America's CAR-MART Inc (CRMT) 2009 Q1 法說會逐字稿

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 results for the Company's fiscal first 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 management's comments today may be forward-looking statements which inherently involve 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 Provision 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 one of part one of the Company's annual report on Form 10K for the [fiscal] year ended April 30, 2008.

And as current quarterly reports furnished to or filed with the Securities and Exchange Commission on forms 8K and 10Q.

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.

And now I'd like to turn the company -- turn the call over to the Company's Chairman, 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%, to 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 30 days decrease to 3.6% versus 4.1% at July 31, '07.

Our provision for credit losses decreased to 20.9% in contrast to 21.8% for the prior year quarter.

And Jeff has additional credit information and we'll have some background percentages in just a minute.

I want to speak briefly to address something that we are 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 showed me the "Wall Street Journal" today about slow sales and it's in the news.

While it's true the new car sales and recent model used car sales were 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 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 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 original 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 better company offering a better customer experience.

We know it.

Our potential customers know it.

So we are continuing to sell vehicles to ever growing number of our core customers, those families and individuals that for the most part live paycheck to paycheck, as evidenced by over 30% repeat customers and which percentage is by the way much higher than other dealerships, and we are also poised to attract and sell vehicles to people slightly above our historical customer base as they recognize Car-Mart as the go to place to purchase and finance a quality used vehicle as they're 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 we'll continue to improve.

But we have and are increasing sales and feeling confident in our ability to do so because of the many improvements we are making and how we do business.

We are also taking advantage of a huge market and demographics that our competitors such as they are can't handle 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 the growing number of new and importantly the repeat Car-Mart customers.

Now I will turn it to Jeff to go over the numbers.

Okay.

Thanks, Skip.

As mentioned in the press release our top line revenues for the quarter increased by 28.9% compared to last year's first quarter.

The increase was a result of a 25.8% increase in retail unit volume, a 6.5% increase in our average retail selling price, a 10.1% increase in interest income offset by $300,000 decrease in wholesale sales.

Same store revenue increased by 28.5% for the quarter as we saw solid sales growth from virtually all of our dealerships and we are especially pleased with the increase volume levels at most of our newer, younger stores including our Texas locations.

We continue to benefit from our increased advertising efforts and other sales initiatives, and we believe we continue to see benefit from constriction in the credit markets as more good customers are coming to us for their basic transportation needs.

It is important to note that our managers are utilizing the tools we have in place to help analyze the deals we make to ensure the paper we write is of the quality that will result in acceptable credit loss rates.

Our down payment percentage for the quarter was 6.5%, this compares to 7.6% last year.

The decrease is primarily due to our $199 down stimulus refund anticipation promotion that went through the month of May.

Without this promotion, our down payment percentages would have been approximately 7.2% for the current quarter.

Higher down payments are very important and can have a significant positive effect on individual loan as well as overall performance.

For the quarter our average initial loan term was approximately 26 months compared to approximately 25 months for the first quarter of last year.

The initial term was up due to the 6.5% increase in the average retail selling price $8,952 compared to $8,407.

It should be noted however that the average resell selling price for the quarter was actually down .4% from our fourth quarter of 2008 which averaged $8,989.

This is the first quarter since October 2005 that we've seen a sequential decrease in our average resell selling price.

This decrease is even greater when consider the fact that our protection plan product is up over $60 per retail unit from the fourth quarter of 2008.

The overall price decrease resulted from cost reductions for SUVs and pick-up trucks as well general improvements within our purchasing department.

We are very happy to see the price reductions for several reasons, including, as you know our goal is to provide quality vehicles at affordable terms so we can earn the repeat business of our customers.

A price reduction increases the affordability for our customer and lower priced cars carry high gross margin percentages.

Again allowing us to keep terms affordable for our customers.

As we mentioned in the previous calls, going forward we do expect to see some growth in our average retail selling price when compared to prior year results, but at a decreasing rate and we will continue to work hard to minimize these increases, while at the same time ensuring that we continue to provide our customers with a quality and mix of vehicles that they need.

Our improved financial results were broad based across almost all of our lots.

Our no lot left behind focus is having a positive effect.

Each lot has a fully loaded stand-alone minimum profit goal which is based on the total investment we have in that specific lot.

The profit goals are met only if the lot's profit exceeds return level to the point where they are generating true economic profit for the company.

Management will continue to spend a significant amount of time working with individual lots to ensure that focus remains on producing real economic profit which of course starts with selling a minimum number of retail units per lots.

