FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-19621 APPLIANCE RECYCLING CENTERS OF AMERICA, INC. MINNESOTA 41-1454591 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7400 Excelsior Blvd. Minneapolis, Minnesota 55426-4517 (Address of principal executive offices) (952) 930-9000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES __X__ NO As of August 10, 2001, the number of shares outstanding of the registrant's no par value common stock was 2,287,369 shares. APPLIANCE RECYCLING CENTERS OF AMERICA, INC. INDEX PART I. FINANCIAL INFORMATION Page No. -------- Item 1: Financial Statements: Consolidated Balance Sheets as of June 30, 2001 and December 30, 2000............................3 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2001 and July 1, 2000......4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and July 1, 2000................5 Notes to Consolidated Financial Statements.....................6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations...............7 Item 3: Quantitative and Qualitative Disclosure about Market Risk.....13 PART II. OTHER INFORMATION.............................................13 2 Appliance Recycling Centers of America, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS
June 30, December 30, 2001 2000 (Unaudited) - ------------------------------------------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 546,000 $ 302,000 Accounts receivable, net of allowance of $20,000 4,612,000 1,731,000 Inventories, net of reserves of $486,000 and $375,000, respectively 5,027,000 4,233,000 Deferred income taxes and other current assets 475,000 386,000 - ------------------------------------------------------------------------------------------------------------- Total current assets 10,660,000 6,652,000 - ------------------------------------------------------------------------------------------------------------- Property and Equipment, at cost Land 2,050,000 2,050,000 Buildings and improvements 3,687,000 3,550,000 Equipment 4,424,000 4,046,000 - ------------------------------------------------------------------------------------------------------------- 10,161,000 9,646,000 Less accumulated depreciation 4,104,000 3,930,000 - ------------------------------------------------------------------------------------------------------------- Net property and equipment 6,057,000 5,716,000 - ------------------------------------------------------------------------------------------------------------- Other Assets 297,000 207,000 Goodwill, net of amortization of $133,000 and $114,000, respectively 57,000 76,000 - ------------------------------------------------------------------------------------------------------------- Total assets $ 17,071,000 $ 12,651,000 ============================================================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Line of credit $ 4,999,000 $ 2,402,000 Current maturities of long-term obligations 315,000 275,000 Accounts payable 2,790,000 1,279,000 Accrued expenses (Note 2) 871,000 936,000 Deferred gain on building sale 24,000 60,000 Income taxes payable 222,000 517,000 - ------------------------------------------------------------------------------------------------------------- Total current liabilities 9,221,000 5,469,000 Long-Term Obligations, less current maturities 4,390,000 4,431,000 - ------------------------------------------------------------------------------------------------------------- Total liabilities 13,611,000 9,900,000 - ------------------------------------------------------------------------------------------------------------- Shareholders' Equity Common stock, no par value; authorized 10,000,000 shares; issued and outstanding 2,287,000 shares 11,360,000 11,360,000 Accumulated deficit (7,900,000) (8,609,000) - ------------------------------------------------------------------------------------------------------------- Total shareholders' equity 3,460,000 2,751,000 - ------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 17,071,000 $ 12,651,000 =============================================================================================================
See Notes to Consolidated Financial Statements. 3 Appliance Recycling Centers of America, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, July 1, June 30, July 1, 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------ Revenues Retail $ 4,940,000 $ 3,020,000 $ 9,668,000 $ 5,227,000 Recycling 4,885,000 2,553,000 7,751,000 4,229,000 Byproduct 270,000 246,000 440,000 537,000 - ------------------------------------------------------------------------------------------------------------------------------ Total revenues 10,095,000 5,819,000 17,859,000 9,993,000 Cost of Revenues 6,164,000 3,280,000 10,774,000 5,450,000 - ------------------------------------------------------------------------------------------------------------------------------ Gross profit 3,931,000 2,539,000 7,085,000 4,543,000 Selling, General and Administrative Expenses 3,009,000 1,734,000 5,399,000 3,165,000 - ------------------------------------------------------------------------------------------------------------------------------ Operating income 