America's Car-Mart Reports Third Quarter Earnings of $0.35 Per Share in Line With Revised Guidance
Company Reaffirms EPS Guidance of $1.92-$1.94 for Fiscal 2004
BENTONVILLE, Ark., March 2 -- America's Car-Mart, Inc. today announced its operating results for the third fiscal quarter and nine months ended January 31, 2004. The Company's results are segmented into continuing and discontinued operations.
Highlights of third quarter operating results (continuing operations):
-- Revenue growth of 9% over the prior year quarter
-- Income decline of 14% from the prior year quarter
-- Diluted EPS decline of 17% from the prior year quarter
-- Retail unit sales growth of 12% over the prior year quarter
For the three months ended January 31, 2004, revenues from continuing operations increased 9% to $41.9 million, compared with $38.3 million in the same period of the prior fiscal year. Income from continuing operations for the quarter decreased 14% to $2.8 million, or $0.35 per diluted share, versus $3.3 million, or $0.42 per diluted share, in the same period last year. Retail unit sales increased 12% to 5,936 vehicles in the current quarter, compared to 5,321 vehicles in the same period last year.
Highlights of nine month operating results (continuing operations):
-- Revenue growth of 14% over the prior year period
-- Income growth of 12% over the prior year period
-- Diluted EPS growth of 11% over the prior year period
-- Retail unit sales growth of 12% over the prior year period
For the nine months ended January 31, 2004, revenues from continuing operations increased 14% to $128.5 million, compared with $112.7 million in the same period of the prior fiscal year. Income from continuing operations for the first nine months of FY2004 increased 12% to $11.0 million, or $1.38 per diluted share, versus $9.8 million, or $1.25 per diluted share, in the same period last year. Retail unit sales increased 12% to 18,098 vehicles in the current period, compared to 16,130 vehicles in the same period last year.
"As previously announced, the decrease in earnings during the third quarter was principally the result of higher charge-offs and a related increase in our allowance for credit losses, and slightly lower sales than expected," said T. J. ("Skip") Falgout, III, the Company's Chief Executive Officer. "The higher level of charge-offs was largely attributable to a change in Company policy with respect to the number of accounts over 30 days past due we will allow our stores to carry. At January 31, 2004, the Company reduced the percentage of accounts over 30 days past due to 4.5%, representing an $800,000 reduction from the end of the second fiscal quarter. We expect to further reduce this percentage by April 30, 2004, which will cause credit losses to be higher in the fourth quarter than normal. We believe that by substantially reducing the number of accounts over 30 days past due (and in particular, accounts over 60 days past due) that our stores will be permitted to carry, our store managers and collection personnel will be motivated to address past due accounts on a timelier basis. This practice will increase the likelihood that a greater percentage of past due accounts can be "saved", rather than charged-off. Thus, in the long-run, we expect this policy change will have a positive impact on credit losses."
"We also believe that our decision ten months ago to purchase more lower- priced vehicles was a factor that contributed to an increase in our credit losses," stated Falgout. "On a percentage basis, lower-priced vehicles have higher gross margins, and are more 'affordable' for our customers. However, our historical credit loss data indicates that loans on our lower-priced vehicles have higher charge-off experience than loans on higher-priced vehicles. Selling lower-priced vehicles also has a negative impact on revenue and same store revenue growth. For the first nine months of last fiscal year, our average retail sales price increased by 4.2%, which was a factor in our same store revenue growth of 15.0% for the period. For the first nine months of this fiscal year, our average retail sales price increased only .5%, which partially explains why same store revenue growth for the current period is only 10.8%. Because selling more lower-priced vehicles is conducive to higher credit loss experience and lower revenue growth, we have recently decided to substantially reduce the purchase and sale of lower-priced vehicles. We expect this decision will have a positive impact on credit losses and revenue growth in the future. Separately, in December 2003, as a result of improvements in our purchasing area, we made the decision to increase prices by about $200, or 3%, on most of the vehicles we sell."
