Operator:

Ladies and gentlemen, thank you for standing by. Welcome to the Appliance Recycling Centers of America's First Quarter 2014 Investor Call. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, May 6, 2014. I would now like to turn the conference over to Jack Cameron. Please go ahead. Edward R. (Jack) Cameron: Thank you, Chris, and good morning, everyone, and thank you for joining us. As mentioned, this is Appliance Recycling Centers of America's First Quarter 2014 Conference Call. I'm Jack Cameron, President and CEO. With me today are members of our executive team, Jeff Cammerrer, who's our Chief Financial Officer; Brad Bremer, President of ApplianceSmart; and Mark Eisenschenk, Chief Operating Officer and President of ARCA Recycling. This morning, we'll expand on yesterday's press release, which can be found also on our website under www.arcainc.com, in Investor Relations section, as I mentioned. On today's agenda, Jeff will read the forward-looking statement and review our first quarter financial results. Then, Brad will give an update on our retail appliance business. Mark will provide an overview of our utility recycling programs and I will discuss some of the industry and market trends. At the end, we'll open it up for questions. And so to get started, Jeff, why don't you take over? Jeffrey Cammerrer: Thank you, Jack. Our comments may contain certain forward-looking statements regarding possible events, including expectations that 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 understand risks that may impact our business. We are very happy with the financial results for the first quarter. Despite the weather challenges we experienced in our markets, overall, revenues were up 10%, and EBITDA grew by $1.6 million compared to the first quarter last year. We generated a bottom line profit of $1 million or $0.17 per diluted share, which was an $800,000 improvement over the first quarter last year. The increase in revenues and profit compared to the first quarter last year is primarily due to growth of our appliance replacement programs and recognizing $1 million in carbon offset revenues. Our recycling segment continues to generate solid financial results. Recycling revenues of $12.1 million were up $3.8 million compared to the first quarter last year. The growth was primarily due to a 72% increase in appliance replacement program volumes, partially offset by a 16% decline in recycling-only volumes. Mark will talk more about our recycling division later in the call. Byproduct revenues of $4.8 million were up $800,000 compared to the first quarter last year. The increase is the result of recognizing $1 million in carbon offset revenues. Of the $1 million, $700,000 was at ARCA, and $300,000 was at AAP. We expect to generate another $500,000 in carbon offset revenues during the latter part of 2014. Revenues at AAP, which are also reported on the income statement as byproduct revenues, were $2.8 million in the first quarter, up $200,000 compared with last year. The increase was due primarily to $300,000 in carbon offset revenues, and partially offset by a 6% decline in recyclable appliances. Our recycling business, including AAP, generated an operating profit of $2.1 million in the first quarter, up $1.3 million compared with last year. Within that increase, AAP improved its operating profit by $400,000 due to a combination of the carbon offset sales previously mentioned, and a 65% reduction in the acquisition costs of certain recyclable appliances. ApplianceSmart, our retail division, improved its operating profit despite the tough winter weather that negatively impacted top line sales. ApplianceSmart sales were down $1.5 million compared with the first quarter last year. The decrease in revenue was also a result of a 6% decline in same-store sales we believe to be weather-related and operating one less store. ApplianceSmart generated an operating profit of $100,000 in the first quarter, an improvement of $300,000 compared with last year. The improvement was due primarily to a more favorable sales mix and lower occupancy and operating expenses. I will now turn the call over to Brad who will talk more about ApplianceSmart. Bradley S. Bremer: Thanks, Jeff. Like other retailers, our first quarter business was dampened by unusual winter weather in January and February. Snowstorms and extreme cold forced some closures and hurt traffic. Fortunately, we did see some pickup in March, and are on track to a more normalized levels. Everything considered, it was a pretty solid, profitable quarter. We saw a good $300,000 swing in profitability compared to the first quarter of 2013. If we hadn't run into weather-related issues, it could've been much better. Although many appliance manufacturers are announcing modest sales gains, retailers are not necessarily seeing it in the stores. The growth has been driven primarily by multi-housing projects. Many times, manufacturers bid and ship direct to builders without any builder or distributors involved. Other manufacturers are pursuing growth by entering new markets. Of course, housing market activity impacts appliance sales. The U.S. housing market continues to struggle. The National Association of Homebuilders says that consumer credit is tight, material prices are rising and lots are in short supply. The U.S. Commerce Department reported that the residential building permits were down 2.4% in March 2014 from the prior month, but up 11.2% from March of 2013. However, there are some encouraging signs. The Pending Home Sales Index for March rose 3.4% according to The National Association of Realtors. The U.S. government's gross domestic product report in late April show consumer confidence rising, with consumer spending on