America's Car-Mart Reports Third Quarter Results
BENTONVILLE, Ark., March 7 -- America's Car-Mart, Inc. today announced its operating results for the third fiscal quarter ended January 31, 2007.
Highlights of third quarter operating results:
* Revenue growth of 1.8%
* Interest income growth of 17.5%
* Loss of $50,000 (less than $.01 per diluted share)
* Retail unit sales decrease of 11.7%
* Same store revenue decrease of 5.3%
* Accounts over 30 days past due down to 3.8% compared to 4.7% in prior
year
* Accounts receivable, net, of $144 million as of January 31, 2007, as
compared to $142 million as of January 31, 2006. Total provision for
loan losses of $16.3 million, or 30.6%, for the three months ended
January 31, 2007, as compared to total provision for loan losses of
$10.9 million, or 20.6%, for the three months ended January 31, 2006.
For the three months ended January 31, 2007, revenues increased 1.8% to $59.3 million compared with $58.2 million in the same period of the prior year. The $50,000 loss for the current quarter compares to $4.5 million income ($.37 per diluted share) for the same period in the prior year. Retail unit sales decreased 11.7% to 6,002 vehicles in the current quarter, compared to 6,799 in the same period last year. Accounts over 30 days past due decreased to 3.8% compared to 4.7% at January 31, 2006 and compared to 5.4% at October 31, 2006 (the end of the Company's second fiscal quarter).
Highlights of nine month operating results:
* Revenue growth of 5.4%
* Interest income growth of 22.8%
* Earnings of $.18 per diluted share including a $.28 per diluted share
charge to increase the allowance for loan losses at October 31, 2006.
* Retail unit sales decrease of 5.1%
* Same store revenue decrease of .5%
* Total provision for loan losses of $48.8 million, or 29.9%, for the
nine months ended January 31, 2007, as compared to total provision for
loan losses of $34.6 million, or 22%, for the nine months ended
January 31, 2006.
For the nine months ended January 31, 2007, revenues increased 5.4% to $181 million, compared with $171.8 million in the same period of the prior fiscal year. Income for the first nine months of FY 2007 was $2.2 million ($.18 per diluted share) compared to $12.2 million ($1.01 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 nine month period. The Company's Allowance for Loan Losses is 22% of Finance Receivables at January 31, 2007, compared to 19.2% at January 31, 2006. The increased percentage equates to approximately $5.2 million in non-cash additions to the allowance to cover future credit losses. Retail unit sales decreased 5.1% to 19,282 vehicles in the current period, compared to 20,319 vehicles in the same period last year.
"As we discussed after our second quarter, the Company has taken action to enhance our long-term per share results," said T. J. ("Skip") Falgout, III, Chairman and Chief Executive Officer of America's Car Mart. "Our bottom line results for the third quarter were in line with where we expected to be at this point. The goal of all our efforts and operational initiatives continues to be to increase the after-tax returns produced by the Company. Due to the nature of our business it takes time for the initiatives to show up in bottom line profits, but we are convinced we are moving in the right direction and are very encouraged by our progress in the following areas thus far:
* Underwriting -- In an effort to help our customers succeed, we have
aggressively adjusted 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. We have also placed
tighter underwriting restrictions on newer dealerships and those
dealerships that have experienced higher than expected credit losses.
Additionally, we are making progress in extracting and using our
internal customer data to develop predictive criteria to be used in
the underwriting process. This underwriting and credit analysis will
be a continuous, long-term process which should help our dealership
managers to make better credit decisions on the front end. Further,
we have set realistic sales goals for our dealerships in order to
strive for quality customers and not just sales numbers. Our goal is
to underwrite as much profitable business as we can, as opposed to
generating sales volume without regard for our ability to collect. We
have seen initial success with these efforts and are encouraged by
early results.
* Collections -- We have completed the training and retraining of
substantially all of our collection staff and, in the process, we are
updating our collections training and increasing the staffing for this
critical function. Also, we now have two collections specialists in
place to assist lots that may be having difficulties with collections,
and these specialists have been successful in improving collections at
lots where they have worked. The efforts on the collection side of our
business are showing up in the reduction in accounts over 30 days past
due. Our quarter-end accounts over 30 days past due were at 3.8%, and
February and March past due percentages continue the positive trend.