922,000 805,000 1,686,000 1,378,000 Other Income (Expense) Other income 26,000 7,000 47,000 8,000 Interest expense (270,000) (225,000) (510,000) (412,000) - ------------------------------------------------------------------------------------------------------------------------------ Income before provision for income taxes 678,000 587,000 1,223,000 974,000 Provision for Income Taxes 285,000 246,000 514,000 342,000 - ------------------------------------------------------------------------------------------------------------------------------ Net income $ 393,000 $ 341,000 $ 709,000 $ 632,000 ============================================================================================================================== Basic Earnings per Common Share $ 0.17 $ 0.15 $ 0.31 $ 0.28 Diluted Earnings per Common Share $ 0.13 $ 0.12 $ 0.24 $ 0.22 ============================================================================================================================== Weighted Average Number of Common Shares Outstanding: Basic 2,287,000 2,287,000 2,287,000 2,287,000 Diluted 2,957,000 2,920,000 2,910,000 2,866,000 ==============================================================================================================================
See Notes to Consolidated Financial Statements. 4 Appliance Recycling Centers of America, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, July 1, 2001 2000 - ------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income $ 709,000 $ 632,000 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 215,000 189,000 Accretion of long-term debt discount 22,000 19,000 Loss on disposal of equipment -- 6,000 Changes in assets and liabilities: Receivables (2,881,000) (488,000) Inventories (794,000) (1,692,000) Other assets (201,000) (48,000) Accounts payable 1,511,000 504,000 Income taxes payable (295,000) 240,000 Deferred gain on building sale recognized (36,000) 0 Accrued expenses (65,000) 176,000 - ------------------------------------------------------------------------------------------------------------- Net cash used in operating activities (1,815,000) (462,000) - ------------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities Purchase of property and equipment (515,000) (160,000) - ------------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities Net borrowings under line of credit 2,597,000 854,000 Payments on long-term obligations (165,000) (58,000) Proceeds from long-term obligations 142,000 -- - ------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 2,574,000 796,000 - ------------------------------------------------------------------------------------------------------------- Increase in cash and cash equivalents 244,000 174,000 Cash and Cash Equivalents Beginning 302,000 220,000 ============================================================================================================= Ending $ 546,000 $ 394,000 ============================================================================================================= Supplemental Disclosures of Cash Flow Information Cash payments for interest $ 489,000 $ 305,000 Cash payments for income taxes $ 808,000 $ 103,800 =============================================================================================================
See Notes to Consolidated Financial Statements. 5 Appliance Recycling Centers of America, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 1. Financial Statements In the opinion of management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal, recurring accruals) necessary to present fairly the financial position of the Company and its subsidiaries as of June 30, 2001, and the results of operations for the three-month and six-month periods ended June 30, 2001 and July 1, 2000 and its cash flows for the six-month periods ended June 30, 2001 and July 1, 2000. The results of operations for any interim period are not necessarily indicative of the results for the year. These interim consolidated financial statements should be read in conjunction with the Company's annual consolidated financial statements and related notes in the Company's Annual Report on Form 10-K for the year ended December 30, 2000. Certain information and footnote disclosures included in the annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. 2. Accrued Expenses Accrued expenses were as follows: June 30, December 30, 2001 2000 ----------- ----------- Compensation $ 221,000 $ 330,000 Warranty 202,000 188,000 Other 448,000 418,000 ----------- ----------- $ 871,000 $ 936,000 =========== =========== 3. Revenue Recognition In the prior year, the Company reported consolidated recycling revenues and byproduct revenues together as recycling revenues. In the current year, the Company determined that byproduct revenues should be separately reported because of their significant dollar amount and since this revenue is a result of both retail and recycling activities. Prior periods have been reclassified to be consistent with this presentation. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued 4. Accounting Standards Issued Net Yet Adopted In July 2001, the Financial Accounting Standards Board issued two new statements. Statement No. 141, Business Combinations, eliminates the pooling method of accounting for business combinations. Statement No. 142, Goodwill and Other Intangible Assets, eliminates the amortization of goodwill and other intangibles that are determined to have an indefinite life and requires, at a minimum, annual impairment tests of goodwill and other intangible assets that are determined to have an indefinite life. The Company has not yet completed its full assessment of the effect of these new standards on its consolidated financial statements, but believes their impact will not be significant. The standards generally are required to be implemented by the Company in its 2002 financial statements. PART I: ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of the Company's level of operations and financial condition. This discussion should be read with the consolidated financial statements appearing in Item 1. The Company generates revenues from three sources: retail, recycling and byproduct. Retail revenues are sales of appliances, warranty and service revenue and delivery fees. Recycling revenues are fees charged for the disposal of appliances. Byproduct revenues are sales of scrap metal and reclaimed chlorofluorocarbons ("CFCs") generated from processed appliances. The Company is managed as a unit and does not measure profit or loss separately for its three primary revenue sources. Therefore, the Company believes that it has one operating segment. Total revenues for the three and six months ended June 30, 2001 were $10,095,000 and $17,859,000, respectively, compared to $5,819,000 and $9,993,000 for the same periods in the prior year, increases of 73% and 79%, respectively. Retail sales accounted for approximately 49% of revenues in the second quarter of 2001. Retail revenues for the three and six months ended June 30, 2001 increased by $1,920,000 or 64% and $4,441,000 or 85%, respectively, from the same periods in the prior year. Second quarter same-store retail sales increased 22% (a sales comparison of four stores that were open the entire second quarters of both 2001 and 2000.) The increase in retail sales was primarily due to an increase in scratch and dent sales as a result of operating four additional stores during the three and six months ended June 30, 2001 compared to the same periods in the previous year. 7 RESULTS OF OPERATIONS - continued Currently, the Company has eight retail locations. In May 2001, the Company opened a store in the Columbus, Ohio market which replaced a significantly smaller store in this market. Any additional stores opened later this year would be located in an existing market. The Company experiences seasonal fluctuations and expects retail sales to be higher in the second and third calendar quarters than in the first and fourth calendar quarters, reflecting consumer purchasing cycles. Recycling revenues for the three and six months ended June 30, 2001 increased by $2,332,000 or 91% and $3,522,000 or 83%, respectively, from the same periods in the prior year. The increases in recycling revenues were primarily due to an increase in refrigerator recycling volumes principally related to the Summer Initiative contract with Southern California Edison Company ("Edison"). The Company is in the second year of a two-year contract with Edison for its refrigerator recycling program which runs through December 30, 2001. The Company expects the 2001 volume for this contract to be at approximately the same level as 2000. This two-year contract does not provide for a minimum number of refrigerators to be recycled in either 2000 or 2001. The timing and amount of revenues will be dependent on advertising by Edison. The Company has another contract with Edison ("Summer Initiative") for a recycling program in the service areas of Pacific Gas & Electric (the San Francisco Bay area) and San Diego Gas & Electric. Under this contract, the Company expects to recycle approximately 30,000 to 40,000 additional units through the end of 2001. However, during the second quarter the program goal for orders was reached. During the third quarter, the recycling will be completed for these orders. The Company began the Summer Initiative in September 2000 and was fully operational in the first quarter of 2001. The Company is responsible for advertising for the Summer Initiative. In June 2001, the Company signed a contract ("the Appliance Early Retirement and Recycling Program") with the California Public Utilities Commission ("CPUC") to operate a refrigerator/freezer/room air conditioner recycling program in San Diego and surrounding areas; a six-county region in California's Central Valley, including the cities of Fresno and Stockton; and the seven-county Bay Area, including the city of San Francisco. The Company started taking customer orders for the Appliance Early Retirement and Recycling Program in San Diego in June. The program will be launched in the Central Valley and Bay Area in September. The CPUC has budgeted $14 million to fund the recycling program. The budget allocation includes $50 incentive payments to participants for refrigerators and freezers and $25 incentive payments for room air conditioners. Initial significant revenues from the new program are anticipated in the second half of this year. The program is a one-year contract through May 31, 2002. The recent energy crisis in California has not had a material adverse effect on the Company's operations. However, there can be no assurance that it will not have an adverse effect in the future if Edison is unable to perform under the terms of its contracts with the Company. 