pace for a 3% annual growth. Recent business news reports indicated payrolls, retail sales and manufacturing activity all rising. The economy appears to be slowly coming out of its doldrums. While waiting for that recovery to strengthen, we continue working on rightsizing our stores, including and exploring sublet opportunities with some of our leases. Our product mix remains good and we're seeing an increase in availability of out-of-carton product, which bodes well for future quarters. I'll now turn the call over to Mark to talk about ARCA Recycling. Mark Eisenschenk: Thanks very much, Brad. Regarding ARCA's recycling business, total recycling revenues for the first quarter were $12.1 million, that's an increase of $3.8 million above the first quarter of 2013. The 46% growth was due to the success of our unique combination of programs that we provide to utility companies across North America. In a broad sense, those programs almost always involve removing energy-guzzling appliances from the grid. And in a specific sense, they involve appliance recycling and replacement activities. To further elaborate, in our straight recycling programs, we pick up and responsibly recycle old energy-guzzling appliances from utility customers who are usually rewarded with a rebate. In our replacement programs, we install new energy-efficient appliances to replace old energy guzzlers. Both programs then feed our recycling centers and enable us to recover valuable scrap materials, materials such as steel, copper and plastic, while also capturing potentially harmful organic compounds, such as refrigerant CFCs. From a financial perspective, during the first quarter, our straight recycling revenues decreased 16% compared to last year. Nearly 1/2 of that decline was due to a loss of a low-margin utility contract, the other half was due to a lower unit volume caused by weather-related issues that hampered appliance pickups and also due to price compression with certain contracts. Overall, our total volume of units recycled declined 11%, and the average revenue per unit lift 1.4% compared with the same quarter last year. Our replacement programs, on the other hand, enjoyed a revenue increase of $4.1 million. Replacement revenues for the quarter of $10.2 million was due to significantly higher unit volumes. And this growth is a function of a shift we've seen toward replacement programs. At least for the near term, that is for the rest of 2014, we believe the shift will continue. The good news is that this particular activity favors ARCA because of our turnkey solution, namely, we have wholesale access to ENERGY STAR appliances, nationwide recycling capabilities and an established supporting infrastructure with related logistical support. In summary, there are many elements involved with making these energy efficiency replacement programs successful and we figured them all out. Our solution simply works. On another note, I wanted to provide an update on the outsourcing of our call center, which is just one element of our logistical support to our programs. I'm happy to say that the transition to an outsourced call center is working well. That third-party call center handled some major spikes in call volumes during the first quarter, and it did so seamlessly, while it also provided much improved service levels. Furthermore, relocating our customer service function from California to our Minneapolis headquarters has also improved service levels and communication. These changes with the call center and the customer service functions have raised the bar in terms of overall customer service and responsiveness. At the same time, we've converted what was primarily a fixed cost to one that is variable and scalable and can better adjust to changes in business levels. Finally, I'd like to add that we're continuing to work on developing innovative and environmentally responsible turnkey solutions, and we're pleased with our progress. That concludes my summary of recycling activity. Next, Jack will finish our presentation with a look at developments in our industry and how we're addressing them. Jack? Edward R. (Jack) Cameron: Thanks, Mark, and Brad. Thank you, Jeff, for the comments. And as you can tell, we're very happy about the quarter. We feel very good about what's going on in the industry for us anyway. And one of the things that's becoming evidenced is the concern for the environment. We're seeing a growing concern for the environment in the U.S. and also around the world. And that's helping us in many ways. One of the things that will help us in the future is this recent decision by the Supreme Court holding up EPA's decision on the coal industry. I had the opportunity to make a presentation last week in a state that is heavily using coal and with the utilities and they're very concerned about their utility rates going up in the future. And this type of thing will increase the awareness and interest in energy conservation programs that we provide to electric utilities. So we think that energy conservation, for all the right reasons, is going to continue, what the utility industry calls demand-side management programs, and we're seeing that. But we're not only seeing that from the utility industry and the government about energy efficiencies, the concerns are around climate change and there'll be announcements today, which I haven't seen, but I understand the White House is coming out with some new policies and so forth about climate change, so we'll have to stand by and see what that is. But some of the other issues that the environment is creating, it's actually having the utilities and the manufacturers and the retailers all look at the type of product that they're selling. And what we're seeing is