The average number of retail units sold per month was up over 27% for the quarter and 21 units to 27 units.

We continue to believe that all of our dealerships, but particularly our newer dealerships have capacity to increase sale volumes, GAAP profits and most importantly real economic profits going forward.

Interest income was up 10.1% for the quarter as the average finance receivable balance was up about $37 million, offset by a decrease in the effective interest rate to 11.9% from 13.1% in the prior year period.

For the first quarter our gross profit margin was 43.6% of sales.

This is up from 40.3% in the first quarter of last year and up from 43% from the fourth quarter of fiscal 2008.

The recent increased gross margin percentages mostly resulted from improved results from wholesale sales and increased deficiencies in our retail pricing.

We will continue to focus efforts on purchase costs, retail pricing, and repairing transport costs and expect to see gross margins around that 43% level on a go-forward basis.

In the first quarter of this year, SG&A as a percentage of sales decreased to 18.5% from 21.2% in the same period last year.

The 270 basis point positive swing in the prior year demonstrates the significant leveraging opportunities available to us as we look to continue to increase our top line and support a higher revenue base.

The overall dollar increase for SG&A related to higher payroll cost, a large percentage of which related to performance based incentive compensation earned at the lot level.

Additionally there was a $450,000, 65 basis point increase in noncash stock-based compensation during the quarter.

Once again we will continue to review our infrastructure to ensure we have adequate support for our associates in the field that feel that the current level volumes we have a good solid structure that can continue to be leveraged.

For the current quarter, net charge-offs as a percentage of average finance receivables was a very low 5.7% compared to 6.4% from the prior years quarter.

However collections as a percentage of average finance receivable decreased to 16.4% from 17.1% for the prior year quarter and from 17.4% for the fourth quarter of 2008.

We are keenly aware of the importance of our collections efforts and we will be working very hard in the coming months in this area.

At July 31, 2008, our 30% plus past due accounts were at 3.6% compared to 4.1% at July 31, 2008.

Our allowance for loan losses remains at 22% of finance receivables at July 31, 2008.

Because of the low level of charge-offs during the first quarter of 2009, the provision for credit losses was 20.9% of sales compared to 21.8% for the first quarter of fiscal 2008.

We have seen significant improvement in our credit losses thus far this year and are very proud of the efforts from our associates.

We do however expect credit loss percentages to pick up some in the next quarter which is not at all unusual for this time of year.

We saw strong overall cash flow during the quarter reflective in the $12.2 million, 5.8% increase in finance receivables to $220 million in the $650,000 in capital expenditures with only a $2.3 million increase in total debt.

Our debt to equity stood at 29.7% and our debt to finance receivables was 19.3% at July 31, 2008.

Excess availability under our revolving credit lines was 16.9% at the end of the quarter.

We will continue to view our future investment decisions from an economic perspective and we are very proud of our healthy balance sheet.

As we have previously discussed our low leverage and asset-based lending agreement has allowed us to remain relatively unaffected by the recent turmoil in the credit markets.

Now I'll turn it over to Hank.

Thanks, Jeff.

As you just heard we are producing improved results in all aspects of our business: purchasing sales and collections, while we are extremely proud of the fact that we are headed in the right direction, we are by no means satisfied.

We are well aware that there's still a lot of room for improvement on all fronts.

No matter how well we refine our policies and procedures and no matter how many new tools or systems we develop, ultimately it's the effectiveness by which carried out by our people that determine our ultimate success.

And with that thought in mind we are increasing our focus and efforts on the recruitment and training of quality people as well as further development of all of our associates.

Much of our future success will be dictated by our building to hire train and keep the very best people possible.

And for that reason we have recently made a significant move within our ranks and I am very pleased to announce that Rob Hay is taking on the new roll within our company as Vice President of Staffing and Development.

Rob has been with us for a little over three years now, came to us from Walmart where he had significant responsibilities in both operations and IT.

He has spent the past three years building a great IT department here.

It;s made tremendous contribution to increasing efficiencies in every area of our business, and he is now ready to take on his next challenge.

Within his umbrella of staffing and development will be recruitment, associate development and human resources.

Rob's immediate focus is to substantially ramp-up our capacity and effectiveness and recruitment and associate development.

We have a great team in place and I have great confidence that under his leadership we are going to see some great things happen in those areas during the upcoming year.

With regard to our present level of sales, we have mentioned on several occasions we have capacity to sell substantially more vehicles on our existing locations.

Throughout the past year we have been able to realize some increases through better advertising, inventory and training, and in an continued effort to increase sales levels, excuse me, we are intensifying our focus on Hispanic market.

