973
|
|
||
Deferred income tax assets
|
21
|
|
|
25
|
|
||
Total assets (a)
|
$
|
44,979
|
|
|
$
|
41,804
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
5,880
|
|
|
$
|
4,957
|
|
Accrued expenses
|
4,806
|
|
|
4,310
|
|
||
Line of credit
|
9,661
|
|
|
10,559
|
|
||
Current maturities of long-term obligations
|
1,131
|
|
|
955
|
|
||
Deferred income tax liabilities
|
—
|
|
|
146
|
|
||
Total current liabilities
|
21,478
|
|
|
20,927
|
|
||
Long-term obligations, less current maturities
|
5,447
|
|
|
6,357
|
|
||
Deferred gain, net of current portion
|
—
|
|
|
365
|
|
||
Deferred income tax liabilities
|
1,092
|
|
|
921
|
|
||
Total liabilities (a)
|
28,017
|
|
|
28,570
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
—
|
|
|
—
|
|
||
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
|
|
||
Common Stock, no par value; 10,000 shares authorized; issued and outstanding: 5,571 shares and 5,556 shares, respectively
|
20,846
|
|
|
20,577
|
|
||
Accumulated deficit
|
(5,331
|
)
|
|
(8,649
|
)
|
||
Accumulated other comprehensive loss
|
(464
|
)
|
|
(290
|
)
|
||
Total shareholders’ equity
|
15,051
|
|
|
11,638
|
|
||
Noncontrolling interest
|
1,911
|
|
|
1,596
|
|
||
|
16,962
|
|
|
13,234
|
|
||
Total liabilities and shareholders’ equity
|
$
|
44,979
|
|
|
$
|
41,804
|
|
|
For the fiscal years ended
|
||||||
|
December 28,
2013 |
|
December 29,
2012 |
||||
Revenues:
|
|
|
|
|
|
||
Retail
|
$
|
68,556
|
|
|
$
|
71,234
|
|
Recycling
|
42,185
|
|
|
25,280
|
|
||
Byproduct
|
18,320
|
|
|
17,721
|
|
||
Total revenues
|
129,061
|
|
|
114,235
|
|
||
Cost of revenues
|
95,187
|
|
|
84,915
|
|
||
Gross profit
|
33,874
|
|
|
29,320
|
|
||
Selling, general and administrative expenses
|
29,295
|
|
|
31,460
|
|
||
Impairment charge
|
—
|
|
|
1,082
|
|
||
Operating income (loss)
|
4,579
|
|
|
(3,222
|
)
|
||
Other expense:
|
|
|
|
|
|||
Interest expense, net
|
(1,194
|
)
|
|
(1,139
|
)
|
||
Other expense, net
|
(90
|
)
|
|
(12
|
)
|
||
Income (loss) before income taxes and noncontrolling interest
|
3,295
|
|
|
(4,373
|
)
|
||
Provision for (benefit of) income taxes
|
(338
|
)
|
|
83
|
|
||
Net income (loss)
|
3,633
|
|
|
(4,456
|
)
|
||
Net (income) loss attributable to noncontrolling interest
|
(315
|
)
|
|
604
|
|
||
Net income (loss) attributable to controlling interest
|
$
|
3,318
|
|
|
$
|
(3,852
|
)
|
|
|
|
|
||||
Income (loss) per common share:
|
|
|
|
|
|
||
Basic
|
$
|
0.60
|
|
|
$
|
(0.69
|
)
|
Diluted
|
$
|
0.58
|
|
|
$
|
(0.69
|
)
|
|
|
|
|
||||
Weighted average common shares outstanding:
|
|
|
|
|
|||
Basic
|
5,562
|
|
|
5,551
|
|
||
Diluted
|
5,742
|
|
|
5,551
|
|
||
|
|
|
|
||||
Net income (loss)
|
$
|
3,633
|
|
|
$
|
(4,456
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
||
Effect of foreign currency translation adjustments
|
(174
|
)
|
|
71
|
|
||
Total other comprehensive income (loss), net of tax
|
(174
|
)
|
|
71
|
|
||
Comprehensive income (loss)
|
3,459
|
|
|
(4,385
|
)
|
||
Comprehensive (income) loss attributable to noncontrolling interest
|
(315
|
)
|
|
604
|
|
||
Comprehensive income (loss) attributable to controlling interest
|
$
|
3,144
|
|
|
$
|
(3,781
|
)
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
Other
|
|
|
|
|
|
|
|||||||||||
|
Common Stock
|
|
Comprehensive
|
|
Accumulated
|
|
Noncontrolling
|
|
|
|||||||||||||
|
Shares
|
|
Amount
|
|
Income (Loss)
|
|
Deficit
|
|
Interest
|
|
Total
|
|||||||||||
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
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
3,318
|
|
|
315
|
|
|
3,633
|
|
|||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
(174
|
)
|
|
—
|
|
|
—
|
|
|
(174
|
)
|
|||||
Issuance of Common Stock
|
15
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36
