Good morning, everyone. We appreciate you joining us today.

Our total revenue for this recent quarter was $123 million, that's down 2.3% from the prior year. Some of this decrease was due to increased competition and some of that was self-imposed as we've not been satisfied with our customers success rates and held the tire line during the quarter for better deal structures.

The decrease in sales year-over-year was about 3 sales per month, per store. Jeff will go over that in a little more detail later, but that is obviously significant for us.

But we believe that, at this time, working to improve our overall customer success rates is the right thing to do. We were successful in improving the quality of the deals overall.

And as you would expect, it did have an impact on sales volumes. We brought down our average sales price by 1.8% to $9,785 in an effort to help ensure affordability for our customers.

And our average down payment percentage was 9.7% for the quarter, up significantly from 8.7%, and I cannot emphasize enough what a big deal this is for us and for our customers.

We are well aware of the impact of higher down payments on overall customer success, so we are extremely pleased with our results in this particular area. Obviously, we would've liked to see more sales for the quarter, but we were pleased with our improvements on our deals and feel like it was the right focus for this time.

For as long as we've been in business, we have had to make adjustments in this area, always looking for the right balance.

Overall, we would, of course, like to have seen better results for the year, but nevertheless, there were several very positive achievements for the year worth noting. We added 10 new locations, increased our active customer count by around 2,900, grew receivables by $16 million, we repurchased $13 million in stock, invested $3 million in GPS technology and invested over $1 million in our operational software; all this, and we actually paid down our debt by $2.5 million.

All in all, these accomplishments reflect that we are continuing on the right direction for our long-term plans, and we are extremely well-positioned and well-prepared for any pullback from the newer competition that we may see in the near future.

So I'll go ahead and turn it over to Jeff to give you more detail on the recent results, and then come back later with a few closing comments. So, Jeff?

Thanks, Hank. As Hank mentioned, total revenue for the quarter was right at $123 million.

Same-store revenues decreased 7.1%. Revenues from stores in the 10-plus category was down around 10%.

Stores in the 5- to 10-year category was down around 5%, partially offset by a 25% increase in revenues from our stores less than 5 years of age.

We continue to face some top line headwinds due to tough environment. We have a customer base under more stress, more hesitant on big-ticket items, together with the direct effects of ultralow interest rates that continue to attract excess capital directed at the same consumer.

Additionally, cars are built better and last longer. At the same time, our improved deal structure certainly had an effect on the top line, as Hank mentioned.

We've been losing too many good customers to competitors that are not always concerned with customers' ultimate success. And we'll continue to try to find the right sales and risk balance.

We know that we can execute better, and we're committed to pushing for improvements. Our continuing efforts to sell less expensive vehicles should help with our volume challenges as we move forward, but that does present some short-term challenges on the cost side, as we try to leverage our fixed cost structure.

We have significant room for volume increases if conditions move in our favor. As always, we will focus on basic transportation needs.

We'll continue to target flat to slightly decreasing overall sales prices in our efforts to keep our payments affordable, with rational term lengths, to increase customer success rates and further differentiate Car-Mart from the competition.

As Hank mentioned, our down payment percentage was 9.7% for the quarter, which was outstanding and will contribute to better credit results in the future. That 9.7% was equal to or better than any quarter we've seen in the last 6 years, so we're very proud of that.

Collections as a percentage of average finance receivables was basically flat at 17.5% compared to 17.6% last year. Our average initial contract term was down to 27.4 months compared to 27.7 months for the prior year quarter and flat sequentially.

We continue to work hard at keeping the term length down and customer equity up by getting higher down payments, offering special payment options during the term of the contract, including some tax-time payment options.

The weighted average contract term for the entire portfolio, including modifications, was 29.8 months, which was up from 29.5 months sequentially and up from 29.3 months at this time last year. The increases in total term, including modifications from the prior year, relate to our efforts to continue to work with more customers when they experience financial difficulties.

Additionally, a contributing factor to the overall term length increase is the fact that the weighted average age of the portfolio was 8.5 months at the end of the current quarter compared to 7.9 months at this time last year. For competitive reasons, our term lengths may continue to increase some into the future.

We stay committed to minimizing any increases.

The overall retail units sold per month per lot for the quarter was 26.9 compared to 29.4 for the prior year and compared to 27.7 sequentially. At quarter end, 42 or 31% of our dealerships were from 0 to 5 years old; 22 or 16% were from 5 to 10 years old, with the remaining 70 lots being 10 years old or older.

Our 10-year-plus lots produced 29.5 units sold per month per lot compared to 32.2 for the prior year quarter. This was an 8% decrease or about 2.5 units per month per dealership.