* Purchasing -- Although inventory supply tends to be tighter and more
costly at this time of year, we have been successful in acquiring
adequate inventory. The improvements we have made in this area, both
in terms of human resources and information systems, as well as in our
ability to get vehicles where they need to be for sale, has allowed us
to significantly reduce the "extra" inventory we historically had on
hand. This efficiency will not only reduce our interest costs related
to inventory, but will also allow us to get the right vehicles where
they need to be sooner. In addition, we are more closely evaluating
our repossessed vehicles and including more of these units in our
retail inventory if they are mechanically sound and cosmetically
acceptable. We believe that over time we have an opportunity to
improve the way in which we buy cars.
* Training -- We have restructured our Associate Development department,
increased its staffing, and are in the process of updating and
improving our training courses and materials for all of our critical
job functions. We have especially bolstered our manager-in-training
staff and curriculum to better train and equip our future management
candidates for success. Training across all aspects of the Company's
business is critical to our future, and we have invested, and will
continue to invest, the appropriate resources in this over time.
* Sales -- Although our overall sales levels have decreased slightly
through tighter underwriting standards, we are working to attract a
better customer through our increased advertising efforts and our
focus on quality sales. During the third quarter we aired newly
produced television and radio commercials focused on the "Car-Mart"
brand, highlighting our long term history of providing superior
vehicles and great customer service. We will continue to air similar
commercials through the rest of the fourth quarter. Additionally, our
recently promoted internal sales specialist is making a significant
impact at those stores that were underperforming on the sales side.
We will continue all of these efforts to focus on the "better
customer", even if in the near term this results in slower sales
growth."
"While we have a high degree of confidence in the various initiatives we have not only put into place, but also continue to enhance, the nature of our business is such that success can only be proven over time. To be certain, the dramatic reduction in the accounts over 30 days past due, and the continuation of this trend into February, is encouraging. Having said that, we will err on the side of caution from a sales perspective until we have produced more evidence that our collection and underwriting efforts are producing the results that we expect," said Mr. Falgout.
"As we have previously stated, our primary focus is to improve the long- term profitability at the store level for our Company by employing capital appropriately," said Mr. Falgout. "By addressing the basics of our business, we believe we have the ability to significantly increase our overall profitability by improving the operational effectiveness of our existing store base. In addition to our over 35 or so "newer" stores that are building their core of repeat customers, we see tremendous upside for profit growth in our more mature stores by virtue of the initiatives we have underway. Once we feel comfortable with the success of these initiatives, we would expect to resume our new store growth."
"We are extremely encouraged by the initial progress on all of our operational initiatives. We expect to continue to gain traction in our fourth quarter and we have seen positive results in February and into March, over and above what we would normally expect during the tax refund season. Down- payments for retail sales in February were up and delinquencies were down even further, which are indications of the progress of the efforts underway." said Hank Henderson, President of America's Car Mart. "As we have said, we will continue to focus on customer service and on cultivating our repeat customer base. This will be accomplished both formally, via the operational initiatives, and informally as we capitalize on the great spirit and culture created over the past 25 years at Car-Mart. We are going back to the basics and focusing all of our day-to-day efforts on attracting the best customers and providing them the best service. By doing the right things to earn the repeat business of our customers, we are confident solid financial results will follow," added Mr. Henderson.
As previously announced, the Company expects to be profitable for the fourth quarter 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 is inconsistent with this goal.
Conference Call
Management will be holding a conference call on Wednesday, March 7, 2007 at 4:00 p.m. Eastern time to discuss third 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 9927407.