We are adding to our sales department an experienced Marketing Director whose singularly focus will be to increase sales to this particular sector.

The Hispanic community is a very significant segment of several of our markets and although we have put forth the efforts in the past that have been lacking, as our past results in this area has not been satisfactory.

We know that the opportunities within this market are substantial and we have come to realize that we to fully garner our fair share of this market we must devote the necessary resources to make it happen.

We've made that commitment and we are extremely excited about this addition to our team.

Another significant addition to our team that we are keyed up about is in the area of collections.

We said many times before, and actually I believe Skip already mentioned it once in this call, the bulk of our business is about collections, and for that reason, it will probably come as a surprise to some of you to learn that we have not had a Director of Collections or similar as such position.

The primary reason for this has been in this area of our business it is what we do.

Virtually everyone, particularly in the management capacity, has always been involved in collections in some way and will continue to be.

However we have come to realized that to effectively monitor collections with the level of intense scrutiny that is required and to continually strive to improve this this area, we need a point person.

As a result we are adding a key person to our management staff for that purpose.

As with any new position, the specific responsibilities and scope of authority will somewhat evolve and become better defined over time.

However we are confident that we will see increased efficiencies and improved results with this added focus.

Having someone continuously examining the delinquency standings of each lot and taking appropriate and proactive action will help to better ensure that collections are effectively managed at each dealership.

Additionally it will be a great benefit to have someone fully dedicated to constantly working to improve all of our collections policies, procedures, as well as partnering with our IT department to continue to improve our collections, module and systems.

The increased focus and the increased accountability in this area should prove to be extremely beneficial.

And again we are extremely excited about the anticipated progress we'll make in each of the areas I have just mentioned with these three additions.

Now then I'd like to highlight for you a particular region within our company.

It's been discussed a great deal on past calls and that is Texas.

As we talked about previously, this region has been a challenge for us, and I am very happy to let you know we have made great strides.

First quarter of last year, we had a loss of just under $200,000 whereas this year for the first quarter, we have positive net income of almost $300,000 for a swing of nearly $.5 million.

Now while there's still a lot of improvement that needs to be made, obviously that is a big move in the right direction and it is very encouraging.

We don't intend to continue to break out region by region for you, but we know that many of you asked about this in the past and we thought we would share that with you and highlight that.

We also saw big improvement in Kentucky for same time periods as well.

These are all further indications that many of our younger dealerships are beginning to mature and become more solid producers.

As for expansions, this past quarter we had grand openings at new facilities at both Magnolia and [Elgrade] Arkansas.

Both of these were a result of old facilities and requiring space to carry more inventory and house more staff to continue to grow.

And we presently have similar projects also underway in Muskogee, Oklahoma and North Little Rock, Arkansas.

I'm also pleased to announce that we plan the opening of another location in Alabama in the near future, this next one being in [Decatur], and this will be our fifth dealership in Alabama.

Throughout the remainder of the year we plan to continue to be conservative on the number of new stores we open, as our primary focus is to continue to work to increase the profitability of each of our underperforming dealerships.

Presently in addition to Decatur, our plan will be to open three more stores within this present fiscal year.

In summary, I am very, very proud of our team here.

We have a great group of dedicated people who put in the hard work necessary to accomplish what we have.

Their contributions are duly noted and greatly appreciated, and I'm also excited about the new positions we are in the process of adding.

I look forward to working with each of these individuals within their area of responsibility and I look forward in seeing the contributions that I know that we'll make.

So that concludes our prepared remarks.

So now we would like to move on to your questions.

Operator.

At this time the participants will now answer questions from the callers.

(OPERATOR INSTRUCTIONS) We will pause for a moment to compile the Q&A roster.

Your first question comes from the line of Bill Armstrong with CL King & Associates.

Good morning, Skip, Hank and Jeff.

Nice quarter.

Thank you.

How much of your sales came from the promotion geared towards the stimulus rebate check during the quarter?

Oh, it was -- it was about 15% and it's all concentrated in May.

Is that of units or total sales or both I guess?

Both.

Basically both.

Got it.

The collection rate was down year-over-year.

I was wondering, Jeff, if you could maybe, or Hank, if you can flush that out a little bit, what is going on there and why that was down?

Well, the gas prices we've seen recent relief on gas prices but we feel like certainly some of our customers were struggling a little bit there at the end of the quarter, and the 30% plus number is in good shape, but the collections are down a little bit, which means we had hung up there on zero to 30 past due and it's normal this time of year.

