2017 Annual Report
To Our Fellow Shareholders:
Thank you, our fellow shareholders, for your continu-
rule in today’s world but we feel strongly that we are in
ing support. America’s Car-Mart is a great company
a unique position to benefit from changes in the land-
and as we move forward, we are working hard to make
scape. The relationships we have with our customers
it even better. We strive to live our Mission, Vision and
form the core of our existence and we are getting back
Values every day in everything we do, and our associ-
to the basics with our service levels. Our customers
ates share in our common purpose by their commit-
need our help and we will be there when they encoun-
ment to helping our customers succeed.
ter challenges. Everything we stand for is reflected in
how our customers and the communities we serve per-
Our Mission—We strive to earn the repeat business
ceive our Company. We believe that one can only
of our customers by providing quality vehicles, afford-
serve our customers at the levels they deserve by having
able payment terms, and excellent service.
an authentic, caring presence in the community.
Our Vision—To be the most respected Integrated
Auto Sales and Finance organization in the country.
We believe that we are well positioned to leverage
the infrastructure investments we have made, and con-
tinue to make in our efforts to increase long-term
Our Values—Integrity, Respect, Compassion and
value. As you know, we spent the last few years build-
Excellence.
ing an infrastructure to compete at a much higher level.
These investments have come with many disruptions
There is tremendous demand for the service we
and distractions but we always focus on the long-term
offer to the communities we serve. Today, as in most
and we will be much stronger in the future because of
industries, our customers expect a higher level of ser-
these efforts. We rolled out our new operational soft-
vice and we are fully committed to consistently exceed-
ware, installed GPS technology, established credit
ing their expectations. The face-to-face nature of our
reporting to reward our customers, centralized a num-
business is certainly more of an exception than the
ber of non-core administrative functions and built out a
Significant Top-Line Growth
$600
$500
$400
$300
$200
$100
0
$588
$568
$530
$489
$465
1 . 3 %
$379
$430
7
1
0
2
–
2
0
0
2
C A G R : 1
$339
$299
$275
$234
$240
$205
$176
$155
$127
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Significant Growth–Active Customers
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
66,803
0 1 7
2
0
–
2
0
2
C A G R : 7. 6 %
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
compliance management system to allow us to confi-
much higher level from the corporate side as we try to
dently move forward and take care of our customers in
shorten the learning curve and help improve results
a new regulatory environment. In addition, we have also
right out of the gate but, at the end of the day, nothing
made significant investments in the areas of General
compares to managing a dealership and even experi-
Manager Recruitment, Training and Advance ment as
encing a few failures along the way.
well as Collections Support. We have made these
Currently, we have several newer GMs who are in
investments in the face of the most intense competitive
the process of “seasoning.” We are supporting them,
environment in the Company’s history which is a testa-
and they are learning and making progress, but they
ment to our commitment and belief in the purpose of
will need some time to develop. We are pleased with
our work and the positive difference we make. We
their progress and we are excited to see where they go
believe that for the most part, the infrastructure related
in the next several years. We believe that they have a
distractions are behind us; we are laser focused on
lot of potential, and we are excited to encourage, chal-
blocking and tackling in all areas of the business.
lenge and support them as they grow. It should be
We have known for our entire 36-year history that
noted that even though competition has been fierce in
the key to our future success is the ability to attract,
recent years, we have several dealerships, managed
train and retain quality General Managers to run our
by experienced GMs, that have had some of the best
dealerships. We operate in a decentralized manner,
results ever, including credit results. We know it can be
which allows our GMs the ability to personalize our
done and we know that the business model is strong.
service and adjust quickly to local competitive chal-
We believe we are in good locations in good towns,
lenges. Our GMs must have the ability to make key
and as our GM’s grow with experience, customer suc-
business decisions resulting from daily face-to-face
cess and our profitability will improve in step.
interactions with our customers. It takes some time
We do plan to open new dealerships in the future
for new GMs to fully develop the skills necessary to
and the timing will be driven by our ability to develop a
maximize operational and financial success at their
bench of properly trained, quality people who are
dealerships. Today, we are supporting new GMs at a
“ready for the keys” to a dealership. We believe these
Self-Funded Growth
Gross AR
Debt
Debt/Receivables
$500
$450
43.3%
$400
$350
$300
$250
$200
$150
$100
$92
$50
$40
$467
$437
$417
$379
$363
$317
23.5%
22.9%
$231
$282
27.4%
$261
24.6%
25.6%
24.6%
24.7%
25.3%
19.1%
$208
$185
$179
$152
19.4%
23.3%
17.5%
$129
$112
16.8%
14.8%
12.9%
$100
$97
$103
$108
$118
$78
$26
$23
$29
$44
$41
$40
$30
$39
$48
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0
people are out there. In the meantime, as mentioned,
our revolving credit facilities. We are in a great finan-
we have great potential to increase our bottom line by
cial position which will allow us to take advantage of
improving results from our existing locations. We
market opportunities and to repurchase shares oppor-
believe that this business is just too hard, and we add
tunistically. Since 2010, we have repurchased 41% of
too much value to not eventually be somewhere closer
our outstanding shares for $155 million at a price per
to a 10% return on assets. We realize that the industry
share of $32. We are very proud of how we manage
has changed and we know that we have a lot of work
our business and we will keep pushing for cash flows
to do to get there, but we have several dealerships that
and operational efficiencies.
are doing better than that currently. We are prepared to
We would like to thank our customers for supporting
outwork the competition as we serve our customers at
our efforts, our associates for always focusing on our
the very highest levels.
customers and you, our fellow shareholders for your
During the year, we grew Finance Receivables by
continuing support. We believe we are in a good place
$29.6 million, bought back $20.5 million of common
and our future is bright.
stock at an average price of $30.75 per share and had
$1.6 million in net capital expenditures. This $51.7 mil-
lion total investment was funded with only a $10 million
increase in debt. Our cash-on-cash returns continue to
be very attractive and our balance sheet is strong. It
is important to note that over the last several years
our income statements have been affected by the
increased contract terms, the higher loan loss reserve
percentage, the deferral of revenue with our two
add-on products as well as the increase in interest
rates on our installment sales contracts, all of which
William H. (“Hank”) Henderson
Chief Executive Officer
push income out into future periods. At the end of the
Jeffrey A. Williams
year, we had $79 million in additional availability under
President and Chief Financial Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:95)(cid:95)(cid:3)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2017
OR
(cid:134)(cid:3)TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14939
AMERICA’S CAR-MART, INC.
(Exact name of registrant as specified in its charter)
Texas
(State or other jurisdiction of incorporation or organization)
802 Southeast Plaza Avenue, Suite 200
Bentonville, Arkansas
(Address of principal executive offices)
63-0851141
(IRS Employer Identification No)
72712
(Zip Code)
(479) 464-9944
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of exchange of which registered
Common Stock, $.01 par value
NASDAQ Global Select Market
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:134)(cid:3) No (cid:95)(cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:134)(cid:3) No (cid:95)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (cid:95) No (cid:134)(cid:3)(cid:3)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes (cid:95) No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (cid:134)(cid:3)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
company” in Rule 12b-2 of the Exchange Act. (Check one):
(cid:134)(cid:3)Large accelerated filer (cid:3) Accelerated filer (cid:95)(cid:3)
(cid:134) Non-accelerated filer
Smaller reporting company (cid:134) Emerging growth company (cid:134) (cid:3)(cid:3)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:133)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:134)(cid:3) No (cid:95)(cid:3)(cid:3)
The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates on October 31, 2016 was $320,114,285
(7,836,335 shares), based on the closing price of the registrant’s common stock on October 30, 2016 of $40.85.
There were 7,548,969 shares of the registrant’s common stock outstanding as of June 8, 2017.
Portions of the registrant’s Proxy Statement to be furnished to stockholders in connection with its 2017 Annual Meeting of Stockholders are
incorporated by reference in response to Part III of this report.
DOCUMENTS INCORPORATED BY REFERENCE
Forward-Looking Statements
PART I
This Annual Report on Form 10-K and the documents incorporated by reference in this Annual Report on
Form 10-K contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements address the Company’s future objectives, plans and goals, as well
as the Company’s intent, beliefs and current expectations regarding future operating performance, and can generally
be identified by words such as “may”, “will”, “should”, “could”, “believe”, “expect”, “anticipate”, “intend”, “plan”,
“foresee” and other similar words or phrases. Specific events addressed by these forward-looking statements
include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
new dealership openings;
performance of new dealerships;
same dealership revenue growth;
future revenue growth;
receivables growth as related to revenue growth;
gross margin percentages;
interest rates;
future credit losses;
the Company’s collection results, including but not limited to collections during income tax refund
periods;
seasonality;
security breaches, cyber-attacks, or fraudulent activity;
compliance with tax regulations;
the Company’s business and growth strategies;
financing the majority of growth from profits; and
having adequate liquidity to satisfy the Company’s capital needs.
These forward-looking statements are based on the Company’s current estimates and assumptions and
involve various risks and uncertainties. As a result, you are cautioned that these forward-looking statements are not
guarantees of future performance, and that actual results could differ materially from those projected in these
forward-looking statements. Factors that may cause actual results to differ materially from the Company’s
projections include those risks described elsewhere in this report, as well as:
•
•
•
•
•
•
•
the availability of credit facilities to support the Company’s business;
the Company’s ability to underwrite and collect its contracts effectively;
competition;
dependence on existing management;
availability of quality vehicles at prices that will be affordable to customers;
changes in consumer finance laws or regulations, including but not limited to rules and regulations
that have recently been enacted or could be enacted by federal and state governments; and
general economic conditions in the markets in which the Company operates, including but not limited
to fluctuations in gas prices, grocery prices and employment levels.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the dates on which they are made.
2
Item 1. Business
Business and Organization
America’s Car-Mart, Inc., a Texas corporation initially formed in 1981 (the “Company”), is one of the
largest publicly held automotive retailers in the United States focused exclusively on the “Integrated Auto Sales
and Finance” segment of the used car market. References to the “Company” include the Company’s consolidated
subsidiaries. The Company’s operations are principally conducted through its two operating subsidiaries,
America’s Car Mart, Inc., an Arkansas corporation (“Car-Mart of Arkansas”), and Colonial Auto Finance, Inc., an
Arkansas corporation (“Colonial”). Collectively, Car-Mart of Arkansas and Colonial are referred to herein as “Car-
Mart.” The Company primarily sells older model used vehicles and provides financing for substantially all of its
customers. Many of the Company’s customers have limited financial resources and would not qualify for
conventional financing as a result of limited credit histories or past credit problems. As of April 30, 2017, the
Company operated 140 dealerships located primarily in small cities throughout the South-Central United States.
Business Strategy
In general, it is the Company’s objective to continue to expand its business using the same business model
that has been developed and used by Car-Mart for over 35 years. This business strategy focuses on:
Collecting Customer Accounts. Collecting customer accounts is perhaps the single most important aspect
of operating an Integrated Auto Sales and Finance used car business and is a focal point for dealership level and
corporate office personnel on a daily basis. The Company measures and monitors the collection results of its
dealerships using internally developed delinquency and account loss standards. Substantially all associate incentive
compensation is tied directly or indirectly to collection results. During fiscal 2017, the Company added a key
position in the collections area, with support staff, to work with field operators to improve credit results. This team
is developing tools to give management better visibility toward efficiencies and the effectiveness of account
representatives as they work to improve customer success rates. Over the last five fiscal years, the Company’s
annual credit losses as a percentage of sales have ranged from a low of 23.1% in fiscal 2013 to a high of 28.7% in
fiscal 2017 (average of 26.6%). See Item 1A. Risk Factors for further discussion.
Maintaining a Decentralized Operation. The Company’s dealerships will continue to operate on a
decentralized basis. Each dealership is ultimately responsible for buying and selling its own vehicles, making credit
decisions and collecting the contracts it originates in accordance with established policies and procedures. Most
customers make their payments in person at one of the Company’s dealerships. This decentralized structure is
complemented by the oversight and involvement of corporate office management and the maintenance of
centralized financial controls, including monitoring proprietary credit scoring, establishing standards for down-
payments and contract terms, and an internal compliance function.
Expanding Through Controlled Organic Growth. The Company plans to continue to expand its
operations by increasing revenues at existing dealerships and opening new dealerships. The Company will continue
to view organic growth as its primary source for growth. The Company continues to make significant infrastructure
investments in order to improve performance of existing dealerships and to support growth of its dealership count.
The Company ended fiscal 2017 with 140 locations, a decrease of three locations over the prior year-end, but the
Company does intend to add new dealerships selectively in what it considers to be good, solid communities, subject
to favorable operating performance and available general manager talent to run these dealerships. These plans, of
course, are subject to change based on both internal and external factors.
Selling Basic Transportation. The Company will continue to focus on selling basic and affordable
transportation to its customers. The Company’s average retail sales price was $10,540 per unit in fiscal 2017. By
selling vehicles at this price point, the Company is able to keep the terms of its installment sales contracts relatively
short (overall portfolio weighted average of 32.5 months), while requiring relatively low payments.
3
Operating in Smaller Communities. The majority of the Company’s dealerships are located in cities and
towns with a population of 50,000 or less. The Company believes that by operating in smaller communities it
experiences better collection results. Further, the Company believes that operating costs, such as salaries, rent and
advertising, are lower in smaller communities than in major metropolitan areas.
Enhanced Management Talent and Experience. It has been the Company’s practice to try to hire honest
and hardworking individuals to fill entry level positions, nurture and develop these associates, and attempt to fill
the vast majority of its managerial positions from within the Company. By promoting from within, the Company
believes it is able to train its associates in the Car-Mart way of doing business, maintain the Company’s unique
culture and develop the loyalty of its associates by providing opportunity for advancement. The Company has
recently focused, however, to a larger extent on looking outside of the Company for associates possessing requisite
skills and who share the values and appreciate the unique culture the Company has developed over the years. The
Company has been able to attract quality individuals via its General Manager Recruitment and Advancement team
as well as other key areas such as Human Resources, Purchasing, Collections, Information Technology, Legal,
Compliance and Portfolio Analysis. Management has determined that it will be increasingly difficult to grow the
Company without looking for outside talent. The Company’s operating success, as well as the challenging macro-
economic environment, has positively affected recruitment of outside talent in recent years, and the Company
currently expects this trend to continue.
Cultivating Customer Relationships. The Company believes that developing and maintaining a
relationship with its customers is critical to the success of the Company. A large percentage of sales at mature
dealerships are made to repeat customers, and the Company estimates an additional 10% to 15% of sales result from
customer referrals. By developing a personal relationship with its customers, the Company believes it is in a better
position to assist a customer, and the customer is more likely to cooperate with the Company should the customer
experience financial difficulty during the term of his or her installment contract. The Company is able to cultivate
these relationships as the majority of its customers make their payments in person at one of the Company’s
dealerships on a weekly or bi-weekly basis.
Business Strengths
The Company believes it possesses a number of strengths or advantages that distinguish it from most of its
competitors. These business strengths include:
Experienced and Motivated Management. The Company’s executive operating officers have significant
experience in the industry and an average tenure of over 15 years. Several of Car-Mart’s dealership managers have
been with the Company for more than 10 years. Each dealership manager is compensated, at least in part, based
upon the net income of his or her dealership. A significant portion of the compensation of senior management is
incentive based and tied to operating profits.
Proven Business Practices. The Company’s operations are highly structured. While dealerships are
operated on a decentralized basis, the Company has established policies, procedures and business practices for
virtually every aspect of a dealership’s operations. Detailed online operating manuals are available to assist the
dealership manager and office, sales and collections personnel in performing their daily tasks. As a result, each
dealership is operated in a uniform manner. Further, corporate office personnel monitor the dealerships’ operations
through weekly visits and a number of daily, weekly and monthly communications and reports.
Low Cost Operator. The Company has structured its dealership and corporate office operations to
minimize operating costs. The number of associates employed at the dealership level is dictated by the number of
active customer accounts each dealership services. Associate compensation is standardized for each dealership
position. Other operating costs are closely monitored and scrutinized. Technology is utilized to maximize
efficiency. The Company believes its operating costs as a percentage of revenues, and per unit sold, are among the
lowest in the industry.
4
Well-Capitalized / Limited External Capital Required for Growth. As of April 30, 2017, the
Company’s debt to equity ratio (Revolving credit facilities and notes payable divided by Total equity on the
Consolidated Balance Sheet) was 0.51 to 1.0, which the Company believes is lower than many of its competitors.
Further, the Company believes it can fund a significant amount of its planned growth from net income generated
from operations. Of the external capital that will be needed to fund growth, the Company plans to draw on its
existing credit facilities, or renewals or replacements of those facilities.
Significant Expansion Opportunities. The Company generally targets smaller communities in which to
locate its dealerships (i.e., populations from 20,000 to 50,000), but is also operating in larger cities such as Tulsa,
Oklahoma; Lexington, Kentucky; Springfield, Missouri and Little Rock, Arkansas. The Company believes there
are numerous suitable communities within the eleven states in which the Company currently operates and other
contiguous states to satisfy anticipated dealership growth for the next several years. As previously discussed, the
Company plans to continue to add new dealerships going forward depending upon operational success. Existing
dealerships will continue to be analyzed to ensure that they are producing desired results and have potential to
provide adequate returns on invested capital.
Operations
Operating Segment. Each dealership is an operating segment with its results regularly reviewed by the
Company’s chief operating decision maker in an effort to make decisions about resources to be allocated to the
segment and to assess its performance. Individual dealerships meet the aggregation criteria for reporting purposes
under the current accounting guidance. The Company operates in the Integrated Auto Sales and Finance segment
of the used car market. In this industry, the nature of the sale and the financing of the transaction, financing
processes, the type of customer and the methods used to distribute the Company’s products and services, including
the actual servicing of the contracts as well as the regulatory environment in which the Company operates, all have
similar characteristics. Each of our individual dealerships is similar in nature and only engages in the selling and
financing of used vehicles. All individual dealerships have similar operating characteristics. As such, individual
dealerships have been aggregated into one reportable segment.
Dealership Organization. Dealerships are operated on a decentralized basis. Each dealership is
responsible for buying and selling vehicles, making credit decisions, and servicing and collecting the installment
contracts it originates. Dealerships also maintain their own records and make daily deposits. Dealership-level
financial statements are prepared by the corporate office on a monthly basis. Depending on the number of active
customer accounts, a dealership may have as few as three or as many as 22 full-time associates employed at that
location. Associate positions at a large dealership may include a dealership manager, assistant dealership manager,
manager trainee, office manager, assistant office manager, service manager, purchasing agent, collections
personnel, salesmen and dealership attendants. Dealerships are generally open Monday through Saturday from 9:00
a.m. to 6:00 p.m. The Company has both regular and satellite dealerships. Satellite dealerships are similar to regular
dealerships, except that they tend to be smaller and sell fewer vehicles.
Dealership Locations and Facilities. Below is a summary of dealerships operating during the fiscal
years ended April 30, 2017, 2016 and 2015:
Dealerships at beginning of year
New dealerships opened/acquired
Dealerships closed
Dealerships at end of year
Years Ended April 30,
2016
141
6
(4)
143
2015
134
7
-
141
2017
143
-
(3)
140
5
Below is a summary of dealership locations by state as of April 30, 2017, 2016 and 2015:
Dealerships by State
Arkansas
Oklahoma
Missouri
Alabama
Texas
Kentucky
Georgia
Tennessee
Mississippi
Indiana
Iowa
Total
2017
36
25
19
15
12
11
9
6
5
1
1
140
As of April 30,
2016
37
25
19
15
12
12
10
6
5
1
1
143
2015
38
26
18
15
14
12
6
6
5
1
0
141
Dealerships are typically located in smaller communities. As of April 30, 2017, approximately 76% of the
Company’s dealerships were located in cities with populations of less than 50,000. Dealerships are located on
leased or owned property between one and three acres in size. When opening a new dealership, the Company will
typically use an existing structure on the property to conduct business, or purchase a modular facility while business
at the new location develops. Dealership facilities typically range in size from 1,500 to 5,000 square feet.
