Appliance Recycling Centers of America Reports Improved First Quarter Operating Results ApplianceSmart Same-Store Sales Up 19% MINNEAPOLIS, May 4 /PRNewswire-FirstCall/ -- Appliance Recycling Centers of America, Inc. (OTC:ARCI) (BULLETIN BOARD: ARCI) today reported revenues of $16,909,000 for the first quarter of 2005 ended April 2, an increase of 46% from $11,597,000 in the year-earlier period. ARCA also reported a net loss of $433,000 or $0.10 per share, an improvement from the net loss of $732,000 or $0.31 per share in the first quarter of 2004. Same-store sales of the nine ApplianceSmart factory outlets that were open during the complete first quarters of 2005 and 2004 rose 19%. Nationally, total retail sales from all 12 ApplianceSmart outlets nationally increased 53% to $14,911,000 in the first quarter of 2005 compared to the same period in the prior year, with 2005 sales including strong contributions from three stores opened late in the fourth quarter of 2004: St. Paul, Minnesota (the fifth store serving the Minneapolis/St. Paul market), San Antonio, Texas (a new market for ApplianceSmart) and Atlanta (the second ApplianceSmart store in this market). The Atlanta facility also serves as a regional distribution center that supplies appliances to the Columbus, San Antonio and Atlanta retail outlets. ARCA recently announced that it will open a second ApplianceSmart factory outlet in San Antonio in August. This 37,000-square-foot superstore will enable ApplianceSmart to increase its market penetration of this growing area, while generating greater economies of scale by leveraging advertising support and other overhead expenses. Recycling revenues, which increased 10% to $1,754,000 in the first quarter of 2005 compared to the year-earlier period, were affected by a temporary reduction in advertising support for recycling programs in California and Connecticut. Full advertising by ARCA's utility partners restarted during the latter stages of the first quarter, and the full impact of this resumption is expected in the second quarter. First quarter revenue contributions to the recycling operation also were made by new programs in the city of Austin, Texas, and in the state of Wisconsin. First quarter results were affected by significantly increased operating expenses, reflecting growth-related investments in three new ApplianceSmart outlets and two additional recycling centers to support new programs in Connecticut and Austin. However, due to the impact of higher sales in this year's first quarter, operating expenses as a percentage of revenues were virtually unchanged at 32% on a year-over-year basis. As revenues associated with these new facilities continue to increase and given current plans for a more moderate pace of near-term expansion, the operating expense ratio is expected to trend downward as the year progresses. Edward R. (Jack) Cameron, president and chief executive officer, commented: "We are encouraged by the improvement in ARCA's first quarter results, which were paced by the growing sales momentum of our ApplianceSmart operation. It is becoming increasingly clear that appliance manufacturers are viewing ARCA as a valuable distribution channel for their special-buy appliances, while consumers are responding favorably to our low prices and wide range of offerings. Our key to future success is to continue expanding our ApplianceSmart network at a steady, measured pace, and backed by the capital that we raised through a private placement of our common shares late in 2004, we have sufficient resources for opening additional outlets. Based upon our outlook for continued ApplianceSmart sales growth, strengthened recycling revenues and commitment to stringent expense management, we believe ARCA's performance should improve further in this year's second quarter." About ARCA Through its ApplianceSmart ( http://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 May 2005, ApplianceSmart was operating 12 factory outlets: five in the Minneapolis/St. Paul market; three in the Columbus, Ohio, market; two in the Atlanta market; one in San Antonio, Texas and one in Los Angeles. ARCA is also one of 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 sites at http://www.arcainc.com/ and http://www.appliancesmart.com/ . Appliance Recycling Centers of America, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF OPERATIONS 1st Quarter 2005 Results (000's omitted except for share amounts) Three months ended April 2 April 3 2005 2004 Revenues Retail $14,911 $9,734 Recycling 1,754 1,595 Byproduct 244 268 Total revenues 16,909 11,597 Cost of Revenues 11,806 8,460 Gross profit 5,103 3,137 Selling, General & Administrative Expenses 5,335 3,675 Operating loss (232) (538) Other Income (Expense) Other income (expense) (2) (8) Interest expense (196) (186) Loss before provision for income taxes (430) (732) Provision for Income Taxes 3 - Net loss $(433) $(732) Basic Earnings (Loss) per Common Share $(0.10) $(0.31) Diluted Earnings (Loss) per Common Share $(0.10) $(0.31) Basic Weighted Average No. of Common Shares Outstanding 4,144 2,398 Diluted Weighted Average No. of Common Shares Outstanding 4,144 2,398 DATASOURCE: Appliance Recycling Centers of America, Inc. CONTACT: Edward R. (Jack) Cameron, CEO of Appliance Recycling Centers of America, Inc., +1-952-930-9000, or Richard G. Cinquina of Equity Market Partners, +1-904-261-2210 Web site: http://www.appliancesmart.com/ http://www.arcainc.com/

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