EXHIBIT 99.1
| Appliance Recycling Centers of America Inc. |
For Immediate Release |
| For Additional Information Contact: |
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| Edward R. (Jack) Cameron (CEO) |
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| 952/930-9000 |
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| Richard G. Cinquina |
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| Equity Market Partners |
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| 904/261-2210 |
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Appliance Recycling Centers of America
Reports Strong Retail Sales Growth
In Third Quarter of 2005
November 3, 2005—Minneapolis, MN—Appliance Recycling Centers of America, Inc. (OTC BB: ARCI) today reported revenues of $20,706,000 for the third quarter of 2005 ended October 1, an increase of 42% from $14,543,000 in the year-earlier period. Net income totaled $47,000 or $0.01 per diluted share, compared to $260,000 or $0.08 per diluted share in the third quarter of 2004.
For the first nine months of 2005, revenues increased 45% to $56,757,000 from $39,135,000 in the same period a year ago. Net income for this period was a breakeven of $18,000 or $0.00 (rounded) per diluted share, compared to a net loss of $514,000 or $0.21 per share in the first nine months of 2004.
Same-store sales of the nine ApplianceSmart factory outlets that were open during the third quarters of 2005 and 2004 rose 19%, while total retail sales from 12 ApplianceSmart outlets increased 52% to $16,513,000 compared to last year’s third quarter. A 37,000-square-foot ApplianceSmart factory outlet in San Antonio, the second store in this market, opened in October 2005.
Recycling revenues increased 17% to $3,757,000 in this year’s third quarter compared to the year-earlier period. The majority of this growth was generated by the energy conservation program in California sponsored by Southern California Edison Company, but growing revenue contributions came from utility-related recycling programs in Connecticut, the city of Austin, Texas, and the state of Wisconsin.
Edward R. (Jack) Cameron, president and chief executive officer, commented: “The sales growth of our ApplianceSmart operation remained exceptionally strong in this year’s third quarter. We believe this sales performance reflects the fundamental soundness of ApplianceSmart’s value proposition, as well as our ability to target attractive locations for new factory outlets in both new and existing markets. However, ARCA’s profitability was affected by growth-related expenses generated by the expansion of our ApplianceSmart network, which grew from nine outlets in the third quarter of 2004 to 12 at the end of this year’s third quarter. Having demonstrated ApplianceSmart’s viability and effectiveness from the standpoint of top line growth, we now must improve the operating efficiencies in order to strengthen ARCA’s profitability.”
Cameron continued: “We remain very confident in ARCA’s prospects. We have made substantial progress in recent years and believe that ARCA is moving in the right strategic direction. Over the near-term, the fourth quarter typically marks the onset of a seasonal slowdown in appliance sales. In addition, the advertising support provided by our utility partners for their recycling programs tends to wind down toward the end of each calendar year.”
ARCA is currently in the process of submitting a bid for renewing its multi-year contract for the California statewide appliance recycling program. This new contract would have three-year durations starting in January 2006.
About ARCA
Through its ApplianceSmart (www.ApplianceSmart.com) operation, ARCA is one of the nation’s leading retailers of special-buy household appliances, primarily those manufactured by Maytag, GE, Frigidaire and Whirlpool. These special-buy appliances, which include close-outs, factory overruns and scratch-and-dent units, typically are not integrated into the manufacturer’s normal distribution channel. ApplianceSmart sells these virtually new appliances at a discount to full retail, offers a 100% money-back guarantee and provides warranties on parts and labor. As of October 2005, ApplianceSmart was operating 13 factory outlets: five in the Minneapolis/St. Paul market; three in the Columbus, Ohio, market; two in the Atlanta market; two in San Antonio, Texas and one in Los Angeles. ARCA is also the nation’s largest recyclers of major household appliances for the energy conservation programs of electric utilities.
Statements about ARCA’s outlook are forward-looking and involve risks and uncertainties, including but not limited to: the strength of recycling programs, the growth of appliance retail sales, the speed at which individual retail stores reach profitability, and other factors discussed in the Company’s filings with the Securities and Exchange Commission.