Purchasing. The Company purchases vehicles primarily from wholesalers, new car dealers, individuals
and auctions. The majority of vehicle purchasing is performed by the Company’s purchasing agents, although
dealership managers are authorized to purchase vehicles as needed. A purchasing agent will purchase vehicles for
one to three dealerships depending on the size of the dealerships. Purchasing agents report to the dealership
manager, or managers, for whom they make purchases, and to a regional purchasing director. The regional
purchasing directors report to the regional vice presidents of operations. The Company centrally monitors the
quantity and quality of vehicles purchased and continuously compares the cost of vehicles purchased to outside
valuation sources and holds responsible parties accountable for results.
Generally, the Company’s purchasing agents purchase vehicles generally between 6 and 12 years of age
with 90,000 to 140,000 miles, and pay between $3,000 and $10,000 per vehicle. The Company focuses on providing
basic transportation to its customers. The Company generally does not purchase sports cars or luxury cars. Some
of the more popular vehicles the Company sells include the Chevrolet Impala, Chevrolet Malibu, Chrysler 300,
Ford Taurus, Ford Fusion, Dodge Ram Pickup, Ford Explorer and the Ford F-150 Pickup. The Company sells a
significant number of trucks and sport utility vehicles. The Company’s purchasing agents inspect and test-drive
almost every vehicle they purchase. Purchasing agents attempt to purchase vehicles that require little or no repair
as the Company has limited facilities to repair or recondition vehicles.
Selling, Marketing and Advertising. Dealerships generally maintain an inventory of 20 to 90 vehicles
depending on the size and maturity of the dealership and the time of the year. Inventory turns over approximately
9 to 10 times each year. Selling is done principally by the dealership manager, assistant manager, manager trainee
or sales associate. Sales associates are paid a commission for sales that they make in addition to an hourly wage.
Sales are made on an “as is” basis; however, customers are given an option to purchase a service contract which
covers certain vehicle components and assemblies. For covered components and assemblies, the Company
coordinates service with third party service centers with which the Company typically has previously negotiated
labor rates. The vast majority of the Company’s customers elect to purchase a service contract when purchasing a
vehicle. Additionally, the Company offers its customers to whom financing is extended a payment protection plan
product. This product contractually obligates the Company to cancel the remaining amount owed on a contract
6
where the vehicle has been totaled, as defined in the plan, or the vehicle has been stolen. This product is available
in most of the states in which the Company operates and the vast majority of financed customers elect to purchase
this product when purchasing a vehicle in those states.
The Company’s objective is to offer its customers basic transportation at a fair price and treat each customer
in such a manner as to earn his or her repeat business. The Company attempts to build a positive reputation in each
community where it operates and generate new business from such reputation as well as from customer referrals.
The Company estimates that approximately 10% to 15% of the Company’s sales result from customer referrals.
The Company recognizes repeat customers with silver, gold and platinum plaques representing the purchase of 5,
10 and 15 vehicles, respectively. These plaques are prominently displayed at the dealership where the vehicles
were purchased. For mature dealerships, a large percentage of sales are to repeat customers.
The Company primarily advertises using local newspapers, radio, television, internet and social media. In
addition, the Company periodically conducts promotional sales campaigns in order to increase sales. During fiscal
2017, the Company began working with an outside marketing firm to broaden the Company’s usage of digital and
social media channels as a part of its marketing strategy.
Underwriting and Finance. The Company provides financing to substantially all of its customers who
purchase a vehicle at one of its dealerships. The Company only provides financing to its customers for the purchase
of its vehicles, and the Company does not provide any type of financing to non-customers. The Company’s
installment sales contracts as of April 30, 2017 typically include down payments ranging from 0% to 17% (average
of 6%), terms ranging from 18 months to 42 months (average of 32.5 months), and a fixed annual interest rate of
15% or 16.5%, based on the Company’s contract interest rate as of the contract origination date (weighted average
of 15.9%). The Company increased its interest rate on all originating contracts to 16.5% from 15% in May 2016.
The Company requires that payments be made on a weekly, bi-weekly, semi-monthly or monthly basis,
scheduled to coincide with the day the customer is paid by his or her employer. Upon the customer and the Company
reaching a preliminary agreement as to financing terms, the Company obtains a credit application from the customer
which includes information regarding employment, residence and credit history, personal references and a detailed
budget itemizing the customer’s monthly income and expenses. Certain information is then verified by Company
personnel. After the verification process, the dealership manager makes the decision to accept, reject or modify
(perhaps obtain a greater down payment or suggest a lower priced vehicle) the proposed transaction. In general,
the dealership manager attempts to assess the stability and character of the applicant. The dealership manager who
makes the credit decision is ultimately responsible for collecting the contract, and his or her compensation is directly
related to the collection results of his or her dealership. The Company provides centralized support to the dealership
manager in the form of a proprietary credit scoring system used for monitoring and other supervisory assistance to
assist with the credit decision. Credit quality is monitored centrally by corporate office personnel on a daily, weekly
and monthly basis.
Collections. All of the Company’s retail installment contracts are serviced by Company personnel at the
dealership level. A majority of the Company’s customers make their payments in person at the dealership where
they purchased their vehicle; however, in an effort to make paying convenient for its customers, the Company offers
a variety of payment options. Customers can send their payments through the mail, set up ACH auto draft, make
mobile and online payments, and make payments at certain money service centers. Each dealership closely monitors
its customer accounts using the Company’s proprietary receivables and collections software that stratifies past due
accounts by the number of days past due. The vice presidents of operations and the area operations managers
routinely review and monitor the status of customer collections to ensure collection activities are conducted in
compliance with applicable policies and procedures. In addition, the Field Operations Officer oversees the
collections department and provides timely oversight and additional accountability on a consistent basis. The
Company also has a Director of Collection Services who assists with managing the Company’s servicing and
collections practices and provides additional monitoring and training and has a team dedicated to helping ensure
collection practices are being carried out efficiently and effectively, and is responsible for minimizing collections
7
staff turnover. The Company believes that the timely response to past due accounts is critical to its collections
success.
The Company has established standards with respect to the percentage of accounts one and two weeks past
due, 15 or more days past due and 30 or more days past due (delinquency standards), and the percentage of accounts
where the vehicle was repossessed or the account was charged off that month (account loss standard).
The Company works very hard to keep its delinquency percentages low and not to repossess vehicles.
Accounts three days late are contacted by telephone. Notes from each telephone contact are electronically
maintained in the Company’s computer system. In May 2017, the Company began implementing text messaging
notifications at select locations which allows customers to elect to receive payment reminders and late notices via
text message.
The Company attempts to resolve payment delinquencies amicably prior to repossessing a vehicle. If a
customer becomes severely delinquent in his or her payments, and management determines that timely collection
of future payments is not probable, the Company will take steps to repossess the vehicle. Periodically, the Company
enters into contract modifications with its customers to extend or modify the payment terms. The Company only
enters into a contract modification or extension if it believes such action will increase the amount of monies the
Company will ultimately realize on the customer’s account and will increase the likelihood of the customer being
able to pay off the vehicle contract. At the time of modification, the Company expects to collect amounts due
including accrued interest at the contractual interest rate for the period of delay. No other concessions are granted
to customers, beyond the extension of additional time, at the time of modification. Modifications are minor and are
made for pay day changes, minor vehicle repairs and other reasons. For those vehicles that are repossessed, the
majority are returned or surrendered by the customer on a voluntary basis. Other repossessions are performed by
Company personnel or third party repossession agents. Depending on the condition of a repossessed vehicle, it is
either resold on a retail basis through a Company dealership or sold for cash on a wholesale basis, primarily through
physical or online auctions.
New Dealership Openings. Senior management, with the assistance of the corporate office staff, will
make decisions with respect to the communities in which to locate a new dealership and the specific sites within
those communities. New dealerships have historically been located in the general proximity of existing dealerships
to facilitate the corporate office’s oversight of the Company’s dealerships. The Company intends to add new
dealerships selectively in what it considers to be good, solid communities, subject to favorable operating
performance of existing dealerships and availability of qualified managers. Due to the decline in operating results
during fiscal 2016 caused by the difficult competitive environment and elevated credit losses, the Company has
elected to defer additional dealership openings in order to focus on making operational improvements to ensure all
existing lots are performing at a high level. Management expects to return to expansion efforts in the future after
overall operating performance improves.
The Company’s approach with respect to new dealership openings has been one of gradual development.
The manager in charge of a new dealership is normally a recently promoted associate who was an assistant manager
at a larger dealership and in most cases participated in the formal manager-in-training program. The corporate
office provides significant resources and support with pre-opening and initial operations of new dealerships.
Historically, new dealerships have operated with a low level of inventory and personnel. As a result of the modest
staffing level, the new dealership manager performs a variety of duties (i.e., selling, collecting and administrative
tasks) during the early stages of his or her dealership’s operations. As the dealership develops and the customer
base grows, additional staff is hired.
Monthly sales levels at new dealerships are typically substantially less than sales levels at mature
dealerships. Over time, new dealerships gain recognition in their communities, and a combination of customer
referrals and repeat business generally facilitates sales growth. Historically, sales growth at new dealerships could
exceed 10% per year for a number of years, whereas mature dealerships typically experience annual sales growth
but at a lower percentage than new dealerships. Due to continual operational initiatives, the Company is able to
8
support higher sales levels, and recently the Company has raised its volume expectation level of new locations
somewhat as infrastructure improvements related to new dealership openings have improved.
New dealerships are generally provided with approximately $1.5 million to $2.5 million in capital from the
corporate office during the first few years of operation. These funds are used principally to fund receivables growth.
After this start-up period, new dealerships can typically begin generating positive cash flow, allowing for some
continuing growth in receivables without additional capital from the corporate office. As these dealerships become
cash flow positive, a decision is made by senior management to either increase the investment due to favorable
return rates on the invested capital, or to deploy capital elsewhere. This limitation of capital to new, as well as
existing, dealerships serves as an important operating discipline. Dealerships must be profitable in order to grow
and typically new dealerships are profitable within the first year of opening.
Corporate Office Oversight and Management. The corporate office, based in Bentonville, Arkansas,
consists of regional vice presidents, area operations managers, regional purchasing directors, a sales director, a field
operations officer, a director of collection services, a support operations officer, a director of audit and compliance
and compliance auditors, a director of human resources, a director of general manager recruitment and development,
associate and management development personnel, accounting and management information systems personnel,
administrative personnel and senior management. The corporate office monitors and oversees dealership
operations. The corporate office receives operating and financial information and reports on each dealership on a
daily, weekly and monthly basis. This information includes cash receipts and disbursements, inventory and
receivables levels and statistics, receivables aging and sales and account loss data. The corporate office uses this
information to compile Company-wide reports, plan dealership visits and prepare monthly financial statements.
Periodically, area operations managers, regional vice presidents, compliance auditors and senior
management visit the Company’s dealerships to inspect, review and comment on operations. The corporate office
assists in training new managers and other dealership level associates. Compliance auditors visit dealerships to
ensure policies and procedures are being followed and that the Company’s assets are being safe-guarded. In addition
to financial results, the corporate office uses delinquency and account loss standards and a point system to evaluate
a dealership’s performance. Also, bankrupt and legal action accounts and other accounts that have been written off
at dealerships are handled by the corporate office in an effort to allow dealership personnel time to focus on more
current accounts.
The Company’s dealership managers meet monthly on an area, regional or Company-wide basis. At these
meetings, corporate office personnel provide training and recognize achievements of dealership managers. Near
the end of every fiscal year, the respective area operations manager, regional vice president and senior management
conduct “projection” meetings with each dealership manager. At these meetings, the year’s results are reviewed
and ranked relative to other dealerships, and both quantitative and qualitative goals are established for the upcoming
year. The qualitative goals may focus on staff development, effective delegation, and leadership and organization
skills. Quantitatively, the Company establishes unit sales goals and profit goals based on invested capital and,
depending on the circumstances, may establish delinquency, account loss or expense goals.
The corporate office is also responsible for establishing policy, maintaining the Company’s management
information systems, conducting compliance audits, orchestrating new dealership openings and setting the strategic
direction for the Company.
Industry
Used Car Sales. The market for used car sales in the United States is significant. Used car retail sales
typically occur through franchised new car dealerships that sell used cars or independent used car dealerships. The
Company operates in the Integrated Auto Sales and Finance segment of the independent used car sales and finance
market. Integrated Auto Sales and Finance dealers sell and finance used cars to individuals with limited credit
histories or past credit problems. Integrated Auto Sales and Finance dealers typically offer their customers certain
advantages over more traditional financing sources, such as less restrictive underwriting guidelines, flexible
9
payment terms (including scheduling payments on a weekly or bi-weekly basis to coincide with a customer’s
payday), and the ability to make payments in person, an important feature to individuals who may not have a
checking account.
Used Car Financing. The used automobile financing industry is served by traditional lending sources such
as banks, savings and loans, and captive finance subsidiaries of automobile manufacturers, as well as by independent
finance companies and Integrated Auto Sales and Finance dealers. Many loans that flow through the more
traditional sources have historically ended up packaged in the securitization markets. Despite significant
opportunities, many of the traditional lending sources have not historically been consistent in providing financing
to individuals with limited credit histories or past credit problems. Management believes traditional lenders have
historically avoided this market because of its high credit risk and the associated collections efforts. Management
believes that there was constriction in the financing sources that existed for the deep sub-prime automobile market
after the financial crisis in 2008. Since the Company does not rely on securitizations as a financing source, it was
largely unaffected by the credit constrictions during the crisis and was able to continue to grow its revenue level
and receivable base. Beginning in 2012, funding for the deep subprime automobile market increased significantly.
Management attributes the increase to the ultra-low interest rate environment combined with the historical credit
performance of the used automobile financing market during and after the recession. Management expects the
availability of consumer credit within the automotive industry to continue to be higher over the near and mid-term
when compared to historical trends.
Competition
The used automotive retail industry is fragmented and highly competitive. The Company competes
principally with other independent Integrated Auto Sales and Finance dealers, as well as with (i) the used vehicle
retail operations of franchised automobile dealerships, (ii) independent used vehicle dealers, and (iii) individuals
who sell used vehicles in private transactions. The Company competes for both the purchase and resale of used
vehicles. The increased funding to the used automobile industry has led to increased competitive pressures which
have been the primary contributors to the Company’s decision in recent periods to allow longer term lengths and
slightly lower down payments in connection with our customer financing contracts, as well as to the higher charge-
off levels experienced by the Company in recent periods.
Management believes the principal competitive factors in the sale of its used vehicles include (i) the
availability of financing to consumers with limited credit histories or past credit problems, (ii) the breadth and
quality of vehicle selection, (iii) pricing, (iv) the convenience of a dealership’s location, (v) the option to purchase
a service contract and a payment protection plan, and (vi) customer service. Management believes that its
dealerships are not only competitive in each of these areas, but have some distinct advantages, specifically related
to the provision of strong customer service. The Company’s local face-to-face presence allows it to serve customers
at a higher level by forming strong personal relationships.
Seasonality
Historically, the Company’s third fiscal quarter (November through January) has been the slowest period
for vehicle sales. Conversely, the Company’s first and fourth fiscal quarters (May through July and February
through April) have historically been the busiest times for vehicle sales. Therefore, the Company generally realizes
a higher proportion of its revenue and operating profit during the first and fourth fiscal quarters. Tax refund
anticipation sales efforts during the Company’s third fiscal quarter have increased sales levels during the third fiscal
quarter in some past years; however, due to the timing of actual tax refund dollars in the Company’s markets, these
sales and collections have primarily occurred in the fourth quarter in each of the last five fiscal years. The Company
expects this pattern to continue in future years.
If conditions arise that impair vehicle sales during the first or fourth fiscal quarters, the adverse effect on
the Company’s revenues and operating results for the year could be disproportionately large.
10
Regulation and Licensing
The Company’s operations are subject to various federal, state and local laws, ordinances and regulations
pertaining to the sale and financing of vehicles. Under various state laws, the Company’s dealerships must obtain a
license in order to operate or relocate. These laws also regulate advertising and sales practices. The Company’s
financing activities are subject to federal laws such as truth-in-lending and equal credit opportunity laws and
regulations as well as state and local motor vehicle finance laws, installment finance laws, usury laws and other
installment sales laws. Among other things, these laws require that the Company limit or prescribe terms of the
contracts it originates, require specified disclosures to customers, restrict collections practices, limit the Company’s
right to repossess and sell collateral, and prohibit discrimination against customers on the basis of certain
characteristics including age, race, gender and marital status.
The Company’s consumer financing and collection activities are also subject to oversight by the federal
Consumer Financial Protection Bureau (“CFPB”), which has broad regulatory powers over consumer credit
products and services such as those offered by the Company. Under a CFPB rule adopted in 2015, the Company’s
finance subsidiary, Colonial, is deemed a “larger participant” in the automobile financing market and is therefore
subject to examination and supervision by the CFPB.
The states in which the Company operates impose limits on interest rates the Company can charge on its
installment contracts. These limits have generally been based on either (i) a specified margin above the federal
primary credit rate, (ii) the age of the vehicle, or (iii) a fixed rate. Management believes the Company is in
compliance in all material respects with all applicable federal, state and local laws, ordinances and regulations;
however, the adoption of additional laws, changes in the interpretation of existing laws, or the Company’s entrance
into jurisdictions with more stringent regulatory requirements could have a material adverse effect on the
Company’s used vehicle sales and finance business.
Employees
As of April 30, 2017, the Company, including its consolidated subsidiaries, employed approximately 1,460
full time associates. None of the Company's employees are covered by a collective bargaining agreement and the
Company believes that its relations with its employees are positive.
Available Information
The Company’s website is located at www.car-mart.com. The Company makes available on this website,
free of charge, access to its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and all amendments to those reports, as well as proxy statements and other information the Company files with,
or furnishes to, the Securities and Exchange Commission (“SEC”) as soon as reasonably practicable after the
Company electronically submits this material to the SEC. The information contained on the website or available
by hyperlink from the website is not incorporated into this Annual Report on Form 10-K or other documents the
Company files with, or furnishes to, the SEC.
Executive Officers of the Registrant
The following table provides information regarding the executive officers of the Company as of April 30,
2017:
Name
William H. Henderson……………..
Jeffrey A. Williams ……………….
Age
53
54
Position with the Company
Chief Executive Officer and Director
President, Chief Financial Officer, Secretary
and Director
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William H. Henderson has served as Chief Executive Officer of the Company since October 2007 and
served as President of the Company from May 2002 to March 2016. Mr. Henderson has also served as a director
of the Company since September 2002. From 1999 until May 2002, Mr. Henderson served as Chief Operating
Officer of Car-Mart. From 1992 through 1998, Mr. Henderson served as General Manager of Car-Mart. From
1987 to 1992, Mr. Henderson primarily held the positions of District Manager and Regional Manager at Car-Mart.
