ARCI - Appliance Recycling Centers of America

[Guest Cameron]

There was an old thread about this company from 2013, it has become cheap again and the landscape looks a bit different from before. Book value is at $13 million while it trades at around $4.4 million. Sales have fallen from $131 million to $103 million. They had to pay back their line of credit they had which was about $8 million outstanding. They had to sell off their property in Compton, CA do to so for about $7.1 million and netted $5.1 while the property was on their balance sheet at $1.9 million. They also got a different line of credit with MidCap Financing after they payed back PNC, the line of credit is $12 million.

 

Both line of their business have taken a turn for the worse the recycling business specifically had a very bad quarter, what gives me pause is the cash position, even though they increased their quick ratio over the last quarter only have $800,000 in cash when they have historically had about $2, $3 million before obviously paying back the line of credit has something to do with it, and they have a new line of credit but chapter 11 looks more likely then it did in late 2015 when it traded at 20 cents higher than today.

 

Wondering if anyone else has looked at this company since its fall.

[Green King]

They look to be a bunch of over paid clowns 500K for a CEO in a dying industry in businesses with a 4 million market cap. look like a trap.

[Morgan]

Forgive my total ignorance, I've done no research on this industry. Why is it dying industry?

 

Are appliances being recycled in other parts of the world?

Is less of the appliance recyclable?

Is it just too expensive to employ people in the us?

Do people simply not recycle appliances?

[Guest Cameron]

Forgive my total ignorance, I've done no research on this industry. Why is it dying industry?

 

Are appliances being recycled in other parts of the world?

Is less of the appliance recyclable?

Is it just too expensive to employ people in the us?

Do people simply not recycle appliances?

 

There very exposed to commodity prices, still looking at the company even though I laughed at what Green King said lol.

[Green King]

Forgive my total ignorance, I've done no research on this industry. Why is it dying industry?

 

Are appliances being recycled in other parts of the world?

Is less of the appliance recyclable?

Is it just too expensive to employ people in the us?

Do people simply not recycle appliances?

 

The numbers show they are dying. The management compensation shows they give zero fucks about the future. Therefore Pass.

 

Assumption From Above:

Also when was the last time you bought a used appliance? Over the years it has changed from a huge ticket item to one of your purchases. With the advent of Globalized manufacturing, the margins ain't what it used to be.

 

http://financials.morningstar.com/ratios/r.html?t=ARCI&region=USA&culture=en_US

[Guest Cameron]

Forgive my total ignorance, I've done no research on this industry. Why is it dying industry?

 

Are appliances being recycled in other parts of the world?

Is less of the appliance recyclable?

Is it just too expensive to employ people in the us?

Do people simply not recycle appliances?

 

The numbers show they are dying. The management compensation shows they give zero fucks about the future. Therefore Pass.

 

Assumption From Above:

Also when was the last time you bought a used appliance? Over the years it has changed from a huge ticket item to one of your purchases. With the advent of Globalized manufacturing, the margins ain't what it used to be.

 

http://financials.morningstar.com/ratios/r.html?t=ARCI&region=USA&culture=en_US

 

I agree they are dying but this is part of the reason they are so cheap with .3x book, I would pull the trigger if they had more cash, it looks like chapter 11 is close even with the credit line, HHGregg went under with a credit line they didn't draw from  but I think the puff has already been had for this one :(

[Green King]

Anyone want to take this over and liquidate? or fire the management and do a 3G ? there might be something here if you can take the brain damage and pain.

 

13m book @ 10% is 1.3m and I recall top management cost around 1m a year and middle might also cost some you might be able to get significant saving just by firing them and gutting the place in terms of cost.  Given their pay they are not producing the returns needed for assets deployed under their stewardship. 13m @ 3% is 390k come on at least beat the risk free rate.

[DTEJD1997]

Forgive my total ignorance, I've done no research on this industry. Why is it dying industry?

 

Are appliances being recycled in other parts of the world?

Is less of the appliance recyclable?

Is it just too expensive to employ people in the us?

Do people simply not recycle appliances?

 

The numbers show they are dying. The management compensation shows they give zero fucks about the future. Therefore Pass.

 

Assumption From Above:

Also when was the last time you bought a used appliance? Over the years it has changed from a huge ticket item to one of your purchases. With the advent of Globalized manufacturing, the margins ain't what it used to be.

 

http://financials.morningstar.com/ratios/r.html?t=ARCI&region=USA&culture=en_US

 

While buying a used appliance is certainly not a common thing these days, used appliance stores most certainly do exist...I know this for a fact as there are several in & around Detroit that I will drive by as I go hither & yon.  Obviously, the majority of these are NOT located in upper or middle class neighborhoods.  I do think there is one that actually is in a better neighborhood that specializes in VERY high end brand of stoves/refrigerators (Wolf, SubZero, European brands).  So the market is probably limited geographically, and is probably not that huge, but it is a definite niche.

[Green King]

Forgive my total ignorance, I've done no research on this industry. Why is it dying industry?

 

Are appliances being recycled in other parts of the world?

Is less of the appliance recyclable?

Is it just too expensive to employ people in the us?

Do people simply not recycle appliances?

 

The numbers show they are dying. The management compensation shows they give zero fucks about the future. Therefore Pass.

 

Assumption From Above:

Also when was the last time you bought a used appliance? Over the years it has changed from a huge ticket item to one of your purchases. With the advent of Globalized manufacturing, the margins ain't what it used to be.

 

http://financials.morningstar.com/ratios/r.html?t=ARCI&region=USA&culture=en_US

 

While buying a used appliance is certainly not a common thing these days, used appliance stores most certainly do exist...I know this for a fact as there are several in & around Detroit that I will drive by as I go hither & yon.  Obviously, the majority of these are NOT located in upper or middle class neighborhoods.  I do think there is one that actually is in a better neighborhood that specializes in VERY high end brand of stoves/refrigerators (Wolf, SubZero, European brands).  So the market is probably limited geographically, and is probably not that huge, but it is a definite niche.

 

Existence with Labour conversion and wealth creation are not the same thing.

[Junto]

Anyone want to take this over and liquidate? or fire the management and do a 3G ? there might be something here if you can take the brain damage and pain.

 

13m book @ 10% is 1.3m and I recall top management cost around 1m a year and middle might also cost some you might be able to get significant saving just by firing them and gutting the place in terms of cost.  Given their pay they are not producing the returns needed for assets deployed under their stewardship. 13m @ 3% is 390k come on at least beat the risk free rate.

 

So who's in? I can do the local scouting since it is in my backyard.

[Guest Cameron]

I ended up selling this for a 80% gain today after holding for a week, sometimes you get lucky with when value is realized I guess. They were trading at .3x book, they ended up selling their AAP recycling division that was capital intensive.

[Green King]

I ended up selling this for a 80% gain today after holding for a week, sometimes you get lucky with when value is realized I guess. They were trading at .3x book, they ended up selling their AAP recycling division that was capital intensive.

 

Lolz. Congrats.

[bizaro86]

Public service announcement: these guys come up on a screen as a net-net. I was a bit excited.

 

They're not, because they issued prefs convertible into 28.9 MM shares in exchange for ownership of a development stage company that has a patent for cellular tranceiver modules.