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 July 4, 1998
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)
(612) 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 14, 1998, the number of shares outstanding of the registrant's no
par value common stock was 1,236,744 shares.
APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
Index
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements:
Consolidated Balance Sheets as of
July 4, 1998 and January 3, 1998
Consolidated Statements of Operations for the
Three and Six Months Ended July 4, 1998 and June 28, 1997
Consolidated Statements of Cash Flows for the
Six Months Ended July 4, 1998 and June 28, 1997
Notes to Consolidated Financial Statements
Item 2: Management's Discussion and Analysis
of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Appliance Recycling Centers of America, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
July 4, January 3,
1998 1998
- ----------------------------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 82,000 $ 13,000
Accounts receivable, net of allowance of $82,000
and $35,000, respectively 727,000 736,000
Inventories 1,301,000 694,000
Other current assets 161,000 140,000
Refundable income taxes 29,000 29,000
- ----------------------------------------------------------------------------------------------------------
Total current assets $ 2,300,000 $ 1,612,000
- ----------------------------------------------------------------------------------------------------------
Property and Equipment, at cost
Land $ 2,103,000 $ 2,103,000
Buildings and improvements 4,181,000 3,955,000
Equipment 3,706,000 5,461,000
- ----------------------------------------------------------------------------------------------------------
$ 9,990,000 $ 11,519,000
Less accumulated depreciation 3,945,000 4,807,000
- ----------------------------------------------------------------------------------------------------------
Net property and equipment $ 6,045,000 $ 6,712,000
- ----------------------------------------------------------------------------------------------------------
Other Assets $ 53,000 $ 55,000
Goodwill, net 171,000 190,000
- ----------------------------------------------------------------------------------------------------------
Total assets $ 8,569,000 $ 8,569,000
==========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Line of credit $ 2,459,000 $ 1,513,000
Current maturities of long-term obligations 108,000 101,000
Accounts payable 1,539,000 1,136,000
Accrued expenses 742,000 821,000
- ----------------------------------------------------------------------------------------------------------
Total current liabilities $ 4,848,000 $ 3,571,000
Long-Term Obligations, less current maturities 1,790,000 1,633,000
- ----------------------------------------------------------------------------------------------------------
Total liabilities $ 6,638,000 $ 5,204,000
- ----------------------------------------------------------------------------------------------------------
Shareholders' Equity
Common stock, no par value; authorized 10,000,000
shares; issued and outstanding 1,237,000 shares as of
July 4, 1998 and 1,137,000 shares as of January 3, 1998 $ 10,550,000 $ 10,350,000
Accumulated deficit (8,619,000) (6,985,000)
- ----------------------------------------------------------------------------------------------------------
Total shareholders' equity $ 1,931,000 $ 3,365,000
- ----------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 8,569,000 $ 8,569,000
==========================================================================================================
See Notes to Consolidated Financial Statements.
Appliance Recycling Centers of America, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
July 4, June 28, July 4, June 28,
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
Revenues
Retail revenues $ 1,956,000 $ 1,029,000 $ 3,468,000 $ 1,967,000
Recycling revenues 1,350,000 1,655,000 2,167,000 3,470,000
Byproduct revenues 284,000 312,000 590,000 802,000
- -----------------------------------------------------------------------------------------------------------------------------
Total revenues $ 3,590,000 $ 2,996,000 $ 6,225,000 $ 6,239,000
Cost of Revenues 2,420,000 1,676,000 4,416,000 3,361,000
- -----------------------------------------------------------------------------------------------------------------------------
Gross profit $ 1,170,000 $ 1,320,000 $ 1,809,000 $ 2,878,000
Selling, General and Administrative Expenses 1,507,000 1,219,000 2,965,000 2,667,000
Loss on Impaired Assets 518,000 -- 518,000 --
- -----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ (855,000) $ 101,000 $(1,674,000) $ 211,000
Other Income (Expense)
Other income 42,000 61,000 269,000 119,000
Interest income -- 3,000 1,000 4,000
Interest expense (129,000) (81,000) (230,000) (174,000)
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision for income taxes
and minority interest $ (942,000) $ 84,000 $(1,634,000) $ 160,000
Provision for (Benefit of) Income Taxes -- (29,000) -- (29,000)
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest $ (942,000) $ 113,000 $(1,634,000) $ 189,000
Minority Interest in Net Income of Subsidiary -- 40,000 -- 53,000
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (942,000) $ 73,000 $(1,634,000) $ 136,000
=============================================================================================================================
Basic and Diluted Earnings (Loss) per
Common Share $ (0.79) $ 0.06 $ (1.41) $ 0.12
=============================================================================================================================
Weighted Average Number of
Common Shares 1,188,000 1,137,000 1,163,000 1,137,000
=============================================================================================================================
See Notes to Consolidated Financial Statements.