About America's Car-Mart
America's Car-Mart operates 91 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 Balance Sheet and Other Data
(Dollars in Thousands)
January 31, April 30,
2007 2006
Cash and cash equivalents $304 $255
Finance receivables, net $144,034 $149,379
Total assets $175,494 $177,613
Total debt $43,324 $43,588
Stockholders' equity $121,572 $119,251
Shares outstanding 11,852,875 11,848,024
Finance receivables:
Principal balance $185,144 $185,243
Allowance for credit losses (41,110) (35,864)
Finance receivables, net $144,034 $149,379
Allowance as % of principal balance 22.20% 19.36%
(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:
Nine Months Ended
January 31,
2007 2006
Balance at beginning of year $35,864 $29,251
Provision for credit losses 48,846 34,596
Net charge-offs (43,804) (30,065)
Allowance related to purchased
accounts 204 ---
Balance at end of period $41,110 $33,782
America's Car-Mart, Inc.
Consolidated Results of Operations
(Operating Statements Dollars in Thousands)
% Change As a % of Sales
Three Months Ended 2007 Three Months Ended
January 31, vs. January 31,
2007 2006 2006 2007 2006
Operating Data:
Retail units sold 6,002 6,799 (11.7)%
Average number of
stores in operation 90.0 81.3 10.7
Average retail units
sold per store
per month 22.2 27.9 (20.3)
Average retail sales
price $8,293 $7,507 10.5
Same store revenue
growth -5.3% 16.7%
Period End Data:
Stores open 91 84 8.3%
Accounts over 30 days
past due 3.8% 4.7%
Finance Receivables,
gross $185,144 $175,979 5.2%
Operating Statement:
Revenues:
Sales $53,376 $53,200 0.3% 100.0% 100.0%
Interest income 5,932 5,048 17.5 11.1 9.5
Total 59,308 58,248 1.8 111.1 109.5
Costs and expenses:
Cost of sales 31,289 29,636 5.6 58.6 55.7
Selling, general
and administrative 10,489 9,769 7.4 19.7 18.4
Provision for credit
losses 16,342 10,936 49.4 30.6 20.6
Interest expense 1,027 691 48.6 1.9 1.3
Depreciation and
amortization 254 151 68.2 0.5 0.3
Total 59,401 51,183 16.1 111.3 96.2
Income before taxes (93) 7,065 (0.2) 13.3
Provision for income taxes (43) 2,601 (0.1) 4.9
Net income $(50) $4,464 (0.1) 8.4
Earnings per share:
Basic $--- $0.38
Diluted $--- $0.37
Weighted average
number of shares
outstanding:
Basic 11,852,875 11,864,475
Diluted 11,852,875 12,011,480
America's Car-Mart, Inc.
Consolidated Results of Operations
(Operating Statements Dollars in Thousands)
% Change As a % of Sales
Nine Months Ended 2007 Nine Months Ended
January 31, vs. January 31,
2007 2006 2006 2007 2006
Operating Data:
Retail units sold 19,282 20,319 (5.1)%
Average number of
stores in operation 88.7 79.8 11.2
Average retail units
sold per store
per month 24.2 28.3 (14.6)
Average retail sales
price $8,046 $7,429 8.3
Same store revenue
growth -0.5% 10.7%
Period End Data:
Stores open 91 84 8.3%
Accounts over 30 days
past due 3.8% 4.7%
Finance Receivables,
gross $185,144 $175,979 5.2%
Operating Statement:
Revenues:
Sales $163,383 $157,377 3.8% 100.0% 100.0%
Interest income 17,655 14,379 22.8 10.8 9.1
Total 181,038 171,756 5.4 110.8 109.1
Costs and expenses:
Cost of sales 93,765 87,011 7.8 57.4 55.3
Selling, general
and administrative 31,405 28,709 9.4 19.2 18.2
Provision for credit
losses 48,846 34,596 41.2 29.9 22.0
Interest expense 2,855 1,736 64.5 1.7 1.1
Depreciation and
amortization 725 429 69.0 0.4 0.3
Total 177,596 152,481 16.5 108.7 96.9
Income before taxes 3,442 19,275 2.1 12.2
Provision for income
taxes 1,265 7,123 0.8 4.5
Net income $2,177 $12,152 1.3 7.7
Earnings per share:
Basic $0.18 $1.03
Diluted $0.18 $1.01
Weighted average
number of shares
outstanding:
Basic 11,849,257 11,812,337
Diluted 11,958,615 11,984,883