ý | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Minnesota (State or other jurisdiction of incorporation or organization) | 41-1454591 (I.R.S. Employer Identification No.) | |
175 Jackson Avenue North Suite 102, Minneapolis, Minnesota (Address of principal executive offices) | 55343-4565 (Zip Code) | |
Registrant’s telephone number, including area code: 952-930-9000 |
Common Stock, without par value Title of each class | NASDAQ Capital Market Name of each exchange on which registered |
Large accelerated filer o | Accelerated filer o | |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
Page | ||
ITEM 1. | BUSINESS |
1. | Retail sales of appliances at our ApplianceSmart stores. |
2. | Fees charged for collecting and recycling appliances for utilities and other sponsors of energy efficiency programs. |
3. | Fees charged for recycling and replacing old appliances with new ENERGY STAR® appliances for energy efficiency programs sponsored by electric and gas utilities. |
4. | Sale of byproduct materials, such as metals, from appliances we recycle, including appliances processed at our joint venture, AAP, and collected through our ApplianceSmart stores. |
5. | Sale of carbon offsets created by the destruction of ozone-depleting refrigerants acquired through various recycling programs. |
Refrigerators | Clothes washers | |
Freezers | 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. |
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. |
3. | Chlorofluorocarbon ("CFC"), hydrochlorofluorocarbon, and hydrofluorocarbon refrigerants (collectively, “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 Refrigerants. |
4. | 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. |
5. | Other materials, such as oil, that are harmful when released into the environment. |
1. | Bosch |
2. | Electrolux |
3. | General Electric |
4. | LG |
5. | Samsung |
6. | Whirlpool |
1. | We have no guarantees for the number or type of appliances that we have to purchase. |
2. | The agreements may be terminated by either party with 30 days’ prior written notice. |
3. | We have agreed to indemnify certain manufacturers for certain claims, allegations or losses concerning the appliances we sell. |
1. | Total number of appliances expected to be processed and/or replaced. |
2. | Length of the contract term. |
3. | Specific services the utility requires us to provide. |
4. | Market factors, including labor rates and transportation costs. |
5. | Anticipated revenue associated with the sale of recycled appliance byproducts. |
6. | Competitive bidding scenarios. |
2015 | 2014 | ||||
Retail | 58.7 | % | 51.2 | % | |
Recycling | 32.1 | 35.1 | |||
Byproduct, including carbon offsets | 9.2 | 13.7 | |||
100.0 | % | 100.0 | % |
1. | Existing recycling companies. |
2. | Entrepreneurs entering the appliance recycling business. |
3. | Management consultants. |
4. | Major waste hauling companies. |
5. | Scrap metal processors. |
6. | National and regional new appliance retailers. |
1. | 38% of our employees, including management, provide customer service, appliance collection, transportation and processing services at our recycling centers. |
2. | 52% of our employees, including management, work in our retail stores. |
3. | 10% of our employees are corporate management and support staff. |
ITEM 1A. | RISK FACTORS |
• | Our employees, customers or investors may not embrace and support our strategy. |
• | We may not be able to hire or retain the personnel necessary to manage our strategy effectively. |
• | We may be unsuccessful in implementing improvements to operational efficiency and such efforts may not yield the intended result. |
• | We may record material charges against earnings due to any number of events that could cause impairments to our assets. |
• | Lower pricing. |
• | More aggressive advertising and marketing. |
• | Enhanced product and service offerings. |
• | Extension of credit to customers on terms more favorable than we make available. |
• | Changes in competition, such as pricing pressure, and the opening of new stores by competitors in our markets. |
• | Periodic sale of carbon offsets resulting from the responsible destruction of certain refrigerants. |
• | Inability to comply with or to identify third parties capable of complying with protocols required for responsible destruction of certain refrigerants. |
• | Fluctuating commodity prices and available markets for our byproduct sales. |
• | Changes in recycling and replacement programs with utility customers. |
• | General economic conditions. |
• | Consumer trends. |
• | Weather conditions in our markets. |
• | Timing of promotional events. |
• | The locations of our stores and traffic drawn to those areas. |
• | Our ability to execute our business strategies effectively. |
• | Consumer confidence in the economy. |
• | Unemployment trends. |
• | Consumer debt levels. |
• | Consumer credit availability. |
• | The housing and home improvement markets. |
• | Gasoline and fuel prices. |
• | Interest rates and inflation. |
• | Foreign currency exchange rates. |
• | Slower rates of growth in real disposable personal income. |
• | Natural disasters. |
• | National and geopolitical concerns. |
• | Tax rates and tax policy. |
• | Other matters that influence consumer confidence and spending. |
• | Commodity prices. |
• | The difficulty of complying with sometimes conflicting statutes and regulations in local, state and national jurisdictions; |
• | The impact of proposed, new or changing statues and regulations, including, but not limited to, corporate governance matters, environmental impact, financial reform, Health Insurance Portability and Accounting Act, health care reform, labor reform, Payment Card Industry compliance, and/or other as yet unknown legislation that could affect how we operate and execute our strategies as well as alter our expense structure. |
• | The impact of changes in tax laws (or interpretations thereof by courts and taxing authorities) and accounting standards. |
• | The impact of litigation, including class action or individual lawsuits involving shareholders, and labor and employment litigation related matters. |
• | Changes in trade regulations, currency fluctuations, economic or political instability, natural disasters, public health emergencies and other factors beyond our control may increase the cost of items we purchase or create shortages of these items, which in turn could have a material adverse effect on our cost of revenues, or may force us to increase prices, thereby adversely impacting net sales and profitability. |
• | Variations in our financial results. |
• | Changes in accounting standards, policies, guidance or interpretations. |
• | Sales of substantial amounts of our stock by existing shareholders. |
• | General economic conditions. |
ITEM 2. | PROPERTIES |
Market | Stores | |
Minnesota | 8 | |
Ohio | 4 | |
Georgia | 4 | |
Texas | 2 | |
Total | 18 |
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 | ||||||
2015 | |||||||
First Quarter | $ | 3.03 | $ | 1.96 | |||
Second Quarter | 2.14 | 1.74 | |||||
Third Quarter | 1.89 | 1.04 | |||||
Fourth Quarter | 1.25 | 0.61 | |||||
2014 | |||||||
First Quarter | $ | 3.32 | $ | 2.80 | |||
Second Quarter | 4.20 | 2.68 | |||||
Third Quarter | 4.23 | 2.79 | |||||
Fourth Quarter | 2.95 | 2.56 |
ITEM 6. | SELECTED FINANCIAL DATA |
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. |
2015 | 2014 | ||||
Revenues: | |||||
Retail | 58.7 | % | 51.2 | % | |
Recycling | 32.1 | 35.1 | |||
Byproduct | 9.2 | 13.7 | |||
Total revenues | 100.0 | 100.0 | |||
Cost of revenues | 77.2 | 74.9 | |||
Gross profit | 22.8 | 25.1 | |||
Selling, general and administrative expenses | 26.4 | 23.1 | |||
Operating income (loss) | (3.6 | ) | 2.0 | ||
Other income (expense): | |||||
Interest expense, net | (1.2 | ) | (0.8 | ) | |
Other income (expense), net | (0.2 | ) | — | ||
Income (loss) before income taxes and noncontrolling interest | (5.0 | ) | 1.2 | ||
Provision for (benefit of) income taxes | (1.6 | ) | 0.5 | ||
Net income (loss) | (3.4 | ) | 0.7 | ||
Net income (loss) attributable to noncontrolling interest | 1.1 | — | |||
Net income (loss) attributable to controlling interest | (2.3 | )% | 0.7 | % |
2015 | 2014 | % Change | ||||||||
Revenues: | ||||||||||
Retail | $ | 66.2 | $ | 68.0 | (2.6 | )% | ||||
Recycling | 45.6 | 62.9 | (27.5 | )% | ||||||
Total revenues | $ | 111.8 | $ | 130.9 | (14.6 | )% | ||||
Gross profit: | ||||||||||
Retail | $ | 17.5 | $ | 17.9 | (2.2 | )% | ||||
% of revenues | 26.4 | % | 26.3 | % | ||||||
Recycling | $ | 7.9 | $ | 14.9 | (46.7 | )% | ||||
% of revenues | 17.4 | % | 23.7 | % | ||||||
Total gross profit | $ | 25.4 | $ | 32.8 | (22.6 | )% | ||||
% of revenues | 22.8 | % | 25.1 | % | ||||||
Operating income (loss): | ||||||||||
Retail | $ | (1.8 | ) | $ | (1.8 | ) | (2.9 | )% | ||
Recycling | (1.7 | ) | 5.0 | (133.5 | )% | |||||
Unallocated corporate costs | (0.6 | ) | (0.7 | ) | 4.9 | % | ||||
Operating income (loss) | $ | (4.1 | ) | $ | 2.5 | (264.0 | )% |
• | Same-store sales declined by $1.4 million compared with the prior year. Sales were lower in fiscal 2015 as there were 52 weeks as compared with 53 weeks in fiscal 2014. |
• | Byproduct revenues from our retail segment activity declined $0.4 million compared to the prior year. |
• | Appliance replacement program revenues decreased by $9.6 million compared with the prior year. |
• | Recycling-only program revenues declined $0.5 million compared with the prior year. |
• | Carbon offset revenues decreased $0.1 million in 2015. |
• | Other byproduct revenues from our recycling segment activity declined by $2.8 million compared to the prior year. |
• | AAP revenues, excluding carbon offsets, decreased by $4.3 million compared with the prior year. |
• | Operating profit for the retail segment was consistent with approximately $1.8 million loss in both 2015 and 2014. |
• | Other operating expenses declined $0.4 million in 2015 when compared with 2014, primarily the result lower advertising and retail store expenses. |
• | Gross profit decreased by $0.4 million compared with 2014, primarily the result of one less week of sales in 2015, lower byproduct revenues, higher costs associated with store remodels and relocations, offset somewhat by higher warranty revenues. |
• | Operating profit for the recycling segment declined $6.7 million to a loss of $1.7 million in 2015 from a profit of $5.0 million in 2014. |
• | The impact of lower appliance replacement volumes and appliance recycling-only programs for ARCA resulted in a $1.3 million reduction in gross profit during 2015. |
• | Byproduct revenues declined by $2.9 million for ARCA. |
• | Carbon offset revenues in 2015 decreased by $0.2 million compared with 2014. |
• | Gross profit for AAP decreased $2.6 million compared to 2014 as a result of declines in byproduct revenues resulting from reduced volumes processed and pricing of the products that AAP sells. |
• | Other operating expense reductions of $0.3 million favorably impacted operating profit in 2015 when compared to 2014. |
2015 | 2014 | % Change | ||||||||
Retail | $ | 65.6 | $ | 67.0 | (2.1 | )% | ||||
Recycling | 35.9 | 45.9 | (21.9 | )% | ||||||
Byproduct | 10.3 | 18.0 | (42.6 | )% | ||||||
$ | 111.8 | $ | 130.9 | (14.6 | )% |
• | Revenues related to carbon offset sales decreased $0.2 million to $0.8 million in 2015 compared with 2014. |
• | Byproduct revenues include all revenues generated by AAP. AAP revenues, excluding $0.3 million in carbon offset sales mentioned above, decreased $4.3 million in 2015, to $6.5 million, compared with 2014. The decrease was due primarily to declines in average steel and non-ferrous metal scrap prices per gross ton and a reduction in the number of appliances processed. |
4. | The volume of appliances we receive through our recycling and replacement 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. |
• | The impact of lower appliance replacement volumes and appliance recycling-only programs for ARCA resulted in a $1.3 million reduction in gross profit during 2015. |
• | Byproduct revenues declined by $2.9 million for ARCA. |
• | Carbon offset revenues in 2015 decreased by $0.2 million compared with 2014. |
• | Gross profit for AAP decreased $2.6 million compared to 2014 as a result in declines in byproduct revenues resulting from reduced volumes processed and pricing of the products that AAP sells. |
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 |
April 1, 2016 |
January 2, 2016 | January 3, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,969 | $ | 3,523 | |||
Accounts receivable, net of allowance of $73 and $106, respectively | 11,536 | 10,954 | |||||
Inventories | 16,733 | 16,113 | |||||
Income taxes receivable | 1,126 | 709 | |||||
Other current assets | 1,350 | 1,096 | |||||
Deferred income tax assets | 1,657 | 2,082 | |||||
Total current assets | 34,371 | 34,477 | |||||
Property and equipment, net | 10,985 | 11,761 | |||||
Restricted cash | 500 | — | |||||
Other assets | 663 | 708 | |||||
Deferred income tax assets | 327 | 14 | |||||
Total assets (a) | $ | 46,846 | $ | 46,960 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 7,019 | $ | 6,380 | |||
Accrued expenses | 8,934 | 8,133 | |||||
Line of credit | 12,668 | 9,237 | |||||
Current maturities of long-term obligations | 1,251 | 1,138 | |||||
Total current liabilities | 29,872 | 24,888 | |||||
Long-term obligations, less current maturities | 4,573 | 5,118 | |||||
Other noncurrent liabilities | 357 | 369 | |||||
Deferred income tax liabilities | — | 1,048 | |||||
Total liabilities (a) | 34,802 | 31,423 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Common Stock, no par value; 10,000 shares authorized; issued and outstanding: 5,901 shares and 5,788 shares, respectively | 21,466 | 21,137 | |||||
Accumulated deficit | (9,577 | ) | (6,860 | ) | |||
Accumulated other comprehensive loss | (565 | ) | (675 | ) | |||
Total shareholders’ equity | 11,324 | 13,602 | |||||
Noncontrolling interest | 720 | 1,935 | |||||
12,044 | 15,537 | ||||||
Total liabilities and shareholders’ equity | $ | 46,846 | $ | 46,960 |
For the fiscal years ended | |||||||
January 2, 2016 | January 3, 2015 | ||||||
Revenues: | |||||||
Retail | $ | 65,637 | $ | 67,023 | |||
Recycling | 35,878 | 45,914 | |||||
Byproduct | 10,324 | 17,993 | |||||
Total revenues | 111,839 | 130,930 | |||||
Cost of revenues | 86,391 | 98,120 | |||||
Gross profit | 25,448 | 32,810 | |||||
Selling, general and administrative expenses | 29,552 | 30,259 | |||||
Operating income (loss) | (4,104 | ) | 2,551 | ||||
Other expense: | |||||||
Interest expense, net | (1,292 | ) | (996 | ) | |||
Other expense, net | (250 | ) | (46 | ) | |||
Income (loss) before income taxes and noncontrolling interest | (5,646 | ) | 1,509 | ||||
Provision for (benefit of) income taxes | (1,714 | ) | 714 | ||||
Net income (loss) | (3,932 | ) | 795 | ||||
Net income (loss) attributable to noncontrolling interest | 1,215 | (24 | ) | ||||
Net income (loss) attributable to controlling interest | $ | (2,717 | ) | $ | 771 | ||
Income (loss) per common share: | |||||||
Basic | $ | (0.47 | ) | $ | 0.14 | ||
Diluted | $ | (0.47 | ) | $ | 0.13 | ||
Weighted average common shares outstanding: | |||||||
Basic | 5,833 | 5,676 | |||||
Diluted | 5,833 | 5,780 | |||||
Net income (loss) | $ | (3,932 | ) | $ | 795 | ||
Other comprehensive income (loss), net of tax: | |||||||
Effect of foreign currency translation adjustments | 110 | (197 | ) | ||||
Total other comprehensive income (loss), net of tax | 110 | (197 | ) | ||||
Comprehensive income (loss) | (3,822 | ) | 598 | ||||
Comprehensive income (loss) attributable to noncontrolling interest | 1,215 | (24 | ) | ||||
Comprehensive income (loss) attributable to controlling interest | $ | (2,607 | ) | $ | 574 |