Jeffrey A. Williams has served as President of the Company since March 2016 and as Chief Financial
Officer and Secretary of the Company since October 2005. Mr. Williams has also served as a director of the
Company since August 2011. Mr. Williams is a Certified Public Accountant and prior to joining the Company, his
experience included approximately seven years in public accounting with Arthur Andersen & Co. and Coopers and
Lybrand LLC in Tulsa, Oklahoma and Dallas, Texas. His experience also includes approximately five years as
Chief Financial Officer and Vice President of Operations of Wynco, LLC, a nationwide distributor of animal health
products.
Item 1A. Risk Factors
The Company is subject to various risks. The following is a discussion of risks that could materially and
adversely affect the Company’s business, operating results, and financial condition.
The Company may have a higher risk of delinquency and default than traditional lenders because it finances its
sales of used vehicles to credit-impaired borrowers.
Substantially all of the Company’s automobile contracts involve financing to individuals with impaired or
limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders. Financing made to
borrowers who are restricted in their ability to obtain financing from traditional lenders generally entails a higher
risk of delinquency, default and repossession, and higher losses than financing made to borrowers with better credit.
Delinquency interrupts the flow of projected interest income and repayment of principal from a contract, and a
default can ultimately lead to a loss if the net realizable value of the automobile securing the contract is insufficient
to cover the principal and interest due on the contract or if the vehicle cannot be recovered. The Company’s
profitability depends, in part, upon its ability to properly evaluate the creditworthiness of non-prime borrowers and
efficiently service such contracts. Although the Company believes that its underwriting criteria and collection
methods enable it to manage the higher risks inherent in financing made to non-prime borrowers, no assurance can
be given that such criteria or methods will afford adequate protection against such risks. If the Company
experiences higher losses than anticipated, its financial condition, results of operations and business prospects could
be materially and adversely affected.
The Company’s allowance for credit losses may not be sufficient to cover actual credit losses, which could adversely
affect its financial condition and operating results.
When applicable, the Company has to recognize losses resulting from the inability of certain borrowers to
pay contracts and the insufficient realizable value of the collateral securing contracts. The Company maintains an
allowance for credit losses in an attempt to cover credit losses inherent in its contract portfolio. Additional credit
losses will likely occur in the future and may occur at a rate greater than the Company has experienced to date. The
allowance for credit losses is based primarily upon historical credit loss experience, with consideration given to
delinquency levels, collateral values, economic conditions and underwriting and collections practices. This
evaluation is inherently subjective as it requires estimates of material factors that may be susceptible to significant
change. If the Company’s assumptions and judgments prove to be incorrect, its current allowance may not be
sufficient and adjustments may be necessary to allow for different economic conditions or adverse developments
in its contract portfolio which could adversely affect the Company’s financial condition and results of operations.
12
A reduction in the availability or access to sources of inventory could adversely affect the Company’s business by
increasing the costs of vehicles purchased.
The Company acquires vehicles primarily through wholesalers, new car dealers, individuals and auctions.
There can be no assurance that sufficient inventory will continue to be available to the Company or will be available
at comparable costs. Any reduction in the availability of inventory or increases in the cost of vehicles could
adversely affect gross margin percentages as the Company focuses on keeping payments affordable to its customer
base. The Company could have to absorb cost increases. The overall new car sales volumes in the United States
decreased dramatically from peak sales years during the economic recession of 2008 and did not return back to pre-
recession levels until fiscal 2016. The reduction in new car sales had a significant negative effect on the supply of
vehicles at appropriate prices available to the Company in recent years. Any future decline in new car sales could
further adversely affect the Company’s access to and costs of inventory.
The used automotive retail industry is fragmented and highly competitive, which could result in increased costs to
the Company for vehicles and adverse price competition. Increased competition on the financing side of the business
could result in increased credit losses.
The Company competes principally with other independent Integrated Auto Sales and Finance dealers, and
with (i) the used vehicle retail operations of franchised automobile dealerships, (ii) independent used vehicle
dealers, and (iii) individuals who sell used vehicles in private transactions. The Company competes for both the
purchase and resale, which includes, in most cases, financing for the customer, of used vehicles. The Company’s
competitors may sell the same or similar makes of vehicles that Car-Mart offers in the same or similar markets at
competitive prices. Increased competition in the market, including new entrants to the market, could result in
increased wholesale costs for used vehicles and lower-than-expected vehicle sales and margins. Further, if any of
the Company’s competitors seek to gain or retain market share by reducing prices for used vehicles, the Company
would likely reduce its prices in order to remain competitive, which may result in a decrease in its sales and
profitability and require a change in its operating strategies. Increased competition on the financing side puts
pressure on contract structures and increases the risk for higher credit losses. More qualified applicants have more
financing options on the front-end, and if events adversely affecting the borrower occur after the sale, the increased
competition may tempt the borrower to default on their contract with the Company in favor of other financing
options, which in turn increases the likelihood of the Company not being able to save that account.
The used automotive retail industry operates in a highly regulated environment with significant attendant
compliance costs and penalties for non-compliance.
The used automotive retail industry is subject to a wide range of federal, state, and local laws and
regulations, such as local licensing requirements and laws regarding advertising, vehicle sales, financing, and
employment practices. Facilities and operations are also subject to federal, state, and local laws and regulations
relating to environmental protection and human health and safety. The violation of these laws and regulations could
result in administrative, civil, or criminal penalties against the Company or in a cease and desist order. As a result,
the Company has incurred, and will continue to incur, capital and operating expenditures, and other costs of
complying with these laws and regulations. Further, over the past several years, private plaintiffs and federal, state,
and local regulatory and law enforcement authorities have increased their scrutiny of advertising, sales and finance
activities in the sale of motor vehicles. Additionally, the Company’s finance subsidiary, Colonial, is deemed a
“larger participant” in the automobile finance market and is therefore subject to examination and supervision by the
CFPB, which has broad regulatory powers over consumer credit products and services such as those offered by the
Company.
Inclement weather can adversely impact the Company’s operating results.
The occurrence of weather events, such as rain, snow, wind, storms, hurricanes, or other natural disasters,
which adversely affect consumer traffic at the Company’s automotive dealerships, could negatively impact the
Company’s operating results.
13
Recent and future disruptions in domestic and global economic and market conditions could have adverse
consequences for the used automotive retail industry in the future and may have greater consequences for the non-
prime segment of the industry.
In the normal course of business, the used automotive retail industry is subject to changes in regional U.S.
economic conditions, including, but not limited to, interest rates, gasoline prices, inflation, personal discretionary
spending levels, and consumer sentiment about the economy in general. Recent and future disruptions in domestic
and global economic and market conditions could adversely affect consumer demand or increase the Company’s
costs, resulting in lower profitability for the Company. Due to the Company’s focus on non-prime customers, its
actual rate of delinquencies, repossessions and credit losses on contracts could be higher under adverse economic
conditions than those experienced in the automotive retail finance industry in general. The Company is unable to
predict with certainty the future impact of the most recent global economic conditions on consumer demand in our
markets or on the Company’s costs.
The Company’s business is geographically concentrated; therefore, the Company’s results of operations may be
adversely affected by unfavorable conditions in its local markets.
The Company’s performance is subject to local economic, competitive, and other conditions prevailing in
the eleven states where the Company operates. The Company provides financing in connection with the sale of
substantially all of its vehicles. These sales are made primarily to customers residing in Alabama, Arkansas,
Georgia, Kentucky, Mississippi, Missouri, Oklahoma, Tennessee and Texas with approximately 30% of revenues
resulting from sales to Arkansas customers. The Company’s current results of operations depend substantially on
general economic conditions and consumer spending habits in these local markets. Any decline in the general
economic conditions or decreased consumer spending in these markets may have a negative effect on the
Company’s results of operations.
The Company’s success depends upon the continued contributions of its management teams and the ability to attract
and retain qualified employees.
The Company is dependent upon the continued contributions of its management teams. Because the
Company maintains a decentralized operation in which each dealership is responsible for buying and selling its own
vehicles, making credit decisions and collecting contracts it originates, the key employees at each dealership are
important factors in the Company’s ability to implement its business strategy. Consequently, the loss of the services
of key employees could have a material adverse effect on the Company’s results of operations. In addition, when
the Company decides to open new dealerships, the Company will need to hire additional personnel. The market for
qualified employees in the industry and in the regions in which the Company operates is highly competitive and
may subject the Company to increased labor costs during periods of low unemployment.
The Company’s business is dependent upon the efficient operation of its information systems.
The Company relies on its information systems in managing its sales, inventory, consumer financing, and
customer information effectively. The failure of the Company’s information systems to perform as designed, or the
failure to maintain and continually enhance or protect the integrity of these systems, could disrupt the Company’s
business, impact sales and profitability, or expose the Company to customer or third-party claims.
Security breaches, cyber-attacks or fraudulent activity could result in damage to the Company's operations or lead
to reputational damage.
Our information and technology systems are vulnerable to damage or interruption from computer viruses,
network failures, computer and telecommunications failures, infiltration by unauthorized persons and security
breaches, usage errors by our employees, power outages and catastrophic events such as fires, tornadoes, floods,
hurricanes and earthquakes. A security breach of the Company's computer systems could also interrupt or damage
its operations or harm its reputation. In addition, the Company could be subject to liability if confidential customer
14
information is misappropriated from its computer systems. Any compromise of security, including security breaches
perpetrated on persons with whom the Company has commercial relationships, that result in the unauthorized
release of its users’ personal information, could result in a violation of applicable privacy and other laws, significant
legal and financial exposure, damage to the Company's reputation, and a loss of confidence in the Company's
security measures, which could harm its business. Any compromise of security could deter people from entering
into transactions that involve transmitting confidential information to the Company's systems and could harm
relationships with the Company's suppliers, which could have a material adverse effect on the Company's business.
Actual or anticipated attacks may cause the Company to incur increasing costs, including costs to deploy additional
personnel and protection technologies, train employees, and engage third-party experts and consultants. Despite the
implementation of security measures, these systems may still be vulnerable to physical break-ins, computer viruses,
programming errors, attacks by third parties or similar disruptive problems. The Company may not have the
resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks.
Most of the Company's customers provide personal information, including bank account information, when
applying for financing. The Company relies on encryption and authentication technology to provide security to
effectively store and securely transmit confidential information. Advances in computer capabilities, new
discoveries in the field of cryptography or other developments may result in the technology used by the Company
to protect transaction data being breached or compromised.
In addition, many of the third parties who provide products, services, or support to the Company could also
experience any of the above cyber risks or security breaches, which could impact the Company's customers and its
business and could result in a loss of customers, suppliers, or revenue.
Changes in the availability or cost of capital and working capital financing could adversely affect the Company’s
growth and business strategies, and volatility and disruption of the capital and credit markets and adverse changes
in the global economy could have a negative impact on the Company’s ability to access the credit markets in the
future and/or obtain credit on favorable terms.
The Company generates cash from income from continuing operations. The cash is primarily used to fund
finance receivables growth. To the extent finance receivables growth exceeds income from continuing operations,
generally the Company increases its borrowings under its revolving credit facilities to provide the cash necessary
to fund operations. On a long-term basis, the Company expects its principal sources of liquidity to consist of income
from continuing operations and borrowings under revolving credit facilities and/or fixed interest term loans. Any
adverse changes in the Company’s ability to borrow under revolving credit facilities or fixed interest term loans, or
any increase in the cost of such borrowings, would likely have a negative impact on the Company’s ability to finance
receivables growth which would adversely affect the Company’s growth and business strategies. Further, the
Company’s current credit facilities contain various reporting and financial performance covenants. Any failure of
the Company to comply with these covenants could have a material adverse effect on the Company’s ability to
implement its business strategy.
If the capital and credit markets experience disruptions and the availability of funds remains low, it is
possible that the Company’s ability to access the capital and credit markets may be limited or available on less
favorable terms which could have an impact on the Company’s ability to refinance maturing debt or react to
changing economic and business conditions. In addition, if negative global economic conditions persist for an
extended period of time or worsen substantially, the Company’s business may suffer in a manner which could cause
the Company to fail to satisfy the financial and other restrictive covenants under its credit facilities.
The Company’s growth strategy is dependent upon the following factors:
(cid:120) Favorable operating performance. Our ability to expand our business through additional dealership
openings is dependent on a sufficiently favorable level of operating performance to support the
management, personnel and capital resources necessary to successfully open and operate new locations.
Due to the decline in operating results during fiscal 2016 caused by the difficult competitive environment
and elevated credit losses, the Company has elected to defer additional dealership openings in order to focus
15
on making operational improvements to ensure all existing lots are performing at a high level. Management
expects to return to expansion efforts in the future after overall operating performance improves. If our
overall operating performance does not improve, management may be unable to devote the resources
necessary to implement its expansion plans or may determine that its focus should continue to be on efforts
to improve the Company’s existing business in lieu of further dealership openings.
(cid:120) Availability of suitable dealership sites. Our ability to open new dealerships is subject to the availability
of suitable dealership sites in locations and on terms favorable to the Company. If and when the Company
decides to open new dealerships, the inability to acquire suitable real estate, either through lease or
purchase, at favorable terms could limit the expansion of the Company’s dealership base. In addition, if a
new dealership is unsuccessful and we are forced to close the dealership, we could incur additional costs if
we are unable to dispose of the property in a timely manner or on terms favorable to the Company. Any of
these circumstances could have a material adverse effect on the Company’s expansion strategy and future
operating results.
(cid:120) Ability to attract and retain management for new dealerships. The success of new dealerships is dependent
upon the Company being able to hire and retain additional competent personnel. The market for qualified
employees in the industry and in the regions in which the Company operates is highly competitive. If we
are unable to hire and retain qualified and competent personnel to operate our new dealerships, these
dealerships may not be profitable, which could have a material adverse effect on our future financial
condition and operating results.
(cid:120) Availability and cost of vehicles. The cost and availability of sources of inventory could affect the
Company’s ability to open new dealerships. The overall new car sales volumes in the United States
decreased dramatically from peak sales years during the economic recession of 2008 and did not return
back to pre-recession levels until fiscal 2016. This could potentially have a significant negative effect on
the supply of vehicles at appropriate prices available to the Company in future periods. This could also
make it difficult for the Company to supply appropriate levels of inventory for an increasing number of
dealerships without significant additional costs, which could limit our future sales or reduce future profit
margins if we are required to incur substantially higher costs to maintain appropriate inventory levels.
(cid:120) Acceptable levels of credit losses at new dealerships. Credit losses tend to be higher at new dealerships
due to fewer repeat customers and less experienced associates; therefore, the opening of new dealerships
tends to increase the Company’s overall credit losses. In addition, new dealerships may experience higher
than anticipated credit losses, which may require the Company to incur additional costs to reduce future
credit losses or to close the underperforming locations altogether. Any of these circumstances could have
a material adverse effect on the Company’s future financial condition and operating results.
The Company’s business is subject to seasonal fluctuations.
Historically, the Company’s third fiscal quarter (November through January) has been the slowest period
for vehicle sales. Conversely, the Company’s first and fourth fiscal quarters (May through July and February
through April) have historically been the busiest times for vehicle sales. Therefore, the Company generally realizes
a higher proportion of its revenue and operating profit during the first and fourth fiscal quarters. Tax refund
anticipation sales efforts during the Company’s third fiscal quarter have increased sales levels during the third fiscal
quarter in some past years; however, due to the timing of actual tax refund dollars in the Company’s markets, these
sales and collections have primarily occurred in the fourth quarter in each of the last five fiscal years. The Company
expects this pattern to continue in future years.
If conditions arise that impair vehicle sales during the first or fourth fiscal quarters, the adverse effect on
the Company’s revenues and operating results for the year could be disproportionately large.
16
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
As of April 30, 2017, the Company leased approximately 86% of its facilities, including dealerships and
the Company’s corporate offices. These facilities are located principally in the states of Alabama, Arkansas,
Georgia, Kentucky, Mississippi, Missouri, Oklahoma, Tennessee and Texas. The Company’s corporate offices are
located in approximately 18,000 square feet of leased space in Bentonville, Arkansas. For additional information
regarding the Company’s properties, see “Operations-Dealership Locations and Facilities” under Item 1 above and
“Contractual Payment Obligations” and “Off-Balance Sheet Arrangements” under Item 7 of Part II.
Item 3. Legal Proceedings
In the ordinary course of business, the Company has become a defendant in various types of legal
proceedings. While the outcome of these proceedings cannot be predicted with certainty, the Company does not
expect the final outcome of any of these proceedings, individually or in the aggregate, to have a material adverse
effect on the Company’s financial position, results of operations or cash flows.
Item 4. Mine Safety Disclosure
Not applicable.
17
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
PART II
General
The Company's common stock is traded on the NASDAQ Global Select Market under the symbol CRMT.
The following table sets forth, by fiscal quarter, the high and low sales prices reported by NASDAQ for the
Company's common stock for the periods indicated.
First quarter
Second quarter
Third quarter
Fourth quarter
Fiscal 2017
Fiscal 2016
$
High
35.89
43.07
47.75
43.85
$
Low
19.49
32.01
36.50
30.20
$
High
56.59
48.10
38.00
27.85
$
Low
44.07
31.00
20.67
21.82
As of June 8, 2017, there were approximately 851 shareholders of record. This number excludes
stockholders holding the Company’s common stock as “beneficial owners” under nominee security position listings.
We currently maintain two compensation plans, the Amended and Restated Stock Incentive Plan and the
Amended and Restated Stock Option Plan, which provide for the issuance of stock-based compensation to directors,
officers and other employees. These plans have been approved by the stockholders.
The following table sets forth information regarding outstanding options and shares reserved for future
issuance under the foregoing plans as of April 30, 2017:
Number of securities
to be issued upon
exercise of
outstanding
options, warrants
and rights
(a)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b)
Number of securities
remaining available for future
issuance under equity
compensation plans
(excluding shares reflected in
column (a))
(c)
1,028,500
$33.51
447,527
-
-
-
Plan Category
Equity compensation plans
approved by the stockholders
Equity compensation plans
not approved by the stockholders
Stockholder Return Performance Graph
Set forth below is a line graph comparing the fiscal year end percentage change in the cumulative total
stockholder return on the Company’s common stock to (i) the cumulative total return of the NASDAQ Market Index
(U.S. companies), and (ii) the Hemscott Group 744 Index – Auto Dealerships (“Automobile Index”), for the period
of five fiscal years commencing on May 1, 2012 and ending on April 30, 2017.
18
The graph assumes that the value of the investment in the Company’s common stock and each index was
$100 on April 30, 2012.
COMPARIS ON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among America's Car-Mart, Inc, the NASDAQ Composite Index,
and Auto Dealerships
$250
$200
$150
$100
$50
$0
4/12
4/13
4/14
4/15
4/16
4/17
America's Car-Mart, Inc.
NASDAQ Composite
Auto Dealerships
* $100 invested on 4/30/2012 in stock or index, including reinvestment of dividends.
Fiscal year ending April 30.
The dollar value at April 30, 2017 of $100 invested in the Company’s common stock on April 30, 2012
was $81.19, compared to $192.50 for the automobile index described above and $209.93 for the NASDAQ Market
Index (U.S. Companies).
Dividend Policy
Since its inception, the Company has paid no cash dividends on its common stock. The Company currently
intends for the foreseeable future to continue its policy of retaining earnings to finance future growth. Payment of
cash dividends in the future will be determined by the Company's Board of Directors and will depend upon, among
other things, the Company's future earnings, operations, capital requirements and surplus, general financial
condition, contractual restrictions that may exist, and such other factors as the Board of Directors may deem
relevant. The Company is also limited in its ability to pay dividends or make other distributions to its shareholders
without the consent of its lender. Please see “Liquidity and Capital Resources” under Item 7 of Part II for more
information regarding this limitation.
