Jack Cameron - President and Chief Executive Officer Jeff Cammerrer - Chief Financial Officer Brad Bremer - President, ApplianceSmart Mark Eisenschenk - Chief Operating Officer and President, ARCA Recycling

Ladies and gentlemen, thank you for standing by. Welcome to the Appliance Recycling Centers of America’s Third Quarter 2013 Investor Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Tuesday, November 5, 2013. I’d now like to turn the conference over to Jack Cameron. Please go ahead sir.

Thank you, Becky. I appreciate it. Good morning everyone and thanks for joining us. Welcome to the Appliance Recycling Centers of America third quarter 2013 conference call. I am Jack Cameron, President and CEO of ARCA. With me today are members of our senior management team Jeff Cammerrer, our Chief Financial Officer; Brad Bremer, President of ApplianceSmart; and Mark Eisenschenk, who has joined us this past summer as Chief Operating Officer and also as President of ARCA Recycling. This morning we will expand upon yesterday’s press release, which can be found on our website under the Investor Relations section and our website is arcainc.com. On today’s agenda today, Jeff will read our forward-looking statements and review our third quarter financial results. Then Brad will give us an update on our retail appliance business and Mark will provide an overview of our utility recycling programs. Finally, I will discuss the company and the industry developments and then we will open up the call for questions. So to start out, we will start out with Jeff. And Jeff, go ahead.

Thank you, Jack. Our comments may contain certain forward-looking statements regarding possible events, including expectations and are not considered guarantees of future performance. Future results may differ materially and you should not attribute undue certainty to any forward-looking statements. Please refer to the cautionary statements in our SEC filings to better understand the risk that may impact our business. We are pleased to report that the company generated a consolidated profit of $1.1 million or $0.20 per diluted share for the quarter. The third quarter profit was spurred by growth in our appliance replacement revenues, improved profit margins at AAP and lower ApplianceSmart expenses. During the third quarter, we negotiated and executed the fourth amendment of our credit agreement with PNC Bank. The amendment allows us to borrow under LIBOR rates effective November 1, previously not available until January 31, 2014. The ability to borrow under LIBOR rates lowers our interest rate by 300 basis points and will save approximately $40,000 over the next three months. The amendment also deferred and lowered the mandatory loan payments from AAP providing additional liquidity for AAP to invest in capital equipment to improve its client efficiencies. Through the third quarter, we are in compliance with all of our bank covenants and we are extremely gratified by PNC’s continued support of the business. In our Recycling segment, revenues of $16.2 million were up $5.1 million compared to the third quarter 2012. The revenue growth was primarily the result of a 200% increase in appliance replacement volumes due to a customer accelerating a portion of its 2014 budget into 2013. Overall, clients’ replacement revenues increased by $5.2 million and $3.8 million of this was related to this customer’s budget acceleration. The growth in appliance replacement revenues was partially offset by a $400,000 decline in recycling-only…

Thanks Jeff. ApplianceSmart posted consistent sales throughout the third quarter week-after-week. Business was much more predictable during this recent quarter than it was during the third quarter of 2012 when we saw some real highs and lows. Last year sales started declining in July and didn’t bottom out until the end of 2012. Our sales tracked with industry’s trend then, this recent quarter we also tracked with industry trends again and we saw same store sales rise 5%. We believe customer confidence is gradually improving leading to more stability in sales. We are also seeing some of the pent-up demand turn into sales from consumers needing replacement appliances or deciding to remodel with new ones. Some of the sales growth also results from increased housing market activity with people starting to move around a little more doing – due to lower interest rates. We are beginning to see more movement and appliance change outs as the housing situation continues to improve nationwide. To recognize one market today, I would like say that Georgia locations especially are continuing to improve their performance. We have right sized the presence in the market to four stores and we are building more consumer awareness of our product selection and value proposition. Our Atlanta stores are becoming more established benefiting from repeat business and word of mouth referrals. Looking ahead to overall fourth quarter sales briefly, I will point out so far that we have not seen a noticeable falloff from the government shutdown in October. Our business has continued at a steady pace. From profitability standpoint, our gross margin improvement was greater operational efficiencies, especially compared to the third quarter of 2012. We continue to make the operational adjustments necessary to sustain further improvements including the right sizing our stores to better fit our…

Thanks very much Brad and Jeff. As Jack said this morning, I joined the company this summer as ARCA’s Chief Operating Officer. I am also President of our company’s recycling subsidiary, ARCA Recycling Incorporated. I am happy to be on this morning’s call. Regarding ARCA’s recycling business, our total revenues for the third quarter of 2013 were $11.8 million, that’s an increase of $4.8 million above the same period in 2012. As you may know ARCA’s recycling business is comprised of two basic elements. First as appliance recycling revenue, which is generated by collecting old appliances from customers of utility companies that sponsor energy efficiency programs and then we will recycle those old appliances, recovering their refrigerants, copper, aluminum, steel and so on. Our second business element is appliance replacement program revenue, which is generated from selling and installing new energy efficient appliances and recycling the old ones under utility company sponsored programs, typically provided for lower income or multifamily residence. We often refer to this appliance replacement program as a change out program. The first element of ARCA’s recycling business our appliance recycling revenues increased 9% to $3.7 million in the third quarter of 2013. This was primarily due to lower volumes and price compression with certain contracts. The total number of units recycled declined 1% and the average per unit pricing declined $7 compared with the same quarter of last year. The largest factor in the decline was changes made in two large recycling programs with less advertising and promotion supporting them. In both these particular markets, overall electrical consumption has remained flat or fallen due in part to weakened economies. So there is less incentive for the utilities to aggressively reduce electrical consumption. When the economies in these markets improve, we expect utilities to once again increase…

Thanks, Mark and Brad and Jeff for your comments. And I’d like to recap I don’t want to repeat everything that was said. There was lot of information given out, but I do want to go over some things. And Mark, we are very happy to have you on the team and thank you for your presentation and Brad just the same. Before I go into some details, I just want to mention that as you know 2012 was a tough year and we started making the adjustments that Brad alluded to it in sales we saw it in the utility business and the turndown in efforts by some utility companies. And we started making the adjustments across the board from operating expenses to renegotiating contracts to rightsizing the stores and we are very pleased with the progress. And I think it started to show up in the beginning of the year in the first quarter, continued in the second and now in the third quarter. Very confident about our management team and the current organizational structure that we have. Very pleased with the progress that we are making. And as you can surmise from the different comments made by everybody, the inner workings or the inner relations of our businesses between the access the product to ApplianceSmart with utility programs, increased out-of-cart merchandise because of some situations with the market share of Home Depot and then also the fact that a lot of the early housing starts last year were multi-family. And they tend to generate more out-of-cart merchandise. And now we are seeing a more residential rebounded with housing. So we are seeing all of it come together for us and providing more product and this also works in favor of AAP appliance – ARCA Advanced Processing, our…

(Operator Instructions) And we appear to have no questions at this time sir.

There are no questions, okay. Well, thank you very much. We appreciate your participation. If there are any questions that develop later, we are always available to answer them. And as you know I take all calls and whatever I could do to answer any questions you have or Jeff or Mark or Brad. So I guess it’s the last call for questions. If there are no questions at all, I guess we will say thank you very much for joining us.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.