Appliance Recycling Centers of America, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
July 4, June 28,
1998 1997
- ----------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net income (loss) $(1,634,000) $ 136,000
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 438,000 569,000
Minority interest in subsidiary -- 53,000
Loss on impaired assets 518,000 --
(Gain) loss on sale of equipment (232,000) (60,000)
Change in assets and liabilities:
(Increase) decrease in:
Receivables 9,000 144,000
Inventories (607,000) 57,000
Other current assets (21,000) 98,000
Refundable income taxes -- 370,000
Increase (decrease) in:
Accounts payable 403,000 (599,000)
Accrued expenses (79,000) (262,000)
- ----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $(1,205,000) $ 506,000
- ----------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Purchase of property and equipment $ (273,000) $ (143,000)
Proceeds from disposal of property and equipment 237,000 78,000
- ----------------------------------------------------------------------------------------------------------
Net cash used in investing activities $ (36,000) $ (65,000)
- ----------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Increase (decrease) in line of credit $ 946,000 $ (299,000)
Payments on long-term obligations (86,000) (115,000)
Proceeds from sale of common stock 200,000 --
Proceeds from long-term debt obligations 250,000 --
- ----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities $ 1,310,000 $ (414,000)
- ----------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents $ 69,000 $ 27,000
Cash and Cash Equivalents
Beginning 13,000 280,000
==========================================================================================================
Ending $ 82,000 $ 307,000
==========================================================================================================
Supplemental Disclosures of Cash Flow Information
Cash payments (receipts) for:
Interest $ 216,000 $ 174,000
Income taxes net of refunds $ -- $ (398,000)
==========================================================================================================
See Notes to Consolidated Financial Statements.
Appliance Recycling Centers of America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 July 4,
1998, and the results of operations for the three-month and six-month
periods ended July 4, 1998 and June 28, 1997 and its cash flows for the
six-month periods ended July 4, 1998 and June 28, 1997. 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 financial
statements and related notes in the Company's Annual Report on Form 10-K
for the year ended January 3, 1998.
2. Accrued Expenses
Accrued expenses were as follows:
July 4, January 3,
1998 1998
--------- ---------
Compensation $ 178,000 $ 167,000
Lease contingencies
and closing costs 130,000 289,000
Other 434,000 365,000
--------- ---------
$ 742,000 $ 821,000
========= =========
3. Preferred Stock
In April 1998, the Company's shareholders approved an amendment to the
Company's Articles of Incorporation authorizing two million shares of
Preferred Stock of the Company ("Preferred Stock") which 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.
4. Loss On Impaired Assets
During the three months ended July 4, 1998, the Company elected to
curtail its appliance shredding operation and intensify its strategic
focus on appliance retailing. As a result, the Company recorded $518,000
as a loss on impaired assets.
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.
RESULTS OF OPERATIONS
The Company generates revenues from three sources: retail revenues,
recycling revenues and byproduct revenues. Retail revenues are sales of
appliances, extended warranty sales and delivery fees. Recycling
revenues are fees charged for the disposal of appliances. Byproduct
revenues are sales of materials generated from processed appliances.
Total revenues for the three and six months ended July 4, 1998 were
$3,590,000 and $6,225,000, respectively, compared to $2,996,000 and
$6,239,000 for the same periods in the prior year.
Retail revenues for the three and six months ended July 4, 1998
increased by $927,000 or 90% and $1,501,000 or 76%, respectively, from
the same periods in the prior year. Second quarter same-store retail
sales increased 102% (a sales comparison of twelve stores that were open
the entire second quarters of 1998 and 1997). Retail sales accounted for
approximately 54% of revenues in the second quarter of 1998. The
increase in retail sales was primarily due to increased sales of
Whirlpool product, offset by lower than anticipated sales of
reconditioned appliances. In July 1998, the Company announced that it
had entered into a contract with Whirlpool Corporation to acquire its
distressed appliances (including "scratch and dent" units with only
cosmetic imperfections) from distribution centers serving the Midwest
and much of the western United States, including the entire West Coast.