8 RESULTS OF OPERATIONS - continued Byproduct revenues for the three months ended June 30, 2001 increased to $270,000 from $246,000 in the same period of 2000. The increase was primarily due to an increase in the volume of CFCs offset by a decrease in scrap metal prices. Byproduct revenues for the six months ended June 30, 2001 decreased to $440,000 from $537,000 in the same period of 2000. The decrease was primarily due to a decrease in scrap metal prices. Gross profit as a percentage of total revenues for the three and six months ended June 30, 2001 decreased to 39% and 40%, respectively, from 44% and 45%, respectively, for the three and six months ended July 1, 2000. The decreases were primarily due to higher retail sales of scratch and dent appliances which have a lower gross margin than sales of reconditioned appliances and additional non-recurring expenses related to the Summer Initiative contract. Gross profit as a percentage of total revenues for future periods can be affected favorably or unfavorably by numerous factors, including the volume of appliances recycled from the Edison contracts and the CPUC contract, the mix of retail product sold during the period and the price and volume of byproduct revenues. The Company believes that gross profit as a percentage of total revenues for the year 2001 will approximate the gross profit as a percentage of total revenues for the first six months of this year. Selling, general and administrative expenses for the three and six months ended June 30, 2001 increased by $1,275,000 or 74% and $2,234,000 or 71%, respectively, from the same periods in 2000. Selling expenses for the three and six months ended June 30, 2001 increased by $721,000 or 103% and $1,515,000 or 129%, respectively, from the same periods in 2000. The increases in selling expenses were primarily due to opening three additional retail stores during the first six months of 2001 and increases in advertising and sales commissions and the expense of operating four additional stores in 2001 as compared to the same period in the previous year. General and administrative expenses for the three and six months ended June 30, 2001 increased by $554,000 or 54% and $719,000 or 36%, respectively, from the same periods in 2000. The increase in general and administrative expenses was primarily due to an increase in personnel costs. Interest expense was $270,000 for the three months and $510,000 for the six months ended June 30, 2001 compared to $225,000 and $412,000 for the same periods in 2000. The increase in interest expense was due to a higher average borrowed amount for the three and six months ended June 30, 2001 than in the same periods in 2000 offset by a decrease in the effective interest rate on the line of credit. The Company recorded a provision for income taxes for the three and six months ended June 30, 2001 of $285,000 and $514,000, respectively, compared to $246,000 and $342,000 in same periods in 2000. The increase was due to both greater pre-tax income and a higher effective tax rate for the three and six months ended June 30, 2001 compared to the same periods in the prior year. 9 RESULTS OF OPERATIONS - continued The Company has net operating loss carryovers of approximately $8,514,000 at June 30, 2001, which are available to reduce taxable income and in turn income taxes payable in future years. However, future utilization of these loss carryforwards is subject to certain limitations under provisions of the Internal Revenue Code including limitations subject to Section 382, which relate to a 50 percent change in control over a three-year period, and are further dependent upon the Company maintaining profitable operations. The Company believes that the issuance of Common Stock during 1999 resulted in an "ownership change" under Section 382. Accordingly, the Company's ability to use net operating loss carryforwards generated prior to February 1999 may be limited to approximately $46,000 per year. At June 30, 2001, the Company had recorded cumulative valuation allowances of approximately $4,022,000 against its net deferred tax assets due to the undercertainty of their realization. The realization of deferred tax assets is dependent upon sufficient future taxable income during the periods when deductible temporary differences and carryforwards are expected to become available to reduce taxable income. The Company recorded net income of $393,000 or $.13 per diluted share and $708,000 or $.24 per diluted share for the three months and six months ended June 30, 2001, respectively, compared to net income of $341,000 or $.12 per diluted share and $632,000 or $.22 per diluted share in the same periods of 2000. The increases in net