Issuer Purchases of Equity Securities
The Company is authorized to repurchase shares of its common stock under its common stock repurchase
program. The Board of Directors most recently approved, and the Company announced, on July 22, 2016 the
authorization to repurchase up to an additional one million shares along with the balance remaining under its
previous authorization approved in November 2014. The following table sets forth information with respect to
purchases made by or on behalf of the Company of shares of the Company’s common stock during the periods
indicated:
Period
February 1, 2017 through February 28, 2017
March 1, 2017 through March 31, 2017
April 1, 2017 through April 30, 2017
Total
(1) The above described stock repurchase program has no expiration date.
Total
Number of
Shares
Purchased
71,882
237,982
55,500
365,364
19
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (1)
71,882
237,982
55,500
365,364
956,240
718,258
662,758
662,758
Average
Price Paid
per Share
$31.94
$33.72
$35.91
$33.70
Item 6. Selected Financial Data
The financial data set forth below was derived from the audited consolidated financial statements of the
Company and should be read in conjunction with the Consolidated Financial Statements and the Notes thereto
contained in Item 8, and the information contained in Item 7, “Management's Discussion and Analysis of Financial
Condition and Results of Operations”.
Years Ended April 30,
(In thousands, except per share amounts)
2015
2014
2016
2013
2017
Revenues
$ 587,751
$ 567,906
$ 530,321
$ 489,187
$ 464,676
Net income attributable to common
stockholders
Diluted earnings per share from
continuing operations
$
$
20,165
2.49
$
$
11,556
1.33
$
$
29,450
3.25
$
$
21,089
2.25
$
$
32,125
3.36
2017
2016
April 30,
(In thousands)
2015
2014
2013
Total assets
Total debt
Mandatorily redeemable preferred stock
Total equity
Shares outstanding
$ 424,258
$ 117,944
$
400
$ 233,008
7,608
$ 406,296
$ 107,902
$
400
$ 228,817
8,074
$ 400,361
$ 102,685
$
400
$ 229,132
8,529
$ 363,297
97,032
$
$
400
$ 213,006
8,736
$ 358,265
99,563
$
$
400
$ 202,268
9,023
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto appearing in Item 8 of this Annual Report on Form 10-K.
Overview
America’s Car-Mart, Inc., a Texas corporation (the “Company”), is one of the largest publicly held
automotive retailers in the United States focused exclusively on the “Integrated Auto Sales and Finance” segment
of the used car market. References to the Company include the Company’s consolidated subsidiaries. The
Company’s operations are principally conducted through its two operating subsidiaries, America’s Car Mart, Inc.,
an Arkansas corporation (“Car-Mart of Arkansas”), and Colonial Auto Finance, Inc., an Arkansas corporation
(“Colonial”). Collectively, Car-Mart of Arkansas and Colonial are referred to herein as “Car-Mart.” The Company
primarily sells older model used vehicles and provides financing for substantially all of its customers. Many of the
Company’s customers have limited financial resources and would not qualify for conventional financing as a result
of limited credit histories or past credit problems. As of April 30, 2017, the Company operated 140 dealerships
located primarily in small cities throughout the South-Central United States.
Car-Mart has been operating since 1981. Car-Mart has grown its revenues between approximately 3% and
14% per year over the last ten years (average 9%). Growth results from same dealership revenue growth and the
addition of new dealerships. Revenue increased 3.5% for the fiscal year ended April 30, 2017 compared to fiscal
2016 primarily due to a 1.7% increase in average retail sales price and a 10.1% increase in interest income. No new
dealerships were added in fiscal 2017.
The Company earns revenue from the sale of used vehicles, and in most cases a related service contract and
a payment protection plan product, as well as interest income and late fees from the related financing. The
20
Company’s cost structure is more fixed in nature and is sensitive to volume changes. Revenues can be affected by
our level of competition, which is influenced to a large extent by the availability of funding to the sub-prime
automobile industry, together with the availability and resulting purchase cost of the types of vehicles the Company
purchases for resale. Revenues can also be affected by the macro-economic environment. Down payments, contract
term lengths and proprietary credit scoring are critical to helping customers succeed and are monitored closely by
corporate management at the point of sale. After the sale, collections, delinquencies and charge-offs are crucial
elements of the Company’s evaluation of its financial condition and results of operations and are monitored and
reviewed on a continuous basis. Management believes that developing and maintaining a relationship with its
customers and earning their repeat business is critical to the success and growth of the Company and can serve to
offset the effects of increased competition and negative macro-economic factors.
A challenging competitive environment puts pressure on sales volumes especially at older dealerships
which tend to have higher overall sales volumes and more repeat customers. Additionally, as the Company attempts
to attract and retain target customers, increased competition can contribute to lower down payments and longer
contract terms which can have a negative effect on collection percentages, liquidity and credit losses. Management
believes that the ultra-low interest rate environment combined with a lack of other investment alternatives has been
attracting excess capital into the sub-prime automobile market and increasing competition. In an effort to combat
the increased competition the Company will continue to focus on the benefits of excellent customer service and its
“local” face to face offering in an effort to help customers succeed. The Company has also focused additional
attention on selling lower priced vehicles to increase affordability for customers, to address sales volume challenges
and to improve credit performance in the future by improving the equity position of customers who may be tempted
to default on their contracts especially when competition on the lending side is elevated.
The purchase price the Company pays for its vehicles can also have a significant effect on revenues,
liquidity and capital resources. Because the Company bases its selling price on the purchase cost of the vehicle,
increases in purchase costs result in increased selling prices. As the selling price increases, it becomes more difficult
to keep the gross margin percentage and contract term in line with historical results because the Company’s
customers have limited incomes and their car payments must remain affordable within their individual budgets.
Decreases in the overall volume of new car sales, particularly domestic brands, lead to decreased supply and
generally increased prices in the used car market. Also, expansions or constrictions in consumer credit, as well as
general economic conditions, can have an overall effect on the demand and the resulting purchase cost of the types
of vehicles the Company purchases for resale.
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 fiscal years, the Company’s credit losses as a
percentage of sales have ranged from approximately 23.1% in fiscal 2013 to 28.7% in fiscal 2017 (average of
26.6%). Credit losses as a percentage of sales have increased in recent years, primarily due to increased contract
term lengths and lower down payments resulting from increased competitive pressures as well as higher charge-
offs caused, to an extent, by negative macro-economic factors affecting the Company’s customer base. Credit losses
as a percentage of sales for fiscal 2015 and 2016 were 25.5% and 28.5%, respectively, as competitive pressures
remained elevated and the increased number of newer dealerships weighed on credit loss results. Credit losses for
fiscal 2017 remained elevated at 28.7% as competitive pressure continued and recovery rates remained low.
The Company maintains an allowance for credit losses in an attempt to cover credit losses inherent in its
contract portfolio. The allowance for credit losses was historically at 22.0% of finance receivables from October
2006 until April 30, 2012, when management reduced the allowance to 21.5% of finance receivables based on the
Company’s then recent credit loss experience. However, as a result of the increased credit losses during fiscal 2013
and with the expectation that charge-offs would remain elevated, management increased the allowance for credit
losses to 23.5% of the finance receivables principal balance, net of deferred payment protection plan revenue, at
January 31, 2014. At April 30, 2015, the Company modified the allowance for credit losses to 23.8% of finance
receivables, net of deferred payment protection plan revenue and deferred service contract revenue. The calculation
of the allowance for credit losses did not previously include a reduction for the deferred service contract revenue.
This change did not have a material impact on net income or earnings per share and was not significant to any prior
21
period. As of October 31, 2015, management increased the allowance to 25.0% due to continued increased credit
losses and the expectation that such activity would continue. For fiscal 2017, the allowance remained at 25% as
credit losses remained at the elevated level the Company experienced in fiscal 2016.
Historically, credit losses, on a percentage basis, tend to be higher at new and developing dealerships than
at mature dealerships. Generally, this is because the management at new and developing dealerships tends to be
less experienced in making credit decisions and collecting customer accounts and the customer base is less seasoned.
Normally more mature dealerships have more repeat customers and, on average, repeat customers are a better credit
risk than non-repeat customers. Negative macro-economic issues do not always lead to higher credit loss results
for the Company because the Company provides basic affordable transportation which in many cases is not a
discretionary expenditure for customers. The Company does believe, however, that general inflation, particularly
within staple items such as groceries and gasoline, as well as overall unemployment levels and potentially lower or
stagnant personal income levels affecting customers can have, and has had in recent years, a negative impact on
collections. Additionally, increased competition for used vehicle financing can have, and management believes is
currently having, a negative effect on collections and charge-offs.
In an effort to offset the elevated credit losses and lower collection levels and to operate more efficiently,
the Company continues to look for improvements to its business practices, including better underwriting and better
collection procedures. The Company has a proprietary credit scoring system which enables the Company to monitor
the quality of contracts. Corporate office personnel monitor proprietary credit scores and work with dealerships
when the distribution of scores falls outside of prescribed thresholds. The Company also uses credit reporting and
the use of global positioning system (“GPS”) units on vehicles. Additionally, the Company has placed significant
focus on the collection area as the Company’s training department continues to spend significant time and effort on
collections improvements. The Field Operations Officer oversees the collections department and provides timely
oversight and additional accountability on a consistent basis. In addition, the Company has a Director of Collection
Services who assists with managing the Company’s servicing and collections practices and provides additional
monitoring and training. The Company believes that the proper execution of its business practices is the single
most important determinant of its long term credit loss experience.
Historically, the Company’s gross margin as a percentage of sales has been fairly consistent from year to
year. Over the previous five fiscal years, the Company’s gross margins as a percentage of sales ranged between
approximately 40% and 43%. The Company’s gross margin is based upon the cost of the vehicle purchased, with
lower-priced vehicles typically having higher gross margin percentages, and is also affected by the percentage of
wholesale sales to retail sales, which relates for the most part to repossessed vehicles sold at or near cost. Gross
margin in recent years has 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. In fiscal 2013, gross margin was 42.5% as a percentage of sales due to improved wholesale results partially
offset by higher losses under the payment protection plan. Gross margin decreased slightly for fiscal 2014 as a result
of higher inventory repair costs and higher claims under the payment protection plan, and remained relatively flat
for fiscal 2015 compared to fiscal 2014. For fiscal 2016, gross margin decreased to 39.8% of sales primarily due
to the high level of repossession activity, as both the volume of wholesale sales and the prices received from
wholesale sales had a negative effect on overall gross margin, as did higher repair expenses. Gross margin for fiscal
2017 improved to 41.4% primarily as a result of lower repair expenses and a decrease in losses on wholesales;
however, the Company expects that its gross margin percentage will continue to remain under pressure over the
near term.
Hiring, training and retaining qualified associates is critical to the Company’s success. The rate at which
the Company adds new dealerships and is able to implement operating initiatives is limited by the number of trained
managers and support personnel the Company has at its disposal. Excessive turnover, particularly at the dealership
manager level, could impact the Company’s ability to add new dealerships and to meet operational initiatives. The
Company has added resources to recruit, train, and develop personnel, especially personnel targeted to fill
dealership manager positions. The Company expects to continue to invest in the development of its workforce.
22
Consolidated Operations
(Operating Statement Dollars in Thousands)
Operating Statement:
Revenues:
Sales
Interest and other income
Total
Costs and expenses:
Cost of sales, excluding depreciation
shown below
Selling, general and administrative
Provision for credit losses
Interest expense
Depreciation and amortization
Loss on disposal of property and
equipment
Total
Years Ended April 30,
2017
2016
2015
% Change
2017
vs.
2016
2016
vs.
2015
As a % of Sales
2016
2017
2015
$
$
520,149
67,602
587,751
506,517
61,389
567,906
$
472,569
57,752
530,321
2.7 %
10.1
3.5
7.2 %
6.3
7.1
100.0 %
13.0
113.0
100.0 %
12.1
112.1
100.0 %
12.2
112.2
304,927
91,940
149,097
4,069
4,272
1,204
555,509
304,886
92,242
144,397
3,306
4,208
369
549,408
272,446
83,802
120,289
2,903
3,830
17
483,287
0.0 %
(0.3)
3.3
23.1
1.5
226.3
1.1
11.9 %
10.1
20.0
13.9
9.9
2070.6
13.7
58.6
17.7
28.7
0.8
0.8
0.2
106.8
60.2
18.2
28.5
0.7
0.8
0.1
108.5
57.7
17.7
25.5
0.6
0.8
-
102.3
Income before income taxes
$
32,242
$
18,498
$
47,034
74.3
(60.7)
6.2 %
3.7 %
10.0 %
Operating Data (Unaudited):
Retail units sold
Average dealerships in operation
Average units sold per dealership
Average retail sales price
$
Same store revenue growth
Receivables average yield
47,116
142
332
10,540
3.5%
14.5%
$
46,483
145
321
10,361
2.7%
14.2%
$
46,760
137
341
9,680
2.9%
14.2%
1.4 %
(2.1)
3.4
1.7
(0.6) %
5.8
(5.9)
7.0
2017 Compared to 2016
Total revenues increased $19.8 million, or 3.5%, in fiscal 2017, as compared to revenue growth of 7.1% in
fiscal 2016, principally as a result of (i) revenue growth from dealerships that operated a full twelve months in both
fiscal years ($19.2 million), and (ii) revenue growth from dealerships opened or closed during or after the year
ended April 30, 2016 ($0.6 million). The increase in revenue for fiscal 2017 is attributable to (i) a 1.7% increase
in average retail sales price, and (ii) a 10.1% increase in interest and other income.
Cost of sales, as a percentage of sales, decreased to 58.6% in fiscal 2017 from 60.2% in fiscal 2016,
primarily due to a company-wide effort to decrease repair costs, partially offset by the higher average retail sales
price. The average retail sales price for fiscal 2017 was $10,540, a $179 increase over the prior fiscal year. As
purchase costs increase, the margin between the purchase cost and the sales price of the vehicles we sell narrows as
a percentage because the Company must offer affordable prices to our customers. The increased purchase costs are
the result of a combination of consumer demand for the types of vehicles the Company purchases for resale, which
remains high relative to supply, and a strategic management decision to purchase higher quality vehicles for our
customers. The high demand and tight supply of the vehicles we purchase for resale are largely related to excess
funding to the used vehicle financing market and the depressed levels of new car sales during and after the recession,
although more robust new car sales in recent years have begun to bolster the supply of used vehicles. Finally, a
decrease in losses on wholesales during fiscal 2017 compared to fiscal 2016, also helped to reduce our cost of sales
and positively affected our gross margin percentages. We will continue to focus efforts on minimizing the average
23
retail sales price of our vehicles in order to help keep contract terms shorter, which helps customers to maintain
appropriate equity in their vehicles and reduces credit losses and resulting wholesale volumes.
Selling, general and administrative expenses, as a percentage of sales, decreased 0.5% to 17.7% in fiscal
2017 from 18.2% in fiscal 2016. Selling, general and administrative expenses are, for the most part, more fixed in
nature. In dollar terms, overall selling, general and administrative expenses decreased $302,000 from fiscal 2016.
Provision for credit losses as a percentage of sales increased to 28.7% for fiscal 2017 compared to 28.5%
for fiscal 2016. Net charge-offs as a percentage of average finance receivables decreased to 30.5% for fiscal 2017
compared to 31.3% for the prior year. The decrease in net charge-offs for fiscal 2017 resulted from a lower
frequency of losses partially offset by an increase in severity due largely to higher principal balances at charge-off
and lower wholesale values at time of repossession. The fiscal 2016 provision included a $4.8 million increase in
the provision as a result of the increase in the provision percentage applied to the grown in finance receivables
during the second quarter of fiscal 2016. Continuing macro-economic challenges and competitive conditions
continue to put pressure on our customers and the resulting collections of our finance receivables. The Company
uses several operational initiatives (including credit reporting and the use of GPS units on vehicles) to improve
collections and continually pushes for improvements and better execution of its collection practices. The Company
believes that the proper execution of its business practices is the single most important determinant of credit loss
experience and that the negative impact on credit losses in both the current and prior year periods resulting from
negative macro-economic and competitive pressures has been somewhat mitigated by the improvements in
oversight and accountability provided by the Company’s investments in our corporate infrastructure within the
collections area.
Interest expense for fiscal 2017 as a percentage of sales increased slightly to 0.8% compared to 0.7% for
fiscal 2016, due to higher average borrowings during the fiscal year 2017 ($118.2 million compared to $109.0
million in the prior year).
2016 Compared to 2015
Total revenues increased $37.6 million, or 7.1%, in fiscal 2016, as compared to revenue growth of 8.4% in
fiscal 2015, principally as a result of (i) revenue growth from dealerships that operated a full twelve months in both
fiscal years ($14.0 million), (ii) revenue growth from dealerships opened during the fiscal year ended April 30, 2015
($14.6 million), and (iii) revenue from dealerships opened after April 30, 2015 ($9.0 million). The increase in
revenue for fiscal 2016 is attributable to (i) a 7.0% increase in average retail sales price, and (ii) a 6.3% increase in
interest and other income.
Cost of sales, as a percentage of sales, increased to 60.2% in fiscal 2016 from 57.7% in fiscal 2015,
primarily due to an increase in the average purchase cost of vehicles sold relative to the increase in average retail
sales price, along with higher repair costs. The average retail sales price for fiscal 2016 was $10,361, a $681
increase over the prior fiscal year. Additionally, increases in the volume of wholesales sales during fiscal 2016,
resulting from higher credit losses, also increase our cost of sales and thus negatively affect our gross margin
percentage in fiscal 2016 compared to fiscal 2015.
Selling, general and administrative expenses, as a percentage of sales, increased 0.5% to 18.2% in fiscal
2016 from 17.7% in fiscal 2015. Selling, general and administrative expenses are, for the most part, more fixed in
nature. In dollar terms, overall selling, general and administrative expenses increased $8.4 million from fiscal 2015,
which consisted primarily of increased payroll costs, incremental costs related to new dealerships and higher
infrastructure costs to support our growth, primarily in technology and compliance.
Provision for credit losses as a percentage of sales increased to 28.5% (27.6% excluding the effect of the
increase in the allowance for credit losses made in the second quarter) for fiscal 2016 compared to 25.5% for fiscal
2015. Net charge-offs as a percentage of average finance receivables increased to 31.3% for fiscal 2016 compared
to 27.8% for the prior year. Macro-economic challenges and competitive conditions continued to put pressure on
24
our customers and the resulting collections of our finance receivables, although the lower gas prices provided some
relief to our customers.
Interest expense for fiscal 2016 as a percentage of sales increased slightly to 0.7% compared to 0.6% for
fiscal 2015, due to higher average borrowings during the fiscal year 2016 ($109.0 million compared to $102.2
million in the prior year).
Financial Condition
The following table sets forth the major balance sheet accounts of the Company at April 30, 2017, 2016
and 2015 (in thousands):
Assets:
Finance receivables, net
Inventory
Property and equipment, net
2017
April 30,
2016
2015
$
357,161
30,129
30,139
$
334,793
29,879
34,755
$
324,144
34,267
33,963
Liabilities:
Accounts payable and accrued liabilities
Deferred revenue
Income taxes payable (receivable), net
Deferred income tax liabilities, net
Revolving credit facilities and notes payable
25,020
28,083
885
18,918
117,944
23,558
27,339
(894)
18,280
107,902
23,730
25,236
(645)
19,178
102,685
The following table shows receivables growth compared to revenue growth during each of the past three
fiscal years. For fiscal year 2017, growth in finance receivables of 7.0% exceeded growth in revenue of 3.5%. The
Company currently anticipates going forward that the growth in finance receivables will generally be slightly higher
than overall revenue growth on an annual basis due to overall term length increases in our installment sales
contracts, partially offset by improvements in underwriting and collection procedures in an effort to reduce credit
losses. The average term for installment sales contracts at April 30, 2017 was 32.5 months compared to 31.6 months
at April 30, 2016.