We are not shocked with it, and we did see some nice improvement for the month of August in the right direction, but we were a little disappointed in overall collections for the quarter, and we are working on that.

Okay.

And then finally this new position director of collections, has that been filled yet, or are you searching for somebody at this point?

We have someone.

They haven't started with us yet, so that will come a little bit later.

But we feel like we have got the right person.

We are extremely excited about it.

I think it's a good addition.

We talked about this a little bit.

A lot of you might be surprised that we didn't already have this in place, but it is -- has been an integral part of what everyone does and what everyone's involved in.

But we have seen a lot of benefit over the past couple of years as I mentioned, a time or two, [John Sims], our Director of Purchasing has really done an excellent job, been really applied best practices with all of our purchasing agents and we have seen a lot of improvement there.

And I would tell you that this would be a very similar in capacity, and we know that we need somebody eating and sleeping every day collections and continually focused on how we get better and how to transport the best practices when we have one lot producing particularly good results to really dissect that and apply that everywhere, and we need somebody to lead that charge as we grow and to prepare for future growth.

So anyway, this is a big deal to us.

It's something we've discussed for a long time, and I would tell you that it is a significant move for us internally.

Right.

Just one quick follow up.

With the collections down a little bit, was there any -- were there any geographical areas that maybe were -- that was weak or any differences between new stores and mature stores?

No.

Nothing that stood out.

It was pretty much across the board.

Okay.

Alright.

Thanks.

Thank you, Bill.

Your next question comes from the line of David Burtzloff with Stephens.

Good morning, guys.

Congratulations on a great quarter.

I just wanted to ask a few questions here.

I don't know if you can provide any color on how August sales are trending or trended?

It continues to be solid for us.

We are pleased.

Okay.

And then, Jeff, going forward on your loss rate, obviously it's now down two quarters now down under 21%.

Do you think it will go higher a little bit?

I mean do you have a good feel for where that may be?

Do you think it will be under 22% for the year, or is that something that is too far out to predict?

Yes.

We do expect it to pick up some.

We don't -- we are not giving any guidance necessarily on that number, but 22% to 23% is probably definitely would make sense for us.

I would say, David, that the band that we are looking at is decreasing.

It's a smaller band.

But there's going to be fluctuations in there.

We are still trying to get exactly where that will be and it will change quarter to quarter, next quarter tends to pick up a tad.

We'll have a good third and fourth quarter should be strong again.

So there will be variation for the rest of the year, but we do expect it to be a little higher than 20.9%.

Okay.

And then final question.

I know you said in the past that your losses on SUVs and pick-ups have been historically below Company average.

Are you seeing anything like over the last few months that may change that focus with gas at $4?

I would tell you that as sales of SUVs and pick-ups as a percentage of our overall sales has increased over the past year, and just the timing of what's out there, there's more SUVs on the road, so that more reflects what sell, but I would say that as that represents a larger band of sales the difference is not a significant as it used to be.

I would tell you that we would begin to see some of those losses come be more in line with our overall losses.

Okay.

All right.

Well, thank you very much.

You're welcome.

Your next question comes from the line of John Hecht with JMP Securities.

Good morning.

Ditto on the good quarter and thanks for taking my questions.

Hi, John.

Real quick just to make sure I have some of the numbers right.

Hank, or Jeff, did you see $60 per unit for the guarantee insurance product?

That was the increase over the fourth quarter of 2008.

Okay.

And then Hank, I think you mentioned between the last quarter and the upcoming quarters, five new units in Arkansas together, one in Alabama plus three for full year expansion of nine units?

Is that right?

No.

I'm sorry.

We are looking at a total of just four for the year.

We have one more, we are opening one in Alabama soon, three more in total, and those would actually be fill in across the board one the Kentucky one in Missouri and then another one in Arkansas.

So --

But you have a couple in Arkansas last quarter as well?

Those were expansions.

Okay.

We expand a lot, John.

We don't count it as a new lot.

Yes.

Okay.

So a couple of expansions and four new lots.

So then I have some questions.

Can you talk a little bit about sourcing during the quarter, what are you finding in terms of your ability to get vehicles either through dealerships versus auctions and is it -- are we in a good environment for you to be selective on that and stock inventory as you'd see fit?

Yes.

As far as our sourcing goes, it tends to be similar as it has been, very few from auctions.

That is not a big part of where our vehicles come from.

We do buy a lot through wholesalers that we do business with and certainly continue to buy direct new car trades.