income for the three and six months ended June 30, 2001 compared to the same periods in the previous year were primarily due to higher revenues together with selling, general and administrative expenses as a percentage of revenues remaining the same for the three and six months ended June 30, 2001 compared to the same periods in the previous year offset by a decrease in the gross profit as a percentage of total revenues. LIQUIDITY AND CAPITAL RESOURCES At June 30, 2001, the Company had working capital of $1,439,000 compared to $1,183,000 at December 30, 2000. Cash and cash equivalents increased to $546,000 at June 30, 2001 from $302,000 at December 30, 2000. Net cash used in operating activities was $1,815,000 for the six months ended June 30, 2001 compared to $462,000 in the same period of 2000. The cash used in operating activities was primarily due to an increase in receivables and inventories offset by an increase in accounts payable and net income for the period. The Company's capital expenditures for the six months ended June 30, 2001 and July 1, 2000 were approximately $515,000 and $160,000, respectively. The 2001 capital expenditures were related to the continued upgrade of computer systems and the purchase of equipment related to the refrigerator recycling operation. The 2000 capital expenditures were primarily related to the purchase of computer equipment. 10 LIQUIDITY AND CAPITAL RESOURCES - continued As of June 30, 2001, the Company has a $6.0 million line of credit with a lender. The interest rate as of June 30, 2001 was 10%. The amount of borrowings available under the line of credit is based on a formula using receivables and inventories. The line of credit has a stated maturity date of August 30, 2001, if not renewed, and provides that the lender may demand payment in full of the entire outstanding balance of the loan at any time. The line of credit is secured by substantially all of the Company's assets and requires minimum monthly interest payments of $16,800 regardless of the outstanding principal balance. The lender also has an inventory repurchase agreement with Whirlpool Corporation that secures the line of credit. The line requires that the Company meet certain financial covenants, provides payment penalties for noncompliance, limits the amount of other debt the Company can incur, limits the amount of spending on fixed assets and limits payments of dividends. At June 30, 2001, the Company had unused borrowing capacity of $434,000. Currently, the Company is investigating options to replace or renew its line of credit. In June 2001, the Company amended its current line of credit to $6,000,000 with its current lender. The terms under the amendment remain the same. In July 2001, the Company amended its current line of credit to $6,300,000 with its current lender. The terms under the amendment remain the same. In June 2001, the Company signed a contract ("the Appliance Early Retirement and Recycling Program") with the California Public Utilities Commission ("CPUC") to operate a refrigerator/freezer/room air conditioner recycling program in San Diego and surrounding areas; a six-county region in California's Central Valley, including the cities of Fresno and Stockton; and the seven-county Bay Area, including the city of San Francisco. The Company started taking customer orders for the Appliance Early Retirement and Recycling Program in San Diego in June. The program will be launched in the Central Valley and Bay Area in September. The CPUC has budgeted $14 million to fund the recycling program. The budget allocation includes $50 incentive payments to participants for refrigerators and freezers and $25 incentive payments for room air conditioners. Initial significant revenues from the new program are anticipated in this year's second half. The program is a one-year contract through May 31, 2002. The recent energy crisis in California has not had a material adverse affect on the Company's operations. However there can be no assurance that it will not have had adverse effect in the future if Edison is unable to perform under them terms of its contracts with the Company 11 LIQUIDITY AND CAPITAL RESOURCES - continued The Company believes, based on the anticipated revenues from the Edison contract, the Summer Initiative contract, the CPUC contract, the anticipated sales per retail store and anticipated gross profit, that its cash balance, anticipated funds generated from operations and its current line of credit, if renewed in August 2001, will be sufficient to finance its operations and capital expenditures through December 2001. The Company's total capital requirements will depend on, among other things as discussed below, the recycling volumes generated from the Edison program, the Summer Initiative program and the CPUC program in 2001 and the number and size of retail stores operating during the fiscal year. Currently, the Company has three recycling centers and eight retail stores in operation. If revenues are lower than anticipated or expenses are higher than anticipated or the line of credit cannot be maintained after August 2001, the Company may require additional capital to finance