Years Ended April 30,
2016
2017
2015
Growth in finance receivables, net of deferred
revenue
Revenue growth
7.0%
3.5%
4.5%
7.1%
8.4%
8.4%
At fiscal year-end 2017, inventory increased slightly, 0.8% ($250,000), compared to fiscal year-end 2016.
The Company strives to improve the quality of the inventory and improve turns while maintaining inventory levels
to ensure adequate supply of vehicles, in volume and mix, and to meet sales demand.
Property and equipment, net, decreased by approximately $4.6 million as of April 30, 2017 as compared to
fiscal 2016. The decrease is attributable to $4.3 million in depreciation expense and the Company’s disposition of
approximately $2 million in assets, partially offset by expenditures to refurbish and expand a number of existing
locations.
Accounts payable and accrued liabilities increased approximately $1.5 million at April 30, 2017 as
compared to April 30, 2016 due primarily to increased payables related to increased inventory levels as well as the
amount and timing of cash overdrafts.
25
Income taxes payable (receivable), net, increased approximately $1.8 million at April 30, 2017 compared
to April 30, 2016 primarily due to the timing of income tax payments and refunds.
Deferred revenue increased $744,000 at April 30, 2017 over April 30, 2016, primarily resulting from the
longer term on the payment protection product due to increased contract terms.
Deferred income tax liabilities, net, increased approximately $638,000 at April 30, 2017 as compared to
April 30, 2016 due primarily to the change in finance receivables and the book/tax difference on stock based
compensation.
Borrowings on the Company’s revolving credit facilities fluctuate primarily based upon a number of factors
including (i) net income, (ii) finance receivables changes, (iii) income taxes, (iv) capital expenditures and (v)
common stock repurchases. Historically, income from continuing operations, as well as borrowings on the
revolving credit facilities, have funded the Company’s finance receivables growth, capital asset purchases and
common stock repurchases. In fiscal 2017 the Company had a $10.0 million net increase in total debt used to
contribute to the funding of finance receivables growth of $29.6 million, net capital expenditures of $1.6 million
and common stock repurchases of $20.5 million.
26
Liquidity and Capital Resources
The following table sets forth certain historical information with respect to the Company’s Statements of
Cash Flows (in thousands):
2017
Years Ended April 30,
2016
2015
Operating activities:
Net income
Provision for credit losses
Losses on claims for payment protection plan
Depreciation and amortization
Amortization of debt issuance costs
Stock based compensation
Deferred income taxes
Finance receivable originations
Finance receivable collections
Accrued interest on finance receivables
Inventory
Accounts payable and accrued liabilities
Deferred payment protection plan revenue
Deferred service contract revenue
Income taxes, net
Other
Total
Investing activities:
Purchase of property and equipment
Proceeds from sale of property and equipment
Total
Financing activities:
Debt facilities, net
Change in cash overdrafts
Purchase of common stock
Dividend payments
Exercise of stock options, including
tax benefits and issuance of common stock
Total
$
20,205
149,097
15,627
4,272
252
1,293
638
(479,099)
249,264
(382)
42,493
676
1,167
(423)
2,963
(709)
7,334
(1,587)
932
(655)
9,790
669
(20,486)
(40)
3,220
(6,847)
$
11,596
144,397
13,521
4,208
214
1,519
(898)
(460,499)
248,166
286
48,154
1,115
1,653
450
(11)
415
14,286
$
29,490
120,289
10,588
3,830
188
780
3,934
(445,405)
238,845
(172)
40,686
3,862
2,419
5,350
200
(2,497)
12,387
(4,526)
7
(4,519)
5,062
(1,587)
(14,214)
(40)
824
(9,955)
(4,009)
112
(3,897)
5,653
502
(20,020)
(40)
5,916
(7,989)
Increase (decrease) in cash
$
(168)
$
(188)
$
501
The primary drivers of operating profits and cash flows include (i) top line sales (ii) interest rates on finance
receivables, (iii) gross margin percentages on vehicle sales, and (iv) credit losses, a significant portion of which
relates to the collection of principal on finance receivables. The Company generates cash flow from income from
operations. Historically, most or all of this cash is used to fund finance receivables growth, capital expenditures
and common stock repurchases. To the extent finance receivables growth, capital expenditures and common stock
repurchases exceed income from operations the Company generally increases its borrowings under its revolving
credit facilities. The majority of the Company’s growth has been self-funded.
Cash flows from operations in fiscal 2017 compared to fiscal 2016 decreased primarily as a result of (i) an
increase in finance receivables originations and (ii) an increase in inventory, offset by (iii) a higher non-cash charge
for credit losses and (iv) an increase in income tax payable and (v) higher payment protection plan claims. Finance
receivables, net, increased by $22.4 million during fiscal 2017.
27
Cash flows from operations in fiscal 2016 compared to fiscal 2015 increased primarily as a result of (i) a
higher non-cash charge for credit losses and (ii) higher finance receivable collections, partially offset by (iii) lower
net income and (iv) an increase in finance receivables originations. Finance receivables, net, increased by $10.6
million during fiscal 2016.
The purchase price the Company pays for a vehicle has a significant effect on liquidity and capital resources.
Because the Company bases its selling price on the purchase cost for the vehicle, increases in purchase costs result
in increased selling prices. As the selling price increases, it becomes more difficult to keep the gross margin
percentage and contract term in line with historical results because the Company’s customers have limited incomes
and their car payments must remain affordable within their individual budgets. Several external factors can
negatively affect the purchase cost of vehicles. Decreases in the overall volume of new car sales, particularly
domestic brands, lead to decreased supply in the used car market. Also, constrictions in consumer credit, as well as
general economic conditions, can increase overall demand for the types of vehicles the Company purchases for
resale as used vehicles become more attractive than new vehicles in times of economic instability. A negative shift
in used vehicle supply, combined with strong demand, results in increased used vehicle prices and thus higher
purchase costs for the Company.
New vehicle sales decreased dramatically during the economic recession of 2008 and did not return to pre-
recession levels until the last two years. In addition, the challenging macro-economic environment, together with
the constriction in consumer credit starting in 2008, contributed to increased demand for the types of vehicles the
Company purchases and a resulting increase in used car prices. These negative macro-economic conditions have
continued to affect our customers in the years since the recession and, in turn, have helped keep demand high for
the types of vehicles we purchase. This increased demand, coupled with depressed levels of new vehicle sales in
recent years, negatively impacted both the quality and the quantity of the used vehicle supply available to the
Company. Management expects the tight supply of vehicles and resulting increases in vehicle purchase costs to
continue, although some relief is expected to continue as a result of increased new car sales levels in recent periods.
The Company has devoted significant efforts to improving its purchasing processes to ensure adequate
supply at appropriate prices, including expanding its purchasing territories to larger cities in close proximity to its
dealerships and increasing its efforts to purchase vehicles from individuals at the dealership level as well as via the
internet. The Company has also increased the level of accountability for its purchasing agents including the
establishment of sourcing and pricing guidelines. Even with these efforts, the Company expects gross margin
percentages to remain under pressure over the near term.
The Company believes that the amount of credit available for the sub-prime auto industry has increased in
recent years, and management expects the availability of consumer credit within the automotive industry to be
higher over the near term when compared to historical levels. This is expected to contribute to continued strong
overall demand for most, if not all, of the vehicles the Company purchases for resale. Increased competition
resulting from availability of funding to the sub-prime auto industry has contributed to lower down payments and
longer terms, which have had a negative effect on collection percentages, liquidity and credit losses when compared
to prior periods.
Macro-economic factors can have an effect on credit losses and resulting liquidity. General inflation,
particularly within staple items such as groceries, as well as overall unemployment levels can have a significant
effect on collection results and ultimately credit losses. The Company has made improvements to its business
processes within the last few years to strengthen controls and provide stronger infrastructure to support its
collections efforts. The Company anticipates that credit losses in the near term will be higher than historical ranges
due to significant continued macro-economic challenges for the Company’s customer base as well as increased
competitive pressures. Management continues to focus on improved execution at the dealership level, specifically
as related to working individually with customers concerning collection issues.
28
The Company has generally leased the majority of the properties where its dealerships are located. As of
April 30, 2017, the Company leased approximately 86% of its dealership properties. The Company expects to
continue to lease the majority of the properties where its dealerships are located.
The Company’s revolving credit facilities generally restrict distributions by the Company to its
shareholders. The distribution limitations under the credit facilities allow the Company to repurchase the
Company’s stock so long as: either (a) the aggregate amount of such repurchases does not exceed $40 million
beginning December 12, 2016 and the sum of borrowing bases combined minus the principal balances of all revolver
loans after giving effect to such repurchases is equal to or greater than 25% of the sum of the borrowing bases, or
(b) the aggregate amount of such repurchases does not exceed 75% of the consolidated net income of the Company
measured on a trailing twelve month basis; provided that immediately before and after giving effect to the stock
repurchases, at least 12.5% of the aggregate funds committed under the credit facilities remain available. Thus, the
Company is limited in its ability to pay dividends or make other distributions to its shareholders without the consent
of the Company’s lenders.
At April 30, 2017, the Company had approximately $434,000 of cash on hand and $79 million of
availability under its revolving credit facilities (see Note F to the Consolidated Financial Statements in Item 8). On
a short-term basis, the Company’s principal sources of liquidity include income from operations and borrowings
under its revolving credit facilities. On a longer-term basis, the Company expects its principal sources of liquidity
to consist of income from operations and borrowings under revolving credit facilities or fixed interest term loans.
The Company’s revolving credit facilities mature in December 2019 and the Company expects that it will be able
to renew or refinance its revolving credit facilities on or before the date they mature. Furthermore, while the
Company has no specific plans to issue debt or equity securities, the Company believes, if necessary, it could raise
additional capital through the issuance of such securities.
The Company expects to use cash from operations and borrowings to (i) grow its finance receivables
portfolio, (ii) purchase property and equipment of approximately $4.2 million in the next 12 months in connection
with refurbishing existing dealerships and adding new dealerships, subject to strong operating results, (iii)
repurchase shares of common stock when favorable conditions exist and (iv) reduce debt to the extent excess cash
is available.
The Company believes it will have adequate liquidity to continue to grow its revenues and to satisfy its
capital needs for the foreseeable future.
Contractual Payment Obligations
The following is a summary of the Company’s contractual payment obligations as of April 30, 2017,
including renewal periods under operating leases that are reasonably assured (in thousands):
Revolving lines of credit
Notes payable
Operating leases
Total
$
$
Payments Due by Period
Total
118,124
413
44,683
163,220
Less Than
1 Year
-
105
5,902
6,007
1-3 Years
3-5 Years
118,124
308
16,334
134,766
-
-
13,760
13,760
More Than
5 Years
-
-
8,687
8,687
The above excludes estimated interest payments on the Company’s revolving lines of credit. The $44.7
million of operating lease commitments includes $13.1 million of non-cancelable lease commitments under the
lease terms, and $31.6 million of lease commitments for renewal periods at the Company’s option that are
reasonably assured.
29
Off-Balance Sheet Arrangements
The Company has entered into operating leases for approximately 86% of its dealership and office facilities.
Generally, these leases are for periods of three to five years and usually contain multiple renewal options. The
Company uses leasing arrangements to maintain flexibility in its dealership locations and to preserve capital. The
Company expects to continue to lease the majority of its dealership and office facilities under arrangements
substantially consistent with the past. For the years ended April 30, 2017, 2016 and 2015, rent expense for all
operating leases amounted to approximately $6.2 million, $6.1 million and $5.5 million, respectively.
The Company has a standby letter of credit relating to an insurance policy totaling $1 million at April 30,
2017.
Other than its operating leases and the letter of credit, the Company is not a party to any off-balance sheet
arrangement that management believes is reasonably likely to have a current or future effect on the Company’s
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to investors.
Related Finance Company Contingency
Car-Mart of Arkansas and Colonial do not meet the affiliation standard for filing consolidated income tax
returns, and as such they file separate federal and state income tax returns. Car-Mart of Arkansas routinely sells its
finance receivables to Colonial at what the Company believes to be fair market value and is able to take a tax
deduction at the time of sale for the difference between the tax basis of the receivables sold and the sales price.
These types of transactions, based upon facts and circumstances, have been permissible under the provisions of the
Internal Revenue Code as described in the Treasury Regulations. For financial accounting purposes, these
transactions are eliminated in consolidation and a deferred income tax liability has been recorded for this timing
difference. The sale of finance receivables from Car-Mart of Arkansas to Colonial provides certain legal protection
for the Company’s finance receivables and, principally because of certain state apportionment characteristics of
Colonial, also has the effect of reducing the Company’s overall effective state income tax rate by approximately
270 basis points. The actual interpretation of the Regulations is in part a facts and circumstances matter. The
Company believes it satisfies the material provisions of the Regulations. Failure to satisfy those provisions could
result in the loss of a tax deduction at the time the receivables are sold and have the effect of increasing the
Company’s overall effective income tax rate as well as the timing of required tax payments.
The Company’s policy is to recognize accrued interest related to unrecognized tax benefits in interest
expense and penalties in operating expenses. The Company had no accrued penalties or interest as of April 30,
2017.
Critical Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the
United States of America requires the Company to make estimates and assumptions in determining the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from the Company’s estimates. The Company believes the most significant estimate made in the preparation
of the Consolidated Financial Statements in Item 8 relates to the determination of its allowance for credit losses,
which is discussed below. The Company’s accounting policies are discussed in Note B to the Consolidated
Financial Statements in Item 8.
The Company maintains an allowance for credit losses on an aggregate basis at a level it considers sufficient
to cover estimated losses inherent in the portfolio at the balance sheet date in the collection of its finance receivables
currently outstanding. At April 30, 2017, the weighted average total contract term was 32.5 months with 23.7
months remaining. The reserve amount in the allowance for credit losses at April 30, 2017, $109.7 million, was
30
25.0% of the principal balance in finance receivables of $466.9 million, less unearned payment protection plan
revenue of $18.5 million and unearned service contract revenue of $9.6 million.
The estimated reserve amount is the Company’s anticipated future net charge-offs for losses incurred
through the balance sheet date. The allowance takes into account historical credit loss experience (both timing and
severity of losses), with consideration given to recent credit loss trends and changes in contract characteristics (i.e.,
average amount financed, months outstanding at loss date, term and age of portfolio), delinquency levels, collateral
values, economic conditions and underwriting and collection practices. The allowance for credit losses is reviewed
at least quarterly by management with any changes reflected in current operations. The calculation of the allowance
for credit losses uses the following primary factors:
(cid:120) The number of units repossessed or charged-off as a percentage of total units financed over specific
historical periods of time from one year to five years.
(cid:120) The average net repossession and charge-off loss per unit during the last eighteen months, segregated
by the number of months since the contract origination date, and adjusted for the expected future
average net charge-off loss per unit. Approximately 50% of the charge-offs that will ultimately occur
in the portfolio are expected to occur within 10-11 months following the balance sheet date. The
average age of an account at charge-off date is 11.9 months.
(cid:120) The timing of repossession and charge-off losses relative to the date of sale (i.e., how long it takes for
a repossession or charge-off to occur) for repossessions and charge-offs occurring during the last
eighteen months.
A point estimate is produced by this analysis which is then supplemented by any positive or negative
subjective factors to arrive at an overall reserve amount that management considers to be a reasonable estimate of
losses inherent in the portfolio at the balance sheet date that will be realized via actual charge-offs in the future.
Although it is at least reasonably possible that events or circumstances could occur in the future that are not presently
foreseen which could cause actual credit losses to be materially different from the recorded allowance for credit
losses, the Company believes that it has given appropriate consideration to all relevant factors and has made
reasonable assumptions in determining the allowance for credit losses. While challenging economic conditions can
negatively impact credit losses, the effectiveness of the execution of internal policies and procedures within the
collections area and the competitive environment on the funding side have historically had a more significant effect
on collection results than macro-economic issues. A 1% change, as a percentage of Finance receivables, in the
allowance for credit losses would equate to an approximate pre-tax change of $4.4 million.
Recent Accounting Pronouncements
Occasionally, new accounting pronouncements are issued by the Financial Accounting Standards Board
(“FASB”) or other standard setting bodies which the Company will adopt as of the specified effective date. Unless
otherwise discussed, the Company believes the implementation of recently issued standards which are not yet
effective will not have a material impact on its consolidated financial statements upon adoption.
Revenue Recognition. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with
Customers (Topic 606), which supersedes existing revenue recognition guidance. The new guidance in ASU 2014-
09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of
revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments
and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU
2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, to provide entities
with an additional year to implement ASU 2014-09. As a result, the guidance in ASU 2014-09 is effective for annual
reporting periods beginning after December 15, 2017, and interim reporting periods within those years, using one
31
of two retrospective application methods. The Company is currently finalizing their evaluation of the potential
effects of the adoption of this update on the consolidated financial statements, but does not expect such impact to
be material.
Leases. In February 2016, the FASB issued ASU 2016-02, Leases. The new guidance requires that lessees
recognize all leases, including operating leases, with a term greater than 12 months on-balance sheet and also
requires disclosure of key information about leasing transactions. The guidance in ASU 2016-02 is effective for
annual reporting periods beginning after December 15, 2018, and interim reporting periods within those years. The
Company is currently evaluating the potential effects of the adoption of this guidance on the consolidated financial
statements.
Stock Compensation. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-
Based Payment Accounting, which aims to simplify aspects of accounting for share-based payment transactions,
including: presenting the excess tax benefit or deficit from the exercise or vesting of share-based payments in the
income statement, a revision to the criteria for classifying an award as equity or liability, an option to recognize
gross stock compensation expense with actual forfeitures recognized as they occur, and certain classifications on
the statement of cash flows. In addition, the new guidance eliminates the excess tax benefit from the assumed
proceeds calculation under the treasury stock method for purposes of calculating diluted shares. ASU 2016-09 is
effective for annual reporting periods beginning after December 15, 2016 and interim reporting periods within those
years. Certain provisions of ASU 2016-09 are required to be adopted prospectively, notably the requirement to
recognize the excess tax benefit or deficit in the income statement, while other provisions require modified
retrospective application or in some cases full retrospective application. Upon adoption, the Company will record
any excess tax benefits or deficiencies from its equity awards in its Consolidated Statements of Operations in the
reporting period in which exercise occurs. As a result, subsequent to adoption, the Company’s income tax expense
and associated effective tax rate will be impacted by fluctuations in stock price between the grant dates and exercise
dates of equity awards.
Credit Losses. In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic
326). ASU 2016-13 requires financial assets such as loans to be presented net of an allowance for credit losses that
reduces the cost basis to the amount expected to be collected over the estimated life. Expected credit losses will be
measured based on historical experience and current conditions, as well as forecasts of future conditions that affect
the collectability of the reported amount. ASU 2016-13 is effective for annual reporting periods beginning after
December 15, 2019, and interim reporting periods within those years using a modified retrospective approach. The
Company is currently evaluating the potential effects of the adoption of this guidance on the consolidated financial
statements.