that there's a big emphasis on buying ENERGY STAR appliances, energy-efficient appliances. And there's couple of things I want to talk about. We talked about the relationship between the business units that we have and how they all work together. So I'd like to talk about a couple of things, and sometimes, they get mixed together and that's because we -- they all support each other. I'd like to talk a little bit about early retirement in appliances. I'd like to talk about what we're seeing as far as producer responsibility or concern about the flow of a product. I'd like to talk a little bit about the responsible appliance disposal, the program that EPA has. And then, a lot of that is centered around what we're doing in Philadelphia with ARCA Advanced Processing or AAP. And I'd like to talk a little bit about the accomplishments there. We're very proud of what's happening there and I'll spend some time on that. Talking about some of the byproduct revenue and scrap plastics and metals and also the carbon offset market that we're facing. But in regard to the early retirement program, The Association of Home Appliance Manufacturers, AHAM, is promoting the early retirement program, they're encouraging consumers to buy energy-efficient appliances. And as part of that, is to recycle the old appliance instead of keeping the unit or putting it back in the second hand market, which takes away from the selling of a new one and it's also not energy efficiency, there's no energy efficiency involved there. So AHAM is recognizing the importance of -- to the consumer about the energy efficiency of the appliances that are being sold. This program that AHAM is sponsoring fits very well into our business model. As you know, as Mark mentioned, we do a lot of what we call change out business or you could call it early retirement, but the idea is to take energy-inefficient appliances off the market, whether they be a secondary unit in the customer's home or the primary unit coming out of the kitchen, they all need to be retired. The second hand market has been subsidizing the disposal for years and we're seeing a move toward more responsible recycling of all the appliances and generating the revenues to the selling of the byproduct. And we think that the market is going to evolve over a period of years, which allows us to capitalize on that transition. Some of the major manufacturers and retailers that handle appliances now for the residential consumer such as Home Depot, through their logistics arm of GE Appliances require that no units be resold. We think that trend is going to continue and it's going to be very helpful to us in the future as far as developing recycling centers. I mentioned producer responsibility. I don't know that we're going to see direct producer responsibility, but we're seeing an awareness of the importance of recycling. For example, recently, Apple Computer came out on Earth Day announcing that all their stores would accept back electronic, any product that they sell for recycling at their locations. And I think they were getting more concerned about it and what we're seeing is more interest on the producers to make sure that the product flow of returned merchandise gets handled properly. We're seeing an emphasis on certification, which we're exploring, and we plan to do that even though we're EPA RAD compliant. We think that, that certification is going to continue to be emphasized and we support that and we'd be happy to continue developing the systems to handle all the old appliances. So across all the industries, either manufacturers, retailers, utilities and government, there needs to be the proper recycling of old appliances. And AHAM's emphasis on early retirement program is going to be something that will be very beneficial to us in both our retail operation and our recycling operation, and provide more product for our facility in Philadelphia, where we have the state-of-the-art equipment. I mentioned RAD, or Responsible Appliance Disposal. Just last week, I was in Washington D.C. for the RAD meeting, and there's a lot of conversation with the retailers and manufacturers on how to handle the old appliances and who should handle it. And I think, we're going to see continued emphasis on that issue. What was mentioned by EPA at that time was the disposal of 1,000 refrigerators properly is equivalent to taking 1,500 passenger cars off the road. So the environmental impact of recycling appliances properly is tremendous. And this fits in with the ozone depletion that happens when CFCs are released in the atmosphere. It also goes into climate change, with what you might call global warming or climate change. And so we're positioned very well to provide these services, both from our retail and also our recycling operation. And we continue to develop those systems to do that. I'd like to talk a little bit about our joint venture in Philadelphia. We're extremely pleased with the progress that we've made over the last 3 to 4 years. We have reached over 250,000 refrigerators processed through the German equipment that we bought that has been rightsized and adapted to American refrigerators. And this was a big task because all of the European systems were designed to handle European refrigerators, which as you know, American refrigerators are quite a bit larger and require more horsepower and there's more materials to sort. And so what we've done over the last couple of years is that we've taken the European technology, we've advanced it, we've improved it and we feel very comfortable. And I think, after 3 years, I think, we're ready to say that this system is ready to be expanded and we're looking for opportunities across the country to take the markets -- the developments