Currently, the Company has 12 retail locations. The Company plans to
continue focusing on increasing sales in the geographic areas where it
is currently located. It plans to consolidate its existing stores and
open an additional three to five new stores over the next 12 months. 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 July 4, 1998
decreased by $305,000 or 18% and $1,303,000 or 38%, respectively, from
the same periods in the prior year. The decrease in recycling revenues
was primarily due to the decrease in refrigerator recycling volume
related to the contract with Southern California Edison Company
("Edison"). Edison started advertising for its refrigerator recycling
program in late March 1998 and again in mid-July 1998, whereas in 1997,
advertising started in January. The contract is
RESULTS OF OPERATIONS - continued
expected to generate a minimum of $3.0 million in revenues in 1998, $1.5
million of which had been generated by July 4, 1998. The timing and
amount of revenues will be dependent on advertising by Edison. The
contract with Edison ends September 30, 1998. At this time, the Company
does not know if the contract will be extended into the fourth quarter
of 1998, and into 1999. Edison has indicated its intention of continuing
the program for the fourth quarter. However, no definitive contract has
been entered into, and currently, the Company doesn't know the size or
timing of any potential program.
Byproduct revenues for the three and six months ended July 4, 1998
decreased by $28,000 or 9% and $212,000 or 26%, respectively, from the
same periods in the prior year. The decrease was primarily due to lower
sales of reclaimed chlorofluorocarbons due to fewer refrigerators being
recycled.
Gross profit as a percentage of total revenues for the three and six
months ended July 4, 1998 decreased to 33% and 29%, respectively, from
44% and 46%, respectively, for the three and six months ended June 28,
1997. The decreases were primarily due to retail revenues being a higher
percentage of total revenues and higher operating expenses. Retail
revenues have a lower gross profit than recycling revenues. 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 contract, the volume of Whirlpool
product sold during the period and the price and volume of byproduct
revenues. The Company expects margins to continue to decline as retail
revenues become a higher percentage of total revenues.
Selling, general and administrative expenses for the three and six
months ended July 4, 1998 increased by $288,000 or 24% and $298,000 or
11%, respectively, from the same periods in 1997. Selling expenses for
the three and six months ended July 4, 1998 increased by $162,000 or 46%
and $209,000 or 29%, respectively, from the same periods in 1997. The
increase in selling expenses was primarily due to an increase in costs
associated with opening an additional retail store during the first
quarter of 1998, an increase in sales commissions and an increase in
advertising during the first and second quarters of 1998. General and
administrative expenses for the three and six months ended July 4, 1998
increased by $126,000 or 15% and $89,000 or 5%, respectively, from the
same periods in 1997. The increase in general and administrative
expenses was primarily due to increased expenses related to personnel
costs.
The Company took a one-time charge of $518,000 during the three months
ended July 4, 1998 related to a loss on impaired assets associated with
the Company's decision to curtail the appliance shredding operation of
its recycling business related primarily to the Company's Minneapolis
center.
RESULTS OF OPERATIONS - continued
Interest expense was $129,000 for the three months and $230,000 for the
six months ended July 4, 1998 compared to $81,000 and $174,000 for the
same periods in 1997. The increase in interest expense was due to a
higher average borrowed amount for the three and six months ended July
4, 1998 than in the same periods in 1997.
The Company recorded no provision for or benefit of income taxes for the
six months ended July 4, 1998. The Company recorded a benefit of income
taxes of $29,000 for the three and six months ended June 28, 1997 due to
the liquidation of its Canadian subsidiary. The Company also has
available net operating loss carryforwards that total approximately
$4,515,000 and $1,115,000 which expire in 2011 and 2012, respectively.
At July 4, 1998, the Company had a valuation allowance recorded against
its net deferred tax assets of approximately $2,952,000, due to
uncertainty of realization.
Realization of deferred tax assets is dependent upon the generation of
sufficient future taxable income during the period that deductible
temporary differences and carryforwards are expected to become available
to reduce taxable income.
During the fourth quarter of 1997, the Company purchased all the
minority shareholder's stock in ARCA California, Inc., a subsidiary of
the Company. Prior to that time, the California subsidiary was owned 80%
by the Company and 20% by a minority shareholder. Accordingly, a
minority interest was recorded for the three and six months ended June
28, 1997, of $40,000 and $53,000, respectively.