"Revenue growth during the third quarter slowed because of a 3.2% decrease in our average retail sales price and a reduction in the number of new stores we opened this year," stated Hank Henderson, America's Car-Mart's President. "In the first nine months of last year, we had net store growth of eight units. This compares to net store growth in the first nine months of this year of four units. While we expect to meet our stated goal of opening six to eight stores this fiscal year, the timing of opening these stores has been much later in the year than we originally planned. Part of the delay can be attributed to the rather slow licensing process in the State of Texas and unanticipated construction delays. In Fiscal Year 2005, we plan to open eight stores, mostly in Texas and Missouri. We expect to get these stores open much earlier in the year, which will facilitate higher revenue growth."
Fiscal 2004 Earnings Guidance
The Company has reaffirmed its revised fiscal year 2004 earnings estimate from continuing operations. Accordingly, the Company projects that it will earn $1.92 to $1.94 per diluted share from continuing operations in FY2004 as follows:
Period Period Ending Diluted EPS 1st Quarter 7-31-03 $ .55 (actual) 2nd Quarter 10-31-03 .48 (actual) 3rd Quarter 1-31-04 .35 (actual) 4th Quarter 4-30-04 .54 to .56 (projected) Fiscal 2004 4-30-04 $1.92 to 1.94 (projected) Conference Call
Management will be holding a conference call on Tuesday, March 2, 2004 at 11:00 a.m. Eastern time to discuss third quarter results. To participate, please dial 800-803-5662 (international callers dial 706-643-1542). Callers should dial in approximately 10 minutes before the call begins. The conference call can also be accessed on www.vcall.com . A conference call replay will be available one hour following the call for seven days and can be accessed by calling: 800-642-1687 (domestic) or 706-645-6291 (international), conference ID# 5524344.
About America's Car-Mart
America's Car-Mart operates 68 automotive dealerships in seven states and is the largest publicly held automotive retailer in the United States focused exclusively on the "Buy Here/Pay Here" segment of the used car market. The Company operates its dealerships primarily in small cities throughout the South-Central United States selling quality used vehicles and providing financing for substantially all of its customers. For more information on America's Car-Mart, please visit our website at www.car-mart.com .
Included herein are forward-looking statements, including statements with respect to projected earnings per share amounts, delinquency percentages and store openings. Such forward-looking statements are based upon management's current knowledge and assumptions. There are many factors that affect management's view about future earnings, delinquency percentages and store openings. These factors involve risks and uncertainties that could cause actual results to differ materially from management's present view. These factors include, without limitation, assumptions relating to unit sales, average selling prices, credit losses, gross margins, operating expenses, collection results, available real estate and economic conditions, and other risk factors described under "Forward-Looking Statements" of Item 1 of Part I of the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2003 and its current and quarterly reports filed with or furnished to the Securities and Exchange Commission. All forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company does not undertake any obligation to update forward-looking statements.
America's Car-Mart, Inc.
Consolidated Results of Operations
(Operating Statement Dollars in Thousands)
% Change As a % of Sales
Three Months Three Months
Ended 2004 Ended
January 31, vs. January 31,
2004 2003 2003 2004 2003
Operating Data:
Retail units sold 5,936 5,321 11.6%
Average number of
stores in operation 67.3 62.0 8.5
Average retail units
sold per store per month 29.4 28.6 2.8
Average retail sales
price $6,300 $6,506 (3.2)
Same store revenue growth 5.9% 17.1%
Period End Data:
Stores open 68 63 7.9%
Accounts over 30 days
past due 4.5% 5.2%
Operating Statement:
Revenues:
Sales $38,643 $35,730 8.2% 100.0% 100.0%
Interest income 3,210 2,569 25.0 8.3 7.2
Total 41,853 38,299 9.3 108.3 107.2
Costs and expenses:
Cost of sales 19,882 19,012 4.6 51.5 53.2
Selling, general
and administrative 7,387 7,012 5.3 19.1 19.6
Provision for credit
losses 9,765 6,621 47.5 25.3 18.5
Interest expense 295 361 (18.3) 0.8 1.0
Depreciation and
amortization 71 74 (4.1) 0.2 0.2
Total 37,400 33,080 13.1 96.8 92.6
Income from
continuing
operations before
taxes 4,453 5,219 (14.7) 11.5 14.6
Provision for income
taxes 1,643 1,935 (15.1) 4.3 5.4
Income from
continuing
operations 2,810 3,284 (14.4) 7.3 9.2
Discontinued operations:
Income from discontinued
operations, after taxes
Gain on sale of
discontinued operation,
after taxes
Income from
discontinued
operations --- ---
Net income $2,810 $3,284 (14.4)%
Basic earnings per share:
Continuing operations $0.37 $0.47 (21.6)%
Discontinued operations --- ---
Total $0.37 $0.47
Diluted earnings per share:
Continuing operations $0.35 $0.42 (16.6)%
Discontinued operations --- ---
Total $0.35 $0.42
Weighted average number
of shares outstanding:
Basic 7,634,222 6,996,036
Diluted 7,994,430 7,794,090
America's Car-Mart, Inc.
