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Aaron Rents Inc. (RNT)
Q4 2008 Earnings Call
February 17, 2009 10:30 am ET
Gilbert L. Danielson – Executive Vice President & Chief Financial Officer
Leigh Wilder – Investor Relations
Robin C. Loudermilk, Jr. – President & Chief Executive Officer
William K. Butler, Jr. – Chief Operating Officer
R. Charles Loudermilk, Sr. – Chairman of the Board
David Burtzlaff – Stephens Inc.
Arvind Bhatia – Sterne, Agee & Leach
David Magee – Suntrust Robinson Humphrey
Laura Champine – Cullen & Company
Laura Richardson – BB&T Capital Markets
Jordan Hymowitz – Philadelphia Financial
John Harlowe – Barrow Hanley
Joel K. Havard – Hilliard Lyons
Michael Smith – Kansas City Capital
Previous Statements by AAN
» Aaron Rents, Inc. Q3 2008 (Quarter End 9/30/2008) Earnings Call Transcript
» Aaron Rents, Inc. Q2 2008 Earnings Call Transcript
» Aaron Rents, Inc. Q1 2008 Earnings Call Transcript
Well, thank you for joining us this morning. I’m going to turn the call over briefly to Leigh Wilder, who works with us in investor relations, and she’s going to make the introductions and read our Safe Harbor Statement and then we’ll have a few prepared remarks and then we’ll certainly answer any questions.
Good morning. My name is Leigh Wilder and I assist in investor relations for Aaron Rents. The company’s earnings release issued yesterday, and the related Form 8-K, are available on our website www.aaronrents.com in the investor relations section, and this webcast will be archived for replay there as well.
With us today are Robin Loudermilk, Chief Executive Officer, Ken Butler, Chief Operating Officer and Gil Danielson, Chief Financial Officer. Before we discuss the results, I would like to read the company's Safe Harbor Statement.
Except for the historical information, the matters discussed today are forward-looking statements of the company. As such, they will involve a number of risks and uncertainties, including factors such as changes in general economic conditions, competition, pricing, customer demand and the other issues that could cause actual results to differ materially from such statements, including the risks and uncertainties discussed under risk factors in the company’s 2007 Annual Report on form 10-K, including, without limitations, the company’s projected revenues, earnings, and store openings for future periods.
Robin, Gil and Ken will have a few remarks and then we will open the floor up for Q&A. Robert?
Robin C. Loudermilk, Jr.
We’re quite pleased with the fourth quarter and fiscal year 2008 results were very strong. Even in these difficult times, our customers continue to come to our stores to get basic home furnishings products. With the credit continuing to tighten and uncertainty in the air, I believe over time we will continue to see an increase in our business, as more and more individuals see the value of Aarons’ programs.
These strong financial results continue to be negatively impacted by the new store start-up expenses related to a large number of stores that we opened during the last year or so, but as we've slowed the growth this year, this new store drag has decreased, as expected, and is returning to more normal levels.
We finalized during the quarter, the sale of our Aaron’s Corporate Furnishings division, which allowed us to pay down some debt, which proved to prudent in this time of uncertainty. This sale will allow us to focus on our faster growing, large market Aaron’s Sales and Lease ownership concept.
To maximize our success in this concept, we must remain focused on servicing and collecting, or as we call it, renting and renewing, from our approximately 1.1 million and growing customer base.
Our plans for the next several years are to grow, on average, our store base in the range of 5 to 9%. The store growth was less than that in 2008 as we consolidated some stores, sold a few stores and had not been achieving our profit goals and taking our breath a little in this tough economic environment, and strengthening our store management team.
The slower growth made in previous years, will let us grow over time at a more consistent, predictable and efficient manner, and it should improve future profit margins as we’ve done here in the last year, and overall financial performance.
Thank you for your support of the company. I’ll turn it over to Ken for a few comments and talk about the results of the Aarons Sales and Lease ownership division.
William K. Butler, Jr.
Well, thank you Robin and good morning and thank you for your continued interest in Aarons. Once again, I want to thank all of our associates, franchisees, partners and vendors in all teaming together for the most eventful quarter in our history.
The highlights were numerous and I’ll start off by mentioning the sale of our corporate furnishings division to CORT. CORT elected not to purchase approximately $18 million worth of inventory at original cost, and consequently our people have been busy emptying warehouses and shipping inventory all over the country into Aarons Sales and Lease ownership stores.
Most of the products have been leased, sold or are now sitting in our stores ready and available for lease or for sale. Shortly after this deal, we acquired the assets and stores of Rosey Rentals, our second largest franchisee, with stores throughout the southeast.
So really the net effect of these two transactions is that we swapped corporate furnishing stores for what we do best, Aarons Sales and Lease ownership stores. Additionally, during the quarter we converted Tiger John Cleek stores in Missouri, the big University of Missouri fan, to the Aarons program.