The Company recorded a net loss of $942,000 (or ($.79) per share) for
the three months and $1,634,000 (or ($1.41) per share) for the six
months ended July 4, 1998 compared to net income of $73,000 (or $.06 per
share) and $136,000 (or $.12 per share) in the same periods of 1997. The
net operating loss for the quarter (excluding the one-time charge of
$518,000 discussed above) was $424,000 (or ($.36) per share). The
decrease in income excluding the write-off, was primarily due to lower
recycling revenues and higher operating and selling, general and
administrative expenses offset by higher retail sales, as discussed
above.
LIQUIDITY AND CAPITAL RESOURCES
At July 4, 1998, the Company had a working capital deficit of $2,548,000
compared to a working capital deficit of $1,959,000 at January 3, 1998.
Cash and cash equivalents increased to $82,000 at July 4, 1998 from
$13,000 at January 3, 1998. Net cash used in operating activities was
$1,205,000 for the six months ended July 4, 1998 compared to net cash
provided by operating activities of $506,000 in the same period of 1997.
The decrease in cash provided by operating activities was primarily due
to the net loss for the period plus
LIQUIDITY AND CAPITAL RESOURCES - continued
an increase in inventories offset by an increase in accounts payable and
the loss on impaired assets.
The Company's capital expenditures for the six months ended July 4, 1998
and June 28, 1997 were approximately $273,000 and $143,000,
respectively. The 1998 and 1997 capital expenditures were primarily
related to building improvements. Capital expenditures are expected to
increase in the second half of 1998 as new retail stores are opened and
existing stores are consolidated.
As of July 4, 1998, the Company had a $2.9 million line of credit with a
lender. The interest rate as of July 4, 1998 was 13-1/2%. The amount of
borrowings available under the line of credit is based on a formula
using receivables, inventories and property and equipment. The line of
credit has a stated maturity date of August 30, 1999 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 receivables,
inventories, equipment, real estate and other assets of the Company and
is guaranteed by the President of the Company. The loan also 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 July 4, 1998, the Company's unused borrowing
capacity was $50,000.
On May 19, 1998, the Company sold in a private placement, 100,000 shares
of Common Stock at a price of $2.00 per share. The sale, which
represents approximately 8% of the Common Stock outstanding after such
sale, was made to an institutional investor. The proceeds were used for
additional working capital.
In July 1998, the Company signed a Letter of Intent to raise additional
working capital.
In July 1998, the Company issued subordinate promissory notes in the
principal amount of $275,000, plus warrants to purchase Common Stock.
The notes pay 12% interest, are due in ninety (90) days and are
renewable for an additional ninety (90) days. The lenders also received
68,750 warrants to purchase the Company's Common Stock at $2.25 per
share. (Additional warrants are issuable if the notes are renewed in
October for an additional ninety (90) days.) The loan proceeds have been
used to purchase inventory and provide additional working capital. It is
anticipated that the loan will be repaid from the funds received from
any additional working capital financing.
LIQUIDITY AND CAPITAL RESOURCES - continued
The Company believes, based on the anticipated revenues from the Edison
contract, the anticipated growth in sales per retail store, the
anticipated improvement in gross profit, the anticipated raising of
additional working capital and refinancing or extension of its current
loan, that its current cash balance, funds generated from operations and
current line of credit will be sufficient to finance its operations and
capital expenditures through December 1999. However, if the Company is
unable to raise sufficient additional working capital it may be unable
to repay the July promissory notes when due and will be unable to expand
the retail side of its business on the currently anticipated schedule.
The Company's total capital requirements will depend, among other things
as discussed below, on the number of recycling centers operating and the
number and size of retail stores operating during the fiscal year.
Currently, the Company has four centers and 12 stores in operation. If
revenues are lower than anticipated or expenses are higher than
anticipated or the line of credit cannot be increased, the Company may
require higher levels of additional capital than is currently expected
to finance operations. Sources of additional financing may include
further debt financing or the sale of equity or other securities. There
can be no assurance that such additional working capital or other
sources of financing will be available or available on terms
satisfactory to the Company or permitted by the Company's current
lender.
Statements 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
those discussed herein among others. In addition, any forward-looking
information regarding the operations of the Company will be affected by
the ability of individual stores to meet planned revenue levels, the
speed at which individual retail stores reach profitability, costs and
expenses being realized at higher than expected levels, the continued
ability to purchase product from Whirlpool at acceptable prices, the
Company's ability to secure an adequate supply of used appliances for
resale, the continued availability of the Company's current line of
credit, the raising of additional working capital, the renewal of the
contract with Edison for the fourth quarter of 1998 and in 1999 and the
ability of Edison to deliver units under its contract with the Company
and the timing of such delivery.