Accumulated | ||||||||||||||||||||||
Other | ||||||||||||||||||||||
Common Stock | Comprehensive | Accumulated | Noncontrolling | |||||||||||||||||||
Shares | Amount | Loss | Deficit | Interest | Total | |||||||||||||||||
Balance at December 28, 2013 | 5,571 | $ | 20,846 | $ | (478 | ) | $ | (7,631 | ) | $ | 1,911 | $ | 14,648 | |||||||||
Net income | — | — | — | 771 | 24 | 795 | ||||||||||||||||
Other comprehensive loss, net of tax | — | — | (197 | ) | — | — | (197 | ) | ||||||||||||||
Issuance of Common Stock | 217 | 24 | — | — | — | 24 | ||||||||||||||||
Share-based compensation | — | 267 | — | — | — | 267 | ||||||||||||||||
Balance at January 3, 2015 | 5,788 | 21,137 | (675 | ) | (6,860 | ) | 1,935 | 15,537 | ||||||||||||||
Net loss | — | — | — | (2,717 | ) | (1,215 | ) | (3,932 | ) | |||||||||||||
Other comprehensive loss, net of tax | — | — | 110 | — | — | 110 | ||||||||||||||||
Issuance of Common Stock | 13 | 24 | — | — | — | 24 | ||||||||||||||||
Tax deficiency related to share-based compensation | — | (11 | ) | — | — | — | (11 | ) | ||||||||||||||
Share-based compensation | 100 | 316 | — | — | — | 316 | ||||||||||||||||
Balance at January 2, 2016 | 5,901 | $ | 21,466 | $ | (565 | ) | $ | (9,577 | ) | $ | 720 | $ | 12,044 |
For the fiscal years ended | |||||||
January 2, 2016 | January 3, 2015 | ||||||
Operating activities | |||||||
Net income (loss) | $ | (3,932 | ) | $ | 795 | ||
Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by operating activities: | |||||||
Depreciation and amortization | 1,270 | 1,355 | |||||
Share-based compensation | 316 | 267 | |||||
Amortization of deferred financing costs | 107 | 104 | |||||
Amortization of deferred gain | — | (365 | ) | ||||
Deferred income taxes | (612 | ) | (313 | ) | |||
Other | (5 | ) | 82 | ||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (584 | ) | 1,232 | ||||
Inventories | (620 | ) | 541 | ||||
Income taxes receivable | (414 | ) | (627 | ) | |||
Other current assets | 66 | (474 | ) | ||||
Other assets | — | 35 | |||||
Accounts payable and accrued expenses | 999 | 963 | |||||
Net cash flows (used in) provided by operating activities | (3,409 | ) | 3,595 | ||||
Investing activities | |||||||
Purchases of property and equipment | (404 | ) | (818 | ) | |||
Decrease (increase) in restricted cash | (500 | ) | 500 | ||||
Proceeds from sale of property and equipment | 7 | 16 | |||||
Other | (52 | ) | — | ||||
Net cash flows used in investing activities | (949 | ) | (302 | ) | |||
Financing activities | |||||||
Net borrowings (payments) under line of credit | 3,431 | (424 | ) | ||||
Payments on debt obligations | (757 | ) | (1,123 | ) | |||
Proceeds from issuance of debt obligations | 325 | — | |||||
Tax deficiency related to share-based compensation | (11 | ) | — | ||||
Proceeds from issuance of common stock | 24 | 24 | |||||
Net cash flows provided by (used in) financing activities | 3,012 | (1,523 | ) | ||||
Effect of changes in exchange rate on cash and cash equivalents | (208 | ) | (195 | ) | |||
Increase (decrease) in cash and cash equivalents | (1,554 | ) | 1,575 | ||||
Cash and cash equivalents at beginning of year | 3,523 | 1,948 | |||||
Cash and cash equivalents at end of year | $ | 1,969 | $ | 3,523 |
For the fiscal years ended | |||||||
January 2, 2016 | January 3, 2015 | ||||||
Supplemental disclosures of cash flow information | |||||||
Cash payments for interest | $ | 970 | $ | 885 | |||
Cash payments (refunds) for income taxes | $ | (694 | ) | $ | 1,660 | ||
Non-cash investing and financing activities | |||||||
Equipment acquired under financing obligations and capital leases | $ | — | $ | 801 |
January 2, 2016 | January 3, 2015 | ||||||
Appliances held for resale | $ | 16,360 | $ | 15,511 | |||
Processed metals to be sold from recycled appliances | 367 | 571 | |||||
Other | 6 | 31 | |||||
$ | 16,733 | $ | 16,113 |
Useful Life (Years) | January 2, 2016 | January 3, 2015 | |||||||
Land | — | $ | 1,140 | $ | 1,140 | ||||
Buildings and improvements | 18-30 | 3,714 | 3,321 | ||||||
Equipment (including computer software) | 3-15 | 19,040 | 18,915 | ||||||
Projects under construction | — | 143 | 440 | ||||||
24,037 | 23,816 | ||||||||
Less accumulated depreciation and amortization | (13,052 | ) | (12,055 | ) | |||||
$ | 10,985 | $ | 11,761 |
Fiscal year 2016 | $ | 100 | |
Fiscal year 2017 | 64 | ||
Fiscal year 2018 | 20 | ||
$ | 184 |
For the fiscal years ended | |||||||
January 2, 2016 | January 3, 2015 | ||||||
Beginning balance | $ | 30 | $ | 34 | |||
Standard accrual based on units sold | 45 | 31 | |||||
Actual costs incurred | (16 | ) | (16 | ) | |||
Periodic accrual adjustments | (17 | ) | (19 | ) | |||
Ending balance | $ | 42 | $ | 30 |
• | Purchase of appliance inventories, including freight to and from our distribution centers. |
• | Shipping, receiving and distribution of appliance inventories to our retail stores, including employee compensation and benefits. |
• | Delivery and service of appliances, including employee compensation and benefits, after the appliances are sold to the consumer. |
• | Early payment discounts and allowances offered by appliance manufacturers. |
• | Inventory markdowns. |
• | Transportation costs, including employee compensation and benefits, related to collecting appliances for recycling and delivering appliances under our replacement programs. |
• | Purchase of appliance inventories, including freight to our recycling center warehouses, early payment discounts, and warehousing costs for appliances used in our replacement programs. |
• | Occupancy costs related to our recycling centers. |
• | Cost of recyclable appliances purchased under our GE contract. |
• | Processing costs, including employee compensation and benefits, related to recycling and processing appliances. |
• | Employee compensation and benefits related to management, corporate services, and retail sales; |
• | Outside and outsourced corporate service fees including legal expenses and professional service fees; |
• | Occupancy costs related to our retail stores and corporate office; |
• | Advertising costs; |
• | Bank charges and costs associated with credit and debit card interchange fees; and |
• | Other administrative costs, such as supplies, travel and lodging. |
For the fiscal year ended | |||||||
January 2, 2016 | January 3, 2015 | ||||||
Numerator: | |||||||
Net income (loss) attributable to controlling interest | $ | (2,717 | ) | $ | 771 | ||
Denominator: | |||||||
Weighted average common shares outstanding - basic | 5,833 | 5,676 | |||||
Employee stock options | — | 104 | |||||
Weighted average common shares outstanding - diluted | 5,833 | 5,780 | |||||
Income (loss) per common share: | |||||||
Basic | $ | (0.47 | ) | $ | 0.14 | ||
Diluted | $ | (0.47 | ) | $ | 0.13 |
January 2, 2016 | January 3, 2015 | ||||||
Assets | |||||||
Current assets | $ | 696 | $ | 912 | |||
Property and equipment, net | 8,077 | 8,775 | |||||
Other assets | 142 | 127 | |||||
Total assets | $ | 8,915 | $ | 9,814 | |||
Liabilities | |||||||
Accounts payable | $ | 2,342 | $ | 923 | |||
Accrued expenses | 399 | 199 | |||||
Current maturities of long-term debt obligations | 946 | 795 | |||||
Long-term debt obligations, net of current maturities | 3,498 | 3,737 | |||||
Other liabilities (a) | 289 | 289 | |||||
Total liabilities | $ | 7,474 | $ | 5,943 |
For the fiscal years ended | |||||||
January 2, 2016 | January 3, 2015 | ||||||
Revenues | $ | 6,838 | $ | 11,137 | |||
Gross profit (loss) | (280 | ) | 2,461 | ||||
Operating income (loss) | (2,205 | ) | 334 |
January 2, 2016 | January 3, 2015 | ||||||
Deposits | $ | 416 | $ | 375 | |||
Recycling contract, net | 20 | 100 | |||||
Deferred financing costs, net | 67 | 174 | |||||
Other | 122 | 21 | |||||
Goodwill | 38 | 38 | |||||
$ | 663 | $ | 708 |
January 2, 2016 | January 3, 2015 | ||||||
Sales tax estimates, including interest | $ | 4,804 | $ | 4,837 | |||
Compensation and benefits | 1,446 | 1,322 | |||||
Accrued rebate and incentive checks | 293 | 381 | |||||
Accrued rent | 235 | 304 | |||||
Warranty | 42 | 30 | |||||
Accrued payables | 749 | 306 | |||||
Deferred revenue | 413 | 276 | |||||
Other | 952 | 677 | |||||
$ | 8,934 | $ | 8,133 |
January 2, 2016 | January 3, 2015 | ||||||
PNC term loan | $ | 1,275 | $ | 1,530 | |||
Susquehanna term loans | 3,242 | 3,316 | |||||
2.75% note, due in monthly installments of $3, including interest, due October 2024, collateralized by equipment | 319 | 348 | |||||
Capital leases and other financing obligations | 988 | 1,062 | |||||
5,824 | 6,256 | ||||||
Less current maturities | 1,251 | 1,138 | |||||
$ | 4,573 | $ | 5,118 |
ARCA | AAP | Total | |||||||||
Fiscal year 2016 | $ | 305 | $ | 946 | $ | 1,251 | |||||
Fiscal year 2017 | 280 | 685 | 965 | ||||||||
Fiscal year 2018 | 274 | 708 | 982 | ||||||||
Fiscal year 2019 | 266 | 661 | 927 | ||||||||
Fiscal year 2020 | 255 | 621 | 876 | ||||||||
Thereafter | — | 823 | 823 | ||||||||
$ | 1,380 | $ | 4,444 | $ | 5,824 |
ARCA | AAP | Total | |||||||||
Fiscal year 2016 | $ | 54 | $ | 511 | $ | 565 | |||||
Fiscal year 2017 | 28 | 176 | 204 | ||||||||
Fiscal year 2018 | 20 | 161 | 181 | ||||||||
Fiscal year 2019 | 11 | 76 | 87 | ||||||||
Total minimum lease and other financing obligation payments | 113 | 924 | 1,037 | ||||||||
Less amount representing interest | 8 | 41 | 49 | ||||||||
Present value of minimum payments | 105 | 883 | 988 | ||||||||
Less current portion | 50 | 492 | 542 | ||||||||
Capital lease and other financing obligations, net of current portion | $ | 55 | $ | 391 | $ | 446 |
ARCA | AAP | Total | |||||||||
Fiscal year 2016 | $ | 3,804 | $ | 462 | $ | 4,266 | |||||
Fiscal year 2017 | 3,368 | 464 | 3,832 | ||||||||
Fiscal year 2018 | 2,611 | 467 | 3,078 | ||||||||
Fiscal year 2019 | 1,578 | 488 | 2,066 | ||||||||
Fiscal year 2020 | 1,270 | 468 | 1,738 | ||||||||
Thereafter | 2,221 | 28 | 2,249 | ||||||||
$ | 14,852 | $ | 2,377 | $ | 17,229 |
For the fiscal years ended | |||||||
January 2, 2016 | January 3, 2015 | ||||||
Current tax expense (benefit): | |||||||
Federal | $ | (855 | ) | $ | 852 | ||
State | (18 | ) | 146 | ||||
Foreign | (229 | ) | 29 | ||||
Current tax expense (benefit) | $ | (1,102 | ) | $ | 1,027 | ||
Deferred tax expense — domestic | (831 | ) | (318 | ) | |||
Deferred tax expense — foreign | 219 | 5 | |||||
Provision for (benefit of) income taxes | $ | (1,714 | ) | $ | 714 |
For the fiscal years ended | |||||||
January 2, 2016 | January 3, 2015 | ||||||
Income tax expense at statutory rate | $ | (1,920 | ) | $ | 512 | ||
Portion attributable to noncontrolling interest at statutory rate | 413 | (8 | ) | ||||
State tax expense, net of federal tax effect | (288 | ) | 69 | ||||
Permanent differences | 83 | 175 | |||||
Change in valuation allowance | (7 | ) | (11 | ) | |||
Recognition of tax effect for the cumulative undistributed earnings from Canada | (16 | ) | (44 | ) | |||
Adjustment of deferred tax assets | — | 7 | |||||
Other | 21 | 14 | |||||
$ | (1,714 | ) | $ | 714 |
For the fiscal years ended | |||||||
January 2, 2016 | January 3, 2015 | ||||||
United States | $ | (5,452 | ) | $ | 1,411 | ||
Canada | (194 | ) | 98 | ||||
$ | (5,646 | ) | $ | 1,509 |
January 2, 2016 | January 3, 2015 | ||||||
Deferred tax assets: | |||||||
Net operating loss carryforwards | $ | 520 | $ | 309 | |||
Federal and state tax credits | 442 | 242 | |||||
Reserves | 218 | 246 | |||||
Accrued expenses | 1,964 | 1,963 | |||||
Share-based compensation | 352 | 348 | |||||
Accumulated other comprehensive loss | 361 | — | |||||
Property and equipment | 191 | 14 | |||||
Other | 166 | 25 | |||||
Total deferred tax assets | 4,214 | 3,147 | |||||
Deferred tax liabilities: | |||||||
Prepaid expenses | (89 | ) | (142 | ) | |||
Property and equipment | (138 | ) | (38 | ) | |||
Investments | (1,269 | ) | (1,315 | ) | |||
Other | (137 | ) | — | ||||
Total deferred tax liabilities | (1,633 | ) | (1,495 | ) | |||
Valuation allowance | (597 | ) | (604 | ) | |||
Net deferred tax assets | $ | 1,984 | $ | 1,048 |
January 2, 2016 | January 3, 2015 | ||||||
Current assets | $ | 1,657 | $ | 2,082 | |||
Non-current assets | 327 | 14 | |||||
Non-current liabilities | — | (1,048 | ) | ||||
$ | 1,984 | $ | 1,048 |
For the fiscal years ended | |||||
January 2, 2016 | January 3, 2015 | ||||
Expected dividend yield | — | — | |||
Expected stock price volatility | 84.80 | % | 83.82 | % | |
Risk-free interest rate | 2.16 | % | 2.16 | % | |
Expected life of options (years) | 10.00 | 7.55 |
Options Outstanding | Weighted Average Exercise Price | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life | ||||||||||
Balance at December 28, 2013 | 766 | $ | 3.26 | ||||||||||
Granted | 219 | 3.04 | |||||||||||
Exercised | (10 | ) | 2.38 | ||||||||||
Forfeited | (70 | ) | 2.73 | ||||||||||
Balance at January 3, 2015 | 905 | 3.25 | $ | 212 | 4.56 | ||||||||
Granted | 130 | 1.33 | |||||||||||
Exercised | (12 | ) | 1.89 | ||||||||||
Cancelled/expired | (173 | ) | 4.63 | ||||||||||
Forfeited | (70 | ) | 2.67 | ||||||||||
Balance at January 2, 2016 | 780 | $ | 2.70 | $ | — | 5.23 | |||||||
Options exercisable at January 2, 2016 | $ | 632 | $ | 2.79 | $ | — |
Fiscal year 2016 | $ | 138 | |
Fiscal year 2017 | 43 | ||
$ | 181 |
For the fiscal years ended | |||||||
January 2, 2016 | January 3, 2015 | ||||||
Revenues: | |||||||
Retail | $ | 66,225 | $ | 68,023 | |||
Recycling | 45,614 | 62,907 | |||||
Total revenues | $ | 111,839 | $ | 130,930 | |||
Operating income (loss): | |||||||
Retail | $ | (1,815 | ) | $ | (1,764 | ) | |
Recycling | (1,667 | ) | 4,969 | ||||
Unallocated corporate costs | (622 | ) | (654 | ) | |||
Total operating income | $ | (4,104 | ) | $ | 2,551 | ||
Cash capital expenditures: | |||||||
Retail | $ | 121 | $ | 443 | |||
Recycling | 43 | 132 | |||||
Corporate | 240 | 243 | |||||
Total cash capital expenditures | $ | 404 | $ | 818 | |||
Depreciation and amortization expense: | |||||||
Retail | $ | 197 | $ | 164 | |||
Recycling | 835 | 886 | |||||
Corporate | 238 | 305 | |||||
Total depreciation and amortization expense | $ | 1,270 | $ | 1,355 | |||
Interest expense: | |||||||
Retail | $ | 437 | $ | 240 | |||
Recycling | 595 | 466 | |||||
Corporate | 260 | 290 | |||||
Total interest expense | $ | 1,292 | $ | 996 | |||
As of | |||||||
January 2, 2016 | January 3, 2015 | ||||||
Assets: | |||||||
Retail | $ | 18,088 | $ | 15,778 | |||
Recycling | 22,122 | 24,019 | |||||
Corporate assets not allocable | 6,636 | 7,163 | |||||
Total assets | $ | 46,846 | $ | 46,960 | |||
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 |
(a) | (b) | (c) | |||||||
Number of Securities to be Issued Upon Exercise of Outstanding Options and Warrants | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Available for Future Issuance Under Equity Compensation Plans, Excluding Securities Reflected in Column (a) | |||||||
Equity compensation plans approved by shareholders | 780,050 | $ | 2.70 | 53,000 | |||||
Equity compensation plans not approved by shareholders | 23,500 | $ | 3.55 | — | |||||
Total | 803,550 | $ | 2.72 | 53,000 |
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 |
April 1, 2016 | APPLIANCE RECYCLING CENTERS OF AMERICA, INC. (Registrant) | |
By | /s/ Tony Isaac | |
Tony Isaac | ||
Interim Chief Executive Officer |
Signature | Title | Date | ||
Principal Executive Officer | ||||
/s/ Tony Isaac | Interim Chief Executive Officer | April 1, 2016 | ||
Tony Isaac | ||||
Principal Financial and Accounting Officer | ||||
/s/ Jeffery Ostapeic | Chief Financial Officer | April 1, 2016 | ||
Jeffery Ostapeic | ||||
Directors | ||||
/s/ Tony Isaac | Director | April 1, 2016 | ||
Tony Isaac | ||||
/s/ Richard Butler | Director | April 1, 2016 | ||
Richard Butler | ||||
/s/ Dennis Gao | Director | April 1, 2016 | ||
Dennis Gao | ||||