We have increased some of our efforts emphasis very recently on buying from individuals, trying to attract more people to come to our stores when they have a car they want to sell.

So we are picking up a few more of those.

As we talked about, we definitely have got some benefits with our SUVs and pick-ups as we felt it was a quick overcorrection on those.

The prices really dropped and we took advantage of some of that and of course as Jeff talked about first time in a long time we are seeing a drop in our overall retail sales price.

And I have to tell you a lot of that, a lot of results of that are truly just really to increase efficiency within our purchasing department.

Those guys are doing a good job.

So we are -- we feel good about the mix and the price range of the inventory we have on our lots today.

So we are well stocked.

John, I would add one thing to is, as you look at our inventory turn, we have increased the number of cars in the dealership, but also continue to turn our inventory about 12 times a year.

Isn't that right Jeff, 11, 12 times a year?

So even with increased stock of some SUVs and those things, they are turning well.

And I wondered could you talk about, was the mix in terms of the type of cars you sold this quarter similar to the prior quarter that you are seeing the popularity of SUVs amongst your customer base increased just given that they can finally afford an SUV?

I would say there wasn't any big change in the mix.

Okay.

And then last question is, maybe Skip if you can provide us an update.

I know you guys you put in an underwriting system, not necessarily automated but it's going to assist the lots and provide some elements to understanding potential credit behavior.

Is there any update on that and how is that performing relative to expectations?

It's in place, we are getting some good results out of it and good acceptance.

Jeff, you might speak a little more than I can about it.

Yes.

It's fully employed at all lots and it basically gives the lot managers a feel on the front end on the overall quality of the paper, and then we are scoring all accounts on the back end for the managers and the area managers and vice presidents to use as they manage their businesses.

Just good data on scoring and distributions within the scoring ranges by lot.

Just a real good tool for our folks in the field.

John, probably one of the initial impacts of it is as Hank talked about it this morning, we are seeing fewer marginal deals.

We are able to minimize those.

We have more turn downs at our dealership which is a good thing because our sales are up and turn downs are also up, which means we have to be selective in the deals we make and hopefully more of those percentages would be the better deal, higher scoring deals and fewer that are in the red zone that may be marginal deals.

It's a real positive force and can only get better over time.

Okay.

Great.

Thank you guys.

Your next question comes from the line of John Carter, who is an individual investor.

Hi.

Thanks for taking my call.

I had two questions.

One is a follow-up on the first question, which was you mentioned related to the rebate checks that 15% was related to those checks during the quarter.

And I was confused in terms of, is that 15% of the sales came from the consumers providing you the rebate checks, or was it 15% of your marketing during the period was targeted towards the rebate check?

15% of our sales were $199 down stimulus refund anticipation sales.

Okay.

Now, I guess -- as related to the rebate checks again, is there any sort of feel for outside of the $199 kind of offering directly targeted at the rebate checks?

How do the rebate checks coming in May, June and July, roughly $1,500 per consumer, kind of impact your business during the quarter overall outside of the marketing and the promotional piece?

Well, I would say it wasn't as significant as we had anticipated or hoped for.

It certainly didn't have the impact that we see here in the traditional income tax return.

So as far as with regard to sales and collections, it wasn't nearly as significant.

Okay.

Now, my second question is related to kind of the average down payment.

For the quarter it was 6.5%.

That's down from 7.6% year-over-year and over 7% sequentially.

What is the reasoning for that?

Is it related to the promotional side?

I'm a little bit surprised by that kind of given the influx of cash and consumers pockets during the quarter.

As I said, we anticipated a little bit more benefit from that.

We would have expected to be higher too.

Obviously in the spring time, more customers have more cash, and those are better.

So I guess a combination as Jeff mentioned earlier, a lot of things being tighter, gas is up, grocery is up.

And also we had the $199 sale that brings it down.

So in the end we didn't see the increase we had hoped for.

And we didn't sell as many cars last year either.

To get more sales, you maybe had to go down especially on the repeat customer, so a little lower on the down payment this quarter.

If you look at it, if you take out the $199, you are 7.2%.

So sequentially -- we look at it and it matters, but it's not as big a deal as you might think.

It's not something we overlooked, don't get me wrong.

But if you take those out, we had a good quarter with repeat customers where we traditionally take lower down payments.

They score higher for other reasons, typically, but typically we had lower down payment on a repeat customer.

Right.

Now, kind of given some of the things you said in terms of the higher gas prices and tighter conditions for your consumers, collections was down during the quarter, down payments were down during the quarter, and yet your allowances were kind of the lowest levels they've been in quite sometime on a year-over-year basis.