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1 - LEGAL PROCEEDINGS
The Company was involved in certain legal proceedings arising from the
cancellation of leases in connection with the closing of certain
facilities. The Company has established a reserve for lease
settlements and closing costs. (See Note 2 to the Consolidated
Financial Statements.)
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 19, 1998, the Company sold in a private placement, 100,000
shares of Common Stock at a price of $2.00 per share. The sale, which
represents approximately 8% of the Common Stock outstanding after such
sale, was made to a client of Perkins Capital Management, Inc.
("Perkins Capital"). After this sale, Perkins Capital had sole
dispositive power of 218,789 (or 17.7%) shares of the Company's stock
based on their Schedule 13G dated June 9, 1998.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 30, 1998 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 20, 1998 in connection with the
three matters indicated below. Proxies were mailed to the holders of
1,136,744 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 916,896 12,629
George B. Bonniwell 915,673 13,852
Duane S. Carlson 917,198 12,327
Harry W. Spell 916,023 13,502
2. Approval of an amendment to the Articles of Incorporation of the
Company to authorize two million shares of Preferred Stock.
Vote
---------------------------------------------
For Against Abstain Not Voted
--- ------- ------- ---------
466,529 47,606 3,581 411,809
3. Ratification of McGladrey & Pullen, LLP as independent public
accountants for fiscal year 1998.
Vote
---------------------------------------------
For Against Abstain Not Voted
--- ------- ------- ---------
923,537 4,074 1,914 0
ITEM 5 - OTHER INFORMATION
Whirlpool Agreement: On July 8, 1998, the Company entered into an
agreement with Whirlpool Corporation for the acquisition of scratch and
dent appliances ("Whirlpool Agreement"). Under the Whirlpool Agreement,
the Company has the exclusive right and has the obligation to purchase
from Whirlpool all Whirlpool scratch and dent appliances in the Midwest
and certain Western States. Under the Whirlpool Agreement, the Company
must purchase up to $3,000,000 of scratch and dent appliances in any
three-month period, with certain exceptions. The Whirlpool agreement is
an expansion of a pilot agreement with Whirlpool's Ohio Distribution
Center. The Whirlpool Agreement may be terminated by either party upon
180 days' written notice, however, it is not terminable by Whirlpool
before July 8, 1999 except for cause. Cause is defined in the Whirlpool
Agreement to include (i) the Company's breach of the Whirlpool
Agreement, (ii) the Company's misappropriation of Whirlpool funds,
(iii) the Company ceases to exist as a going concern, or (iv) the
Company uses Whirlpool trademarks without the written consent of
Whirlpool. In addition, the Company has agreed to indemnify Whirlpool
for certain claims, allegations or losses with respect to Whirlpool
appliances sold by the Company. The Agreement is expected to supply the
Company's Encore(R)and Appliance$mart(SM) retail outlets with a
significant supply of Whirlpool appliances.
Shareholder Proposals: Pursuant to the rules of the Securities and
Exchange Commission ("SEC"), any shareholder wishing to have a
proposal considered for inclusion in the Company's proxy solicitation
material for the 1999 Annual Meeting of Shareholders must set forth
such proposal in writing and file it with the Secretary of the Company
no later than November 24, 1998. Pursuant to SEC Rule 14a-4(c)(1), any
shareholder wishing to have a proposal considered at the 1999 Annual
Meeting of Shareholders, but not submitted for inclusion in the
Company's proxy solicitation material, must set forth such proposal in
writing and file it with the Secretary of the Company no later than
February 8, 1999 and failure to notify the Company by such date would
allow the Company's proxies to use their discretionary voting
authority when the proposal is raised at the Annual Meeting (to vote
for or against the proposal) without any discussion of the matter in
the proxy materials.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a)(i) Exhibit 3 - Articles of Amendment of Articles of
Incorporation of Company dated April 30, 1998.
(ii) Exhibit 10 - Reverse Logistics Master Service Agreement
between Whirlpool Corporation and Appliance Recycling
Centers of America, Inc.
(iii) Exhibit No. 27 - Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the
three months ended July 4, 1998.
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 14, 1998 /s/ Edward R. Cameron
--------------------------------------------
Edward R. Cameron
President
Date: August 14, 1998 /s/ Kent S. McCoy
--------------------------------------------
Kent S. McCoy
Chief Financial Officer