America's Car-Mart Reports Second Quarter Results
BENTONVILLE, Ark., Dec. 7, 2006 -- America's Car-Mart, Inc. today announced its operating results for the second fiscal quarter ended October 31, 2006.
Highlights of second quarter operating results:
* Revenue growth of 7.6%
* Interest income growth of 23.6%
* Loss of $.16 per diluted share including a $.28 per diluted share
charge to increase the allowance for loan losses
* Retail unit sales decrease of 3.3%
* Same store revenue growth of 1.4%
For the three months ended October 31, 2006, revenues increased 7.6% to $59.5 million compared with $55.3 million in the same period of the prior year. The $1.9 million loss ($.16 per diluted share) for the current quarter compares to a $2.8 million income ($.23 per diluted share) for the same period in the prior year. Excluding the effect of the non-cash increase in the allowance for loan losses ($5.3 million pre-tax charge), the Company earned profits of $1.4 million ($.12 per diluted share) during the current quarter. Retail unit sales decreased 3.3% to 6,413 vehicles in the current quarter, compared to 6,635 in the same period last year.
Highlights of six month operating results:
* Revenue growth of 7.2%
* Interest income growth of 25.6%
* Earnings of $.19 per diluted share including a $.28 per diluted share
charge to increase the allowance for loan losses
* Retail unit sales decrease of 1.8%
* Same store revenue growth of 2%
For the six months ended October 31, 2006, revenues increased 7.2% to $121.7 million, compared with $113.5 million in the same period of the prior fiscal year. Income for the first six months of FY 2006 was $2.2 million ($.19 per diluted share) compared to $7.7 million ($.64 per diluted share) for the same period in the prior year. Excluding the effect of the non-cash increase in the allowance for loan losses, the Company earned profits of $5.5 million ($.46 per diluted share) during the current quarter. Retail unit sales decreased 1.8% to 13,280 vehicles in the current period, compared to 13,520 vehicles in the same period last year.
"The Company has taken action to address our earnings shortfall and to enhance our long-term per share results," said T. J. ("Skip") Falgout, III, Chairman and Chief Executive Officer of America's Car Mart. "The focus of all our efforts is to increase the after-tax returns produced by the Company. In particular, we have focused on the following inter-related aspects of our business:
* Repeat business - Repeat customers are our lifeblood, and we are
committed to ensuring our customers' satisfaction with Car-Mart. There
is a significant positive correlation between the percentage of repeat
business and store level profitability, in addition to lower credit
losses. Our older, more established dealerships, primarily in
Arkansas, have the highest percentage of repeat customers (45% +). We
are devoting our resources and attention to building this base of
repeat business in all of our lots. It takes several years to build
repeat business at a new location. Within the last five years we have
opened 35 new dealerships and, although it will take time, we are
confident that these newer lots will eventually build and capitalize
on their repeat relationships. We are focused on helping our customers
get their vehicles paid for so that they will come back to us for
their vehicle needs time and time again. We have originated a program
to register with credit agencies, so we can help our customer
rehabilitate his or her credit through successful car payments with
us.
* Underwriting - In an effort to help our customers succeed, we are
aggressively adjusting our payment terms and underwriting practices to
more closely match the economic life of the vehicle and, at the same
time, maintain affordability for our customers. In order to promote
repeat business, our customers need to build equity in the vehicles
they buy. We are adjusting our underwriting to account for this, and
to help ensure that all of our customers are being set up for success
when they drive off one of our lots.
* Collections - The collection side of our business is as important as,
if not more so, than the underwriting side. We have re-directed and
re-vamped our training programs for our dealership level collection
staff. We will be focused on continuing collections education in an
effort to improve the performance of this critically important lot-
level function.
* Purchasing - The single most important factor in the success of our
customers is the mechanical dependability of the vehicle they purchase
from us. We recently hired a new Purchasing Director, and are making
strides in improving the quality of our vehicles. We will continue to
focus significant efforts on improving the mix and quality of the
vehicles we sell with emphasis on affordability.
* Sales - We are working with our lots to improve our merchandising,
promotions and sales efforts. We have also significantly increased and
upgraded our advertising to improve and expand lot traffic and to
attract our target customer."
"Our primary focus is to improve the long-term profitability at the store level for our Company by employing capital appropriately," said Mr. Falgout. "While we are confident in our long-range ability to continue opening stores, we believe that we need to allow our infrastructure time to catch up to our growth. As a result, we are curtailing our new store openings until our new initiatives have a chance to bear fruit, and we will continue to closely evaluate the results of our underperforming lots. Also, we will continue to push infrastructure upgrades to ensure we have the tools at hand to support our efforts."
"We believe we are doing the right things to ensure the long-term profitable growth of the Company. Car-Mart has had tremendous success over our 25-year history, and we are confident that these efforts will help us achieve our goals of profitably building America's leading buy-here, pay-here used car company," added Mr. Falgout.
The Company expects to be profitable for the remainder of its fiscal year which ends on April 30, 2007. However, the Company will not provide earnings guidance for the remainder of fiscal 2007 due to the preliminary nature of the operational initiatives underway. The Company's primary goal is to maximize long-term per share results, and management has determined that issuing guidance at this point is inconsistent with this goal.
The Company has received a waiver from its lenders for the violation of a covenant under its revolving credit facilities. The violation related to exceeding certain thresholds for account losses and past due amounts.
Conference Call
Management will be holding a conference call on Thursday, December 7, 2006 at 11:00 a.m. Eastern time to discuss second quarter results. To participate, please dial (800) 309-9490. International callers dial (706) 634-0104. Callers should dial in approximately 10 minutes before the call begins. A conference call replay will be available one hour following the call for seven days and can be accessed by calling: (800) 642-1687 (U.S. Callers) or (706) 645-9291 (International Callers), conference ID 1814070.