Consolidated Results of Operations
(Operating Statement Dollars in Thousands)
As a % of Sales
Nine Months % Change Nine Months
Ended 2004 Ended
January 31, vs. January 31,
2004 2003 2003 2004 2003
Operating Data:
Retail units sold 18,098 16,130 12.2%
Average number of stores
in operation 66.2 60.5 9.5
Average retail units sold
per store per month 30.4 29.6 2.4
Average retail sales
price $6,363 $6,334 0.5
Same store revenue growth 10.8% 15.0%
Period End Data:
Stores open 68 63 7.9%
Accounts over 30 days
past due 4.5% 5.2%
Operating Statement:
Revenues:
Sales $119,160 $105,477 13.0% 100.0% 100.0%
Interest income 9,318 7,197 29.5 7.8 6.8
Total 128,478 112,674 14.0 107.8 106.8
Costs and expenses:
Cost of sales 62,014 55,828 11.1 52.0 52.9
Selling, general and
administrative 21,823 20,199 8.0 18.3 19.2
Provision for credit
losses 26,047 19,415 34.2 21.9 18.4
Interest expense 915 1,366 (33.0) 0.8 1.3
Depreciation and
amortization 231 210 10.0 0.2 0.2
Total 111,030 97,018 14.4 93.2 92.0
Income from
continuing
operations
before taxes 17,448 15,656 11.4 14.6 14.8
Provision for
income taxes 6,444 5,835 10.4 5.4 5.5
Income from
continuing
operations 11,004 9,821 12.0 9.2 9.3
Discontinued operations:
Income from discontinued
operations, after taxes 165 375
Loss on sale of
discontinued operation,
after taxes 131
Income from
discontinued
operations 165 506
Net income $11,169 $10,327 8.2%
Basic earnings per share:
Continuing operations $1.47 $1.41 4.7%
Discontinued operations 0.02 0.07
Total $1.49 $1.48
Diluted earnings per share:
Continuing operations $1.38 $1.25 10.6%
Discontinued operations 0.02 0.07
Total $1.40 $1.32
Weighted average number
of shares outstanding:
Basic 7,480,518 6,987,118
Diluted 7,951,513 7,846,605
America's Car-Mart, Inc.
Consolidated Balance Sheet and Other Data
January 31, April 30,
2004 2003
Cash and cash equivalents $ 1,177,712 $ 783,786
Finance receivables, net $ 100,279,489 $ 91,358,935
Total assets $ 112,295,583 $ 101,840,582
Revolving credit facility $ 23,913,131 $ 25,968,220
Stockholders' equity $ 79,980,794 $ 65,960,873
Shares outstanding 7,705,241 7,207,963
Book value per share $ 10.38 $ 9.15
Finance receivables:
Principal balance $ 124,339,106 $ 111,754,030
Allowance for credit losses (24,059,617) (20,395,095)
Finance receivables, net $ 100,279,489 $ 91,358,935
Allowance as % of principal balance 19.35% 18.25%
Changes in allowance for credit losses:
Nine Months Ended
January 31,
2004 2003
Balance at beginning of year $ 20,395,095 $ 17,042,609
Provision for credit losses 26,046,851 19,415,277
Net charge-offs (22,382,329) (16,942,359)
Balance at end of period $ 24,059,617 $ 19,515,527