Our lots in the 5- to 10-year category produced 26.4 compared to 27.8, which was a 5% decrease. And our lots in the less-than-5-year category produced 22.4 compared to 24.2 for the fourth quarter of last year, a 7% decrease.

Productivity continues to be negatively affected by macro and competitive factors, as well as our efforts internally to find the right risk/customer success balance that's so important to our mission of earning repeat business by helping customers succeed. We will continue to focus on customer retention, earning repeat business and offering good-quality, lower-priced vehicles that are affordable under rational terms.

Our more mature dealerships have a deep pool of past and present -- past and current customers. We will continue to highlight the benefits of Car-Mart's excellent local, face-to-face offering to the market.

Interest income was up a little over $900,000 for the quarter, about 7.5%, due to the $27 million increase in finance receivables. The weighted average interest rate for all receivables was 14.9%, flat with this time last year.

For the quarter, our gross profit margin percentage was 41.6% of sales compared to 41.9% for last year. The decrease related to higher repair costs, lower margins on the Payment Protection Plan product and higher relative wholesale sales as a result of the higher credit losses, offset by improved margins on the service contract product and the benefit of pricing for the lower-priced cars, which carry a slightly higher gross profit percentage.

During fiscal 2014, we successfully piloted a $595, 12-month, 12,000-mile service contract product in about 15 of our locations. Based on the successful results of the pilot, especially the benefit to the customer, we began to offer this product company-wide earlier this month, in May, after the end of the quarter.

In Georgia, we do have a 9-month contract, and 2 of our discount auto locations will stay with the current 5-month, 5,500-mile contract. But all other lots have moved to a 12-month, 12,000-mile product for $595.

We think that's a great value for our customers.

We do expect the product to help more customers succeed and it is expected to have a slight positive effect on overall gross margins. We will continue to focus on minimizing repair costs.

However, in this competitive environment, it does put more pressure on discretionary repair expenses. Our goal is to balance affordability for our customers, with appropriate gross margin percentages to enhance customer success.

We expect gross margin percentages to remain generally in the current range over the near term.

For the quarter, SG&A as a percentage of sales increased to 17.9% compared to 17% for the prior year quarter, but down from 18.1% sequentially. The $348,000 increase in overall SG&A dollars compared to the prior year related primarily to higher payroll costs and other incremental costs related to the 10 new lot openings.

Additionally, we did incur around $300,000 in GPS expenses for the quarter and ended the quarter with a little over -- or a little less than 55% of our accounts having the products. Obviously, we have reduced expenses in most other areas to offset the above increases.

Reductions have come in many areas, and we are committed to keeping our operating costs just as low as possible. We are aggressively managing our expenses, and we continue to expect some SG&A leveraging in the future as we grow our revenues.

However, we will continue to invest in our infrastructure to support our growth.

The GPS effort is a long-term infrastructure investment that has resulted in some direct cost savings, but more importantly, is enhancing our operational efficiencies out in the field. Once again, when this project is completely rolled out, we expect the cost to be from $3 to $4 per account per month, and it's looking like it'll be much closer to the $3 as we work hard to squeeze out efficiencies in this effort.

For the current quarter, net charge-offs as a percentage of average finance receivables was 8.3%. This is up from 7.1% for the prior year quarter.

The increase for this quarter related mostly to a higher frequency of losses, again, pretty much across all age categories, about 90% of the increase related to frequency. But we also saw an increase in severity measured as a percentage of principal outstanding, which resulted, in part, from slightly lower wholesale values at repo and in the longer terms.

Our associates continue to do a good job of minimizing losses for those accounts that do default, but we did see a higher relative number of account losses due primarily to competitive pressures, both from the front-end sales side and a default point. We also think the prolonged negative macro factors for our customers are contributing to the higher losses.

Principal collections as a percentage of average finance receivables for the quarter was 17.5%, basically flat with the prior year quarter. The flat principal collected percentage between periods resulted from a negative effect of longer contract terms, together with more modifications, offset by the positive effect of lower delinquencies.

Tax time results were just okay, not as good as the prior year, which was expected, and one of the factors that we looked at in raising the reserve at the end of January. Ultra-aggressive competitive offerings dipped even lower and become even more appealing to customers during tax time, and we did anticipate that this year would be more challenging than in the past, and it was.

Overall credit losses were about 40 basis points higher due to the increased losses for the stores in the less-than-5-year-old category, about 30 basis points higher due to the increased losses for the stores in the 5- to 10-year category, and the remainder of the increase related to our stores that were over 10 years of age. As we look out, we do expect losses in the near term to be closer to historical levels.

Buying great cars, structuring deals that our customers can succeed and then earning repeat business by providing excellent service. The quality of the portfolio is good, and delinquencies are down significantly.

Our 30-plus category past due was down to 4.4% compared to 5.1% this time last year. We're especially pleased with the most recent deals for the fourth quarter where the structures were outstanding.

