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America's CarMart Inc (CRMT) filed Quarterly Report for the period ended 2011-07-31.
America's Carmart Inc has a market cap of $300.1 million; its shares were traded at around $29.37 with a P/E ratio of 11 and P/S ratio of 0.8. America's Carmart Inc had an annual average earning growth of 23.9% over the past 10 years.
This is the annual revenues and earnings per share of CRMT over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of CRMT.
Highlight of Business Operations:
Car-Mart has been operating since 1981. Car-Mart has grown its revenues between 3% and 21% per year over the last ten fiscal years (average 14%). Growth results from same dealership revenue growth and the addition of new dealerships. Revenue increased 9.9% for the first three months of fiscal 2012 compared to the same period of fiscal 2011 due primarily to a 6.7% increase in retail units sold, a 2.2% increase in average retail sales price, 15.2% increase in interest income and a $670,000 increase in wholesale sales.
The Company s primary focus is on collections. Each dealership is responsible for its own collections with supervisory involvement of the corporate office. Over the last five full fiscal years, the Company s credit losses as a percentage of sales have ranged between approximately 20.2% in fiscal 2010 and 29.1% in fiscal 2007 (average of 22.7%). Credit losses in fiscal 2007 (29.1%) were higher than the Company s average over the last five years. Credit losses were higher due to several factors and included higher losses experienced in most of the dealerships, including mature dealerships, as the Company saw weakness in the performance of its portfolio as customers had difficulty making payments under the terms of their contracts. Additionally, the Company s rapid growth put stress on its infrastructure, leading to operational difficulties resulting in higher losses. Credit losses in fiscal 2008 returned to a more historical level at 22% of sales as the Company continued to focus on its operational initiatives, including credit and collections efforts. In fiscal 2009, the Company saw the benefit of continuing operational improvements despite negative macro-economic factors and experienced a reduction in credit losses to 21.5% of sales. Improvements in credit losses continued into fiscal 2010 and fiscal 2011 as the provision for credit losses were 20.2% and 20.8% of sales, respectively. While the first three months of fiscal 2012 experienced higher credit losses of 20.5% of sales compared to 19.5% of sales for the prior year period, the first quarter of 2012 credit losses were favorable by historical comparison and at the low end of the acceptable range.
The Company s gross margins as a percentage of sales have been fairly consistent from year to year. Over the last five full fiscal years, the Company s gross margins as a percentage of sales have ranged between approximately 42% and 44%. Gross margin as a percentage of sales for fiscal 2011 was 42.7%. The Company s gross margins are based upon the cost of the vehicle purchased, with lower-priced vehicles typically having higher gross margin percentages. In recent years, the Company s gross margins have been negatively affected by the increase in the average retail sales price (a function of a higher purchase price) and higher operating costs, mostly related to increased vehicle repair costs and higher fuel costs. Additionally, the percentage of wholesale sales to retail sales, which relate for the most part to repossessed vehicles sold at or near cost, can have a significant effect on overall gross margin percentages. The negative effect from wholesale sales was higher in fiscal 2007 and during the first quarter of fiscal 2008 due to the increased level of repossession activity coupled with relatively flat retail sales levels. Higher retail sales levels and lower repossessions activity during the latter part of fiscal 2008 and for fiscal 2009 helped to bring gross margin percentages back up. Gross margin percentages in fiscal 2010 and fiscal 2011 benefitted from higher retail sales levels and from a strong wholesale market for repossessed vehicles due to overall used vehicle supply shortages. The Company expects that its gross margin percentage will not change significantly in the near term from its current level (generally in the 43% range) but will continue to see significant pressure based on increases in the costs of vehicles purchased.
Cost of sales as a percentage of sales increased 0.9% to 57.1% for the three months ended July 31, 2011 from 56.2% in the same period of the prior fiscal year. The increase from the prior year period relates primarily to higher wholesale sales which resulted from increased credit losses, an increase in the average purchase price of vehicles and higher service contract expenditures. Wholesale sales are for the most part sales of repossessed vehicles or trade-ins at break-even. The Company will continue to focus efforts on holding down purchase costs and expects to see gross margin percentages generally hold in the 43% range over the near term. Top line sales levels in relation to wholesale volumes, resulting from credit loss experience, can have a significant effect on gross margin percentages.
Provision for credit losses as a percentage of sales increased to 20.5% for the three months ended July 31, 2011 compared to 19.5% for the three months ended July 31, 2010. Although the provision for the first quarter of fiscal 2012 was higher than the first quarter of fiscal 2011, the percentage was at the low end of our acceptable range and favorable when compared to historical standards. The Company continues to push for improvements and better execution of its collection practices. However, the extended negative macro-economic issues continue to put pressure on our customers and the resulting collections of our finance receivables. The Company has made considerable investment in the corporate infrastructure within the collection area which is continuing to have a positive effect on results by providing more oversight and providing more accountability on a consistent basis. The Company believes that the proper execution of its business practices is the single most important determinate of credit loss experience.
Interest expense (excluding the non-cash charge related to the change in fair value of the Company s interest rate swap agreement for the three months ended July 31, 2011) as a percentage of sales decreased to 0.5% for the three months ended July 31, 2011 compared to 0.9% for the three months ended July 31, 2010. Higher average borrowings during the three months ended July 31, 2011 ($53.8 million compared to $41.5 million in the prior year) were offset by lower interest rates on the Company s variable rate debt.
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