Impact of Inflation
Inflation has not historically been a significant factor impacting the Company’s results; however, recent
purchase price increases for vehicles, most pronounced over the last five fiscal years, have had a negative effect on
the Company’s gross margin percentages when compared to past years. This is due to the fact that the Company
focuses on keeping payments affordable for its customer base and at the same time ensuring that the term of the
contract matches the economic life of the vehicle.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk on its financial instruments from changes in interest rates. In
particular, the Company has historically had exposure to changes in the federal primary credit rate and has exposure
to changes in the prime interest rate of its lender. The Company does not use financial instruments for trading
purposes but has in the past entered into an interest rate swap agreement to manage interest rate risk.
Interest rate risk. The Company’s exposure to changes in interest rates relates primarily to its debt
obligations. The Company is exposed to changes in interest rates as a result of its revolving credit facilities, and
32
the interest rates charged to the Company under its credit facilities fluctuate based on its primary lender’s base rate
of interest. The Company had total revolving debt of $118.1 million outstanding at April 30, 2017. The impact of
a 1% increase in interest rates on this amount of debt would result in increased annual interest expense of
approximately $1.2 million and a corresponding decrease in net income before income tax.
The Company’s earnings are impacted by its net interest income, which is the difference between the
income earned on interest-bearing assets and the interest paid on interest-bearing notes payable. The Company’s
finance receivables carry a fixed interest rate of 15% or 16.5% per annum, based on the Company’s contract interest
rate as of the contract origination date, while its revolving credit facilities contain variable interest rates that fluctuate
with market interest rates.
33
Item 8. Financial Statements and Supplementary Data
The following financial statements and accountant’s report are included in Item 8 of this Annual Report on
Form 10-K:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of April 30, 2017 and 2016
Consolidated Statements of Operations for the years ended April 30, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended April 30, 2017, 2016 and 2015
Consolidated Statement of Equity for the years ended April 30, 2017, 2016 and 2015
Notes to Consolidated Financial Statements
34
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
America’s Car-Mart, Inc.
We have audited the accompanying consolidated balance sheets of America’s Car-Mart, Inc. (a Texas corporation)
and subsidiaries (the “Company”) as of April 30, 2017 and 2016, and the related consolidated statements of
operations, equity, and cash flows for each of the three years in the period ended April 30, 2017. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of America’s Car-Mart, Inc. and subsidiaries as of April 30, 2017 and 2016, and the results of
their operations and their cash flows for each of the three years in the period ended April 30, 2017, in conformity
with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company’s internal control over financial reporting as of April 30, 2017, based on criteria established
in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated June 13, 2017 expressed an unqualified opinion.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
June 13, 2017
35
Consolidated Balance Sheets
America’s Car-Mart, Inc.
(Dollars in thousands)
Assets:
Cash and cash equivalents
Accrued interest on finance receivables
Finance receivables, net
Inventory
Prepaid expenses and other assets
Income taxes receivable, net
Goodwill
Property and equipment, net
April 30, 2017
April 30, 2016
$
434
2,098
357,161
30,129
3,942
-
355
30,139
$
602
1,716
334,793
29,879
3,302
894
355
34,755
Total Assets
$
424,258
$
406,296
Liabilities, mezzanine equity and equity:
Liabilities:
Accounts payable
Deferred payment protection plan revenue
Deferred service contract revenue
Accrued liabilities
Income tax payable, net
Deferred income tax liabilities, net
Revolving credit facilities and notes payable
Total liabilities
Commitments and contingencies (Note L)
Mezzanine equity:
Mandatorily redeemable preferred stock
Equity:
Preferred stock, par value $.01 per share, 1,000,000 shares authorized;
none issued or outstanding
Common stock, par value $.01 per share, 50,000,000 shares authorized;
12,927,413 and 12,726,560 issued at April 30, 2017 and April 30, 2016,
respectively, of which 7,608,471 and 8,073,820 were outstanding at
April 30, 2017 and April 30, 2016, respectively
Additional paid-in capital
Retained earnings
Less: Treasury stock, at cost, 5,318,942 and 4,652,740
shares at April 30, 2017 and April 30, 2016, respectively
Total stockholders' equity
Non-controlling interest
Total equity
$
11,224
18,472
9,611
13,796
885
18,918
117,944
190,850
400
-
129
69,284
325,519
(162,024)
232,908
100
233,008
$
12,313
17,305
10,034
11,245
-
18,280
107,902
177,079
400
-
127
64,771
305,354
(141,535)
228,717
100
228,817
Total Liabilities, mezzanine equity and equity
$
424,258
$
406,296
The accompanying notes are an integral part of these consolidated financial statements.
36
Consolidated Statements of Operations
America’s Car-Mart, Inc.
(Dollars in thousands except per share amounts)
Revenues:
Sales
Interest and other income
Total revenues
Costs and expenses:
Cost of sales, excluding depreciation
Selling, general and administrative
Provision for credit losses
Interest expense
Depreciation and amortization
Loss on disposal of property and equipment
Total costs and expenses
Income before income taxes
Provision for income taxes
Net income
Less: Dividends on mandatorily redeemable
preferred stock
Net income attributable to common stockholders
Earnings per share:
Basic
Diluted
2017
Years Ended April 30,
2016
2015
$
520,149
67,602
587,751
304,927
91,940
149,097
4,069
4,272
1,204
555,509
32,242
12,037
$
506,517
61,389
567,906
304,886
92,242
144,397
3,306
4,208
369
549,408
18,498
6,902
472,569
57,752
530,321
272,446
83,802
120,289
2,903
3,830
17
483,287
47,034
17,544
20,205
$
11,596
$
29,490
40
20,165
2.57
2.49
$
$
$
40
11,556
1.38
1.33
$
$
$
40
29,450
3.42
3.25
$
$
$
$
$
Weighted average number of shares outstanding:
Basic
Diluted
7,854,238
8,110,777
8,370,478
8,666,031
8,617,864
9,048,957
The accompanying notes are an integral part of these consolidated financial statements.
37
Consolidated Statements of Cash Flows
America’s Car-Mart, Inc.
(In thousands)
2017
Years Ended April 30,
2016
2015
$
20,205
$
11,596
$
29,490
Operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses
Losses on claims for payment protection plan
Depreciation and amortization
Amortization of debt issuance costs
Loss on disposal of property and equipment
Stock-based compensation
Deferred income taxes
Excess tax benefit from stock based compensation
Change in operating assets and liabilities:
Finance receivable originations
Finance receivable collections
Accrued interest on finance receivables
Inventory
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Deferred payment protection plan revenue
Deferred service contract revenue
Income taxes, net
Net cash provided by operating activities
Investing Activities:
Purchases of property and equipment
Proceeds from sale of property and equipment
Net cash used in investing activities
Financing Activities:
Exercise of stock options
Excess tax benefits from stock based compensation
Issuance of common stock
Purchase of common stock
Dividend payments
Debt issuance costs
Change in cash overdrafts
Prinicipal payments on notes payable
Proceeds from revolving credit facilities
Payments on revolving credit facilities
Net cash used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
149,097
15,627
4,272
252
1,204
1,293
638
(1,183)
(479,099)
249,264
(382)
42,493
(730)
676
1,167
(423)
2,963
7,334
(1,587)
932
(655)
1,895
1,183
142
(20,486)
(40)
(449)
669
(104)
387,050
(376,707)
(6,847)
(168)
602
144,397
13,521
4,208
214
369
1,519
(898)
(238)
(460,499)
248,166
286
48,154
284
1,115
1,653
450
(11)
14,286
(4,526)
7
(4,519)
400
238
186
(14,214)
(40)
146
(1,587)
(34)
374,214
(369,264)
(9,955)
(188)
790
120,289
10,588
3,830
188
17
780
3,934
(1,627)
(445,405)
238,845
(172)
40,686
(887)
3,862
2,419
5,350
200
12,387
(4,009)
112
(3,897)
4,143
1,627
146
(20,020)
(40)
(256)
502
-
377,225
(371,316)
(7,989)
501
289
790
Cash and cash equivalents, end of period
$
434
$
602
$
The accompanying notes are an integral part of these consolidated financial statements.
38
Consolidated Statements of Equity
America’s Car-Mart, Inc.
(Dollars in thousands)
For the Years Ended April 30, 2017, 2016 and 2015
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Retained
Earnings
Treasury
Stock
Non-
Controlling
Interest
Total
Equity
Balance at April 30, 2014
12,452,809
$
125
$
55,734
$
264,348
$ (107,301)
$
100
$
213,006
Issuance of common stock
Stock options exercised
Purchase of 442,700 treasury shares
Tax benefit of stock based compensation
Stock based compensation
Dividends on subsidiary preferred stock
Net income
3,831
212,250
-
-
20,000
-
-
-
2
-
-
-
-
-
146
4,141
-
1,627
780
-
-
-
-
-
-
-
(40)
29,490
-
-
(20,020)
-
-
-
-
-
-
-
-
-
-
-
146
4,143
(20,020)
1,627
780
(40)
29,490
Balance at April 30, 2015
12,688,890
$
127
$
62,428
$
293,798
$ (127,321)
$
100
$
229,132
Issuance of common stock
Stock options exercised
Purchase of 493,073 treasury shares
Tax benefit of stock based compensation
Stock based compensation
Dividends on subsidiary preferred stock
Net income
6,920
30,750
-
-
-
-
-
-
-
-
-
-
-
-
186
400
-
238
1,519
-
-
-
-
-
-
-
(40)
11,596
-
-
(14,214)
-
-
-
-
-
-
-
-
-
-
-
186
400
(14,214)
238
1,519
(40)
11,596
Balance at April 30, 2016
12,726,560
$
127
$
64,771
$
305,354
$ (141,535)
$
100
$
228,817
Issuance of common stock
Stock options exercised
Purchase of 666,202 treasury shares
Tax benefit of stock based compensation
Stock based compensation
Dividends on subsidiary preferred stock
Net income
4,750
196,103
-
-
-
-
-
-
2
-
-
-
-
-
142
1,895
-
1,183
1,293
-
-
-
-
-
-
-
(40)
20,205
-
-
(20,489)
-
-
-
-
-
-
-
-
-
-
-
142
1,897
(20,489)
1,183
1,293
(40)
20,205
Balance at April 30, 2017
12,927,413
$
129
$
69,284
$
325,519
$ (162,024)
$
100
$
233,008
The accompanying notes are an integral part of these consolidated financial statements.
39
Notes to Consolidated Financial Statements
America’s Car-Mart, Inc.
A - Organization and Business
America’s Car-Mart, Inc., a Texas corporation (the “Company”), is one of the largest publicly held
automotive retailers in the United States focused exclusively on the “Integrated Auto Sales and Finance” segment
of the used car market. References to the Company typically include the Company’s consolidated subsidiaries.
The Company’s operations are principally conducted through its two operating subsidiaries, America’s Car Mart,
Inc., an Arkansas corporation (“Car-Mart of Arkansas”), and Colonial Auto Finance, Inc., an Arkansas corporation
(“Colonial”). Collectively, Car-Mart of Arkansas and Colonial are referred to herein as “Car-Mart”. The Company
primarily sells older model used vehicles and provides financing for substantially all of its customers. Many of the
Company’s customers have limited financial resources and would not qualify for conventional financing as a result
of limited credit histories or past credit problems. As of April 30, 2017, the Company operated 140 dealerships
located primarily in small cities throughout the South-Central United States.
B - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of America’s Car-Mart, Inc. and its subsidiaries.
All intercompany accounts and transactions have been eliminated.
Segment Information
Each dealership is an operating segment with its results regularly reviewed by the Company’s chief
operating decision maker in an effort to make decisions about resources to be allocated to the segment and to assess
its performance. Individual dealerships meet the aggregation criteria for reporting purposes under the current
accounting guidance. The Company operates in the Integrated Auto Sales and Finance segment of the used car
market, also referred to as the Integrated Auto Sales and Finance industry. In this industry, the nature of the sale
and the financing of the transaction, financing processes, the type of customer and the methods used to distribute
the Company’s products and services, including the actual servicing of the contracts as well as the regulatory
environment in which the Company operates all have similar characteristics. Each of our individual dealerships is
similar in nature and only engages in the selling and financing of used vehicles. All individual dealerships have
similar operating characteristics. As such, individual dealerships have been aggregated into one reportable segment.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amount
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Significant estimates include, but are not limited to, the Company’s allowance for credit losses.
Concentration of Risk
The Company provides financing in connection with the sale of substantially all of its vehicles. These sales
are made primarily to customers residing in Alabama, Arkansas, Georgia, Kentucky, Mississippi, Missouri,
Oklahoma, Tennessee, and Texas, with approximately 30% of revenues resulting from sales to Arkansas customers.
Periodically, the Company maintains cash in financial institutions in excess of the amounts insured by the
federal government. The Company’s revolving credit facilities mature in December 2019. The Company expects
that these credit facilities will be renewed or refinanced on or before the scheduled maturity dates.
40
Restrictions on Distributions/Dividends
The Company’s revolving credit facilities generally restrict distributions by the Company to its
shareholders. The distribution limitations under the credit facilities allow the Company to repurchase the
Company’s stock so long as: either (a) the aggregate amount of such repurchases does not exceed $40 million
beginning December 12, 2016 and the sum of borrowing bases combined minus the principal balances of all revolver
loans after giving effect to such repurchases is equal to or greater than 25% of the sum of the borrowing bases, or
(b) the aggregate amount of such repurchases does not exceed 75% of the consolidated net income of the Company
measured on a trailing twelve month basis; provided that immediately before and after giving effect to the stock
repurchases, at least 12.5% of the aggregate funds committed under the credit facilities remain available. Thus, the
Company is limited in its ability to pay dividends or make other distributions to its shareholders without the consent
of the Company’s lenders.
Cash Equivalents
The Company considers all highly liquid instruments purchased with original maturities of three months or
less to be cash equivalents.
Finance Receivables, Repossessions and Charge-offs and Allowance for Credit Losses
The Company originates installment sale contracts from the sale of used vehicles at its dealerships. These
installment sale contracts carry an average interest rate of approximately 15.9% using the simple effective interest
method including any deferred fees. In May 2016, the Company increased its retail installment sales contract interest
rate from 15.0% to 16.5% in response to continued high levels of credit losses. Contract origination costs are not
significant. The installment sale contracts are not pre-computed contracts whereby borrowers are obligated to pay
back principal plus the full amount of interest that will accrue over the entire term of the contract. Finance
receivables are collateralized by vehicles sold and consist of contractually scheduled payments from installment
contracts net of unearned finance charges and an allowance for credit losses. Unearned finance charges represent
the balance of interest receivable to be earned over the entire term of the related installment contract, less the earned
amount ($2.1 million at April 30, 2017 and $1.7 million at April 30, 2016), and as such, has been reflected as a
reduction to the gross contract amount in arriving at the principal balance in finance receivables. An account is
considered delinquent when the customer is one day or more behind on their contractual payments. While the
Company does not formally place contracts on nonaccrual status, the immaterial amount of interest that may accrue
after an account becomes delinquent up until the point of resolution via repossession or write-off, is reserved for
against the accrued interest on the Consolidated Balance Sheets. Delinquent contracts are addressed and either made
current by the customer, which is the case in most situations, or the vehicle is repossessed or written off if the
collateral cannot be recovered quickly. Customer payments are set to match their payday with approximately 74%
of payments due on either a weekly or bi-weekly basis. The frequency of the payment due dates combined with the
declining value of collateral lead to prompt resolutions on problem accounts. At April 30, 2017, 3.6% of the
Company’s finance receivables balances were 30 days or more past due compared to 3.0% at April 30, 2016.
Substantially all of the Company’s automobile contracts involve contracts made to individuals with
impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders. Contracts
made with buyers who are restricted in their ability to obtain financing from traditional lenders generally entail a
higher risk of delinquency, default and repossession, and higher losses than contracts made with buyers with better
credit.
The Company strives to keep its delinquency percentages low, and not to repossess vehicles. Accounts
three days late are contacted by telephone. Notes from each telephone contact are electronically maintained in the
Company’s computer system.
The Company attempts to resolve payment delinquencies amicably prior to repossessing a vehicle. If a
customer becomes severely delinquent in his or her payments, and management determines that timely collection
of future payments is not probable, the Company will take steps to repossess the vehicle.
41
Periodically, the Company enters into contract modifications with its customers to extend or modify the
payment terms. The Company only enters into a contract modification or extension if it believes such action will
increase the amount of monies the Company will ultimately realize on the customer’s account and will increase the
likelihood of the customer being able to pay off the vehicle contract. At the time of modification, the Company
expects to collect amounts due including accrued interest at the contractual interest rate for the period of delay. No
other concessions are granted to customers, beyond the extension of additional time, at the time of modifications.
Modifications are minor and are made for payday changes, minor vehicle repairs and other reasons. For those
vehicles that are repossessed, the majority are returned or surrendered by the customer on a voluntary basis. Other
repossessions are performed by Company personnel or third party repossession agents. Depending on the condition
of a repossessed vehicle, it is either resold on a retail basis through a Company dealership, or sold for cash on a
wholesale basis primarily through physical or online auctions.
The Company takes steps to repossess a vehicle when the customer becomes delinquent in his or her
payments and management determines that timely collection of future payments is not probable. Accounts are
charged-off after the expiration of a statutory notice period for repossessed accounts, or when management
determines that the timely collection of future payments is not probable for accounts where the Company has been
unable to repossess the vehicle. For accounts with respect to which the vehicle was repossessed, the fair value of
the repossessed vehicle is charged as a reduction of the gross finance receivables balance charged-off. On average,
accounts are approximately 60 days past due at the time of charge-off. For previously charged-off accounts that
are subsequently recovered, the amount of such recovery is credited to the allowance for credit losses.
The Company maintains an allowance for credit losses on an aggregate basis, as opposed to a contract-by-
contract basis, at an amount it considers sufficient to cover estimated losses inherent in the portfolio at the balance
sheet date in the collection of its finance receivables currently outstanding. The Company accrues an estimated loss
as it is probable that the entire amount will not be collected and the amount of the loss can be reasonably estimated
in the aggregate. The allowance for credit losses is based primarily upon historical credit loss experience, with
consideration given to recent credit loss trends and changes in contract characteristics (i.e., average amount financed
and term), delinquency levels, collateral values, economic conditions and underwriting and collection practices.
The allowance for credit losses is periodically reviewed by management with any changes reflected in current
operations. Although it is at least reasonably possible that events or circumstances could occur in the future that
are not presently foreseen which could cause actual credit losses to be materially different from the recorded
allowance for credit losses, the Company believes that it has given appropriate consideration to all relevant factors
and has made reasonable assumptions in determining the allowance for credit losses. The calculation of the
allowance for credit losses uses the following primary factors:
(cid:120) The number of units repossessed or charged-off as a percentage of total units financed over specific
historical periods of time from one year to five years.
(cid:120) The average net repossession and charge-off loss per unit during the last eighteen months, segregated
by the number of months since the contract origination date, and adjusted for the expected future
average net charge-off loss per unit. Approximately 50% of the charge-offs that will ultimately occur
in the portfolio are expected to occur within 10-11 months following the balance sheet date. The
average age of an account at charge-off date is 11.9 months.
(cid:120) The timing of repossession and charge-off losses relative to the date of sale (i.e., how long it takes for
a repossession or charge-off to occur) for repossessions and charge-offs occurring during the last
eighteen months.
A point estimate is produced by this analysis which is then supplemented by any positive or negative
subjective factors to arrive at an overall reserve amount that management considers to be a reasonable estimate of
losses inherent in the portfolio at the balance sheet date that will be realized via actual charge-offs in the future.