that we have in Philadelphia to other markets. And with the trends of early retirement and producer responsibility moving our way, and as you know, we've been pioneers in this businesses for many years, we feel very, very positive and upbeat about our future in the recycling business. AAP has done a great job in developing markets for not only the steel, which is fairly traditional, but also we've developed some markets for the plastics and we continue to look at developing a higher-grade plastics out of the appliances by sorting systems that we then can increase that revenue. We think, one of the bigger upsides that we have in the recycling of appliances in the plastics revenue stream that we're continuing to spend money on, we're developing. A couple of weeks ago, we were at the ISRI Conference, Institute of Scrap Recycling industries. As a matter of fact, we happened to be in the audience when a tennis shoe was thrown at Hilary Clinton, and it was quite a scene. Anyway, they talked about the 3 things that's important for them in ISRI. One is safety, of course. And we're always concerned about safety at all of our centers, with all of our people. Also they we're talking about the reputation of the industry. Well, we have a great reputation of safety, great reputation of being a legitimate company that does all the right things, as far as compliance is concerned. And the other thing that they talked about was the need to develop more plastics recycling. So I think, we're going to see a big need for more plastics in our revenue stream. Currently, we sell our mixed plastics to China for about $0.18 a pound. We think that, that plastic sorted properly could raise that revenue to 3x to 4x to 5x that, which would be a substantial increase in the revenue at AAP in Philadelphia. Also scrap volume has been up and down. And we feel that as time goes on, there'll be more and more appliances to be available for delivery to our recycling centers. About a month ago, also, I attended the Carbon Offset Market Seminar that is put on in California every year by the Climate Action Reserve. And what's interesting about -- and I guess, the observation I have was that in the past years, there's been a lot of politicians at the conference. And this year, there were very few politicians. And I think the reason is that the Climate Action Reserve and AB 32 in California, the cap and trade system, is well on its way. It's been over a year now. It's been operating. It's fought off any legislation that tried to stop it. It's working very well. And probably, the reasons are is they took lessons learned from Europe and from Reggie [ph] on the East Coast, and they've developed a system that's very workable, and we feel really good about the future of the carbon offset market as it relates to our ability to generate those credits, which we plan to do. Jeff mentioned earlier that we received a total of $1 million in the first quarter, about $700,000 for ARCA, and three-hundred-some-thousand for AAP, and we expect another probably about $500,000 yet this year. And that would be split between both AAP and ARCA. So if you want to draw a conclusion from everything that's been said today, I think, the conclusion is very, very obvious to me, and I think, everybody in our ARCA team, we're extremely excited about where we're going. All the pick and shovel work that we've done over the years in developing systems and processes and contacts and people and trying to be responsible in handling appliances, we think, that is finally getting some notice. The environmental awareness, of course, is pointing a lot of that out, and we've been on the forefront of that for many, many years. So given the early retirement programs, the producer responsibilities or the responsibilities of producers to be concerned about where the product is going is becoming clear to everybody. Generating revenues from the selling of the fractions coming out of the shredding systems is more important than selling the used appliances, putting new appliances in the marketplace that are more energy-efficient, cutting down on greenhouse gas emissions. So if you boil everything up and wrap it up in a ball, you can see that we're on the right track to really doing what we've been trying to do for 25 years, and that is develop appliance recycling centers in every major market using state-of-the-art equipment. We're really optimistic about the future. We look forward to work with anybody that's interested in doing the same thing, either joint venture or consolidation. And we're very happy to have had a good first quarter and I want to really thank everybody in this room, all the management team, for their leadership, and also the employees and our customers for helping us along the way. As you know, it takes a team to get anything done. You can't do it by yourself. We have certainly added a lot of people to our team from all the industries and we feel really good about that. So anyway, it's all my comments for today, and I'd like to go ahead and open it up for questions. Thank you. Chris? Operator: [Operator Instructions] And we do have a question from the line of David Kanen with Aegis Capital. David Kanen: First question is on the retail side. You closed one store. Can you tell me approximately what that store was losing? And do you expect, on a yearly basis, with an improved cost structure and retail for this year, to breakeven or be profitable because it looks like there's a pretty good year-over-year improvement despite the decline of 6% in same-store sales? Edward R. (Jack) Cameron: Well, no -- one thing is we do not do projections and that type of stuff. But as far as that store is concerned, I don't know whether we have the detailed