So when -- how is that calculation made when I'm trying to think about the business?

Is it -- are you looking at down payments, are you looking at collections, or is it just a number that's produced by some sort of other calculation?

We look at all those factors.

Of course the 20.9% credit loss amount is simply the losses we took during the quarter as a percentage of sales.

So you don't get the full story from that percentage, and we tried to supplement that story with your cash collections and your past due numbers, and we have 40,000 accounts out there at various stages of their lives.

So we are analyzing all this data at the same time and establishing our quarter end reserve at 22%.

So, yes.

Down payments are very important.

Collections are important.

Average percentage of finance receivables current is important, and all that is being looked at continuously from all angles.

Okay.

And then this has been great.

I'll just ask one other question and get off.

With the kind of entry into Alabama, what has the Company learned kind of given its entry into Kansas for a short period of time for entering into new markets?

I guess the question is, Kansas didn't work.

Why was that?

What were the lessons learned?

And then how are you using that to move into Alabama?

Well, I would tell you that Alabama is attractive to us for a number of reasons.

One, it's situated very similar to the way Arkansas is.

We have a lot of towns that fall into the size where we want to open a store and they're also in close proximity to each other, and I think that allows us to provide more intense onsite oversight direction help, whereas I would tell you that the one you mentioned was a little bit further removed.

I didn't get as much oversight as Alabama will receive.

We are extremely excited about Alabama.

We paced ourselves and have been pretty methodical, slow, about how we have opened stores there to make sure that each one has their feet under them as we continue to open the next one.

So we anticipate this to be a very good state for us.

Now, with Kansas, were there any regulatory reasons why Kansas was not a good candidate and Alabama is?

Those were the most significant reasons.

Okay.

Okay.

Well thanks for taking my call.

Thanks, John.

Your next question comes from the line of Ben [Ricotto] with Jefferies & Company.

Thanks for taking my call guys and congratulations on a good quarter.

I just wanted to try to get a handle on, are you seeing any difference in [loan] performance from especially the '08 stuff?

Of course we are tracking the various pools of loans monthly and quarterly, and so far loans placed in 2008 are performing well.

Okay.

So no [aborations], everything seems to be going according to plan.

Excellent.

The other question -- when you say north of the down payment was 7.2% and that's normalized for the sales promotion, that is just removing the 15% of sales down at $199 down?

Yes.

Okay.

And then one final I guess it's a clarification question.

I don't know if this boarders on guidance or not, but you are saying about 15% of the units sold in the quarter was due to this promotion which would lead us -- 6,250 would be the number of units sold without this promotion.

Can I think of one third of that 6,250 as a monthly run rate, or is my math going to lead me astray if I do that?

The $199 down doesn't mean we wouldn't have gotten those sales, or at least some of them anyway.

Obviously the point to run the promotion we picked up some extra sales, but I wouldn't say it was the entire 15%.

We would have gotten some of those.

Got you.

Okay.

Those were all my questions.

Thanks again for your time.

You're welcome.

Your next question comes from the line of Brandon Osmond with Hammond Capital.

Hi, guys, how are you doing today?

Thanks for taking my call.

Most of my questions have been asked and answered.

But just had a quick followup on the percentage of current receivables dropping from 84% quarter-over-quarter to 81.6%.

That drop of 2.4% versus the slight uptick in 30-day delinquencies, where is the delta the 1.9% coming from?

Is that all kind of two to 30 day delinquencies?

Yes.

It is.

But it's nothing in the later stages.

It's not any cars that haven't been picked up for repo?

No.

There may be a few, but it's mostly the delta between the two percentages there, time period.

Okay.

Then on the collections side, we've already talked about that a little bit, but I was wondering, is it possible to quantify how much of the drop in collections was attributable to modifications of loans, or deferrals of loans, however you want to classify that?

Yes.

That is possible.

We are not discussing that deferrals externally at this point, but that is certainly a portion of the decrease, yes.

And Brandon, that is part of our business is refinancing a certain number of accounts we need to keep track to monitor closely.

That could be part of it as you -- when we refinance some more, we believe that they are going to continue to pay and refinance.

You don't want to refinance a loss that you know you are going to take.

But there is some of that in there.

Sure.

Is there a number though that you had consider making public or reporting going forward?

It tends to be a measure of kind of some early trends in the credit performance.

In the dollar, if you go from [17.1] to [16.4], it's about $1.5 million on a $220 million portfolio.

So it's a big percentage drop and $1.5 million when you consider the gas prices and those accounts that are just slightly past due, and it's not as dramatic as it appears.

