Fourth Quarter Financial Overview:

Total revenues for fourth quarter of 2008 decreased 14.5% to $26.2 million, from $30.6 million in the comparable period of 2007. The consolidated gross profit for the fourth quarter of 2008 was 30%, which was consistent with the fourth quarter of 2007. The company had an operating loss of $0.3 million compared to $1.6 million of operating income during the same period last year. ARCA also incurred a loss from continuing operations of $0.7 million or $0.14 per diluted share in the fourth quarter of 2008 compared to income from continuing operations of $1.0 million or $0.22 per diluted share in the fourth quarter of 2007.

During the fourth quarter of 2008, the company made a strategic decision to discontinue its North American Appliance company (NAACO) and Productos Duraderos de Norte America (PDN) operations and dispose of the assets. NAACO and PDN were not operating as originally planned and were no longer economically viable. In 2008, the company’s supply of window air conditioners from a major manufacturer was depleted and no longer offering refurbishment opportunities for PDN and revenues for NAACO, which was the basis for our investment in these two businesses. All results of operations for periods presented prior to the abandonment date have been reclassified as discontinued operations. The company recorded a loss on the disposal of the NAACO and PDN operations of $0.7 million, net of taxes, for the quarter ended January 3, 2009.

The overall impact on earnings of the discontinued operations in the fourth quarter of 2008 was a loss of $1.1 million, net of taxes. This overall loss is comprised of a $0.4 million loss from the discontinued operations, net of taxes, combined with a $0.7 million loss on the disposal of the discontinued operations, net of taxes. Earnings in the fourth quarter of 2008 also included pre-tax non-cash stock compensation expense of $110,000 or $0.02 per diluted share compared to $35,000 or $0.01 per diluted share in the fourth quarter of 2007.

Comparable store sales of the fourteen ApplianceSmart Factory Outlets that were open during the complete fourth quarters of 2008 and 2007 declined 16.7%, while total retail sales declined 5.7% to $17.6 million on a year-over-year basis. The quarter-over-quarter decline is primarily the result of two factors: 1) the fourth quarter of 2007 was positively impacted by a large close-out purchase from a major manufacturer that resulted in very strong customer demand. This purchasing opportunity did not exist in the fourth quarter of 2008, and 2) the overall retail economy had one of its worst quarters since the Great Depression as a result of the nationwide recession and cutback in consumer spending.

Fourth quarter revenue in the company’s recycling segment decreased 28.3% to $8.6 million from $12.0 million in the comparable period of 2007. The decrease was due primarily to lower revenues in the Canadian market in the fourth quarter of 2008 compared to the same period in 2007 because of high appliance volumes during the recycling program’s kick-off period during the second half of 2007. Additionally, the decline in the Canadian dollar resulted in a $0.5 million decline in revenues translated to the U.S. dollar due to impact of the foreign currency exchange rate. While byproduct revenue remained flat in the fourth quarter of 2008 compared to the same quarter of 2007, scrap metal prices decreased significantly during the fourth quarter compared to the first three quarters of 2008. The company expects that scrap metal prices will stay at depressed prices throughout 2009.

2008 Financial Results:

The company generated income from continuing operations of $1.9 million or $0.41 per diluted share for 2008 compared to $2.5 million or $0.55 per diluted share for the previous year. The overall impact of the NAACO and PDN discontinued operations for 2008 was a loss of $1.5 million, net of taxes, comprised of a $0.8 million loss from the discontinued operations, net of taxes, and a $0.7 million loss on the disposal of the assets, net of taxes. Discontinuing these operations will preclude further operating losses from these two businesses. The 2008 earnings included pre-tax non-cash stock compensation expense of $0.5 million or $0.11 per diluted share compared to $0.1 million or $0.02 per fully diluted share for the same period last year.

Comparable store sales of the fourteen ApplianceSmart Factory Outlets operating during the entire years of 2008 and 2007 decreased 2.5%, while total store sales increased 5.9% to $76.2 million due to opening four new factory outlets during 2008. Revenues from the company’s recycling segment increased 24.9% in 2008 to $34.8 million compared to $27.9 million in 2007. The increase was due primarily to higher recycling volumes in Canada and, to a lesser extent, higher scrap metal prices during the first three quarters of 2008. The increase in tax expense for the full year of 2008 is related primarily to increases in income generated from the company’s Canadian operations.

Edward R. (Jack) Cameron, president and chief executive officer, stated: Clearly the fourth quarter of 2008 was a very challenging period for our retail outlet stores as a result of one of the worst economic recessions in the past fifty years. We believe that the strong value proposition and wide breadth of choices we are able to offer our retail customers prevented our sales from being down even further. As previously communicated, we completed the planned openings of three new ApplianceSmart Factory Outlets in strategic locations with compelling rent structures during the fourth quarter. These new retail outlets will allow us to continue to leverage our advertising dollars and general and administrative expenses.

For our appliance recycling business, we feel good overall about our operating results in both the fourth quarter and the full year of 2008. Nationwide, we are seeing a significant increase in utility companies including appliance recycling programs as part of their energy efficiency initiatives. We believe we are well positioned to leverage new opportunities in the coming year and are confident our appliance recycling business will continue to grow.