information in the room with us today. Jeff, do you have those? Jeffrey Cammerrer: I don't. Edward R. (Jack) Cameron: I'm sorry, I don't -- we don't have the breakdown with us at this point in time. The store was in Rogers and was closed in April last year. It was a nonperforming store and the lease was running out, so we just didn't renew the lease. I don't, off the top of my head, have the exact loss for that store, but it was a store that was not making money. I can get back to you. We have the information, I just don't have it in front of me. David Kanen: Okay. And then, how much of the recycling revenue do you think, if you can quantify, was impacted due to weather? Like any sort of guesstimate, have things been more normal, what we would have done? Edward R. (Jack) Cameron: That's a good question. I know that we pulled a lot of our centers in the Midwest and we were affected by the weather. We pulled trucks off the road 3 or 4 days in all of our centers. And so that's another one that's a little hard to estimate. David Kanen: Okay. About 3 to 4 days. I mean, I could just guesstimate based on 3 to 4 days and average it out. Okay. Edward R. (Jack) Cameron: So what happens if you have 5 centers, there's 6 centers that makes a difference. So -- but then also, that's rescheduling and that kind of stuff and some of that doesn't stand as lost as a result of that as well, too. So it's a hard number to really get, we know it had an influence. David Kanen: Okay. It looks like free cash flow was around $2.3 million for the quarter. I'm going by what was paid down on your credit facility and then the sequential improvement in cash, is that about right? Jeffrey Cammerrer: Yes, that's about right. David Kanen: Okay. And then, do you expect continued working capital improvements in the current quarter and for there to be meaningful cash generation like in Q1? Edward R. (Jack) Cameron: Well, we're -- that's getting into projections. We obviously are upbeat about this. David Kanen: I just mean on working capital. I'm just talking about working capital because it looks like receivables were high ending the year and I know there were some utility programs that you had alluded to in the December call. Edward R. (Jack) Cameron: Well, Jeff, you want to try to answer that? Jeffrey Cammerrer: From a working capital perspective, David, I don't think we're going to see a huge increase in cash coming from our working capital. The programs that generated those high receivables continue to operate at the same level. So we're going to turn working capital at the same rate, but we're not going to see it go down. Meaning, cash coming into the business. David Kanen: Okay. And Jeff, on your balance sheet, the long-term obligations, less current maturities, are those primarily leases related to the retail? Can you just give me a little color on that? Jeffrey Cammerrer: Well, it's primarily -- we consolidate AAP on our balance sheet, 100% on our balance sheet, and it's primarily related to financing the URT equipment out at AAP. And then, some other financing obligations, some are leases, some aren't leases. But that's a smaller portion of the total. Operator: [Operator Instructions] Our next question comes from the line of John Pinuco [ph], a private investor. Unknown Attendee: Great quarter... Edward R. (Jack) Cameron: John, we can hardly hear you. Unknown Attendee: Can you hear me now? Edward R. (Jack) Cameron: Barely. Unknown Attendee: Can you hear me now? Edward R. (Jack) Cameron: Yes, that's better. Unknown Attendee: Good. Jack, as well as the -- you mentioned about the opportunities and as you, over the years, have put this recycling business together here and developed strategy and all the elements seem to be working together to move forward. What do you see are the greatest hurdles down the road here in the next year, 2 years, 3 years, as well as competition to what you're doing? And at the same time, how would you maybe broaden your definition or the specifics of the strategy, the business strategy going forward? Edward R. (Jack) Cameron: Well, our main goal has always been, as our name, Appliance Recycling Centers of America. We have been trying for 25 years to develop a state-of-the-art recycling center. It's our belief that every major market needs a center that does things properly. One of the issues we had is we never had enough supply or guaranteed supply to make the capital investment into a center, until we struck a deal with a major manufacturer that had control over returns, as GE has with their program with Home Depot. And with the ability to have guaranteed supply, we then have the ability to make the capital investment and take the risk of putting up what would be the state-of-the-art equipment. And one of the major issues there is that some of the revenues that you have to develop, you have to guess at, unless you actually have a center up and running. So it's hard to sell materials from a shredder of appliances if you don't have the materials. And so we accomplished a big hurdle that we got over by getting that center up and running. Thank goodness that working with somebody as responsible about these issues as GE is and Home Depot. We have the supply to make the capital investment. And at the same time, we've been able to do a proof of concept that just works. And then, after we proved that we could recycle the appliances, we also had to prove that we have a proof of concept as far the financial model is concerned because it has to make money. And so over the last 5 years, we've been working very, very hard at making sure that the systems work, making sure that the financial model works. And at the same time, we now are taking it to the next level by taking all the fractions