Okay.

All right.

Well, I appreciate it, and congrats again on another great quarter and thanks for taking my call.

Thank you, Brandon.

Your next question comes from the line of Bob Bridges with Sterling Capital Management.

Good morning.

Can you break out the percentage of your pre-tax or percentage of your EBIT that you are earning in Arkansas in the quarter and --

No.

We don't -- we do indicate that 55% of our sales are basically in Arkansas at this point.

Okay.

And can you break out the interest rate mix that you are collecting from customers.

I know that Arkansas is structurally different due to the laws in the state, but do you have that number for what you are earning in Arkansas and what you are earning in other states?

Currently in Arkansas, we are capped at [7.25] but we do have some loans that are older in age, so they are at a little higher rates.

And in the other states we are well below maximum rates allowed, but probably closer to 17%, 18% on a blended basis.

With that as a back drop, I guess you indicated that you would put another store in Arkansas sometime this fiscal year.

Given the opportunity to grow your earnings base with capital you employ at a higher rate in states outside of Arkansas, can you explain the rational why you put another store in a region that is already seemingly mature?

We actually -- we do very well in Arkansas, and although we do have a much lower rate in some ways over a long period of time, the business with lower rate, the good repeat business, faster repeat business lends itself to lower credit losses.

So we realize a pickup on the difference there.

And the particular store we have in mind although we are not ready to give its exact location is in where we already sell a very large number of vehicles, and the area is growing, and in order for us to continue to get our fair share of the market here we need to add another store.

So we feel confident it's a solid decision for us.

I think Jeff you referenced earlier in the call that gross margin trends in the 43% level are what you are seeing going forward.

Could you maybe unwind a little bit and tick off some of the reasons why you think that is a durable level in the foreseeable future?

That has been our -- we had some negative effect last year from mostly from the wholesale sales.

Our sales levels were down and our repos and write-offs were up, so there was an artificial reduction in our margin for most of '07 and the first part of '08.

And now that we have come out of that, we have three -- two and a half, three full quarters where we are right at that 43% rate, and we've made some pricing efficiency adjustments and some other changes.

So we feel pretty comfortable with that number on a go-forward basis.

Maybe some of the other changes would also be the impact of your changed sourcing structure over the last couple of years?

I would assume that is contributing as well?

Yes.

It's a lot of factors, more efficient purchasing.

You are right.

Two years ago our percentages of purchases were higher than it is today significantly.

That makes a difference in the cost.

When you sell a vehicle that averages wholesales cost is in the $4,200, $4,300 range, a dollar or two here or there really adds up, and we have been fortunate and worked hard in our purchasing department to take advantage of some efficiency where we can, localized efficiencies, cars are cheaper in one area or another.

A few dollars really add up on a percentage basis.

Over the last year, a year and a half, you've put up this tightened credit profile and tracking system in your stores, and I guess in the last couple of quarters, we've had kind of the macroeconomic effect of maybe customers who were not traditionally buy here/pay here in your stores.

Are you able to quantify in any of the data that you are collecting from your customers coming in, to come to an announced that says, yes you are inherently higher credit quality customer an aggregate that you are servicing now, or is that something that is not something you can quantify?

We couldn't tell you exactly what percentage of our recent sales we would describe as that customer who has come down into our market that might have previously had conditional financing.

We do know that we are seeing improvement across the board, and that is a blend, obviously as we make better decisions and call out some of the weakest deals, that is going to bring some of our numbers up and at the same time we pick up some number of the customers at the other end, the average of income and various other points of scoring.

We feel like we are doing better in the deals, that I would not tell you -- it's not a radical change.

We sell basically to the same people.

Okay.

Great.

I have a couple more.

I'll jump back in the queue.

Thank you, Bill.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Peter Reed with CL King & Associates.

Thanks, good morning.

I was just trying to get a sense of, you've just come off really impressive quarter of same-store sales, 30% and 28.5%, and is there any way to get a sense of how the tax refund checks and how the kind of lack of financing traditional dealers has impacted that?

Can you put a contribution to that sum from those factors, or is that something you can't really quantify?

We ask that question ourselves at times, Peter, about these things.

The tax stimulus thing was marginal and it was -- it helped but it wasn't significant and as Hank said earlier not nearly as significant as the tax repo in the third and fourth quarter, but it does -- it has helped.

And this customer coming to our level, it's hard to quantify.

A lot of things we have done in the last year are attracting more of these customers, but some of this is anecdotal that we believe we are getting customers.