While challenging economic conditions can negatively impact credit losses, the effectiveness of the execution of
42
internal policies and procedures within the collections area and the competitive environment on the lending side
have historically had a more significant effect on collection results than macro-economic issues.
An increase to the allowance for credit losses to 25% was made in the second quarter of fiscal 2016 which
resulted in a $4.8 million charge to the provision for credit losses based on the analysis discussed above and the
increased level of charge-offs with the expectation that charge-offs related to a significant extent to increased
competition on the lending side will remain elevated.
In most states, the Company offers retail customers who finance their vehicle the option of purchasing a
payment protection plan product as an add-on to the installment sale contract. This product contractually obligates
the Company to cancel the remaining principal outstanding for any contract where the retail customer has totaled
the vehicle, as defined by the product, or the vehicle has been stolen. The Company periodically evaluates
anticipated losses to ensure that if anticipated losses exceed deferred payment protection plan revenues, an
additional liability is recorded for such difference. No such liability was required at April 30, 2017 or 2016.
Inventory
Inventory consists of used vehicles and is valued at the lower of cost or market on a specific identification
basis. Vehicle reconditioning costs are capitalized as a component of inventory. Repossessed vehicles and trade-
in vehicles are recorded at fair value, which approximates wholesale value. The cost of used vehicles sold is
determined using the specific identification method.
Goodwill
Goodwill reflects the excess of purchase price over the fair value of specifically identified net assets
purchased. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to
qualitative annual impairment tests at the Company’s year-end. The impairment tests are based on the comparison
of the fair value of the reporting unit to the carrying value of such unit. The implied goodwill is compared to the
carrying value of the goodwill to determine the impairment, if any. There was no impairment of goodwill during
fiscal 2017 or fiscal 2016.
Property and Equipment
Property and equipment are stated at cost. Expenditures for additions, remodels and improvements are
capitalized. Costs of repairs and maintenance are expensed as incurred. Leasehold improvements are amortized
over the shorter of the estimated life of the improvement or the lease period. The lease period includes the primary
lease term plus any extensions that are reasonably assured. Depreciation is computed principally using the straight-
line method generally over the following estimated useful lives:
Furniture, fixtures and equipment
Leasehold improvements
Buildings and improvements
3 to 7 years
5 to 15 years
18 to 39 years
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate
the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying values of the impaired assets exceed the fair value of such assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Cash Overdraft
As checks are presented for payment from the Company’s primary disbursement bank account, monies are
automatically drawn against cash collections for the day and, if necessary, are drawn against one of its revolving
43
credit facilities. Any cash overdraft balance principally represents outstanding checks, net of any deposits in transit
that as of the balance sheet date had not yet been presented for payment. Any cash overdraft balance is reflected in
accrued liabilities on the Company’s Consolidated Balance Sheets.
Deferred Sales Tax
Deferred sales tax represents a sales tax liability of the Company for vehicles sold on an installment basis
in the states of Alabama and Texas. Under Alabama and Texas law, for vehicles sold on an installment basis, the
related sales tax is due as the payments are collected from the customer, rather than at the time of sale. Deferred
sales tax liabilities are reflected in accrued liabilities on the Company’s Consolidated Balance Sheets.
Income Taxes
Income taxes are accounted for under the liability method. Under this method, deferred income tax assets
and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates expected to apply in the years in which these differences are expected
to be recovered or settled.
Occasionally, the Company is audited by taxing authorities. These audits could result in proposed
assessments of additional taxes. The Company believes that its tax positions comply in all material respects with
applicable tax law; however, tax law is subject to interpretation, and interpretations by taxing authorities could be
different from those of the Company, which could result in the imposition of additional taxes.
The Company recognizes the financial statement benefit of a tax position only after determining that the
relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting
the more likely than not threshold the amount recognized in the financial statements is the largest benefit that has a
greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The
Company applies this methodology to all tax positions for which the statute of limitations remains open.
The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax
regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and
require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state
and local income tax examinations by tax authorities for the fiscal years before 2014.
The Company’s policy is to recognize accrued interest related to unrecognized tax benefits in interest
expense and penalties in operating expenses. The Company had no accrued penalties or interest as of April 30, 2017
and 2016, respectively.
Revenue Recognition
Revenues are generated principally from the sale of used vehicles, which in most cases includes a service
contract and a payment protection plan product, and interest income and late fees earned on finance receivables.
Revenues are net of taxes collected from customers and remitted to government agencies. Cost of vehicle sales
include costs incurred by the Company to prepare the vehicle for sale including license and title costs, gasoline,
transport services and repairs.
Revenues from the sale of used vehicles are recognized when the sales contract is signed, the customer has
taken possession of the vehicle and, if applicable, financing has been approved. Revenues from the sale of vehicles
sold at wholesale are recognized at the time the proceeds are received. Revenues from the sale of service contracts
are recognized ratably over the expected duration of the product. Service contract revenues are included in sales
and the related expenses are included in cost of sales. Payment protection plan revenues are initially deferred and
then recognized to income using the “Rule of 78’s” interest method over the life of the contract so that revenues are
recognized in proportion to the amount of cancellation protection provided. Payment protection plan revenues are
included in sales and related losses are included in cost of sales as incurred. Interest income is recognized on all
44
active finance receivables accounts using the simple effective interest method. Active accounts include all accounts
except those that have been paid-off or charged-off.
Sales consist of the following for the years ended April 30, 2017, 2016 and 2015:
(In thousands)
Sales – used autos
Wholesales – third party
Service contract sales
Payment protection plan revenue
Total
2017
Years Ended April 30,
2016
2015
$
$
$
448,183
23,554
28,668
19,744
436,080
24,917
27,323
18,197
520,149
$
506,517
$
$
416,060
19,961
19,758
16,790
472,569
At April 30, 2017 and 2016, finance receivables more than 90 days past due were approximately $1.5
million and $1.1 million, respectively. Late fee revenues totaled approximately $2.0 million, $2.0 million and $2.2
million for the fiscal years ended 2017, 2016 and 2015, respectively. Late fee revenue is recognized when collected
and is reflected within Interest and other income on the Consolidated Statements of Operations.
Advertising Costs
Advertising costs are expensed as incurred and consist principally of radio, television and print media
marketing costs. Advertising costs amounted to $4.0 million, $4.2 million and $3.6 million for the years ended
April 30, 2017, 2016 and 2015, respectively.
Employee Benefit Plans
The Company has 401(k) plans for all of its employees meeting certain eligibility requirements. The plans
provide for voluntary employee contributions and the Company matches 50% of employee contributions up to a
maximum of 4% of each employee’s compensation. The Company contributed approximately $437,000, $403,000,
and $363,000 to the plans for the years ended April 30, 2017, 2016 and 2015, respectively.
The Company offers employees the right to purchase common shares at a 15% discount from market price
under the 2006 Employee Stock Purchase Plan which was approved by shareholders in October 2006. The Company
takes a charge to earnings for the 15% discount. Amounts for fiscal years 2017, 2016 and 2015 were not material
individually or in the aggregate. A total of 200,000 shares were registered and 147,886 remain available for issuance
under this plan at April 30, 2017.
Earnings per Share
Basic earnings per share are computed by dividing net income attributable to common stockholders by the
average number of common shares outstanding during the period. Diluted earnings per share are computed by
dividing net income attributable to common stockholders by the average number of common shares outstanding
during the period plus dilutive common stock equivalents. The calculation of diluted earnings per share takes into
consideration the potentially dilutive effect of common stock equivalents, such as outstanding stock options and
non-vested restricted stock, which if exercised or converted into common stock would then share in the earnings of
the Company. In computing diluted earnings per share, the Company utilizes the treasury stock method and anti-
dilutive securities are excluded.
Stock-Based Compensation
The Company recognizes the cost of employee services received in exchange for awards of equity
instruments, such as stock options and restricted stock, based on the fair value of those awards at the date of grant
over the requisite service period. The Company uses the Black-Scholes option pricing model to determine the fair
value of stock option awards. The Company may issue either new shares or treasury shares upon exercise of these
45
awards. Stock-based compensation plans, related expenses, and assumptions used in the Black-Scholes option
pricing model are more fully described in Note K.
Treasury Stock
The Company purchased 666,202, 493,073, and 442,700 shares of its common stock to be held as treasury
stock for a total cost of $20.5 million, $14.2 million and $20.0 million during the years ended April 30, 2017, 2016
and 2015, respectively. Treasury stock may be used for issuances under the Company’s stock-based compensation
plans or for other general corporate purposes. During fiscal 2016, the Company established a reserve account of
10,000 shares of treasury stock to secure outstanding service contracts issued in Iowa in accordance with the
regulatory requirements of that state. In fiscal 2017, the Company established another reserve account of 10,000
shares of treasury stock for its subsidiary, ACM Insurance Company, in accordance with the requirements of the
Arkansas Department of Insurance.
Recent Accounting Pronouncements
Occasionally, new accounting pronouncements are issued by the Financial Accounting Standards Board
(“FASB”) or other standard setting bodies which the Company will adopt as of the specified effective date. Unless
otherwise discussed, the Company believes the implementation of recently issued standards which are not yet
effective will not have a material impact on its consolidated financial statements upon adoption.
Revenue Recognition. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with
Customers (Topic 606), which supersedes existing revenue recognition guidance. The new guidance in ASU 2014-
09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of
revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments
and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU
2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, to provide entities
with an additional year to implement ASU 2014-09. As a result, the guidance in ASU 2014-09 is effective for annual
reporting periods beginning after December 15, 2017, and interim reporting periods within those years, using one
of two retrospective application methods. The Company is currently finalizing their evaluation of the potential
effects of the adoption of this update on the consolidated financial statements, but does not expect such impact to
be material.
Leases. In February 2016, the FASB issued ASU 2016-02, Leases. The new guidance requires that lessees
recognize all leases, including operating leases, with a term greater than 12 months on-balance sheet and also
requires disclosure of key information about leasing transactions. The guidance in ASU 2016-02 is effective for
annual reporting periods beginning after December 15, 2018, and interim reporting periods within those years. The
Company is currently evaluating the potential effects of the adoption of this guidance on the consolidated financial
statements.
Stock Compensation. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-
Based Payment Accounting, which aims to simplify aspects of accounting for share-based payment transactions,
including: presenting the excess tax benefit or deficit from the exercise or vesting of share-based payments in the
income statement, a revision to the criteria for classifying an award as equity or liability, an option to recognize
gross stock compensation expense with actual forfeitures recognized as they occur, and certain classifications on
the statement of cash flows. In addition, the new guidance eliminates the excess tax benefit from the assumed
proceeds calculation under the treasury stock method for purposes of calculating diluted shares. ASU 2016-09 is
effective for annual reporting periods beginning after December 15, 2016 and interim reporting periods within those
years. Certain provisions of ASU 2016-09 are required to be adopted prospectively, notably the requirement to
recognize the excess tax benefit or deficit in the income statement, while other provisions require modified
retrospective application or in some cases full retrospective application. Upon adoption, the Company will record
any excess tax benefits or deficiencies from its equity awards in its Consolidated Statements of Operations in the
reporting period in which exercise occurs. As a result, subsequent to adoption, the Company’s income tax expense
46
and associated effective tax rate will be impacted by fluctuations in stock price between the grant dates and exercise
dates of equity awards.
Credit Losses. In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic
326). ASU 2016-13 requires financial assets such as loans to be presented net of an allowance for credit losses that
reduces the cost basis to the amount expected to be collected over the estimated life. Expected credit losses will be
measured based on historical experience and current conditions, as well as forecasts of future conditions that affect
the collectability of the reported amount. ASU 2016-13 is effective for annual reporting periods beginning after
December 15, 2019, and interim reporting periods within those years using a modified retrospective approach. The
Company is currently evaluating the potential effects of the adoption of this guidance on the consolidated financial
statements.
C - Finance Receivables, Net
The Company originates installment sale contracts from the sale of used vehicles at its dealerships. These
installment sale contracts, which carry an interest rate of 15% or 16.5% per annum (based on the Company’s
contract interest rate in effect at the contract origination date), are collateralized by the vehicle sold and typically
provide for payments over periods ranging from 18 to 42 months. The Company’s finance receivables are defined
as one segment and one class of loans, which is sub-prime consumer automobile contracts. The level of risks
inherent in our financing receivables is managed as one homogeneous pool. The components of finance receivables
as of April 30, 2017 and 2016 are as follows:
(In thousands)
Gross contract amount
Less unearned finance charges
Principal balance
Less allowance for credit losses
April 30, 2017
April 30, 2016
$
545,916
(79,062)
466,854
(109,693)
$
504,149
(66,871)
437,278
(102,485)
Finance receivables, net
$
357,161
$
334,793
Changes in the finance receivables, net for the years ended April 30, 2017, 2016 and 2015 are as follows:
(In thousands)
Balance at beginning of period
Finance receivable originations
Finance receivable collections
Provision for credit losses
Losses on claims for payment protection plan
Inventory acquired in repossession and payment protection plan claims
$
2017
334,793
479,099
(249,264)
(149,097)
(15,627)
(42,743)
Years Ended April 30,
2016
$
324,144
460,499
(248,166)
(144,397)
(13,521)
(43,766)
$
2015
293,299
445,405
(238,845)
(120,289)
(10,588)
(44,838)
Balance at end of period
$
357,161
$
334,793
$
324,144
Changes in the finance receivables allowance for credit losses for the years ended April 30, 2017, 2016 and
2015 are as follows:
(In thousands)
Balance at beginning of period
Provision for credit losses
Charge-offs, net of recovered collateral
2017
$
102,485
149,097
(141,889)
Years Ended April 30,
2016
$
93,224
144,397
(135,136)
Balance at end of period
$
109,693
$
102,485
2015
86,033
120,289
(113,098)
93,224
$
$
47
The factors which influenced management’s judgment in determining the amount of the additions to the
allowance charged to provision for credit losses are described below:
The level of actual charge-offs, net of recovered collateral, is the most important factor in determining the
charges to the provision for credit losses. This is due to the fact that once a contract becomes delinquent the account
is either made current by the customer, the vehicle is repossessed or the account is written off if the collateral cannot
be recovered. Net charge-offs as a percentage of average finance receivables was 30.5% for fiscal 2017 as compared
to 31.3% for fiscal 2016. The decrease in net charge-offs for fiscal 2017 resulted from a lower frequency of losses
partially offset by an increase in severity due largely to higher principal balances at charge-off and lower wholesale
values at time of repossession. The fiscal 2016 provision included a $4.8 million increase in the provision as a
result of the increase in our provision percentage applied to the growth in finance receivables during the second
quarter of fiscal 2016.
Collections and delinquency levels can have a significant effect on additions to the allowance and are
reviewed frequently. Collections as a percentage of average finance receivables were 53.6% for the year ended
April 30, 2017 compared to 57.5% for the year ended April 30, 2016. The decrease in collections as a percentage
of average finance receivables was primarily due to the longer overall contract term, higher levels of contract
modifications related to a large extent to delays in income tax refunds, a lower level of early payoffs and the increase
in the contract interest rate, offset by a slightly higher average age of receivables. Delinquencies greater than 30
days increased to 3.6% for April 30, 2017 compared to 3.0% at April 30, 2016.
Macro-economic factors, and more importantly, proper execution of operational policies and procedures
have a significant effect on additions to the allowance charged to the provision. Higher unemployment levels,
higher gasoline prices and higher prices for staple items can potentially have a significant effect. The Company
continues to focus on operational improvements within the collections area such as credit reporting for customers
and further implementation of GPS technology on vehicles sold.
Credit quality information for finance receivables is as follows:
(Dollars in thousands)
April 30, 2017
April 30, 2016
Current
3 - 29 days past due
30 - 60 days past due
61 - 90 days past due
> 90 days past due
Total
Principal
Balance
397,341
52,869
11,658
3,516
1,470
466,854
$
$
Percent of
Portfolio
85.12%
11.32%
2.50%
0.75%
0.31%
100.00%
Principal
Balance
$
$
378,631
45,631
8,429
3,498
1,089
437,278
Percent of
Portfolio
86.59%
10.43%
1.93%
0.80%
0.25%
100.00%
Accounts one and two days past due are considered current for this analysis, due to the varying payment
dates and variation in the day of the week at each period end. Delinquencies may vary from period to period based
on the average age of the portfolio, seasonality within the calendar year, the day of the week and overall economic
factors. The above categories are consistent with internal operational measures used by the Company to monitor
credit results.
Substantially all of the Company’s automobile contracts involve contracts made to individuals with
impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders. Contracts
made with buyers who are restricted in their ability to obtain financing from traditional lenders generally entail a
higher risk of delinquency, default and repossession, and higher losses than contracts made with buyers with better
credit. The Company monitors contract term length, down payment percentages, and collections for credit quality
indicators.
48
Principal collected as a percent of average finance receivables
Average down-payment percentage
Twelve Months Ended
April 30,
2017
53.6%
6.0%
2016
57.5%
6.7%
Average originating contract term (in months )
Portfolio weighted average contract term, including modifications (in months )
29.5
32.5
28.9
31.6
April 30, 2017
April 30, 2016
The decrease in collections as a percentage of average finance receivables was primarily due to the longer
overall contract term, higher levels of contract modifications related to a large extent to delays in income tax refunds,
a lower level of early payoffs and the increase in the contract interest rate, offset by a slightly higher average age
of receivables. The increases in contract term are primarily related to efforts to keep payments affordable, for
competitive reasons and to continue to work more with our customers when they experience financial difficulties.
In order to remain competitive, term lengths may continue to increase.
D - Property and Equipment
A summary of property and equipment is as follows:
(In thousands)
April 30, 2017
April 30, 2016
Land
Buildings and improvements
Furniture, fixtures and equipment
Leasehold improvements
Construction in progress
Accumulated depreciation and amortization
$
$
6,742
11,972
13,143
24,464
-
(26,182)
6,711
11,928
14,941
23,308
250
(22,383)
Property and equipment, net
$
30,139
$
34,755
E - Accrued Liabilities
A summary of accrued liabilities is as follows:
(In thousands)
April 30, 2017
April 30, 2016
Employee compensation
Cash overdrafts (see Note B)
Deferred sales tax (see Note B)
Other
5,406
$
669
2,894
4,827
$
3,684
-
2,736
4,825
Accrued liabilities
$
13,796
$
11,245
F – Debt Facilities
A summary of revolving credit facilities is as follows:
(In thousands)
Aggregate
Amount
Interest
Rate
Maturity
April 30, 2017
April 30, 2016
Balance at
Revolving credit facilities
$
200,000
LIBOR + 2.375% December 12, 2019
( 3.37% at April 30, 2017 and 2.81% at April 30, 2016)
$
118,124
$
107,386
49
On March 9, 2012, the Company entered into an Amended and Restated Loan and Security Agreement with a group
of lenders providing revolving credit facilities totaling $125 million (“Credit Facilities”). The Credit Facilities were
amended on September 30, 2012, February 4, 2013, June 24, 2013, February 13, 2014 and October 8, 2014,
respectively. The first amendment increased the total revolving commitment to $145 million. The second
amendment amended the definition of eligible vehicle contracts to include contracts with 36-42 month terms. The
third amendment extended the term to June 24, 2016, provided the option to request revolver commitment increases
for up to an additional $55 million and provided for a 0.25% decrease in each of the three pricing tiers for
determining the applicable interest rate. The fourth amendment amended the structure of the debt covenants related
to the application of the fixed charge coverage ratio calculation. The fourth amendment also increased allowable
capital expenditures to $10 million in the aggregate during any fiscal year and allows the sale of certain vehicle
contracts to third parties. The Company’s fifth amendment extended the term of the Credit Facilities to October 8,
2017, added a new pricing tier for determining the applicable interest rate, provided for a 0.125% increase in each
of the three existing pricing tiers and amended one of two alternative distribution limitations related to repurchases
of the Company’s stock.