/s/ Brian Conners | Director | April 1, 2016 | ||
Brian Conners |
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]. | |
10.5* | Employment Agreement dated February 9, 2015, between Jeffery Ostapeic and the Company [filed as Exhibit No. 10.2 to the Company's Form 8-K dated February 9, 2015 (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‡ | Amendment No. 3, dated July 1, 2013, to the Appliance Sales and Recycling Agreement dated October 21, 2009, between General Electric Company and the Company [filed as Exhibit No. 10.1 to the Company's Form 10-Q for the quarter ended September 28, 2013 (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 [filed as Exhibit No. 10.10 to the Company's Form 10-K for the year ended December 29, 2012 (File No. 0-19621) and incorporated herein by reference]. | |
10.11 | Amendment No. 4, dated September 27, 2013, to Revolving Credit, Term Loan and Security Agreement dated January 24, 2011, between PNC Bank, National Association and the Company [filed as Exhibit No. 10.3 to the Company's Form 10-Q for the quarter ended September 28, 2013 (File No. 0-19621) and incorporated herein by reference]. | |
10.12+ | Amendment No. 5, dated January 22, 2016, to Revolving Credit, Term Loan and Security Agreement dated January 24, 2011, between PNC Bank, National Association and the Company. | |
10.13 | 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]. |
10.14 | 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]. | |
10.15 | ARCA Advanced Processing, LLC Joint Venture Agreement dated October 20, 2009, between 4301 Operations, LLC and the Company, as amended by Amendment No.1 dated June 3, 2010, and Amendment No. 2 dated February 15, 2011 [filed as Exhibit No. 10.16 to the Company's Form 10-K for the year ended December 28, 2013 (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 January 2, 2016, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and 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. |
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. | The registrant's other certifying officer and I are 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. |
Date: | April 1, 2016 | /s/ Tony Isaac |
Tony Isaac | ||
Interim Chief Executive Officer |
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. | The registrant's other certifying officer and I are 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. |
Date: | April 1, 2016 | /s/ Jeffery Ostapeic |
Jeffery Ostapeic | ||
Chief Financial Officer |
Date: | April 1, 2016 | /s/ Tony Isaac |
Tony Isaac | ||
Interim Chief Executive Officer |
Date: | April 1, 2016 | /s/ Jeffery Ostapeic |
Jeffery Ostapeic | ||
Chief Financial Officer |
Document and Entity Information - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Jan. 02, 2016 |
Mar. 29, 2016 |
Jul. 04, 2015 |
|
Document and Entity Information | |||
Entity Registrant Name | APPLIANCE RECYCLING CENTERS OF AMERICA INC /MN | ||
Entity Central Index Key | 0000862861 | ||
Current Fiscal Year End Date | --01-02 | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Document Type | 10-K | ||
Document Period End Date | Jan. 02, 2016 | ||
Document Fiscal Year Focus | 2015 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 5,900,818 | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 10.3 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands |
Jan. 02, 2016 |
Jan. 03, 2015 |
---|---|---|
Accounts receivable, allowance | $ 73 | $ 106 |
Inventories, reserves | $ 175 | |
Common Stock, shares authorized (in shares) | 10,000 | 10,000 |
Common Stock, issued shares (in shares) | 5,900 | 5,788 |
Common Stock, outstanding shares (in shares) | 5,900 | 5,788 |
Assets of the consolidated variable interest entity | $ 8,915 | $ 9,814 |
Liabilities of the consolidated variable interest entity | $ 2,838 | $ 2,338 |
Nature of Business and Basis of Presentation |
12 Months Ended |
---|---|
Jan. 02, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Fiscal Period, Policy [Policy Text Block] | Fiscal year: We report on a 52- or 53-week fiscal year. Our 2015 fiscal year (“2015”) ended on January 2, 2016, and included 52 weeks. Our 2014 fiscal year (“2014”) ended on January 3, 2015, and included 53 weeks. |
Nature of Business and Basis of Presentation | Nature of Business and Basis of Presentation Nature of business: Appliance Recycling Centers of America, Inc. and subsidiaries (“we,” the “Company” or “ARCA”) are in the business of providing turnkey appliance recycling and replacement services for electric utilities and other sponsors of energy efficiency programs. We also sell new major household appliances through a chain of Company-owned stores under the name ApplianceSmart®. In addition, we have a 50% interest in a joint venture operating under the name ARCA Advanced Processing, LLC (“AAP”), which recycles appliances from twelve states in the Northeast and Mid-Atlantic regions of the United States for General Electric Company (“GE”) acting through its GE Appliances business component. These appliances include units manufactured by GE as well as by other manufacturers. Principles of consolidation: The consolidated financial statements include the accounts of Appliance Recycling Centers of America, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. ApplianceSmart, Inc., a Minnesota corporation, is a wholly owned subsidiary that was formed through a corporate reorganization in July 2011 to hold our business of selling new major household appliances through a chain of Company-owned retail stores. ARCA Canada Inc., a Canadian corporation, is a wholly owned subsidiary that was formed in September 2006 to provide turnkey recycling services for electric utility energy efficiency programs. ARCA Recycling, Inc., a California corporation, is a wholly owned subsidiary that was formed in November 1991 to provide turnkey recycling services for electric utility efficiency programs. The operating results of our wholly owned subsidiaries are consolidated in our financial statements. AAP is a joint venture that was formed in October 2009 between ARCA and 4301 Operations, LLC (“4301”) to support ARCA’s agreement, as amended, with GE acting through its GE Appliances business component. Both ARCA and 4301 have a 50% interest in AAP. GE sells its recyclable appliances to ARCA, which collects, processes and recycles the appliances. The agreement requires that ARCA will only recycle, and will not sell for re-use or resale, the recyclable appliances purchased from GE. AAP established a regional processing center in Philadelphia, Pennsylvania, at which the recyclable appliances are processed. The term of the agreement is for six years from the first date of appliance collection, which was March 31, 2010. AAP commenced operations in February 2010 and has the exclusive rights to service the GE agreement as a subcontractor for ARCA. The financial position and results of operations of AAP are consolidated in our financial statements based on our conclusion that AAP is a variable interest entity due to our contribution in excess of 50% of the total equity, subordinated debt and other forms of financial support. We have a controlling financial interest in AAP through our contractual agreement with GE which is material to AAP, and we have provided substantially all of the financial support to fund the operations of AAP since its inception. Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to estimates and assumptions include the valuation allowances for accounts receivable, inventories, deferred tax assets, accrued expenses, and the assumptions we use to value share-based compensation. Actual results could differ from those estimates. Fair value of financial instruments: The following methods and assumptions are used to estimate the fair value of each class of financial instrument: Cash and cash equivalents, accounts receivable and accounts payable: Due to their nature and short-term maturities, the carrying amounts approximate fair value. Short- and long-term debt: The fair value of short- and long-term debt approximates carrying value and has been estimated based on discounted cash flows using interest rates being offered for similar debt having the same or similar remaining maturities and collateral requirements. No separate comparison of fair values versus carrying values is presented for the aforementioned financial instruments since their fair values are not significantly different than their balance sheet carrying amounts. In addition, the aggregate fair values of the financial instruments would not represent the underlying value of our Company. Fiscal year: We report on a 52- or 53-week fiscal year. Our 2015 fiscal year (“2015”) ended on January 2, 2016, and included 52 weeks. Our 2014 fiscal year (“2014”) ended on January 3, 2015, and included 53 weeks. |
Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of Sales, Policy [Policy Text Block] | Retail segment cost of revenues: Costs of revenues in our retail segment are comprised primarily of the following:
Recycling segment cost of revenues: Costs of revenues in our recycling segment are comprised primarily of the following:
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Significant Accounting Policies | Significant Accounting Policies Cash and cash equivalents: We consider all highly liquid investments purchased with original maturity dates of three months or less to be cash equivalents. We maintain our cash in bank deposit and money-market accounts, which, at times, exceed federally insured limits. We have determined that the fair value of the money-market accounts fall within Level 1 of the fair value hierarchy. We have not experienced any losses in such accounts. Trade receivables: We carry unsecured trade receivables at the original invoice amount less an estimate made for doubtful accounts based on a monthly review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. We write off trade receivables when we deem them uncollectible. We record recoveries of trade receivables previously written off when we receive them. We consider a trade receivable to be past due if any portion of the receivable balance is outstanding for more than ninety days. We do not charge interest on past due receivables. Our management considers the allowance for doubtful accounts of $73 and $106 to be adequate to cover any exposure to loss as of January 2, 2016, and January 3, 2015, respectively. Inventories: Inventories, consisting principally of appliances, are stated at the lower of cost, determined on a specific identification basis, or market and consist of the following as of January 2, 2016, and January 3, 2015:
We provide estimated provisions for the obsolescence of our appliance inventories, including adjustments to market, based on various factors, including the age of such inventory and our management’s assessment of the need for such provisions. We look at historical inventory aging reports and margin analyses in determining our provision estimate. A revised cost basis is used once a provision for obsolescence is recorded. Property and equipment: Property and equipment are stated at cost. We compute depreciation using straight-line method over a range of estimated useful lives from 3 to 30 years. We amortize leasehold improvements on a straight-line basis over the shorter of their estimated useful lives or the underlying lease term. Repair and maintenance costs are charged to operations as incurred. Property and equipment consists of the following as of January 2, 2016 and January 3, 2015:
Depreciation and amortization expense: Depreciation and amortization expense related to buildings and equipment from our recycling centers is presented in cost of revenues, and depreciation and amortization expense related to buildings and equipment from our ApplianceSmart stores and corporate assets, such as furniture and computers, is presented in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). Depreciation and amortization expense was $1,190 and $1,275 for fiscal years 2015 and 2014, respectively. Depreciation and amortization included in cost of revenues was $846 and $868 for fiscal years 2015 and 2014, respectively. Software development costs: We capitalize software developed for internal use and are amortizing such costs over their estimated useful lives of three years. Costs capitalized were $118 and $143 for fiscal years 2015 and 2014, respectively. Amortization expense on software development costs was $117 and $134 for fiscal years 2015 and 2014, respectively. Estimated future amortization expense is as follows:
Impairment of long-lived assets: We evaluate long-lived assets such as property and equipment for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. We assess impairment based on the estimated future net undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future net cash flows be less than the carrying value, we recognize an impairment loss at that time. We measure an impairment loss by comparing the amount by which the carrying value exceeds the fair value (estimated discounted future cash flows or appraisal of assets) of the long-lived assets. We recognized no impairment charges during fiscal years 2015 and 2014 related to long-lived assets. Restricted cash: Restricted cash consisted of a reserve required by our bankcard processor to cover chargebacks, adjustments, fees and other charges that may be due from us. As of January 2, 2016, we had restricted cash of $500. Goodwill: We test goodwill annually for impairment. Additionally, goodwill is tested for impairment between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of an entity below its carrying value. In assessing the recoverability of goodwill, market values and projections regarding estimated future cash flows and other factors are used to determine the fair value of the respective assets. If these estimates or related projections change in the future, we may be required to record impairment charges for these assets. We allocate goodwill to our two reporting segments, retail and recycling. We compare the fair value of each reporting segment to its carrying amount on an annual basis to determine if there is potential goodwill impairment. If the fair value of a reporting segment is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value of its goodwill. To determine the fair value of our reporting segments, we generally use a present value technique (discounted cash flow) corroborated by market multiples when available and as appropriate. The factor most sensitive to change with respect to the discounted cash flow analyses is the estimated future cash flows of each reporting segment, which is, in turn, sensitive to the estimates of future revenue growth and margins for these businesses. If actual revenue growth and/or margins are lower than expectations, the impairment test results could differ. Fair value for goodwill is determined based on discounted cash flows, market multiples or appraised values as appropriate. As of January 2, 2016 and January 3, 2015, we had goodwill of $38 allocated to our recycling segment which is presented as a component of other assets on the consolidated balance sheets. Accounting for leases: We conduct the majority of our retail and recycling operations from leased facilities. The majority of our leases require payment of real estate taxes, insurance and common area maintenance in addition to rent. The terms of our lease agreements typically range from five to ten years. Most of the leases contain renewal and escalation clauses, and certain store leases require contingent rents based on factors such as revenue. For leases that contain predetermined fixed escalations of the minimum rent, we recognize the related rent expense on a straight-line basis from the date we take possession of the property to the end of the initial lease term. We record any difference between straight-line rent amounts and amounts payable under the leases as part of accrued rent in accrued expenses, a portion of which is included in other non-current liabilities. Cash or lease incentives (tenant allowances) received upon entering into certain store leases are recognized on a straight-line basis as a reduction to rent from the date we take possession of the property through the end of the initial lease term. Product warranty: We provide a warranty for the replacement or repair of certain defective appliances. Our standard warranty policy requires us to repair or replace certain defective units at no cost to our customers. We estimate the costs that may be incurred under our warranty and record an accrual in the amount of such costs at the time we recognize product revenue. Factors that affect our warranty accrual for covered units include the number of units sold, historical and anticipated rates of warranty claims on these units, and the cost of such claims. We periodically assess the adequacy of our recorded warranty accrual and adjust the amounts as necessary. Changes in our warranty accrual, presented as a component of accrued expenses on the consolidated balance sheets, for the fiscal years ended January 2, 2016 and January 3, 2015 are as follows:
Income taxes: We account for income taxes under the liability method. Deferred tax liabilities are recognized for temporary differences that will result in taxable amounts in future years. Deferred tax assets are recognized for deductible temporary differences and tax operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. We assess the likelihood that our deferred tax assets will be recovered from future taxable income and record a valuation allowance to reduce our deferred tax assets to the amounts we believe to be realizable. We regularly evaluate both positive and negative evidence related to either recording or retaining a valuation allowance against our deferred tax assets. Share-based compensation: We recognize share-based compensation expense on a straight-line basis over the vesting period for all share-based awards granted. We use the Black-Scholes option pricing model to determine the fair value of awards at the grant date. We calculate the expected volatility for stock options and awards using historical volatility. We estimate a 0%-5% forfeiture rate for stock options issued to employees and Board of Directors members, but will continue to review these estimates in future periods. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life represents the period that the stock option awards are expected to be outstanding. The expected dividend yield is zero as we have not paid or declared any cash dividends on our common stock. Comprehensive income (loss): Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income (loss) but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to shareholders’ equity. Our other comprehensive income (loss) is comprised of foreign currency translation adjustments. Foreign Currency: The financial statements of the Company's non-U.S. subsidiary are translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. Under ASC 830, if the assets and liabilities of the Company are recorded in certain non-U.S. functional currencies other than the U.S. dollar, they are translated at current rates of exchange. Revenue and expense items are translated at the average exchange rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income (loss). In addition, due to declines in the Canadian dollar relative to the U.S. dollar we experienced foreign currency transaction losses included in other expense of approximately $380 and $155 in 2015 and 2014, respectively. Revenue recognition: We recognize revenue from appliance sales in the period the consumer purchases and pays for the appliance, net of an allowance for estimated returns. We recognize revenue from appliance recycling when we collect and process a unit. We recognize revenue generated from appliance replacement programs when we deliver the new appliance and collect and process the old appliance. The delivery, collection and processing activities under our replacement programs typically occur within one business day and are required to complete the earnings process; there are no other performance obligations. We recognize byproduct revenue upon shipment. We recognize revenue on extended warranties with retained service obligations on a straight-line basis over the period of the warranty. On extended warranty arrangements that we sell but others service for a fixed portion of the warranty sales price, we recognize revenue for the net amount retained at the time of sale of the extended warranty to the consumer. As a result of our recycling processes, we are able to produce carbon offsets from the destruction of certain types of ozone-depleting refrigerants. We record revenue from the sale of carbon offsets in the period when all of the following requirements have been met: (i) there is persuasive evidence of an arrangement, (ii) the sales price is fixed or determinable, (iii) title, ownership and risk of loss associated with the credits have been transferred to the customer, and (iv) collectability is reasonably assured. These requirements are met upon collection of cash due to the uncertainty around collectability and the involvement of various third parties and partners. We include shipping and handling charges to customers in revenue, which are recognized in the period the consumer purchases and pays for delivery. Retail segment cost of revenues: Costs of revenues in our retail segment are comprised primarily of the following:
Recycling segment cost of revenues: Costs of revenues in our recycling segment are comprised primarily of the following:
Selling, general and administrative expenses: Selling, general and administrative expenses are comprised primarily of the following:
Advertising expense: Our policy is to expense advertising costs as incurred. Advertising expense was $1,822 and $1,905 for fiscal years 2015 and 2014, respectively. Taxes collected from customers: We account for taxes collected from customers on a net basis. Basic and diluted income (loss) per common share: Basic income (loss) per common share is computed based on the weighted average number of common shares outstanding. Diluted income (loss) per common share is computed based on the weighted average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive shares of Common Stock include unexercised stock options and warrants. Basic per share amounts are computed, generally, by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted per share amounts assume the conversion, exercise or issuance of all potential Common Stock instruments unless their effect is anti-dilutive, thereby reducing the loss or increasing the income per common share. In calculating diluted weighted average shares and per share amounts, we included stock options with exercise prices below average market prices, for the respective fiscal years in which they were dilutive, using the Treasury stock method. We calculated the number of additional shares by assuming that the outstanding stock options were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the year. For fiscal year 2015, we excluded options and warrants covering 726 common shares from the diluted weighted average share outstanding calculation as the effect of these options and warrants is anti-dilutive. For fiscal year 2014, we excluded options and a warrant covering 383 common shares from the diluted weighted average share outstanding calculation as the effect of these options and warrant is anti-dilutive. A reconciliation of the denominator in the basic and diluted income (loss) per share is as follows:
Recent Accounting Pronouncements- New Accounting Standards Not Yet Effective: Revenue from Contracts with Customers: In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance creating Accounting Standards Codification (“ASC”) Section 606, “Revenue from Contracts with Customers”. The new section will replace Section 605, “Revenue Recognition” and creates modifications to various other revenue accounting standards for specialized transactions and industries. The section is intended to conform revenue accounting principles with a concurrently issued International Financial Reporting Standards with previously differing treatment between United States practice and those of much of the rest of the world, as well as, to enhance disclosures related to disaggregated revenue information. The updated guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. Early application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company will further study the implications of this statement in order to evaluate the expected impact on its consolidated financial statements. ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs: This standard, which will be effective January 3, 2016 for the Company, requires that debt issuance costs be presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Presently, debt issuance costs are reported as an asset. The new guidance aligns the presentation of debt issuance costs with debt discounts and premiums. The standard is to be applied retrospectively to all prior periods presented. As of January 2, 2016, we had $67 of unamortized debt issuance costs. This amount is recorded in other non-current assets on the consolidated balance sheets. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) Related to Simplifying the Measurement of Inventory which applies to all inventory except that which is measured using last-in, first-out (LIFO) or the retail inventory method. Inventory measured using first-in, first-out (FIFO) or average cost is included in the new amendments. Inventory within the scope of the new guidance should be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments will take effect for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The new guidance should be applied prospectively, and earlier application is permitted as of the beginning of an interim or annual reporting period. We are evaluating the impact of the standard on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases.” ASU No. 2016-02 was issued to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently assessing the effect that ASU No. 2016-02 will have on its results of operations, financial position and cash flows. In 2015, the FASB issued ASU No. 2015-17, "Income Taxes Balance Sheet Classification of Deferred Taxes." ASU 2015-17 requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for annual and interim periods beginning after December 15, 2016, with either prospective or retrospective application permitted. Early adoption is permitted. The Company plans to adopt this ASU for annual and interim periods beginning after December 15, 2016. The Company is evaluating the potential impact to its financial position and expects to reclassify material amounts of deferred income tax balances from current to noncurrent. The adoption of this standard will not impact its results of operations. |
Sale-Leaseback Transaction |
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Sale-Leaseback Transaction [Abstract] | |
Sale Leaseback Transaction Disclosure [Text Block] | Sale-Leaseback Transaction On September 25, 2009, we completed the sale-leaseback of our St. Louis Park, Minnesota, building. The building is a 126,458-square-foot facility that included our corporate offices, a processing and recycling center, and an ApplianceSmart retail store. Pursuant to the agreement entered into on August 11, 2009, we sold the St. Louis Park building for $4,627, net of fees, and leased the building back over an initial lease term of five years. The sale of the building provided the Company with $2,032 in cash after repayment of the $2,595 mortgage. The sale-leaseback transaction resulted in an adjustment of $2,191 to the net book value related to the land and building, and we recorded a deferred gain of $2,436. Under the terms of the lease agreement, we are classified the lease as an operating lease and amortized the gain on a straight-line basis over five years. We amortized $365 of the deferred gain for fiscal year 2014 and is now fully amortized. The deferred gain amortization is netted against rent expense as a component of selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). |
Variable Interest Entity |
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Variable Interest Entity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entity | Variable Interest Entity The financial position and results of operations of AAP are consolidated in our financial statements based on our conclusion that AAP is a variable interest entity due to our contribution of 50% of the total equity, subordinated debt and other forms of financial support. We have a controlling financial interest in AAP through our contractual agreement with GE, which is material to AAP, and we have provided substantially all of the financial support to fund the operations of AAP since its inception. The financial position and results of operations for AAP are reported in our recycling segment. The following table summarizes the assets and liabilities of AAP as of January 2, 2016 and January 3, 2015:
(a) Other liabilities represent outstanding loans from ARCA and are eliminated in consolidation. The following table summarizes the operating results of AAP for fiscal years 2015 and 2014:
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Other Assets |
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Other Assets | Other Assets Other assets as of January 2, 2016 and January 3, 2015, consist of the following:
For fiscal years 2015 and 2014, we recorded amortization expense of $80, related to our recycling contract. For fiscal years 2015 and 2014, we recorded non-cash interest expense of $107 and $104, respectively, related to deferred financing costs. |
Accrued Expenses |
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Accrued Expenses | Accrued Expenses Accrued expenses as of January 2, 2016 and January 3, 2015, consist of the following:
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Line of Credit |
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Line of Credit Facility [Abstract] | |
