Aaron's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Aaron’s, Inc. (AAN)

Q1 2012 Earnings Call

April 27, 2012; 10:00 am ET


Charlie Loudermilk - Chairman

Ron Allen - Chief Executive Officer

Ken Butler - Chief Operating Officer

Gil Danielson - Chief Financial Officer

Lee Wilder - Investor Relations


Brad Thomas - Keybanc Capital Markets

John Baugh - Stifel Nicolaus

John Rowan - Sidoti & Company

Matt McCall - BB&T Capital Markets

David Magee - Suntrust Robinson Humphrey

Jordan Hymowitz - Philadelphia Financial

Chuck Ruff - Inside Investments

Laura Champine - Canaccord Genuity

TJ McConville - Raymond James & Associates

Arvind Bhatia - Sterne Agee



Good morning, and welcome to the first quarter 2012 Aaron’s Inc earnings call. All lines will be muted during the presentation portions of the call, with the opportunity for questions-and-answers at the end.

At this time I would like to introduce your host, Gil Danielson with Aaron’s, Inc. Thank you and enjoy your conference. You may proceed Mr. Danielson.

Gil Danielson

Okay, well thank you everybody for joining us this morning. As usual I’m going to turn it over to Lee Wilder to read our standard Safe Harbor statement and then we’ll start the call. Lee.

Lee Wilder

Good morning. My name is Lee Wilder and I assist in Investor Relations for Aaron’s. The company’s earnings release issued last night and the related Form 8-K are available on our website www.aaronsinc.com, in the Investor Relations section and this webcast will be archived for replay there as well. With us today are Charlie Loudermilk, Chairman; Ron Allen, CEO; Ken Butler, COO; and Gil Danielson, CFO.

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, litigations, customer pricing, information security, customer demand and 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 2011 Annual Report on Form 10-K, including without limitation the company’s projected revenues, earnings and store openings and store acquisitions, as well as disposition activity for future periods.

Ron, Ken and Charlie will have a few comments and then Gil will add further information. Ron.

Ron Allen

Thank you Lee and good morning ladies and gentlemen. We thank you for joining us today. I’m honored to participate in my second earnings calls since becoming CEO. It’s a pleasure to discuss the first quarter results of our operations.

As detailed in our earnings release last evening, we had another outstanding quarter with records in both revenues and earnings and overall results were better than expectations. We raised our revenue and earnings guidance for the year and feel we have very good momentum as we move forward through the rest of 2012.

Now business has continued to be strong through the high customer traffic and demands and our ability to execute and meet that demand, even though our customers have been affected for years now by high unemployment and generally difficult economic conditions.

As we’ve noted in the past, we feel that high consumer credit market has actually helped Aaron’s business, as customers in the past who would have qualified for credit at retail establishments are being constantly turned down for financing. People need good basic homes furnishings and they can obtain these goods as Aaron’s, with our very good product offerings, our service, our flexible payment plans and the fact there are no credit checks.

We anticipate that the current market conditions will continue to exist in the foreseeable future and if the past is any indication, we should have a continuing good environment for our business.

Now during my first six months as CEO, I have observed and worked with an outstanding team of associates. Aaron’s has a long tenured management team throughout the organization, who grew our customers in the market place and our business model is superior to others.

Our management team has been spending more time recently on business planning and the re-thinking of some of our support functions and exploring ways to do various tasks a little better, which over the long term will result in improved efficiencies and increased profitability for the company.

One thing we are concentrating on in 2012 is improving our management recruiting, our trading and retention. Our goal is to make Aaron’s one of the premier work places in America and to continue to attract outstanding Managers and Associates.

Most of you are probably aware that we did settle the sexual harassment lawsuit in the first quarter and brought back in income, some of the amount that had been accrued for in the second quarter 2011 for this litigation expense, and believe me, its good to have this distraction behind us.

Today the future looks bright for the company, there is plenty of expansion left opened in existing stores and in new ones and we are encouraged by the early returns of our HomeSmart stores. There is always room for improvement, but the company strategy and growth plans are not changing, there is certainly no reason to do so.

Charlie Loudermilk founded this company a remarkable 57 years ago, which has proven year-in and year-out to be exceptional in every way and I plan to continue to learn from Charlie and build on the legacy he has established and given our customers, our associates, our business partners and our shareholders. We again thank you for your support and interest in the company.

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