that come out of the shredders and increasing those revenues. And that's going to allow us to be more competitive on the front end to get more supply. And I think, as the awareness of the environment and the awareness of where these materials go and the idea of doing it properly gains traction, and before the center in Philadelphia, there really was not an option for the retailers, they had to deal with the used appliance industry. And this is the first option that's been available where you don't have to deal with the used appliance dealers, you can actually generate revenues and pay for this proper recycling through the value of the materials going out the back door out of the shredders. So our strategy is to continue to develop more revenues on plastics, as I mentioned earlier, and the quality steel product, copper, aluminum. Developing those revenue streams allows us to be more competitive in the front end. And as time goes on, we think people will be more concerned about compliance and being green than they are about the small margin they might make in selling used appliances and also when you realize that there's a margin lost on not selling a new appliance when a used appliance gets sold. So I think that we've offered the industry, while we may be solving the problem today for GE, we think that what we're doing is an industry solution. We think that all the products need to be recycled properly no matter where they come from, whether they come from a retailer, utility, a city, a county, a state, housing authority, utility, they all need to end up being handled properly for all the right reasons, the environmental issues, the energy efficiency issues and also the -- you've got to remember that when you take and you make new steel out of old steel, it's much more energy efficient than it is producing urgent steel. So the recycling part of it is a big deal. And it's what I mentioned earlier is that we kind of cover a lot of areas, and one of the things that we look at in our outlet stores is that we deal a lot of out-of-carton merchandise. We feel that we're actually a service to the manufacturers. We provide a channel of distribution that can handle large volume. And as the retailers sell -- it goes to more and more big-box retailers, there's more and more returns. Also the returns from the new construction business is -- as that goes up, there'll be more returns. And manufacturers need a channel of distribution, we provide that. At the same time, that provides us access to product that we can use on the early retirement programs. So everything we do seems to be working together. And I think that we're getting the recognition from everybody that we're doing the right thing. And I think, people down deep want to do the right thing. So our strategy is to continue to push the envelope for appliance recycling in every market that we can gain enough supply to do that. And we think the industry is moving our way. And I think, it's moving our way without legislation. I think that the services are compelling. And I think, we're going to see more executives in the corner office adopt the policies and procedures to handle the appliances properly, be green, be compliant and increase the selling of new appliances that are more energy efficiency, which does a favor to everybody, the community benefits, the utility benefits, the consumer benefits and the environment benefits. So if you take a look at what we've been doing, and our mission statement over the years has always been to do the right thing in recycling appliances, and we think that we're on the front end of that deal, and I think that the market is moving our way and we're extremely encouraged. And even though there's a few bumps in the road every now and then, we can handle it. So I don't know if that answers your question or not, but that's our strategy. Unknown Attendee: If I could follow up, if I can here, as you mentioned the word leg -- that you're doing this without the benefit of major legislation. The question arises then, what -- is there any major legislation emanating on EPA and/or other governmental agencies, as well as the states that's going to be -- that can help to drive this business? Edward R. (Jack) Cameron: Well, I think, a little -- it's a little by little situation. You're not going to see any national legislation come out. It's going to be state and local. It's going to be people taking on the responsibility. It's a huge industry. There's 50 million, 60 million, 70 million appliances a year that need to be recycled in United States, and a lot of them are getting recycled but not properly. A lot of them are going back in the second hand market, which is not helpful. So I think, you're going to see this as a gradual change. Something that will allow us to grow our business over the coming years. And I think, if you take a look at where we're going to be 5 and 10 years from now, you're going to see many centers that have state-of-the-art equipment that will continue to push that envelope. And I think, you'll see more manufacturers and retailers and governments that are looking for people to be responsible. You're seeing it in the electronics industry now, most of the major companies that are getting rid of computers are saying to the recycler, they just don't want them to go to any Tom, Dick or Harry. They want -- the first question they're asking the recycling are, "Are you certified? Do you know where this material is going? Are you going to hold us harmless? Is there any liability here." And I think, the compliance issue and chain of custody is getting to be a bigger issue as environmental health and safety people get more involved in this business. I think, you're going to see more emphasis on