operations. Sources of additional financing, if needed in the future, may include further debt financing or the sale of equity (common or preferred stock) or other securities. There can be no assurance that the line of credit will be renewed or replaced or such additional sources of financing will be available or available on terms satisfactory to the Company or permitted by the Company's current lender. FORWARD-LOOKING STATEMENTS Statements contained in this quarterly report regarding the Company's future operations, performance and results, and anticipated liquidity discussed herein are forward-looking and therefore are subject to certain risks and uncertainties, including, but not limited to, those discussed herein. Any forward-looking information regarding the operations of the Company will be affected primarily by the Company's continued ability to purchase product from Whirlpool at acceptable prices, the ability and timing of Edison to deliver units under both its contracts with the Company and the ability and timing of the CPUC to deliver units under its contract with the Company. In addition, any forward-looking information will also be affected by the ability of individual retail stores to meet planned revenue levels, the rate of sustainable growth in the number of retail stores, the speed at which individual retail stores reach profitability, costs and expenses being realized at higher than expected levels, the Company's ability to secure an adequate supply of special buy and used appliances for resale and the continued availability of the Company's current line of credit or the ability to replace the current line of credit. 12 PART I: ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK - -------------------------------------------------------------------------------- MARKET RISK AND IMPACT OF INFLATION The Company does not believe there is any significant risk related to interest rate fluctuations on its long-term debt since it has fixed rates. However, there is interest rate risk on the line of credit since its interest rate is based on the prime rate. Also, the Company believes that inflation has not had a material impact on the results of operations for the three and six-month periods ended June 30, 2001. However, there can be no assurance that future inflation will not have an adverse impact on the Company's operating results and financial condition. PART II. OTHER INFORMATION - -------------------------------------------------------------------------------- ITEM 1 - LEGAL PROCEEDINGS The Company and its subsidiaries are involved in various legal proceedings arising in the normal course of business, none of which is expected to result in any material loss to the Company or any of its subsidiaries. ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS - None ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On April 26, 2001 the Annual Meeting of Shareholders of Appliance Recycling Centers of America, Inc. was held to obtain the approval of shareholders of record as of March 16, 2001 in connection with the three matters indicated below. Proxies were mailed to the holders of 2,287,369 shares. Following is a brief description of each matter voted on at the meeting and the number of votes cast for, against or withheld, as well as the number of abstentions and broker nonvotes, as to each matter: Vote --------------------------------- Matter For Withhold Authority ------ --- ------------------ 1. Election of Directors: Edward R. Cameron 2,032,165 6,808 George B. Bonniwell 2,032,165 6,808 Duane S. Carlson 2,032,090 6,883 Harry W. Spell 2,032,040 6,933 Marvin Goldstein 2,032,190 6,783 13 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - continued 2. Approval and adoption of Amendments to the 1997 Stock Option Plan. Vote ---------------------------------------------- For Against Abstain Not Voted --- ------- ------- --------- 1,473,339 85,383 1,707 478,544 3. Ratification of McGladrey & Pullen, LLP as independent public accountants for fiscal year 2001. Vote ---------------------------------------------- For Against Abstain Not Voted --- ------- ------- --------- 2,031,433 6,301 1,239 0 ITEM 5 - EXHIBITS AND REPORTS ON FORM 8-K (a)(i) Exhibit 10.1 - Agreement dated June 12, 2001 between the California Public Utilities Commission and Appliance Recycling Centers of America, Inc. (ii) Exhibit 10.2 - Agreement dated June 18, 2001 between Spectrum Commercial Services Company and Appliance Recycling Centers of America, Inc. (iii) Exhibit 10.3 - Agreement dated July 26, 2001 between Spectrum Commercial Services Company and Appliance Recycling Centers of America, Inc. (b) The Company filed a Form 8-K on June 25, 2001 announcing the agreement with the California Public Utilities Commission. ITEM 6 - OTHER INFORMATION - None 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Appliance Recycling Centers of America, Inc. -------------------------------------------- Registrant Date: August 10, 2001 /s/ Edward R. Cameron --------------------------------------- Edward R. Cameron President Date: August 10, 2001 /s/ Linda Koenig --------------------------------------- Linda Koenig Controller 15