However, this is a risk business and taking chances on good, hard-working people is what we do. We'll continue to try to find the right balance between sales and customer success in this challenging environment.

As we said in the press release, we just finished what could be considered the most challenging year in our history. We know we can do better, and we do expect external conditions to improve at some point.

At the end of the year, our total debt was $97 million. We had $46 million in additional availability under our revolving credit facilities.

Our current debt-to-equity ratio was 45.6%, and our debt-to-finance receivables ratio was 25.6%. Both improved from the beginning of the year.

Our first priority will be to continue to grow the business in a healthy manner, and we will continue to keep an eye on the competitive landscape, and our future decisions on capital allocation will take this into account.

Now I'll turn it back over to Hank.

All right. Thanks, Jeff.

As I mentioned earlier, we opened 10 new stores this past year. We have 2 more lots that should be opening very soon as we begin this new year, and we do plan to continue to open new stores throughout this upcoming year.

However, at this time, we plan to be even more selective than typical, so new store openings will more likely be right at 8 for this upcoming year, a little less than the 10% new store pace we'd like to see if conditions were more favorable. We have seen a couple of our recent openings had record-setting starts.

So while we do learn from our mistakes, we also like to learn from our successes and do our best to repeat this and continue to assure great starts for our new locations.

Before we go on to your questions, I would like to take a minute, if I could, to recognize Bill Sams, as he will be retiring from our board this year. Bill has been a director with us for the past 9 years and will certainly be missed.

I would like to say, from myself and on behalf of all of us, Bill, we thank you for your confidence in us and believing in us throughout our ups and downs, and we thank you for your years of service as a director. You have helped us navigate these past several years and continue to grow our company the right way, and your contributions are greatly appreciated.

That concludes our prepared remarks. And now, we would like to move on to your questions.

Operator?

I was a little surprised to hear that the average duration increased. Kind of -- by the wording in the press release, it seemed like you guys were taking steps to be more proactive and improving the ability of customers to actually complete the transaction.

So I'm curious, if it's not duration, what are you changing that you think is better for the consumer and why you're seeing sales decline, if it's not duration?

The terms, John, were actually down. The originating terms were actually down, so the terms were shorter and the down payments were higher.

So both of those factors are going to be big positives for performance down the road. The one-term amount that is up is the entire portfolio, including modifications.

So because our portfolio overall was more seasoned, it's quite a bit older this year than last. We had a few more modifications in that overall pool, which is part of the reason the terms are up, including modifications.

Okay. Did you give out the originating term?

Yes, we did.

You did. Okay.

Okay, I'll look that up. And then, as far as capital goes, have you guys looked at all about doing an ABS deal on paying a dividend or buying back more stock?

Obviously, the business is flowing, so I think there's more capital available for you guys to move around a bit.

Well, we're always looking at different options, and the ABS market is something that we do look at periodically and, certainly, with our very healthy balance sheet, gives us a lot of flexibility.

Jeff and Hank, in your opening remarks and in your press release, you talk about the competition not sharing the same view of customer success in terms of seeing them through to the end of the contract, and that, that's pushing up your default rate. I can see how that would push up your competitors' default rate; how does that push up your default rate?

Well, obviously, a lot of our folks have been with us a long time. And with the aggressive deals that are offered out there right now, we're seeing some deals on some lower-end new cars or some higher-end used cars, either case, they're above what we sell.

Some of the offerings are 0% down, no payments for 90 days. We've even seen no payments for a year, and then those are getting financed at 72 months, sometimes even longer.

So it's a long time before they reach that equity point. And just knowing our customer base, this is not a good situation for them, we don't feel like.

And so, they are attracted sometimes to drop what they have and go to a new car dealer. And I think we actually talked about this on the last call and tell it like it is.

We've actually had occasions where we've had to go pick up our car at a new car dealership, where the new car dealer just said "Oh, you can just leave it here, and we'll put you in this." So we know that's a bad situation.

Okay. So that's -- there's been no letup in that situation then, it sounds like?

No, it was actually worse recently because people, in a lot of cases, people did have some money in hand so they could put down a down payment somewhere. And again, in a lot of the cases, there was a 0 down and they could just keep their money.

Keep in mind, some of these customers had special payments due to us. That's one of the ways we keep their regular payments down throughout the year.

We have some seasonal payments that we structure. In some cases, they thought, well, we can go over here and get this car for 0 down and not even make a special payment over here at Car-Mart and go spend this money on something else.

And so, it did cost us some losses.

And as a reminder, about 95% of our customers get a $4,500 tax check in the first few weeks of February. So they really, at that point, have some ability to go find some decent financing somewhere else.

And they've been aggressively marketed to default, which causes our issues on that side.