Some of the data we are getting in our profile again is blended, but would indicate higher incomes, more trade-ins, higher credit would indicate better customers.

At some point we would be able to be more specific empirically about it, but it's hard to do right now.

So it's really more internally generated type of response.

Is it fair to say we can look to continuation of that type of growth?

I know at some point you will anniversary tough comps but it looks like you guys are attracting --

If you look historically, we've been same store revenue growth in 8% to 10%, 12% range.

Obviously even in this first quarter we are comping a slow quarter from a year ago.

We ought to continue to see historical levels of improvement, not necessarily quite as dramatic as this one.

But it sounds like you are doing something better that is bringing more people in the door that are buying.

It's not fair to say that you are going to accelerate at historical levels, you're more comfortably just assuming that same historical rate of sale.

We always try to do better.

The key here is collections.

I will point out at the same time while we are making efforts to sell more cars, as we talked about, we invest more in advertising, we feel like we are doing a better job with our inventory mix, at the same time we are recognizing the need to tighten our own -- you've got a couple of forces there.

Right.

So we can still settle historical levels.

Okay.

Alright, well, thanks very much.

Congratulations.

Thank you, Peter.

You do have a follow-up question from the line of Bob Bridges with Sterling Capital Management.

On the inventory mix, can you -- with the higher mix of SUVs and trucks, would you characterize that as opportunistic, or -- what I'm driving is if we turn back to $4 gas and higher, do you have any risk from buying too much to serve the demand that you have got now?

Yes.

If we curtail somewhat, every day we review where we are, and we did feel like we were getting a little bit heavy on those.

We still have a good selection.

We still have a fair amount of number that want those and they do not and have not ever represented the majority of what we sell, but we still have a good collection of those.

Yes, we have tightened up, tried to be disciplined about that to make sure we have not gotten a little carried away with that ourselves.

Did you, in the quarter, what percentage SUVs and pick-ups were of your sales?

Did you break that out?

No.

We did not.

But you would say it's in line with history and maybe it's a little bit higher due to the opportunity of buying these vehicles?

I would say it's in line with recent history, yes.

Okay.

Just kind of getting back to the headline on the call, it's very impressive that the sales were able to increase so significantly, given the same store base that you had over the last several quarters.

Can you characterize how much of that might be due to opening the flood gates on some of your credit underwriting or how much is demand driven?

Actually to the contrary I would say we are actually tighter on our underwriting during this quarter than we were a year ago.

That is our intent.

As I've said, we've invested pretty heavily in our advertising.

We've done -- we've really worked hard with sales training, done a better job maintaining a good inventory mix selection.

I think those things combined, and again we don't know how many, but we know that we are at a time where the buy here/pay here does become more of a viable alternative which previously may not have been.

So I think all those things combined we've been able to raise our sales and be disciplined on our underwriting.

And even with the great quarter we had we still averaged 27 retail units sold per month per lot, which with our newer younger lot, there's room to continue to ratchet that number up some, and that is the focus of our no lot left behind effort this year.

Maybe that's what I was driving up when I mentioned flood gates opening.

I just recall maybe four to six quarters ago there was a deliberate effort on your part to curtail the volume of sales coming out of newer, less mature lots while you were going through your tighter underwriting training, creating the guidelines and so forth.

And I look at this larger sales growth number and I'm wondering if we are on the back end of this education implementing guidelines phase, and now some of these managers are encouraged and able to generate higher volumes because they have more of a play book or so to speak to follow.

I am wondering if that is part of the higher sales growth.

Not really.

That would not be the case.

And I would tell you actually as far as our overall scoring that was referred to, we've been pretty methodical about how we roll this out, and it's only been very recently that it's been fully deployed throughout the whole company.

So this is still -- we've been talking about it for a little bit since we've been working on it, but it's still new for many of our stores.

Okay.

That's helpful.

Thanks a lot.

Thank you, Bob.

At this time there are no further questions.

Okay.

Well thank you very much, everyone.

I would like to point out that our annual report and proxies will go out next week, Jeff, I believe.

It should be in the mail and you should be receiving those shortly.

We will have our annual meeting of shareholders here in Bentonville on October the 15th, and certainly everyone on this call and others are invited to attend, and again the annuals will be in your hand shortly.

We do thank you for your time today and we are, as Hank and Jeff have said, very pleased with this quarter, and we'll continue to work hard to continue to improve our results.

Thank you very much.

Thank you for joining today's America's Car-Mart first quarter 2009 conference call.

You may now disconnect.