|
|
|||||
Share-based compensation
|
—
|
|
|
233
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
233
|
|
|||||
Balance at December 28, 2013
|
5,571
|
|
|
$
|
20,846
|
|
|
$
|
(464
|
)
|
|
$
|
(5,331
|
)
|
|
$
|
1,911
|
|
|
$
|
16,962
|
|
|
For the fiscal years ended
|
||||||
|
December 28,
2013 |
|
December 29,
2012 |
||||
Operating activities
|
|
|
|
||||
Net income (loss)
|
$
|
3,633
|
|
|
$
|
(4,456
|
)
|
Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
1,369
|
|
|
1,221
|
|
||
Impairment charge
|
—
|
|
|
1,082
|
|
||
Share-based compensation
|
233
|
|
|
153
|
|
||
Amortization of deferred financing costs
|
131
|
|
|
197
|
|
||
Amortization of deferred gain
|
(488
|
)
|
|
(488
|
)
|
||
Reversal of deferred income tax valuation allowance
|
(1,200
|
)
|
|
—
|
|
||
Deferred income taxes
|
703
|
|
|
367
|
|
||
Other
|
83
|
|
|
38
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable
|
(6,018
|
)
|
|
1,178
|
|
||
Inventories
|
620
|
|
|
1,182
|
|
||
Income taxes receivable
|
440
|
|
|
(130
|
)
|
||
Other current assets
|
711
|
|
|
(304
|
)
|
||
Other assets
|
(34
|
)
|
|
20
|
|
||
Accounts payable and accrued expenses
|
1,557
|
|
|
491
|
|
||
Net cash flows provided by operating activities
|
1,740
|
|
|
551
|
|
||
|
|
|
|
||||
Investing activities
|
|
|
|
|
|
||
Purchases of property and equipment
|
(501
|
)
|
|
(818
|
)
|
||
Increase in restricted cash
|
(500
|
)
|
|
—
|
|
||
Proceeds from sale of property and equipment
|
10
|
|
|
—
|
|
||
Net cash flows used in investing activities
|
(991
|
)
|
|
(818
|
)
|
||
|
|
|
|
||||
Financing activities
|
|
|
|
|
|
||
Net payments under line of credit
|
(898
|
)
|
|
(126
|
)
|
||
Payments on debt obligations
|
(1,032
|
)
|
|
(990
|
)
|
||
Proceeds from issuance of debt obligations
|
220
|
|
|
—
|
|
||
Payment of deferred financing costs
|
(129
|
)
|
|
—
|
|
||
Proceeds from issuance of Common Stock
|
36
|
|
|
86
|
|
||
Net cash flows used in financing activities
|
(1,803
|
)
|
|
(1,030
|
)
|
||
|
|
|
|
||||
Effect of changes in exchange rate on cash and cash equivalents
|
(172
|
)
|
|
70
|
|
||
|
|
|
|
||||
Decrease in cash and cash equivalents
|
(1,226
|
)
|
|
(1,227
|
)
|
||
Cash and cash equivalents at beginning of year
|
3,174
|
|
|
4,401
|
|
||
Cash and cash equivalents at end of year
|
$
|
1,948
|
|
|
$
|
3,174
|
|
|
For the fiscal years ended
|
||||||
|
December 28,
2013 |
|
December 29,
2012 |
||||
Supplemental disclosures of cash flow information
|
|
|
|
|
|
||
Cash payments for interest
|
$
|
966
|
|
|
$
|
935
|
|
Cash refunds for income taxes
|
$
|
(274
|
)
|
|
$
|
(154
|
)
|
|
|
|
|
||||
Non-cash investing and financing activities
|
|
|
|
|
|
||
Equipment acquired under financing obligations and capital leases
|
$
|
78
|
|
|
$
|
159
|
|
Repayment of debt from trade-in of equipment
|
$
|
—
|
|
|
$
|
87
|
|
|
December 28,
2013 |
|
December 29,
2012 |
||||
Appliances held for resale
|
$
|
16,449
|
|
|
$
|
17,768
|
|
Processed metals to be sold from recycled appliances
|
380
|
|
|
188
|
|
||
Less provision for inventory obsolescence
|
(175
|
)
|
|
(682
|
)
|
||
|
$
|
16,654
|
|
|
$
|
17,274
|
|
|
Useful Life (Years)
|
|
December 28,
2013 |
|
December 29,
2012 |
||||
Land
|
—
|
|
$
|
1,140
|
|
|
$
|
1,140
|
|
Buildings and improvements
|
18-30
|
|
3,273
|
|
|
3,429
|
|
||
Equipment (including computer software)
|
3-15
|
|
20,561
|
|
|
20,158
|
|
||
Projects under construction
|
—
|
|
63
|
|
|
63
|
|
||
|
|
|
25,037
|
|
|
24,790
|
|
||
Less accumulated depreciation and amortization
|
|
|
(13,613
|
)
|
|
(12,542
|
)
|
||
|
|
|
$
|
11,424
|
|
|
$
|
12,248
|
|
Fiscal year 2014
|
$
|
111
|
|
Fiscal year 2015
|
50
|
|
|
Fiscal year 2016
|
13
|
|
|
|
$
|
174
|
|