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Rent-A-Center, Inc. (RCII)
Q12008 Earnings Call
April 29, 2008 10:45 am ET
Mark E. Speese- Chief Executive Officer and Chairman of the Board
Mitchell E. Fadel- President and Chief Operating Officer
Robert D. Davis- Executive Vice President- Finance, CFO and Treasurer
David Carpenter – Vice President, Investor Relations
Dennis Telzrow- Stephens, Inc.
Henry Coffey- Ferris, Baker Watts, Inc.
William Baldwin- Baldwin Anthony Securities
John Baugh- Stifel Nicolaus & Company, Inc.
Arvind Bhatia- Sterne, Agee & Leach
Jeff Embersits- Shareholder Value Management
Robert Straus- Merriman Curhan Ford & Co.
Previous Statements by RCII
» Rent-A-Center Inc. Q4 2008 Earnings Call Transcript
» Rent-A-Center, Inc. Q2 2008 Earnings Call Transcript
» Rent-A-Center Q4 2007 Earnings Call Transcript
Thank you. Good morning everyone, and thank you for joining us. You should have received a copy of the earnings release distributed after the market closed yesterday. It outlines our operational and financial results that were made in the first quarter. If for some reason you did not receive a copy of the release you can download it from our website at investor.rentacenter.com. In addition, certain financial and statistical information that will be discussed during the conference call will also be provided on the same web site. Also, in accordance with SEC rules concerning non-GAAP financial measures, the reconciliation of EBITDA is provided in our earnings press release under the Statement of Earnings Highlight. Finally I must remind you that some of the statements made in this call, such as forecast growth and revenues, earnings, operating margins, cash flow, and profitability or other business or trade information are forward-looking statements. These matters are of course subject to many factors that could cause actual results to differ materially from out expectations reflected in the forward-looking statement. These factors are described in the earnings release issued yesterday as well as our most recent annual report on form 10K for the year ended December 31st, 2007. Rent-A-Center undertakes no obligation to publicly update or revise any forward-looking statements. I would now like to turn the conference call over to Mitch. Mitch?
Thanks, David. Good morning, everyone and thanks for joining us on our first quarter earnings call. As you can see in the press release, total revenue, same store sales, and both reported and adjusted diluted earnings per share exceeded our guidance. A very good quarter for us, including the 2.8% same-store sales which was primarily the result of higher merchandise sales revenue as more customers than we anticipated exercised their purchase option in the first quarter. These extra sales as well as getting some of the benefits from out store consolidation plan earlier than expected drove our revenue and our earnings above our guidance.
Traffic was ok for the quarter as we continue with our Worry-Free Guarantee advertising campaign. Collections continue to improve. Our average weekly delinquency number on customers one or more days past due was right at our goal of 5.9%, down 46 bases points from the last quarter, and 17 bases points better when compared to the first quarter of 2007. Very good results there and they are translating to better results in the loss line. In fact our customer s skips and stones as a percent of revenue were 2.6% down 20 bases points from last quarter and down 60 bases points from our high level last summer. Our inventory held for rent metric came down nicely to 20.9%, a 70 bases point drop from the fourth quarter and comfortably within our range of 20-24%.
The store consolidation plan that we announced in early December is substantially complete, and as I mentioned earlier we’ve recognized some of the expense synergies from that plan earlier than expected, and we are on track for the monthly $2-2.5 Million from that initiative from that quarter.
With regard to the economic stimulus act, where the additional tax refunds start this week, in fact they started yesterday and run through mid-July; we’ve developed a well though out plan to benefit from the tax refunds through additional advertising and additional operational efforts. So we are pretty comfortable with our plan there.
In summary, the quarter was a very good one for us, as we continue to focus on driving traffic through our various advertising and marketing initiative, continuing to control our delinquencies, our losses, and our inventory levels. I would like to thank our 20,000 co-workers for their execution of that plan, and for their continued commitment to our success. Robert?
Thank you, Mitch. I want to spend a few minutes updating you on some of our financial highlights during the quarter, and then I’ll turn the call over to Mark. I would like to mention that much of the information I provide, whether it is historical results or forecast results will be presented in a recurring and comparable basis. As outlined in the press release, total revenues increased during the first quarter of 2008 to $756.6 Million. Supported by a positive same-store sales comp of 2.8% that Mitch just spoke to. Adjusted net earnings and diluted earnings per share were $38.2 Million and $.57 respectively and exceeded our guidance range for the quarter of $.47-.53.
As reflected in the press release, our reported GAAP earnings for the quarter were impacted negatively by approximately $.03, or $2.9 Million as a result of finalizing the previously announced restructuring plan, the benefits of which include approximately $2-2.5 Million in incremental monthly operating profits. And as Mitch alluded to, we do believe that our ability to move with appropriate level of speed and diligence in executing our restructuring plan has enabled us to capture some of the benefits much sooner than originally anticipated. And as such, is reflected in our first quarter results as well as our forward guidance for the balance of the year.