America's Car-Mart, Inc. F1Q09 (Qtr End 7/31/09) Earnings Call Transcript

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America's Car-Mart Inc. (CRMT)

F1Q09 (Qtr End 7/31/09) Earnings Call

September 04, 2008 11:00 am ET

Executives

Skip Falgout - Chairman

Hank Henderson - President and CEO

Jeff Williams - CFO

Analysts

Bill Armstrong - C.L. King & Associates

David Burtzlaff - Stephens

John Hecht - JMP Securities

Dan Furtado - Jefferies & Company

Brendan Ozlin - Hayman Capital

Bob Bridges - Sterling Capital Management

Peter Reed - C. L. King & Associates

John Carter

Presentation

Operator

Good morning everyone. Thank you for holding and welcome to the America's Car-Mart first quarter 2009 conference call. The topic of this call will be the earnings and opening result's for the company's fiscal quarter ended July 31, 2008.

Before we begin, I would like to remind everyone; this call is being recorded and later will be available for replay for the next 30 days. The dial-in number and access information are included in the morning's press release, which can be found on America's Car-Mart website at www.car-mart.com.

As you all know, some of the management's comments today may be forward-looking statements, which inherently involves risks and uncertainties that could cause actual results to differ materially from management's present view. These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The company cannot guarantee the accuracy of any forecast or estimate, nor does it undertake any obligation to update such forward-looking statements.

For more information regarding forward-looking information, please see Item 1 of Part 1 of the company's Annual Report on Form 10-K for the fiscal year ended April 30, 2008. Its current quarterly reports furnished to or filed with the Securities and Exchange Commission on Forms 8-K and 10-Q.

Participating on this call this morning are Skip Falgout, Car-Mart's Chairman of the Board; Hank Henderson, the company's Chief Executive Officer and President; and Jeff Williams, Chief Financial Officer.

Now, I'd like to turn the call over to the company's Chairman of the Board, Skip Falgout.

Skip Falgout

Thank you operator and good morning everyone. We are pleased to announce this morning that we reported net income of $5.3 million or $0.45 per diluted share for the first quarter of fiscal 2009 versus $2.1 million or $0.18 per share for the prior period quarter. Importantly retail unit sales increased a strong 25.8%, with 7,353 vehicles versus 5,847 vehicles last year on essentially the same store base, 92 stores versus 91 stores.

On the credit and collection front, we also showed significant improvement, as our accounts over the past 30 days decreased to 3.6% versus 4.1% at July 31, '07. Our provision for credit losses decreased to 20.9% of sales in contrast to 21.8% for the prior year quarter. Jeff has additional credit information. We'll have some background of the percentages in just a minute.

I want to speak briefly to address something that we're seeing quite a lot about in the financial press and TV, radio and print; and that is the issue of slow automobile sales. As a matter of fact, Hank just showed me the Wall Street Journal today about slow sales, and it's in the news. While it's very true the new car sales in recent model-year used car sales are down as indicated by all the recent public announcements and research reports covering the major auto retailers. Our sales are up. Why?

Well first, we sell basic transportation in markets where there isn't much competition on how a person gets from point A to point B. There is no significant public transportation. Second, we offer quality vehicles and importantly we offer affordable financing to folks that otherwise may have difficulty buying a car. These are folks that for whatever reason have personal credit issues and aren't part of the traditional auto lending universe, and as we all know that universe has constricted in recent months with the turmoil in the credit markets.

Third and most importantly; we just do a better job and offer a better value proposition to our customers than our rather limited mostly local or regional competitors. With the operational improvements we have made over the last year and a half acquiring better and more diverse inventory at reasonable prices, better underwriting, sales efforts and collections, we are a better company offering a better customer experience. We know it, our customers, our potential customers know it.

So we continue to sell more vehicles to an ever growing number of our core customers. Those families and individuals that for the most part will be paycheck-to-paycheck as evidenced by over 30% repeat customers in which percentage by the way is much higher at older dealerships. We are also poised to attract and sell vehicles to people slightly above our historical customer base as they recognize Car-Mart as the place to go to purchase and finance a quality used vehicle as they are squeezed out credit upstream.

Obviously, this business is not all about sales. In fact it's really more about credit and collection and as Jeff and Hank will discuss in a minute, that is a key area in which we have been and will continue to improve. We have an increase in sales and are feeling confident in our ability to do so, because of the many improvements we are making on how we do business. We are also taking advantage of a huge market and demographics of our competitors being as they are; they can't handle it as well and as profitably as we can.

So we are selling more vehicles, but we believe we are doing it in a prudent and profitable manner. All the while continue to increase growing number of new and importantly the repeat Car-Mart customers.

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