About America's Car-Mart
America's Car-Mart operates 90 automotive dealerships in nine 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 http://www.car-mart.com/ .
Included herein are forward-looking statements, including statements with respect to projected revenues and earnings per share amounts. Such forward- looking statements are based upon management's current knowledge and assumptions. There are many factors that affect management's view about future revenues and earnings. 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, operational initiatives underway and economic conditions, and other risk factors described under "Forward-Looking Statements" of Item 1A of Part I of the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2006 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 Ended 2006 Three Months Ended
October 31, vs. October 31,
2006 2005 2005 2006 2005
Operating Data:
Retail units sold 6,413 6,635 (3.3)%
Average number of
stores in
operation 89.0 80.0 11.3
Average retail units
sold per store
per month 24.0 27.6 (13.0)
Average retail
sales price $7,957 $7,301 9.0
Same store revenue
growth 1.4% 5.9%
Period End Data:
Stores open 90 81 11.1%
Accounts over 30
days past due 5.4% 4.1%
Finance
Receivables,
gross $189,620 $167,455 13.2%
Operating Statement:
Revenues:
Sales $53,669 $50,581 6.1% 100.0% 100.0%
Interest
income 5,870 4,748 23.6 10.9 9.4
Total 59,539 55,329 7.6 110.9 109.4
Costs and expenses:
Cost of sales 31,140 28,114 10.8 58.0 55.6
Selling, general
and
administrative 10,446 9,610 8.7 19.5 19.0
Provision for
credit losses 19,848 12,459(a) 59.3 37.0 24.6
Interest expense 927 567 63.5 1.7 1.1
Depreciation and
amortization 239 130 83.8 0.4 0.3
Total 62,600 50,880 23.0 116.6 100.6
Income
before
taxes (3,061) 4,449 (5.7) 8.8
Provision for
income taxes (1,133) 1,650 (2.1) 3.3
Net income
(loss) $(1,928) $2,799 (3.6) 5.5
Earnings (loss)
per share:
Basic $(0.16) $0.24
Diluted $(0.16) $0.23
Weighted average
number of
shares
outstanding:
Basic 11,844,101 11,855,982
Diluted 11,844,101 12,030,908
(a) The 2006 amount includes a non-cash charge of $5,271,000 related to
an increase in the allowance for credit losses to 22% from 19.2% at
October 31, 2006.
America's Car-Mart, Inc.
Consolidated Results of Operations
(Operating Statement Dollars in Thousands)
% Change As a % of Sales
Six Months Ended 2006 Six Months Ended
October 31, vs. October 31,
2006 2005 2005 2006 2005
Operating Data:
Retail units sold 13,280 13,520 (1.8)%
Average number of
stores in
operation 88.0 79.5 10.7
Average retail
units sold per
store per month 25.2 28.4 (11.3)
Average retail
sales price $7,934 $7,390 7.4
Same store revenue
growth 2.0% 8.1%
Period End Data:
Stores open 90 81 11.1 %
Accounts over 30
days past due 5.4% 4.1%
Finance
Receivables,
gross $189,620 $167,455 13.2 %
Operating Statement:
Revenues:
Sales $110,007 $104,177 5.6 % 100.0% 100.0%
Interest
income 11,723 9,331 25.6 10.7 9.0
Total 121,730 113,508 7.2 110.7 109.0
Costs and expenses:
Cost of sales 62,476 57,375 8.9 56.8 55.1
Selling, general
and
administrative 20,916 18,941 10.4 19.0 18.2
Provision for
credit losses 32,504 23,660(a) 37.4 29.5 22.7
Interest expense 1,829 1,045 75.0 1.7 1.0
Depreciation and
amortization 470 278 69.1 0.4 0.3
Total 118,195 101,299 16.7 107.4 97.2
Income
before
taxes 3,535 12,209 3.2 11.7
Provision for
income taxes 1,308 4,522 1.2 4.3
Net income $2,227 $7,687 2.0 7.4
Earnings per share:
Basic $0.19 $0.65
Diluted $0.19 $0.64
Weighted average
number of shares
outstanding:
Basic 11,847,449 11,850,609
Diluted 11,969,592 12,035,926
(a) The 2006 amount includes a non-cash charge of $5,271,000 related to
an increase in the allowance for credit losses to 22% from 19.2% at
October 31, 2006.
America's Car-Mart, Inc.
Consolidated Balance Sheet and Other Data
October 31, April 30,
2006 2006
Cash and cash equivalents $ 37,851 $ 254,824
Finance receivables, net $147,511,910 $149,379,024
Total assets $180,983,436 $177,613,203
Total debt $48,933,554 $43,588,443
Stockholders' equity $121,778,214 $119,251,431
Shares outstanding 11,852,875 11,848,024
Finance receivables:
Principal balance $189,620,212 $185,243,207
Allowance for credit losses (42,108,302) (35,864,183)
Finance receivables, net $147,511,910 $149,379,024
Allowance as % of principal
balance 22.21% (a) 19.36% (a)
(a) Represents the weighted average for Finance Receivables generated by
the Company (at 22.0% and 19.2%) and purchased Finance Receivables.
Changes in allowance for credit
losses:
Six Months Ended October 31,
2006 2005
Balance at beginning of period $35,864,183 $29,251,244
Provision for credit losses 32,503,516 23,660,177
Charge-offs, net of collateral
recovered (26,402,844) (20,761,415)
Allowance related to purchased
accounts 143,447 ---
Balance at end of year $42,108,302 $32,150,006