04-30-02
RTO Online
Rent A Center held its quarterly earnings conference call today at 10:45 am
Eastern....at 11:45 am, RAC stock was up over 11%. Needless to say, it was a
banner quarter for the nations largest Rent to Own chain.
Following are quotes and highlights from the conference call....for more detail
on actual results, see our article from
04-29-02.
Call Participants
Mark Speese, Chairman and CEO
Mitch Fadel, President
Robert D. Davis, CFO
Peter Bates, Director of Investor relations
Call Length 42 minutes
Out of the 7.7% increase in same store sales, 3% was
BOR
growth, and 3% was APU.
Generated over $96 million in operating cash flow.
Reduced debt by $18million
Robert Davis
"...will reduce debt further by 30mm in the next week or so"
Rent A Center Priorities moving forward
$685 million debt outstanding. ($600 million net)
Inventory on Rent $545 million
Idle inventory $112 million only 17% of total inventory
Mark Speese
We expect to invest $20 - $30 million in Q2 for needed inventory replacement.
We prefer 19-20% idle....
"We try to hold 160 pieces of idle inventory in the stores. That insures a fair
mix and availability. Because of strong demand in Q1 we got down to 135 to 140
pieces
we are still meeting demand but it's a little lighter than we like"
"Demand for our business remains very strong"
Increase was spread across all inventory categories. But the largest increase
was for 'High End' goods.
Mark Speese
"Even in a soft economy, our customers want bigger and better merchandise"
Collections or delinquencies continue to remain in line
Mark Speese
"Company objective is no more than 6.5% past due by Saturday close. We have been
averaging 5.5 to 5.9%.
"Skips and stolen less than 3% of revenue.
"Very pleased with all the leading indicators"
Part of the "abnormally high" revenues were a result of buyouts due to the
discount program from last summer.
$40 million dollars in payouts...up from historical $30 million dollar range.
Mark Speese
"We are about 80 or 90% through the discounted merchandise from last summer"
14cents of Q1 earnings are considered non-recurring ...due to those sales.
"...done a good job of converting payouts to new agreements".
Regional pay plan, instituted 3 months ago, reduced salary and other expense by
$8 million during Q1.
Mark Speese
"About 800 co-workers on the new plan....saving currently 1.5mm/year
in 2003 we will recognize 10million dollars in annual savings".
We will open 60 to 80 new stores this year
We will open 100 - 120 stores next year
Mark Speese
"We have opened 120 stores over the last 18 months...new stores on "on
plan"...this speaks to our successful model".
"We are confident we can add 5-10% to our store base annually going forward"
"Multiples for acquisitions are running between 8-10 times revenue. That is down
a bit from a few years ago when multiples were 10-12".
Shifted money from print to National TV campaign.
Rent A Center owns over 5000 vehicles
See the entire earnings release here
Listen to the archived earnings conference call here
end
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