# # #
Visit our web site at www.arcainc.com
Appliance Recycling Centers of America, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
3rd Quarter 2005 Results
(000’s omitted except for share amounts)
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| Three months ended |
| Nine months ended |
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| October 1 |
| October 2 |
| October 1 |
| October 2 |
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| 2005 |
| 2004 |
| 2005 |
| 2004 |
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Revenues |
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Retail |
| $ | 16,513 |
| $ | 10,838 |
| $ | 47,709 |
| $ | 31,161 |
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Recycling |
| 3,757 |
| 3,199 |
| 7,973 |
| 6,854 |
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Byproduct |
| 436 |
| 506 |
| 1,075 |
| 1,120 |
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Total revenues |
| 20,706 |
| 14,543 |
| 56,757 |
| 39,135 |
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Cost of Revenues |
| 14,873 |
| 10,041 |
| 39,667 |
| 27,661 |
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Gross profit |
| 5,833 |
| 4,502 |
| 17,090 |
| 11,474 |
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Selling, General & Administrative Expenses |
| 5,529 |
| 4,086 |
| 16,401 |
| 11,516 |
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Operating income (loss) |
| 304 |
| 416 |
| 689 |
| (42 | ) | ||||
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Other Income (Expense) |
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Other income |
| 2 |
| 33 |
| 1 |
| 22 |
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Interest expense |
| (259 | ) | (187 | ) | (672 | ) | (558 | ) | ||||
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Income (loss) before provision for income taxes |
| 47 |
| 262 |
| 18 |
| (578 | ) | ||||
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Provision for (Benefit of) Income Taxes |
| — |
| 2 |
| — |
| (64 | ) | ||||
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Net income (loss) |
| $ | 47 |
| $ | 260 |
| $ | 18 |
| $ | (514 | ) |
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Basic Earnings (Loss) per Common Share |
| $ | 0.01 |
| $ | 0.09 |
| $ | 0.00 |
| $ | (0.21 | ) |
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Diluted Earnings (Loss) per Common Share |
| $ | 0.01 |
| $ | 0.08 |
| $ | 0.00 |
| $ | (0.21 | ) |
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Basic Weighted Average No. of Common Shares Outstanding |
| 4,269 |
| 2,986 |
| 4,242 |
| 2,429 |
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Diluted Weighted Average No. of Common Shares Outstanding |
| 4,388 |
| 3,095 |
| 4,353 |
| 2,429 |
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Appliance Recycling Centers of America, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
As of October 1, 2005
(000’s)
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| October 1, |
| January 1, |
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| 2005 |
| 2005 |
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| (Unaudited) |
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Assets |
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Current Assets |
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Cash and cash equivalents |
| $ | 2,692 |
| $ | 4,362 |
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Receivables - net of allowance of $102,000 |
| 3,204 |
| 2,034 |
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Inventories, net of reserves of $352,000 and $385,000 respectively |
| 12,736 |
| 10,154 |
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Deferred income taxes |
| 468 |
| 468 |
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Other current assets |
| 476 |
| 338 |
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Total Current Assets |
| 19,576 |
| 17,356 |
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Property and Equipment, at cost |
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Land |
| 2,050 |
| 2,050 |
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Building and Improvements |
| 4,477 |
| 4,338 |
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Equipment |
| 6,241 |
| 5,928 |
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| 12,768 |
| 12,316 |
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Less accumulated depreciation |
| 6,594 |
| 5,982 |
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Net property and equipment |
| 6,174 |
| 6,334 |
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Other assets |
| 327 |
| 300 |
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Restricted cash |
| 350 |
| 350 |
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Total Assets |
| $ | 26,427 |
| $ | 24,340 |
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Liabilities and Shareholders’ Equity |
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Current Liabilities |
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Line of credit |
| $ | 6,102 |
| $ | 5,415 |
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Current maturities of long term obligations |
| 225 |
| 615 |
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Accounts payable |
| 5,352 |
| 3,889 |
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Accrued expenses |
| 2,917 |
| 2,779 |
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Income taxes payable |
| 58 |
| 58 |
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Total Current Liabilities |
| 14,654 |
| 12,756 |
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Minority Interest |
| 12 |
| — |
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Long-Term Obligations, less current maturities |
| 4,922 |
| 5,053 |
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Deferred Income Tax Liabilities |
| 468 |
| 468 |
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Total Liabilities |
| 20,056 |
| 18,277 |
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Shareholders’ Equity |
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Common stock, no par value; authorized 10,000,000 shares; issued and outstanding 4,319,000 and 4,136,000 shares respectively |
| 14,840 |
| 14,549 |
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Accumulated Deficit |
| (8,469 | ) | (8,486 | ) | ||
Total Shareholders’ Equity |
| 6,371 |
| 6,063 |
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Total Liabilities and Shareholders’ Equity |
| $ | 26,427 |
| $ | 24,340 |
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