Line of Credit | Line of Credit We have a Revolving Credit, Term Loan and Security Agreement, as amended, (“Revolving Credit Agreement”) with PNC Bank, National Association (“PNC”) that provides us with a $15,000 revolving line of credit. See Note 8 for further discussion regarding the Term Loan entered into with PNC. The Revolving Credit Agreement had a stated maturity date of January 24, 2016, and was renewed on January 22, 2016. Our financial covenants were reset in connection with this renewal. The renewed Revolving Credit Agreement has a stated maturity of January 31, 2017. The Revolving Credit Agreement includes a lockbox agreement and a subjective acceleration clause and, as a result, we have classified the revolving line of credit as a current liability. The Revolving Credit Agreement is collateralized by a security interest in substantially all of our assets, and PNC is also secured by an inventory repurchase agreement with Whirlpool Corporation for Whirlpool purchases only. We also issued a $750 letter of credit in favor of Whirlpool Corporation. The Revolving Credit Agreement requires, starting with the fiscal quarter ending March 30, 2014, and continuing at the end of each quarter thereafter, that we meet a minimum earnings before interest, taxes, depreciation and amortization and/or a fixed charge coverage ratio of 1.1 to 1.0. The Revolving Credit Agreement limits investments we can purchase, the amount of other debt and leases we can incur, the amount of loans we can issue to our affiliates and the amount we can spend on fixed assets, along with prohibiting the payment of dividends. In the January 22, 2016 renewal, the affiliate loan balance is to be capped at $1,000 on December 31, 2015, and thereafter. As of January 2, 2016, we were not in compliance with certain covenants of the Revolving Credit Agreement which were subsequently waived with the January 22, 2016 renewal. As of January 3, 2015, we were in compliance with all the covenants of the Revolving Credit Agreement. The interest rate on the Revolving Credit Agreement, in our renewal agreement on January 22, 2016, is PNC Base Rate plus 1.75% to 3.25%, or 1-, 2- or 3-month PNC LIBOR Rate plus 2.75% to 4.25%, with the rate being dependent on our level of fixed charge coverage. The interest rate will be fixed for the first half of 2016 at PNC Base Rate plus 3.25%, or 1-, 2- or 3-month PNC LIBOR Rate plus 4.25%. The PNC Base Rate shall mean, for any day, a fluctuating per annum rate of interest equal to the highest of (i) the interest rate per annum announced from time to time by PNC at its prime rate, (ii) the Federal Funds Open Rate plus 0.5%, and (iii) the one-month LIBOR rate plus 1%. As of January 2, 2016, the weighted average interest rate was 7.25%, which was the PNC Base Rate plus a default rate premium. As of January 3, 2015, the weighted average interest rate was 3.30%, which included both PNC LIBOR Rate and PNC Base Rate loans. As of January 2, 2016, and January 3, 2015, the outstanding balance under the Revolving Credit Agreement was $12,668 and $9,237, respectively. The amount of revolving borrowings under the Revolving Credit Agreement is based on a formula using accounts receivable and inventories. We may not have access to the full $15,000 revolving line of credit due to the formula using accounts receivable and inventories, the amount of the letter of credit issued in favor of Whirlpool Corporation and the amount of outstanding loans between PNC and our AAP joint venture. As of January 2, 2016, and January 3, 2015, our available borrowing capacity under the Revolving Credit Agreement was $1,382 and $4,882, respectively. |
Borrowings |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings | Borrowings Long-term debt, capital lease and other financing obligations as of January 2, 2016 and January 3, 2015 consist of the following:
On January 24, 2011, we entered into a $2,550 term loan (“Term Loan”) with PNC Bank to finance the mortgage on our California facility. The Term Loan is payable as follows, subject to acceleration upon the occurrence of an event of default or termination of the Revolving Credit Agreement: 119 consecutive monthly principal payments of $21 plus interest commencing on February 1, 2011, and continuing on the first day of each month thereafter followed by a 120th payment of all unpaid principal, interest and fees on February 1, 2021. If the Revolving Credit Agreement is not renewed a balloon payment of $1,020 in principal plus interest and additional fees will be due on January 31, 2017. The Term Loan is collateralized with our California facility located in Compton, California. The Term Loan interest rate is PNC Base Rate plus 2.25% to 3.75%, or 1-, 2- or 3-month PNC LIBOR Rate plus 3.25% to 4.75%. with the rate being dependent on our level of fixed charge coverage. The interest rate will be fixed for the first half of 2016 at PNC Base Rate plus 3.75%, or 1-, 2- or 3-month PNC LIBOR Rate plus 4.75%. As of January 2, 2016, the weighted average interest rate was 7.75%, which was the PNC Base Rate plus a default rate premium. As of January 3, 2015, the weighted average interest rate was 3.45%, which included both PNC LIBOR Rate and PNC Base Rate loans. On March 10, 2011, AAP entered into three separate commercial term loans (“Term Loans”) with Susquehanna Bank, pursuant to the guidelines of the U.S. Small Business Administration 7(a) Loan Program. The total amount of the Term Loans is $4,750, split into three separate loans for $2,100, $1,400 and $1,250. The Term Loans mature in ten years and bear an interest rate of Prime plus 2.75%. As of both January 2, 2016, and January 3, 2015, the interest rate was 6.00%. The total monthly interest and principal payments are $54 and began on July 1, 2011. Borrowings under the Term Loans are secured by substantially all of the assets of AAP along with liens on the business assets and certain personal assets of the owners of 4301 Operations, LLC. We are a guarantor of the Term Loans along with 4301 Operations, LLC and its owners. In connection with these Term Loans, Susquehanna Bank also has a security interest in the assets of the Company. In March of 2015, an entity controlled by the noncontrolling interest holders of AAP loaned AAP $325 through the issuance of promissory notes. The notes bear interest at an annual rate of 8%. In May of 2015, one of the March 2015 notes totaling $125 was repaid in full by AAP. The remaining note totaling $200 is expected to be repaid with the revenues expected during the second quarter of 2016 from the disposal of refrigerants through carbon offset programs. The future annual maturities of borrowings are as follows:
Capital leases and other financing obligations: We acquire certain equipment under capital leases and other financing obligations. The cost of such equipment was approximately $2,606 and $2,667 as of January 2, 2016, and January 3, 2015. Accumulated amortization as of January 2, 2016, and January 3, 2015, was approximately $1,635 and $1,588, respectively. Depreciation and amortization expense for equipment under capital leases and other financing obligations is included in cost of revenues and selling, general and administrative expenses. The following schedule by fiscal year is the approximate remaining minimum payments required under the capital leases and other financing obligations, together with the present value as of January 2, 2016:
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Operating leases: We lease the majority of our retail stores and recycling centers under noncancelable operating leases. The leases typically require the payment of taxes, maintenance, utilities and insurance. Minimum future rental commitments under noncancelable operating leases as of January 2, 2016, are as follows:
Rent expense for fiscal years 2015 and 2014 was $5,300 and $4,882, respectively. We have agreements to receive future sublease payments of $840 through September 2019. Contracts: We have entered into material contracts with three appliance manufacturers. Under the agreements there are no minimum purchase commitments; however, we have agreed to indemnify the manufacturers for certain claims, allegations or losses with respect to appliances we sell. Litigation: On March 6, 2015, a complaint was filed in United States District Court for the Central District of California by Jason Feola, individually and as a representative of a putative class consisting of purchasers of the Company’s common stock between March 15, 2012 and February 11, 2015, against Appliance Recycling Centers of America, Inc. and certain current and former officers of the Company. Mr. Feola, pursuant to terms of his retainer agreement with The Rosen Law Firm, certified that he purchased 240 shares of the Company’s common stock for $984 in total consideration. On May 7, 2015, the Company and the individual defendants were served the complaint. In July 2015, the Company and the individual defendants received an amended complaint. The complaint alleges that misstatements and omissions occurred in press releases and filings by the Company with the Securities and Exchange Commission and that these misstatements or omissions constitute violations of Section 20 (a) and Section 10(b) of, and Rule 10b-5 under, the Securities Exchange Act of 1934. In October 2015, the court held a hearing on the Company's motion to dismiss the complaint. On November 24, 2015, the United States District Court for the Central District of California entered an order granting the motion to dismiss the amended complaint. The Court’s order provided that the dismissal was without prejudice and that the plaintiffs may file an amended complaint within 21 days of the issuance of the order. On December 15, 2015, the Company and the individual defendants were served with a second amended complaint. In January 2016, we filed a motion to dismiss the second amended complaint and expect a court hearing on the motion to dismiss to be held in May 2016. This matter has been forwarded to our insurance carriers and we intend to contest vigorously the claims made in the complaint. On November 6, 2015, a complaint was filed in the Minnesota District Court for Hennepin County, Minnesota, by David Gray and Michael Boller, purporting to bring suit derivatively and on behalf of the Company against twelve current and former officers and directors of the Company. The complaint alleges that the defendants breached their fiduciary duties based on substantially similar allegations to those asserted in Mr. Feola's putative securities class action complaint, and that the defendants have been unjustly enriched as a result thereof. The complaint seeks damages, disgorgement, an award of attorneys’ fees and other expenses, and an order compelling changes to the Company’s corporate governance and internal procedures. This matter has been stayed by the court, pursuant to a stipulation of the parties, until the United States District Court for the Central District of California determines the legal sufficiency of Mr. Feola's complaint or other specified developments occur in that case. This matter has been submitted to our insurance carriers. Given the uncertainty of litigation and the preliminary stage of these cases, we cannot reasonably estimate the possible loss or range of loss that may result from these actions. The Company maintains liability insurance policies that may reduce the Company’s exposure, if any. In February 2012, various individuals commenced a class action lawsuit against Whirlpool Corporation (“Whirlpool”) and various distributors of Whirlpool products, including Sears, The Home Depot, Lowe’s and us, alleging certain appliances Whirlpool sold through its distribution chain, which includes us, 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 us 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 us, and has engaged legal counsel to defend itself and the distributors. We are monitoring Whirlpool’s defense of the claims and believe the possibility of a material loss is remote. AMTIM Capital, Inc. (“AMTIM”) acts as our representative to market our recycling services in Canada under an arrangement that pays AMTIM for revenues generated by recycling services in Canada as set forth in the agreements between the parties. A dispute has arisen between AMTIM and us with respect to the calculation of amounts due to AMTIM pursuant to the agreement. In a lawsuit filed in the province of Ontario, AMTIM claims a discrepancy in the calculation of fees due to AMTIM by us of approximately $2.0 million. Although the outcome of this claim is uncertain, we believe that no further amounts are due under the terms of the agreement and that we will continue to defend our position relative to this lawsuit. We are party from time to time to ordinary course disputes that we do not believe to be material or have merit. We intend to vigorously defend ourselves against these ordinary course disputes. Sales and Use Taxes: We operate in twenty-three states in the U.S. and in various provinces in Canada. From time to time, we are subject to sales and use tax audits that could result in additional taxes, penalties and interest owed to various taxing authorities. As previously disclosed, the California Board of Equalization (“BOE”) is conducting a sales and use tax examination covering the California operations of Appliance Recycling Centers of America, Inc. (the “Company”) for 2011, 2012 and 2013. The Company believed it was exempt from collecting sales taxes under service agreements with utility customers that included appliance replacement programs. During the fourth quarter of 2014, the Company received communication from the BOE indicating they are not in agreement with the Company’s interpretation of the law. As a result, the Company applied for and, as of February 9, 2015, received approval to participate in the California Board of Equalization’s Managed Audit Program. The period covered under this program includes 2011, 2012, 2013 and extends through the nine-month period ended September 30, 2014. At this time, our best estimate of the amount that will be assessed by the BOE covering all periods under audit is approximately $4.1 million ($2.5 million net of income tax benefit) in sales tax and interest related to the appliance replacement programs that we administered on behalf of our customers on which we did not assess, collect or remit sales tax. The Company has been working with outside consultants to arrive at our assessment estimate and will continue to engage the services of these sales tax experts throughout the Managed Audit Program process. The sales tax amounts that we will likely be assessed relate to transactions in the period under examination by the BOE. Such assessment, however, will be subject to protest and appeal, and would not need to be funded until the matter has been fully resolved. Resolution could take up to two years. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes For fiscal year 2015, we recorded an income tax benefit of $1,714. For fiscal year 2014, we recorded an income tax expense of $714. As of January 2, 2016, we maintained a valuation allowance of $597 against our state net operating loss carryforwards, foreign tax credits and capital loss carryforwards and all deferred tax assets in Canada, principally net operating losses. . During the first quarter of 2015, we concluded, based upon the assessment of all available evidence that it was more-likely-than-not that we would not be able to realize the majority of our Canadian deferred tax assets in the future and as a result did not record any tax benefit related to the Canadian loss for the current period. The provision for (benefit of) income taxes for fiscal years 2015 and 2014 consisted of the following:
A reconciliation of our provision for (benefit of) income taxes with the federal statutory tax rate for fiscal years 2015 and 2014 is shown below:
Income before provision for (benefit of) income taxes and noncontrolling interest was derived from the following sources for fiscal years 2015 and 2014 as shown below:
The components of net deferred tax assets (liabilities) as of January 2, 2016, and January 3, 2015, are as follows:
The deferred tax amounts have been classified in the accompanying consolidated balance sheets as follows:
Future utilization of net operating loss (“NOL”) and tax credit carryforwards is subject to certain limitations under provisions of Section 382 of the Internal Revenue Code. This section relates to a 50 percent change in control over a three-year period. We believe that the issuance of common stock during 1999 resulted in an “ownership change” under Section 382. Accordingly, our ability to utilize NOL and tax credit carryforwards generated prior to February 1999 is limited to approximately $56 per year. As of January 2, 2016, we had no federal NOL carryforwards not subject to IRC section 382 and a foreign tax credit carryforward of $256. We also had state NOL carryforwards of $8,398. The state NOL carryforwards are available to offset future taxable income or reduce taxes payable through 2030. These state loss carryforwards began expiring in 2011. In Canada, we had federal and provincial NOL carryforwards of $93. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% percent likelihood of being realized upon ultimate settlement with the relevant tax authority. As of January 2, 2016 and January 3, 2015, we did not have any material uncertain tax positions. It is our practice to recognize interest related to income tax matters as a component of interest expense and penalties as a component of selling, general and administrative expense. As of January 2, 2016 and January 3, 2015, we had an immaterial amount of accrued interest and penalties. We are subject to income taxes in the U.S. federal jurisdiction, foreign jurisdictions and various state jurisdictions. Tax regulations from each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, we are no longer subject to U.S. federal, foreign, state or local income tax examinations by tax authorities for the years before 2011. We are not currently under examination by any taxing jurisdiction. We had no significant unrecognized tax benefits as of January 2, 2016, that would reasonably be expected to affect our effective tax rate during the next twelve months. |
Shareholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | Shareholders’ Equity Common Stock: During fiscal year 2015, stock options to purchase 13 shares of common stock were exercised that resulted in cash proceeds of $24 and had an intrinsic value of $10. During fiscal year 2014, stock options to purchase 10 shares of common stock were exercised that resulted in cash proceeds of $24 and had an intrinsic value of $9. In 2015, 100 shares of common stock were granted from the 2011 Stock Compensation Plan (the "2011 Plan") to the Company's then CEO and the corresponding fair value of $114 was included in share-based compensation. Stock options: The 2011 Plan authorizes the granting of awards in any of the following forms: (i) stock options, (ii) stock appreciation rights, and (iii) other share-based awards, including but not limited to, restricted stock, restricted stock units or performance shares, and expires on the earlier of May 12, 2021, or the date that all shares reserved under the 2011 Plan are issued or no longer available. The 2011 Plan provides for the issuance of up to 700 shares of common stock pursuant to awards granted under the 2011 Plan. Options granted to employees typically vest over two years, while grants to non-employee directors vest in six months. As of January 2, 2016, 534 options were outstanding under the 2011 Plan. Our 2006 Stock Option Plan (the “2006 Plan”) expired on June 30, 2011, but the options outstanding under the 2006 Plan continue to be exercisable in accordance with their terms. As of January 2, 2016, 238 options were outstanding to employees and non-employee directors under the 2006 Plan. Our Restated 1997 Stock Option Plan (the “1997 Plan”) has expired, but the options outstanding under the expired 1997 Plan continue to be exercisable in accordance with their terms. As of January 2, 2016, options to purchase an aggregate of 8 shares were outstanding under the 1997 Plan. We issue new common stock when stock options are exercised. The Company periodically grants stock options that vest based upon the achievement of performance targets. For performance based options, the Company evaluates the likelihood of the targets being met and records the expense over the probable vesting period. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for fiscal years 2015 and 2014:
Additional information relating to all outstanding options is as follows (in thousands, except per share data):
The weighted average fair value per option of options granted during fiscal years 2015 and 2014 was $1.12 and $2.34, respectively. We recognized share-based compensation expense of $316 and $267 for fiscal years 2015 and 2014, respectively. The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on our closing stock price of $1.05 on January 2, 2016, which theoretically could have been received by the option holders had all option holders exercised their options as of that date. As of January 2, 2016, there were no in-the-money options exercisable. Based on the value of options outstanding as of January 2, 2016, estimated future share-based compensation expense is as follows:
The estimate above does not include any expense for additional options that may be granted and vest during 2016 and 2017. Warrants: On October 21, 2009, we issued a warrant to GE to purchase 248 shares of common stock at a price of $0.75 per share. The fair market value of the warrant issued was $479 and it was exercisable in full at any time during a term of ten years. The fair value per share of common stock underlying the warrant issued to GE was $1.93 based on our closing stock price of $1.97. The exercise price may be reduced and the number of shares of common stock that may be purchased under the warrant may be increased if the Company issues or sells additional shares of common stock at a price lower than the then-current warrant exercise price or the then-current market price of the common stock. The shares underlying the warrant include legal restrictions regarding the transfer or sale of the shares. As a result of our private placement offering in April 2010, the number of shares of common stock underlying the warrant increased to 254 shares and the exercise price decreased to $0.73 per share as defined in the agreement. There was no accounting charge as a result of the change in warrant shares or exercise price due to the treatment of the warrant as permanent equity. In July 2014, the warrant to purchase 254 shares of common stock was exercised on a cashless basis, which resulted in GE receiving 207 shares of common stock. As of January 2, 2016, we had fully vested warrants outstanding to purchase 24 shares of common stock at a price of $3.55 per share and expire in May 2020. Preferred Stock: Our amended Articles of Incorporation authorize two million shares of preferred stock that may be issued from time to time in one or more series having such rights, powers, preferences and designations as the Board of Directors may determine. To date no such preferred shares have been issued. |
Major Customers and Suppliers |
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Major Customers and Suppliers [Abstract] | |
Major Customers and Suppliers | Major Customers and Suppliers For the fiscal year ended January 2, 2016, no customer represented more than 10% of our total revenues. For the fiscal year ended January 3, 2015, one customer represented 14% of our total revenues. As of January 2, 2016, two customers, each represented more than 10% of our total trade receivables, for a total of 39% of our total trade receivables. As of January 3, 2015, three customers, each represented more than 10% of our total trade receivables, for a total of 46% of our total trade receivables. During the two fiscal years ended January 2, 2016 and January 3, 2015, we purchased a vast majority of appliances for resale from three suppliers. We have and are continuing to secure other vendors from which to purchase appliances. However, the curtailment or loss of one of these suppliers or any appliance supplier could adversely affect our operations. |
Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information We operate within targeted markets through two reportable segments: retail and recycling. The retail segment is comprised of income generated through our ApplianceSmart stores, which includes appliance sales and byproduct revenues from collected appliances. The recycling segment includes all fees charged and costs incurred for collecting, recycling and installing appliances for utilities and other customers. The recycling segment also includes byproduct revenue, which is primarily generated through the recycling of appliances and includes all revenues from AAP. The nature of products, services and customers for both segments varies significantly. As such, the segments are managed separately. Our Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”). The CODM evaluates performance and allocates resources based on sales and income from operations of each segment. Income from operations represents revenues less cost of revenues and operating expenses, including certain allocated selling, general and administrative costs. There are no inter-segment sales or transfers. The decrease in recycling segment revenues for the fiscal year ended January 2, 2016, presented in the following table was the result of a decrease in revenues related to appliance replacement programs, recycling programs and a significant decline in byproduct revenues that resulted from decreases in the prices of the byproducts that we sell. The following tables present our segment information for fiscal years 2015 and 2014:
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Benefit Contribution Plan |
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Benefit Contribution Plan [Abstract] | |
Benefit Contribution Plan | Benefit Contribution Plan We have a defined contribution salary deferral plan covering substantially all employees under Section 401(k) of the Internal Revenue Code. We contribute an amount equal to 10 cents for each dollar contributed by each employee up to a maximum of 5% of each employee’s compensation. AAP also has a 401(k) plan which includes a safe harbor matching contribution of 4% of the employee’s contribution. We recognized expense for contributions to the plans of $84 and $74 for fiscal years 2015 and 2014, respectively. |
Nature of Business and Basis of Presentation (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of business and basis of presentation | Nature of business: Appliance Recycling Centers of America, Inc. and subsidiaries (“we,” the “Company” or “ARCA”) are in the business of providing turnkey appliance recycling and replacement services for electric utilities and other sponsors of energy efficiency programs. We also sell new major household appliances through a chain of Company-owned stores under the name ApplianceSmart®. In addition, we have a 50% interest in a joint venture operating under the name ARCA Advanced Processing, LLC (“AAP”), which recycles appliances from twelve states in the Northeast and Mid-Atlantic regions of the United States for General Electric Company (“GE”) acting through its GE Appliances business component. These appliances include units manufactured by GE as well as by other manufacturers. |
Principles of consolidation | Principles of consolidation: The consolidated financial statements include the accounts of Appliance Recycling Centers of America, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. ApplianceSmart, Inc., a Minnesota corporation, is a wholly owned subsidiary that was formed through a corporate reorganization in July 2011 to hold our business of selling new major household appliances through a chain of Company-owned retail stores. ARCA Canada Inc., a Canadian corporation, is a wholly owned subsidiary that was formed in September 2006 to provide turnkey recycling services for electric utility energy efficiency programs. ARCA Recycling, Inc., a California corporation, is a wholly owned subsidiary that was formed in November 1991 to provide turnkey recycling services for electric utility efficiency programs. The operating results of our wholly owned subsidiaries are consolidated in our financial statements. AAP is a joint venture that was formed in October 2009 between ARCA and 4301 Operations, LLC (“4301”) to support ARCA’s agreement, as amended, with GE acting through its GE Appliances business component. Both ARCA and 4301 have a 50% interest in AAP. GE sells its recyclable appliances to ARCA, which collects, processes and recycles the appliances. The agreement requires that ARCA will only recycle, and will not sell for re-use or resale, the recyclable appliances purchased from GE. AAP established a regional processing center in Philadelphia, Pennsylvania, at which the recyclable appliances are processed. The term of the agreement is for six years from the first date of appliance collection, which was March 31, 2010. AAP commenced operations in February 2010 and has the exclusive rights to service the GE agreement as a subcontractor for ARCA. The financial position and results of operations of AAP are consolidated in our financial statements based on our conclusion that AAP is a variable interest entity due to our contribution in excess of 50% of the total equity, subordinated debt and other forms of financial support. We have a controlling financial interest in AAP through our contractual agreement with GE which is material to AAP, and we have provided substantially all of the financial support to fund the operations of AAP since its inception |
Fair value of financial instruments | Fair value of financial instruments: The following methods and assumptions are used to estimate the fair value of each class of financial instrument: Cash and cash equivalents, accounts receivable and accounts payable: Due to their nature and short-term maturities, the carrying amounts approximate fair value. Short- and long-term debt: The fair value of short- and long-term debt approximates carrying value and has been estimated based on discounted cash flows using interest rates being offered for similar debt having the same or similar remaining maturities and collateral requirements. No separate comparison of fair values versus carrying values is presented for the aforementioned financial instruments since their fair values are not significantly different than their balance sheet carrying amounts. In addition, the aggregate fair values of the financial instruments would not represent the underlying value of our Company. |
Estimates | Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to estimates and assumptions include the valuation allowances for accounts receivable, inventories, deferred tax assets, accrued expenses, and the assumptions we use to value share-based compensation. Actual results could differ from those estimates. |
Reclassifications | . |
Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | Cash and cash equivalents: We consider all highly liquid investments purchased with original maturity dates of three months or less to be cash equivalents. We maintain our cash in bank deposit and money-market accounts, which, at times, exceed federally insured limits. We have determined that the fair value of the money-market accounts fall within Level 1 of the fair value hierarchy. We have not experienced any losses in such accounts. |
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Trade receivables | Trade receivables: We carry unsecured trade receivables at the original invoice amount less an estimate made for doubtful accounts based on a monthly review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. We write off trade receivables when we deem them uncollectible. We record recoveries of trade receivables previously written off when we receive them. We consider a trade receivable to be past due if any portion of the receivable balance is outstanding for more than ninety days. We do not charge interest on past due receivables. Our management considers the allowance for doubtful accounts of $73 and $106 to be adequate to cover any exposure to loss as of January 2, 2016, and January 3, 2015, respectively. |
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Inventories | Inventories: Inventories, consisting principally of appliances, are stated at the lower of cost, determined on a specific identification basis, or market and consist of the following as of January 2, 2016, and January 3, 2015:
We provide estimated provisions for the obsolescence of our appliance inventories, including adjustments to market, based on various factors, including the age of such inventory and our management’s assessment of the need for such provisions. We look at historical inventory aging reports and margin analyses in determining our provision estimate. A revised cost basis is used once a provision for obsolescence is recorded. |
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Property and equipment | Property and equipment: Property and equipment are stated at cost. We compute depreciation using straight-line method over a range of estimated useful lives from 3 to 30 years. We amortize leasehold improvements on a straight-line basis over the shorter of their estimated useful lives or the underlying lease term. Repair and maintenance costs are charged to operations as incurred. Property and equipment consists of the following as of January 2, 2016 and January 3, 2015:
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Depreciation and amortization expense | Depreciation and amortization expense: Depreciation and amortization expense related to buildings and equipment from our recycling centers is presented in cost of revenues, and depreciation and amortization expense related to buildings and equipment from our ApplianceSmart stores and corporate assets, such as furniture and computers, is presented in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). Depreciation and amortization expense was $1,190 and $1,275 for fiscal years 2015 and 2014, respectively. Depreciation and amortization included in cost of revenues was $846 and $868 for fiscal years 2015 and 2014, respectively. |
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Software development costs | Software development costs: We capitalize software developed for internal use and are amortizing such costs over their estimated useful lives of three years. Costs capitalized were $118 and $143 for fiscal years 2015 and 2014, respectively. Amortization expense on software development costs was $117 and $134 for fiscal years 2015 and 2014, respectively. Estimated future amortization expense is as follows:
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Impairment of long-lived assets | Impairment of long-lived assets: We evaluate long-lived assets such as property and equipment for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. We assess impairment based on the estimated future net undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future net cash flows be less than the carrying value, we recognize an impairment loss at that time. We measure an impairment loss by comparing the amount by which the carrying value exceeds the fair value (estimated discounted future cash flows or appraisal of assets) of the long-lived assets. We recognized no impairment charges during fiscal years 2015 and 2014 related to long-lived assets. |
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Goodwill | Goodwill: We test goodwill annually for impairment. Additionally, goodwill is tested for impairment between annual tests if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of an entity below its carrying value. In assessing the recoverability of goodwill, market values and projections regarding estimated future cash flows and other factors are used to determine the fair value of the respective assets. If these estimates or related projections change in the future, we may be required to record impairment charges for these assets. We allocate goodwill to our two reporting segments, retail and recycling. We compare the fair value of each reporting segment to its carrying amount on an annual basis to determine if there is potential goodwill impairment. If the fair value of a reporting segment is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than the carrying value of its goodwill. To determine the fair value of our reporting segments, we generally use a present value technique (discounted cash flow) corroborated by market multiples when available and as appropriate. The factor most sensitive to change with respect to the discounted cash flow analyses is the estimated future cash flows of each reporting segment, which is, in turn, sensitive to the estimates of future revenue growth and margins for these businesses. If actual revenue growth and/or margins are lower than expectations, the impairment test results could differ. Fair value for goodwill is determined based on discounted cash flows, market multiples or appraised values as appropriate. As of January 2, 2016 and January 3, 2015, we had goodwill of $38 allocated to our recycling segment which is presented as a component of other assets on the consolidated balance sheets. |
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Cost of Revenue | Retail segment cost of revenues: Costs of revenues in our retail segment are comprised primarily of the following:
Recycling segment cost of revenues: Costs of revenues in our recycling segment are comprised primarily of the following:
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Selling, general and administrative expenses | Selling, general and administrative expenses: Selling, general and administrative expenses are comprised primarily of the following:
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Accounting for leases | Accounting for leases: We conduct the majority of our retail and recycling operations from leased facilities. The majority of our leases require payment of real estate taxes, insurance and common area maintenance in addition to rent. The terms of our lease agreements typically range from five to ten years. Most of the leases contain renewal and escalation clauses, and certain store leases require contingent rents based on factors such as revenue. For leases that contain predetermined fixed escalations of the minimum rent, we recognize the related rent expense on a straight-line basis from the date we take possession of the property to the end of the initial lease term. We record any difference between straight-line rent amounts and amounts payable under the leases as part of accrued rent in accrued expenses, a portion of which is included in other non-current liabilities. Cash or lease incentives (tenant allowances) received upon entering into certain store leases are recognized on a straight-line basis as a reduction to rent from the date we take possession of the property through the end of the initial lease term. |
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Product warranty | Product warranty: We provide a warranty for the replacement or repair of certain defective appliances. Our standard warranty policy requires us to repair or replace certain defective units at no cost to our customers. We estimate the costs that may be incurred under our warranty and record an accrual in the amount of such costs at the time we recognize product revenue. Factors that affect our warranty accrual for covered units include the number of units sold, historical and anticipated rates of warranty claims on these units, and the cost of such claims. We periodically assess the adequacy of our recorded warranty accrual and adjust the amounts as necessary. Changes in our warranty accrual, presented as a component of accrued expenses on the consolidated balance sheets, for the fiscal years ended January 2, 2016 and January 3, 2015 are as follows:
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Income Taxes | Income taxes: We account for income taxes under the liability method. Deferred tax liabilities are recognized for temporary differences that will result in taxable amounts in future years. Deferred tax assets are recognized for deductible temporary differences and tax operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. We assess the likelihood that our deferred tax assets will be recovered from future taxable income and record a valuation allowance to reduce our deferred tax assets to the amounts we believe to be realizable. We regularly evaluate both positive and negative evidence related to either recording or retaining a valuation allowance against our deferred tax assets. |
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Share-based compensation | Share-based compensation: We recognize share-based compensation expense on a straight-line basis over the vesting period for all share-based awards granted. We use the Black-Scholes option pricing model to determine the fair value of awards at the grant date. We calculate the expected volatility for stock options and awards using historical volatility. We estimate a 0%-5% forfeiture rate for stock options issued to employees and Board of Directors members, but will continue to review these estimates in future periods. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life represents the period that the stock option awards are expected to be outstanding. The expected dividend yield is zero as we have not paid or declared any cash dividends on our common stock. |
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Comprehensive Income (loss) | Comprehensive income (loss): Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income (loss) but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to shareholders’ equity. Our other comprehensive income (loss) is comprised of foreign currency translation adjustments. |
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Foreign Currency Transactions and Translations Policy [Policy Text Block] | Foreign Currency: The financial statements of the Company's non-U.S. subsidiary are translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. Under ASC 830, if the assets and liabilities of the Company are recorded in certain non-U.S. functional currencies other than the U.S. dollar, they are translated at current rates of exchange. Revenue and expense items are translated at the average exchange rates. The resulting translation adjustments are recorded directly into accumulated other comprehensive income (loss). In addition, due to declines in the Canadian dollar relative to the U.S. dollar we experienced foreign currency transaction losses included in other expense of approximately $380 and $155 in 2015 and 2014, respectively. |
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Revenue Recognition | Revenue recognition: We recognize revenue from appliance sales in the period the consumer purchases and pays for the appliance, net of an allowance for estimated returns. We recognize revenue from appliance recycling when we collect and process a unit. We recognize revenue generated from appliance replacement programs when we deliver the new appliance and collect and process the old appliance. The delivery, collection and processing activities under our replacement programs typically occur within one business day and are required to complete the earnings process; there are no other performance obligations. We recognize byproduct revenue upon shipment. We recognize revenue on extended warranties with retained service obligations on a straight-line basis over the period of the warranty. On extended warranty arrangements that we sell but others service for a fixed portion of the warranty sales price, we recognize revenue for the net amount retained at the time of sale of the extended warranty to the consumer. As a result of our recycling processes, we are able to produce carbon offsets from the destruction of certain types of ozone-depleting refrigerants. We record revenue from the sale of carbon offsets in the period when all of the following requirements have been met: (i) there is persuasive evidence of an arrangement, (ii) the sales price is fixed or determinable, (iii) title, ownership and risk of loss associated with the credits have been transferred to the customer, and (iv) collectability is reasonably assured. These requirements are met upon collection of cash due to the uncertainty around collectability and the involvement of various third parties and partners. We include shipping and handling charges to customers in revenue, which are recognized in the period the consumer purchases and pays for delivery. |
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Advertising expense | Advertising expense: Our policy is to expense advertising costs as incurred. Advertising expense was $1,822 and $1,905 for fiscal years 2015 and 2014, respectively. |
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Taxes collected from customers [Policy Text Block] | Taxes collected from customers: We account for taxes collected from customers on a net basis. |
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Basic and diluted income per common share | Basic and diluted income (loss) per common share: Basic income (loss) per common share is computed based on the weighted average number of common shares outstanding. Diluted income (loss) per common share is computed based on the weighted average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued. Potentially dilutive shares of Common Stock include unexercised stock options and warrants. Basic per share amounts are computed, generally, by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted per share amounts assume the conversion, exercise or issuance of all potential Common Stock instruments unless their effect is anti-dilutive, thereby reducing the loss or increasing the income per common share. In calculating diluted weighted average shares and per share amounts, we included stock options with exercise prices below average market prices, for the respective fiscal years in which they were dilutive, using the Treasury stock method. We calculated the number of additional shares by assuming that the outstanding stock options were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the year. For fiscal year 2015, we excluded options and warrants covering 726 common shares from the diluted weighted average share outstanding calculation as the effect of these options and warrants is anti-dilutive. For fiscal year 2014, we excluded options and a warrant covering 383 common shares from the diluted weighted average share outstanding calculation as the effect of these options and warrant is anti-dilutive. A reconciliation of the denominator in the basic and diluted income (loss) per share is as follows:
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Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block] | Restricted cash: Restricted cash consisted of a reserve required by our bankcard processor to cover chargebacks, adjustments, fees and other charges that may be due from us. As of January 2, 2016, we had restricted cash of $500. |
Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block] | Estimated future amortization expense is as follows:
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Schedule of inventories, consisting principally of appliances, are stated at the lower of cost, determined on a specific identification basis, or market | Inventories, consisting principally of appliances, are stated at the lower of cost, determined on a specific identification basis, or market and consist of the following as of January 2, 2016, and January 3, 2015:
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Schedule of property and equipment | Property and equipment consists of the following as of January 2, 2016 and January 3, 2015:
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Schedule of warranty accrual | Changes in our warranty accrual, presented as a component of accrued expenses on the consolidated balance sheets, for the fiscal years ended January 2, 2016 and January 3, 2015 are as follows:
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Schedule of reconciliation of the denominator in the basic and diluted income or loss per share | A reconciliation of the denominator in the basic and diluted income (loss) per share is as follows:
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Variable Interest Entity (Tables) |
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Summary of assets and liabilities | The following table summarizes the assets and liabilities of AAP as of January 2, 2016 and January 3, 2015:
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Summary of operating results | The following table summarizes the operating results of AAP for fiscal years 2015 and 2014:
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Other Assets (Tables) |
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Jan. 02, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets, Noncurrent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other assets | Other assets as of January 2, 2016 and January 3, 2015, consist of the following:
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Schedule of expected recycling contract amortization expense |
Accrued Expenses (Tables) |
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Jan. 02, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accrued expenses | Accrued expenses as of January 2, 2016 and January 3, 2015, consist of the following:
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Borrowings (Tables) |
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Jan. 02, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt, capital lease and other financing obligations | Long-term debt, capital lease and other financing obligations as of January 2, 2016 and January 3, 2015 consist of the following:
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Schedule of Maturities of Long-term Debt [Table Text Block] | The future annual maturities of borrowings are as follows:
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Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block] | The following schedule by fiscal year is the approximate remaining minimum payments required under the capital leases and other financing obligations, together with the present value as of January 2, 2016:
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Commitments and Contingencies (Tables) |
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Jan. 02, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Minimum future rental commitments under noncancelable operating leases | Minimum future rental commitments under noncancelable operating leases as of January 2, 2016, are as follows:
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Income Taxes (Tables) |
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Jan. 02, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] | The provision for (benefit of) income taxes for fiscal years 2015 and 2014 consisted of the following:
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Schedule of Effective Income Tax Rate Reconciliation [Table Text Block] | A reconciliation of our provision for (benefit of) income taxes with the federal statutory tax rate for fiscal years 2015 and 2014 is shown below:
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Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block] | Income before provision for (benefit of) income taxes and noncontrolling interest was derived from the following sources for fiscal years 2015 and 2014 as shown below:
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Schedule of Deferred Tax Assets and Liabilities [Table Text Block] | The components of net deferred tax assets (liabilities) as of January 2, 2016, and January 3, 2015, are as follows:
The deferred tax amounts have been classified in the accompanying consolidated balance sheets as follows:
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Shareholders' Equity (Tables) |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the assumptions used to estimate the fair value of stock options granted using the Black-Scholes Model | The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for fiscal years 2015 and 2014:
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Schedule of all outstanding options, activity [Table Text Block] | Additional information relating to all outstanding options is as follows (in thousands, except per share data):
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Summary of stock options outstanding and exercisable by range of excercise prices | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of estimated future share-based compensation expense | Based on the value of options outstanding as of January 2, 2016, estimated future share-based compensation expense is as follows:
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment information | The following tables present our segment information for fiscal years 2015 and 2014:
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Nature of Business and Basis of Presentation (Details) |
12 Months Ended | ||
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Jan. 02, 2016
state
W
|
Jan. 03, 2015
W
|
Jan. 02, 2016 |
|
Nature of Business and Basis of Presentation | |||
Interest in a joint venture (as a percent) | 50.00% | ||
Number of States in which Entity Operates | 12 | 23 | |
Number of weeks reflected in operating results | 52 | 53 | |
Term of contractual agreement between GE and the entity | 6 years | ||
4301 | |||
Nature of Business and Basis of Presentation | |||
Interest in a joint venture (as a percent) | 50.00% |
Significant Accounting Policies (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jan. 02, 2016 |
Jan. 03, 2015 |
|
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Recycling contract, net | $ 20 | $ 100 |
Trade receivables | ||
Trade Receivable Period to be Recognized as Past Due Minimum | 90 days | |
Accounts receivable, allowance | $ 73 | 106 |
Advertising Expense | 1,822 | 1,905 |
Restricted cash | $ 500 | 0 |
Software development costs | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
2014 | 100 | |
2015 | 64 | |
2016 | 20 | |
Recycling contract, net | $ 184 |
Significant Accounting Policies (Details 1) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 02, 2016 |
Jan. 03, 2015 |
|
Accounting Policies [Abstract] | ||
Foreign Currency Transaction Gain (Loss), Unrealized | $ 380 | $ 155 |
Goodwill | 38,000 | 38,000 |
Inventories | ||
Appliances held for resale | 16,360,000 | 15,511,000 |
Processed metals from recycled appliances held for resale | 367,000 | 571,000 |
Other Inventory, Net of Reserves | $ 6,000 | 31,000 |
Less provision for inventory obsolescence | (175,000) | |
Inventory, Net | $ 16,733,000 | $ 16,113,000 |
Significant Accounting Policies (Details 3) $ in Thousands |
12 Months Ended |
---|---|
Jan. 03, 2015
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill | $ 38 |
Significant Accounting Policies (Details 4) |
12 Months Ended |
---|---|
Jan. 02, 2016 | |
Minimum [Member] | |
Operating Leased Assets [Line Items] | |
Operating lease term | 5 years |
Maximum [Member] | |
Operating Leased Assets [Line Items] | |
Operating lease term | 10 years |
Significant Accounting Policies (Details 5) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jan. 02, 2016 |
Jan. 03, 2015 |
|
Changes in warranty accrual | ||
Beginning Balance | $ 30 | $ 34 |
Standard accrual based on units sold | 45 | 31 |
Actual costs incurred | (16) | (16) |
Periodic accrual adjustments | (17) | (19) |
Ending Balance | $ 42 | $ 30 |
Significant Accounting Policies (Details 6) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jan. 02, 2016 |
Jan. 03, 2015 |
|
Share-based Compensation [Abstract] | ||
Estimated forfeiture rate, minimum (as a percent) | 0.00% | |
Estimated forfeiture rate, maximum (as a percent) | 5.00% | |
Expected dividend yield (as a percent) | 0.00% | |
Share-based compensation expense recognized | $ 316 | $ 267 |
Significant Accounting Policies (Details 7) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
12 Months Ended | |
---|---|---|
Jan. 02, 2016 |
Jan. 03, 2015 |
|
Numerator: | ||
Net income (loss) attributable to controlling interest | $ (2,717) | $ 771 |
Denominator: | ||
Weighted average shares outstanding - basic | 5,833 | 5,676 |
Employee stock options (in shares) | 0 | 104 |
Weighted average shares outstanding - diluted (in shares) | 5,833 | 5,780 |
Income per share: | ||
Basic (in dollars per share) | $ (0.47) | $ 0.14 |
Diluted (in dollars per share) | $ (0.47) | $ 0.13 |
Significant Accounting Policies Significant Accounting Policies (Details 8) - shares shares in Thousands |
12 Months Ended | |
---|---|---|
Jan. 02, 2016 |
Jan. 03, 2015 |
|
Significant Accounting Policies (Details 8) [Abstract] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1 | 0 |
Sale-Leaseback Transaction (Details) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2009
USD ($)
|
Jan. 02, 2016
USD ($)
|
Jan. 03, 2015
USD ($)
|
Sep. 25, 2009
USD ($)
ft²
|
|
Sale-Leaseback Transaction [Abstract] | ||||
Area of building (Sq ft) | ft² | 126,458 | |||
Proceeds, net of fees | $ 4,627 | |||
Initial lease period (in years) | 5 years | |||
Proceeds from Sale of building | $ 2,032 | $ 7 | $ 16 | |
Repayments of mortgage | $ 2,595 | |||
Adjustment to net book value | $ 2,191 | |||
Deferred gain | $ 2,436 | |||
Amortization of deferred gain | $ 0 | $ 365 |
Other Assets (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jan. 02, 2016 |
Jan. 03, 2015 |
|
Other Assets, Noncurrent [Abstract] | ||
Deposits | $ 416 | $ 375 |
Recycling contract, net | 20 | 100 |
Debt issuance costs, net | 67 | 174 |
Patent costs | 122 | 21 |
Goodwill | 38 | 38 |
Total | 663 | 708 |
Amortization expense related to recycling contract | 80 | 80 |
Non-cash interest expense related to debt issuance costs | $ 107 | $ 104 |
Accrued Expenses (Details) - USD ($) $ in Thousands |
Jan. 02, 2016 |
Jan. 03, 2015 |
Dec. 28, 2013 |
---|---|---|---|
Payables and Accruals [Abstract] | |||
Sales and Excise Tax Payable | $ 4,804 | $ 4,837 | |
Compensation and benefits | 1,446 | 1,322 | |
Accrued rebate and incentive checks | 293 | 381 | |
Accrued rent | 235 | 304 | |
Warranty expense | 42 | 30 | $ 34 |
Accrued payables | 749 | 306 | |
Deferred revenue | 413 | 276 | |
Other | 952 | 677 | |
Total | $ 8,934 | $ 8,133 |
Borrowings Schedule of Short-term Debt Instrument (Details) - AAP |
12 Months Ended |
---|---|
Jan. 02, 2016
USD ($)
| |
Short-term Debt [Line Items] | |
Other Notes Payable, Current | $ 200,000 |
Notes Payable, Other Payables [Member] | |
Short-term Debt [Line Items] | |
Interest rate at the end of the period (as a percent) | 8.00% |
Repayments of Notes Payable | $ 125,000 |
Proceeds from Issuance of Debt | $ 325,000 |
Commitments and Contingencies (Details) $ in Thousands |
12 Months Ended | |
---|---|---|
Jan. 02, 2016
USD ($)
manufacturer
|
Jan. 03, 2015
USD ($)
|
|
Minimum future payments operating leases | ||
2013 | $ 4,266 | |
2014 | 3,832 | |
2015 | 3,078 | |
2016 | 2,066 | |
2017 | 1,738 | |
Thereafter | 2,249 | |
Total | 17,229 | |
Operating Leases, Rent Expense | 5,300 | $ 4,882 |
Future sublease rentals payments receivable through March 2016 | $ 840 | |
Number of appliance manufacturers that have material contracts with the Company | manufacturer | 3 | |
ARCA | ||
Minimum future payments operating leases | ||
2013 | $ 3,804 | |
2014 | 3,368 | |
2015 | 2,611 | |
2016 | 1,578 | |
2017 | 1,270 | |
Thereafter | 2,221 | |
Total | 14,852 | |
AAP | ||
Minimum future payments operating leases | ||
2013 | 462 | |
2014 | 464 | |
2015 | 467 | |
2016 | 488 | |
2017 | 468 | |
Thereafter | 28 | |
Total | $ 2,377 |
Commitments and Contingencies Commitments and Contingencies Disclosure (Details) - 12 months ended Jan. 02, 2016 $ in Millions |
USD ($)
state
|
Total |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Loss Contingency, Damages Sought, Value | $ 2.0 | |
Number of States in which Entity Operates | 12 | 23 |
Income Taxes (Details 1) - USD ($) $ in Thousands |
Jan. 02, 2016 |
Jan. 03, 2015 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Current assets | $ 1,657 | $ 2,082 |
Non-current assets | 327 | 14 |
Deferred income tax liabilities | 0 | (1,048) |
Net deferred tax liabilities | $ 1,984 | $ 1,048 |
Income Taxes (Details 2) $ in Thousands |
12 Months Ended |
---|---|
Jan. 02, 2016
USD ($)
| |
Carry Forwards [Line Items] | |
Percentage of change in control | 50.00% |
Period of change in control | 3 years |
Limitation On Use of Carryforward Annual Amount as per Section 382 | $ 56 |
State | |
Carry Forwards [Line Items] | |
Operating Loss Carryforwards | 8,398 |
Canada Revenue Agency [Member] | |
Carry Forwards [Line Items] | |
Operating Loss Carryforwards | 0 |
Foreign Tax Credit Carryforward | |
Carry Forwards [Line Items] | |
Tax credit carryforward | $ 256 |
Shareholders' Equity (Details 2) - USD ($) |
12 Months Ended | |||
---|---|---|---|---|
Jan. 02, 2016 |
Jan. 03, 2015 |
Jan. 02, 2015 |
Oct. 21, 2009 |
|
Shareholders' Equity | ||||
Outstanding Options, Weighted Average Remaining Contractual Life (in years) | 5 years 2 months 22 days | 4 years 6 months 21 days | ||
Options exercisable at January 2, 2016 | $ 0 | $ 212 | ||
Closing stock price used for calculation of intrinsic value | $ 1.05 | $ 1.97 | ||
5.05 to 6.41 [Member] | ||||
Shareholders' Equity | ||||
Exercise price, minimum | $ 5.05 | |||
Exercise price, maximum | 6.41 | |||
3.55 to 4.69 [Member] | ||||
Shareholders' Equity | ||||
Exercise price, minimum | 3.55 | |||
Exercise price, maximum | 4.69 | |||
2.22 to 2.80 [Member] | ||||
Shareholders' Equity | ||||
Exercise price, minimum | 2.22 | |||
Exercise price, maximum | 2.80 | |||
1.87 [Member] | ||||
Shareholders' Equity | ||||
Exercise price, minimum | 1.87 | |||
Exercise price, maximum | $ 1.89 |
Stockholders' Equity (Details 3) - shares shares in Millions |
3 Months Ended | |
---|---|---|
Dec. 31, 2009 |
Jan. 02, 2016 |
|
Preferred Stock | ||
Number of authorized shares of preferred stock | 2 | |
Non Employee Member [Member] | ||
Preferred Stock | ||
Warrant exercisable period | 0 years | |
Warrant [Member] | ||
Preferred Stock | ||
Warrant exercisable period | 10 years |
Shareholders' Equity Stockholders' Equity (Details 4) $ in Thousands |
12 Months Ended |
---|---|
Jan. 02, 2016
USD ($)
| |
Stockholders' Equity Note [Abstract] | |
Fiscal year 2016 | $ 138 |
Fiscal year 2017 | 43 |
Share-based Compensation Expense | $ 181 |
Shareholders' Equity (Details 5) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
1 Months Ended | 3 Months Ended | ||||
---|---|---|---|---|---|---|
Jul. 31, 2014 |
Dec. 31, 2009 |
Jan. 02, 2016 |
Jan. 02, 2015 |
Apr. 30, 2010 |
Oct. 21, 2009 |
|
Warrants [Line Items] | ||||||
Share Price | $ 1.05 | $ 1.97 | ||||
GE Common Stock Warrant | ||||||
Warrants [Line Items] | ||||||
Exercise Price of warrant | $ 0.73 | $ 0.75 | ||||
Number of shares of common stock which can be purchased | 0 | 254 | 248 | |||
Warrants Fair Value | $ 479 | |||||
Fair value per share | $ 1.93 | |||||
Warrant exercisable period | 10 years | |||||
Number of shares in the money | 0 | |||||
Non Employee Member Stock Warrant | ||||||
Warrants [Line Items] | ||||||
Exercise Price of warrant | $ 3.55 | |||||
Number of shares of common stock which can be purchased | 24 | |||||
Warrant exercisable period | 0 years |
Benefit Contribution Plan (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 02, 2016 |
Jan. 03, 2015 |
|
Benefit Contribution Plan [Abstract] | ||
Employer contribution per dollar | $ 0.10 | |
Defined Contribution Plan, Employer Matching Contribution, Percent | 5.00% | |
Employer contribution safe habor matching percent | 4.00% | |
Recognized expenses for contributions | $ 84,000 | $ 74,000 |
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