So in light of that, how are you able to increase your down payment, by as great amount as you did this quarter?

Well, unfortunately, we had to pass up on some sales, and that's one of the reasons our sales were down somewhat. We actually had pretty good traffic.

Again, we stay very, very focused on our repeat business and cultivating new customers through our existing customer base. So we had the traffic there, but we just -- we were holding out for some better deals.

We'd seen losses go up. We knew that it would cost us a bit.

But in our -- we're certainly not just looking for short-term rewards, we're focused on long term, and this is the right move for us.

Okay. And then last question regarding SG&A.

Jeff, did I hear you say that you expected to get some SG&A leverage going forward this year?

Yes. We don't have specific timing on that, but we certainly feel like the structure we have and certainly, we're going to be able to get some leverage at some point in the future.

It's a little harder to pinpoint exactly what quarter that might happen. But we're committed to staying as lean as we can on the expense side and get some leveraging at some point.

Is it safe to assume that we're not going to see that until same-store sales get back into positive territory?

That would certainly help.

Seth Basham with Wedbush. I'm just trying to better understand the competitive environment out there right now.

You talk about the competitors being very aggressive, more aggressive now than they had been over the last year or 2. I'm trying to understand what changes that environment When do losses rise so much that competitors start to tighten terms and take some of the pressure off you guys?

Well, we would like to know that, too. And I think Jeff even alluded to that in his earlier remarks.

We've seen this cycle before, but I will have to say, correct me if I misstate here, but I think the cycle's already endured longer than what we've seen before. By this time, we would've already seen the pullback.

So I can't really tell you for sure the mechanism exactly that's going to cause it to pull back, but we know from experience it typically does. And maybe it is that it's reduced, but there'll be some left behind that's going to stay there for quite some time that may be a reality.

But really, I don't know when it's going to let up.

Yes. And then, the securitization market is hot as ever.

I think April may have been one of the best months ever for ABS securitizations at even lower yield spreads. So we're not sure what it's going to take.

But in the interim, we're going to try to do everything we can to reduce expenses and sell good deals to good people.

What are the signposts you're looking for in the environment to understand whether or not it changes?

Well, certainly, the securitization market itself would be an indication that things may be moving in the right direction. Interest rate increases would certainly help us in a big way.

Higher default rates on the pools of loans that are out there. Decreasing wholesale values is certainly going to increase severity of losses out there for other folks, and any combination of those things would be positives for us.

And I'd add, too, just internally, I think where would feel it, we're not really experiencing this everywhere. We have to add, we do have a handful of towns where we don't seem to feel this pressure so much.

But as it happens, where we've felt the pressure the most is in some of our larger areas where we do have several of our larger stores. So that's why it has impacted our sales to the level it has.

So I think that we would see a pickup pretty quickly on our sales in some of these bigger stores, and a couple of particular markets if it started to pull back.

Okay. That's helpful.

And lastly, just thinking about what you're doing with loan modifications. Have you changed your processes such that you're offering more modifications, and how do you expect that to play out going forward?

We haven't really changed our process there. It's typical that this time of year we have more, and I think we have a little more.

It seems like a handful more people actually didn't get their tax refund. We saw a little bit more of that.

And so our modifications were up somewhat recently, but it is seasonal, too. We do see more of it during this time of year.

Hank, last quarter, we talked on the conference call about comparable terms in the marketplace, right? And you were saying that your customers leasing or buying a similar vehicle from independent dealers, they were seeing loan terms of up to 48 months.

Is that still the case? Has that changed?

I'm just curious, from the customer standpoint, how big the duration difference is between coming to Car-Mart to get a car and going to any of the thousands of used car dealerships that are around everywhere?

Well, I will tell you, and as I just mentioned, some of our stores where we're seeing the greatest pressure are in some of our larger areas and actually from those guys, what we've been hearing the past few months is that their main competition is not necessarily just the other used car dealers, but it is new cars stores dipping down, not just with the new cars, but also what would, compared to us, would be the higher-end used cars. But we've heard quite a bit lately of terms as high as 72 months, so it's a significant difference.

I mean, 72 months is material, especially when you're dealing with even high-end used cars and whether or not you're keeping the mechanical life of that car.

Yes, yes.

Yes.

I mean, obviously, I think you have very little -- I would think you have very little appetite to sign a loan beyond the useful life of a vehicle. I would think that the frequency of default on that is close to 100%.

Right.

Yes.

That's the main measure we use. We don't want to put somebody in a car for a term that's longer than that asset is going to last.

We want to them to have a real asset at the end of the term.

Okay. Well, we thank everyone for joining us today.

And obviously, we'll be talking to you after our next quarter and hope we'll have some good news for you then. So we will get back to work, and you guys have a great rest of the day.

Thank you.