people wanting to do it right and now and knowing that they can be done right is a big deal and I think we just need to do a little more PR work, if you will. We've been kind of reluctant to get out on the soapbox too early on Philadelphia because we want to make sure that we had a sound business model and we want to make sure that we had a concept that could be duplicated. And I think, we're at that point now and I think we're ready to move forward. And it's been 5 years of pick and shovel work. And I think that, Brian Conners, as our President and Operating Officer in Philadelphia, has done an outstanding job in developing that business. So we're very positive on the future. Well, thanks, John. I appreciate the opportunity. It's a -- it can be -- trying to figure out the industry, if you're just new to it or -- I know you've been around for a while, but to some people, it gets confusing as to what the strategy is, and the strategy is to be the best recycler of old appliances in the country and develop it into a business that is very responsible. Operator: And we do have a follow-up question from the line of David Kanen with Aegis Capital. David Kanen: In your prepared remarks, you were referring to the potential with recycling plastics as it relates to some capital investments on your part. I think, you said 3x to 4x. Could you just repeat that? I have gotten distracted during that and I didn't get exactly what you said. Edward R. (Jack) Cameron: So 2 of the major plastics that come out of appliances are ABS and HIPS, and that's a lot of the plastics. Right now, they're co-mingled when they come out of the shredder. And I'll just use that as an example. There's other plastics that can be handled as well. But those typically come out of the shredder mix. We know if we separate those, their value could come close to $0.80 to $1 a pound as opposed to $0.18 a pound. And so if we're generating $1 million in revenue on plastics, now that could go $2 million or $3 million. And I think that as -- and this was -- this is happening in the industry, the auto shredders are facing the same problem, is that more cars and more appliances are containing more plastics, and these plastics need to be recycled as opposed to go to the landfills. And right now, most of the shredders in the United States that have plastics come out of them, they all end up in landfills. And I think, there's a real -- there's really -- EPA has just finally -- has come out with an announcement that they're going to allow the auto shredders to be able to sort the plastics and start recycling it now. They've been holding that up for years, saying that some of those plastics were contaminated with PCBs, they've now reversed that position. And so you're going to see some more development in plastics recycling, which is going to allow us to maybe invest, we figured, probably about $400,000, $500,000 into a plastics sorting system that allow us to increase that revenue. The payback is pretty fast. And why haven't we done that? Well, we've been spending our time on getting the system in Philadelphia up and running and working on the basics. And we're now there and now we're in a position to start improving the Philadelphia operation in several areas, revenue stream, cost effectiveness and labor, utilizing conveyors and other types of equipment cranes, and so we can cut our labor cost per ton down and we're working on that. So this is just the beginning for us. And so, we think that what we've accomplished -- and I said earlier, there was a big hurdle, is that you can't do any of this until you have the first one. And we have the first one now. Now we're in a position where we can grow that concept. And I think that's probably one of the most exciting things that's happened to me in the 38 years that I've been on this business, is that we're finally there where I've been trying to get to for many, many years. David Kanen: Okay. And then, final question. What do you think the life is of these carbon offset credits, are you recognizing this revenue? How long will it last approximately? Edward R. (Jack) Cameron: Well, let me answer it this way, 10 years ago, almost all the refrigerators that we saw had CFC or R12. Today, we're seeing about half of the ones coming into Philadelphia, for example, are CFC and some of the utility programs. A newer program with the utility company, it runs higher because we're cleaning up a lot of old appliances. In some more mature markets where we've been, for example, California, where we've been in that market 20 years, we're seeing the percent of units coming in with CFCs is about 30%. But California is a little different because they were early on, on energy-efficient appliances. California was requiring manufacturers to produce energy-efficient appliances before there was a national standard, and so they're way ahead of the curve in California, and it's still running 30%. So we think that the CFC revenue will continue for 3, 4, 5 years. It will be declining because the number of units are going to decline. But also, there's some other issues with new refrigerants coming out. And so there will be new opportunities, but we think that there'll be 2 or 3 or 4 years, but it won't go forever, if that's your question. There will be a sunset on it someday. Operator: And there are no further questions on the phone lines at this time. Edward R. (Jack) Cameron: Okay. Well, thank you, Chris, and thanks, everybody, for listening to us today. And we look forward to the future. And thank you very much for joining us. And with no further questions, that'll be the end of the conference call today. Thank you for joining us. Thank you. Bye. Operator: 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.