On February 18, 2016, the Company exercised an option under its existing credit agreement to increase the
total revolving credit facilities by $27.5 million from $145 million to $172.5 million. The increase in the total
revolving credit commitments was made pursuant to the aforementioned accordion feature of the Credit Facilities,
which allows the Company to increase the total revolver commitments by up to an additional $55 million (up to
$200 million in total commitments), subject to lender approval and/or successful syndication.
On December 12, 2016, the Company entered into a Second Amended and Restated Loan and Security
Agreement which amended and restated the Company’s Credit Facilities. The new agreement extended the terms
of the Credit Facilities to December 12, 2019, reduced the pricing tiers for determining the applicable interest rate
from four to three, and reset the aggregate limit on the repurchase of Company stock to $40 million beginning
December 12, 2016. The agreement also increased the total revolving credit facilities from $172.5 million to $200
million, provided the option to request revolver commitment increases for up to an additional $50 million and
increased the advance rate on accounts receivable with 37- 42 month terms from 50% to 55%, and the advance rate
on accounts receivable with 43-60 month terms from 45% to 50%.
The revolving credit facilities are collateralized primarily by finance receivables and inventory, are cross
collateralized and contain a guarantee by the Company. Interest is payable monthly under the revolving credit
facilities. The Credit Facilities provide for three pricing tiers for determining the applicable interest rate, based on
the Company’s consolidated leverage ratio for the preceding fiscal quarter. The current applicable interest rate under
the Credit Facilities is generally LIBOR plus 2.375%. The Credit Facilities contain various reporting and
performance covenants including (i) maintenance of certain financial ratios and tests, (ii) limitations on borrowings
from other sources, (iii) restrictions on certain operating activities and (iv) restrictions on the payment of dividends
or distributions.
The distribution limitations under the Credit Facilities allow the Company to repurchase the Company’s
stock so long as: either (a) the aggregate amount of such repurchases does not exceed $40 million beginning
December 12, 2016 and the sum of borrowing bases combined minus the principal balances of all revolver loans
after giving effect to such repurchases is equal to or greater than 25% of the sum of the borrowing bases, or (b) the
aggregate amount of such repurchases does not exceed 75% of the consolidated net income of the Company
measured on a trailing twelve month basis; provided that immediately before and after giving effect to the stock
repurchases at least 12.5% of the aggregate funds committed under the credit facilities remain available.
The Company was in compliance with the covenants at April 30, 2017. The amount available to be drawn
under the credit facilities is a function of eligible finance receivables and inventory. Based upon eligible finance
receivables and inventory at April 30, 2017, the Company had additional availability of approximately $79 million
under the revolving credit facilities.
50
The Company recognized $252,000 and $214,000 of amortization for the twelve months ended April 30,
2017 and 2016, respectively, related to debt issuance costs. The amortization is reflected as interest expense in the
Company’s Consolidated Statements of Operations.
During the year ended April 30, 2017, the Company incurred approximately $449,000 in debt issuance
costs related to the Second Amended and Restated Loan and Security Agreement.
During the third quarter of fiscal 2016, the Company implemented the guidance of ASU 2015-03,
Simplifying the Presentation of Debt Issuance Costs, which amended the presentation of debt issuance costs in the
financial statements. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with
debt discounts, rather than as an asset. As a result of the retrospective adoption of this guidance, debt issuance costs
were reclassified from prepaid expenses and other assets to revolving credit facilities on the Company’s
Consolidated Financial Statements. Debt issuance costs of approximately $593,000 and $396,000 as of April 30,
2017 and 2016, respectively, are shown as a deduction from the revolving credit facilities in the Consolidated
Balance Sheet.
On December 15, 2015, the Company entered into an agreement to purchase the property on which one of
its dealerships is located for a purchase price of $550,000. Under the agreement, the purchase price is being paid
in monthly principal and interest installments of $10,005. The debt matures in December 2020, bears interest at a
rate of 3.50% and is secured by the property. The balance on this note payable was approximately $413,000 as of
April 30, 2017.
G – Fair Value Measurements
The table below summarizes information about the fair value of financial instruments included in the
Company’s financial statements at April 30, 2017 and 2016:
(In thousands)
Cash
Finance receivables, net
Accounts payable
Revolving credit facilities
April 30, 2017
April 30, 2016
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
$ 434
357,161
11,224
117,944
$ 434
287,115
11,224
117,944
$ 602
334,793
12,313
107,902
$ 602
268,926
12,313
107,902
Because no market exists for certain of the Company’s financial instruments, fair value estimates are based
on judgments and estimates regarding yield expectations of investors, credit risk and other risk characteristics,
including interest rate and prepayment risk. These estimates are subjective in nature and involve uncertainties and
matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly
affect these estimates. The methodology and assumptions utilized to estimate the fair value of the Company’s
financial instruments are as follows:
Financial Instrument
Valuation Methodology
Cash
The carrying amount is considered to be a reasonable estimate of
fair value due to the short-term nature of the financial instrument.
Finance receivables, net
The Company estimated the fair value of its receivables at what a
third party purchaser might be willing to pay. The Company has
had discussions with third parties and has bought and sold
portfolios, and has had a third party appraisal in November 2012
that indicates a range of 35% to 40% discount to face would be a
reasonable fair value in a negotiated third party transaction. The
sale of finance receivables from Car-Mart of Arkansas to Colonial
51
is made at a 38.5% discount. For financial reporting purposes
these sale transactions are eliminated. Since the Company does
not intend to offer the receivables for sale to an outside third party,
the expectation is that the net book value at April 30, 2017, will
ultimately be collected. By collecting the accounts internally the
Company expects to realize more than a third party purchaser
would expect to collect with a servicing requirement and a profit
margin included.
Accounts payable
The carrying amount is considered to be a reasonable estimate of
fair value due to the short-term nature of the financial instrument.
Revolving credit facilities and
notes payable
The fair value approximates carrying value due to the variable
interest rates charged on
the borrowings, which reprice
frequently.
H - Income Taxes
The provision for income taxes was as follows:
(In thousands)
Provision for income taxes
Current
Deferred
Total
2017
Years Ended April 30,
2016
2015
$
$
11,399
638
12,037
$
$
7,800
(898)
6,902
$
$
13,610
3,934
17,544
The provision for income taxes is different from the amount computed by applying the statutory federal
income tax rate to income before income taxes for the following reasons:
(In thousands)
Tax provision at statutory rate
State taxes, net of federal benefit
Other, net
Total
2017
11,285
868
(116)
12,037
$
$
Years Ended April 30,
2016
$
$
6,474
443
(15)
6,902
2015
16,463
1,172
(91)
17,544
$
$
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant
components of the Company’s deferred income tax assets and liabilities were as follows:
(In thousands)
Deferred income tax liabilities related to:
Finance receivables
Property and equipment
Total
Deferred income tax assets related to:
Accrued liabilities
Inventory
Share based compensation
Deferred revenue
Total
Deferred income tax liabilities, net
Years Ended April 30,
2017
2016
$ 26,524
131
26,655
$ 24,868
1,160
26,028
2,371
149
3,964
1,253
7,737
$ 18,918
2,069
149
4,505
1,025
7,748
$ 18,280
52
I – Capital Stock
The Company is authorized to issue up to one million shares of $.01 par value preferred stock in one or
more series having such respective terms, rights and preferences as are designated by the Board of Directors. The
Company has not issued any preferred stock.
A subsidiary of the Company has issued 500,000 shares of $1.00 par value preferred stock which carries
an 8% cumulative dividend. The Company’s subsidiary can redeem the preferred stock at any time at par value
plus any unpaid dividends. After April 30, 2017, a holder of 400,000 shares of the subsidiary preferred stock can
require the Company’s subsidiary to redeem such stock for $400,000 plus any unpaid dividends.
J – Weighted Average Shares Outstanding
Weighted average shares of common stock outstanding used in the calculation of basic and diluted earnings
per share were as follows:
Weighted average shares outstanding-basic
Dilutive options and restricted stock
2017
7,854,238
256,539
Years Ended April 30,
2016
8,370,478
295,553
2015
8,617,864
431,093
Weighted average shares outstanding-diluted
8,110,777
8,666,031
9,048,957
Antidilutive securities not included:
Options
359,250
325,125
76,250
K – Stock-Based Compensation Plans
The Company has stock-based compensation plans available to grant non-qualified stock options, incentive
stock options and restricted stock to employees, directors and certain advisors of the Company. The current stock-
based compensation plans are the Amended and Restated Stock Option Plan and the Amended and Restated Stock
Incentive Plan. The Company recorded total stock-based compensation expense for all plans of $1.3 million
($811,000 after tax effects), $1.5 million ($952,000 after tax effects) and $780,000 ($489,000 after tax effects) for
the years ended April 30, 2017, 2016 and 2015, respectively. Tax benefits were recognized for these costs at the
Company’s overall effective tax rate.
Stock Options
The Company has options outstanding under the Amended and Restated Stock Option Plan. The
shareholders of the Company approved the Amended and Restated Stock Option Plan (the “Restated Option Plan”)
on August 5, 2015, which extended the term of the Restated Option Plan to June 10, 2025 and increased the number
of shares of common stock reserved for issuance under the plan by an additional 300,000 shares to 1,800,000 shares.
The Restated Option Plan provides for the grant of options to purchase shares of the Company’s common stock to
employees, directors and certain advisors of the Company at a price not less than the fair market value of the stock
on the date of grant and for periods not to exceed ten years. Options granted under the Company’s stock option
plans expire in the calendar years 2016 through 2027.
Minimum exercise price as a percentage of fair market value at date of grant
Last expiration date for outstanding options
Shares available for grant at April 30, 2017
Restated Option Plan
100%
March 13, 2027
277,500
53
The fair value of options granted is estimated on the date of grant using the Black-Scholes option pricing
model based on the assumptions in the table below.
Expected terms (years)
Risk-free interest rate
Volatility
Dividend yield
April 30, 2017
5.5
1.47%
36%
-
April 30, 2016
5.5
1.55%
34%
-
April 30, 2015
5.4
1.64%
34%
-
The expected term of the options is based on evaluations of historical and expected future employee exercise
behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates
approximately equal to the expected life at the grant date. Volatility is based on historical volatility of the
Company’s common stock. The Company has not historically issued dividends and does not expect to do so in the
foreseeable future.
The following is an aggregate summary of the activity in the Company’s stock option plans from April 30,
2014 to April 30, 2017:
Outstanding at April 30, 2014
Granted
Exercised
Cancelled
Outstanding at April 30, 2015
Granted
Exercised
Cancelled
Outstanding at April 30, 2016
Granted
Exercised
Cancelled
Outstanding at April 30, 2017
Number
of
Shares
Exercise
Price
per Share
Proceeds
on
Exercise
(in thousands)
Weighted Average
Exercise Price per
Share
1,117,000
89,000
(212,250)
(12,000)
981,750
338,750
(30,750)
(11,500)
1,278,250
45,000
(264,500)
(30,250)
1,028,500
$ 11.90 to $ 46.44
$36.54 to $50.25
$11.90 to $45.46
$41.86 to $45.72
$ 11.90 to $ 53.02
$ 26.37 to $ 53.02
$ 11.90 to $ 23.34
$ 41.86 to $ 53.02
$ 26.42 to $ 34.09
$ 11.90 to $ 28.13
$ 41.86 to $ 53.02
$
$
$
$
24,294
3,997
(4,143)
(540)
23,608
16,471
(400)
(598)
39,081
1,301
(4,363)
(1,559)
34,460
$
$
$
$
21.75
44.91
19.52
45.08
24.05
48.62
13.00
52.05
30.57
28.90
17.92
51.55
33.51
Stock option compensation expense on a pre-tax basis was $1.2 million ($728,000 after tax effects), $1.4
million ($870,000 after tax effects) and $664,000 ($416,000 after tax effects) for the years ended April 30, 2017,
2016 and 2015, respectively. As of April 30, 2017, the Company had approximately $2.8 million of total
unrecognized compensation cost related to unvested options that are expected to vest. These options have a
weighted-average remaining vesting period of 2.9 years.
There were 45,000 options granted during fiscal 2017. The grant-date fair value of all options granted
during fiscal 2017, 2016 and 2015 was $461,000, $5.6 million and $1.4 million, respectively. The options were
granted at fair market value on date of grant. Generally, options vest after three to five years, except for options
issued to directors which are immediately vested at date of grant.
As of April 30, 2017, there were 131,125 performance based stock options outstanding that were granted
in fiscal year 2016 with a five-year performance period ending April 30, 2020. Tiered vesting of these options is
based solely on comparing the Company’s net income over the specified performance period to net income at April
30, 2015. As of April 30, 2017, the Company had $1.1 million in unrecognized compensation expense related to
62,750 of these options that are not currently expected to vest.
The aggregate intrinsic value of outstanding options at April 30, 2017 and 2016 was $8.7 million and $4.8
million, respectively.
54
The Company had the following options exercised for the periods indicated. The impact of these cash
receipts is included in financing activities in the accompanying Consolidated Statements of Cash Flows.
(Dollars in thousands)
Options Exercised
Cash Received from Options Exercised
Intrinsic Value of Options Exercised
2017
Years Ended April 30,
2016
2015
264,500
2,609
6,439
$
$
30,750
400
943
$
$
212,250
4,143
5,983
$
$
During the year ended April 30, 2017, there were 88,750 options exercised through net settlements in
accordance with plan provisions, wherein the shares issued were reduced by 68,397 shares to satisfy the exercise
price and applicable withholding taxes to acquire 20,353 shares.
As of April 30, 2017 there were 669,500 vested and exercisable stock options outstanding with an aggregate
intrinsic value of $8.2 million and a weighted average remaining contractual life of 3.11 years and a weighted
average exercise price of $26.17.
Stock Incentive Plan
On October 14, 2009, the shareholders of the Company approved an amendment to the Company’s Stock
Incentive Plan that increased the number of shares of common stock that may be issued under the Stock Incentive
Plan from 150,000 to 300,000. On August 5, 2015, the shareholders of the Company approved the Amended and
Restated Stock Incentive Plan, which extended the term of the Stock Incentive Plan to June 10, 2025. For shares
issued under the Stock Incentive Plan, the associated compensation expense is generally recognized equally over
the vesting periods established at the award date and is subject to the employee’s continued employment by the
Company.
The following is a summary of the activity in the Company’s Stock Incentive Plan:
Number
of
Shares
Weighted Average
Grant Date
Fair Value
Unvested shares at April 30, 2016
Shares granted
Shares vested
Shares cancelled
$
9,500
10,000
-
(2,500)
Unvested shares at April 30, 2017
17,000
$
52.10
39.14
-
49.51
44.86
The fair value at vesting for awards under the stock incentive plan was $763,000, $495,000 and $495,000
in fiscal 2017, 2016 and 2015, respectively.
During the fiscal year 2017, 10,000 restricted shares were granted with a fair value of $39.14 per share.
There were no restricted shares granted during fiscal year 2016. During the fiscal year 2015, 9,500 restricted shares
were granted with a fair value of $52.10 per share. A total of 170,027 shares remain available for award at April
30, 2017.
The Company recorded compensation cost of $107,000 ($67,000 after tax effects), $99,000 ($62,000 after
tax effects) and $90,000 ($56,000 after tax effects) related to the Stock Incentive Plan during the years ended April
30, 2017, 2016 and 2015, respectively. As of April 30, 2017 the Company had $557,000 of total unrecognized
compensation cost related to unvested awards granted under the Stock Incentive Plan, which the Company expects
to recognize over a weighted-average remaining period of four years.
55
L - Commitments and Contingencies
Letter of Credit
The Company has a standby letter of credit relating to an insurance policy totaling $1 million at April 30, 2017.
Facility Leases
The Company leases certain dealership and office facilities under various non-cancelable operating leases.
Dealership leases are generally for periods from three to five years and contain multiple renewal options. As of
April 30, 2017 the aggregate rentals due under such leases, including renewal options that are reasonably assured,
were as follows:
Years Ending
April 30,
Amount
(In thousands)
2018
2019
2020
2021
2022
Thereafter
$
5,902
5,675
5,528
5,131
4,827
17,620
Total
$
44,683
The $44.7 million of lease commitments includes $13.1 million of non-cancelable lease commitments under
the lease terms, and $31.6 million of lease commitments for renewal periods at the Company’s option that are
reasonably assured. For the years ended April 30, 2017, 2016 and 2015, rent expense for all operating leases
amounted to approximately $6.2 million, $6.1 million, and $5.5 million, respectively.
Litigation
In the ordinary course of business, the Company has become a defendant in various types of legal
proceedings. The Company does not expect the final outcome of any of these actions, individually or in the
aggregate, to have a material adverse effect on the Company’s financial position, annual results of operations or
cash flows. The results of legal proceedings cannot be predicted with certainty, however, and an unfavorable
resolution of one or more of these legal proceedings could have a material adverse effect on the Company’s financial
position, annual results of operations or cash flows.
Related Finance Company
Car-Mart of Arkansas and Colonial do not meet the affiliation standard for filing consolidated income tax
returns, and as such they file separate federal and state income tax returns. Car-Mart of Arkansas routinely sells its
finance receivables to Colonial at what the Company believes to be fair market value and is able to take a tax
deduction at the time of sale for the difference between the tax basis of the receivables sold and the sales price.
These types of transactions, based upon facts and circumstances, have been permissible under the provisions of the
Internal Revenue Code as described in the Treasury Regulations. For financial accounting purposes, these
transactions are eliminated in consolidation, and a deferred income tax liability has been recorded for this timing
difference. The sale of finance receivables from Car-Mart of Arkansas to Colonial provides certain legal protection
for the Company’s finance receivables and, principally because of certain state apportionment characteristics of
Colonial, also has the effect of reducing the Company’s overall effective state income tax rate. The actual
interpretation of the Regulations is in part a facts and circumstances matter. The Company believes it satisfies the
material provisions of the Regulations. Failure to satisfy those provisions could result in the loss of a tax deduction
56
at the time the receivables are sold, and have the effect of increasing the Company’s overall effective income tax
rate as well as the timing of required tax payments.
M - Supplemental Cash Flow Information
Supplemental cash flow disclosures for the years ended April 30, 2017, 2016 and 2015 are as follows:
(in thousands)
Supplemental disclosures:
Interest paid
Income taxes paid, net
2017
Years Ended April 30,
2016
2015
$
4,069
8,435
$
3,536
7,811
$
2,885
13,409
Non-cash transactions:
Inventory acquired in repossession and payment protection plan claims
Purchase of property and equipment using the issuance of debt
Loss accrued on disposal of property and equipment
Net settlement option exercises
42,743
-
797
714
43,766
550
300
-
44,838
-
-
-
N - Quarterly Results of Operations (unaudited)
A summary of the Company’s quarterly results of operations for the years ended April 30, 2017 and 2016
is as follows (in thousands, except per share information):
Revenues
Gross profit
Net income
Net income attributable to common
stockholders
Earnings per share:
Basic
Diluted
Revenues
Gross profit
Net income
Net income attributable to common
stockholders
Earnings per share:
Basic
Diluted
$
$
First
Quarter
Second
Quarter
Year Ended April 30, 2017
Third
Quarter
Fourth
Quarter
145,840
54,171
7,109
$
150,210
55,173
5,018
$
7,099
5,008
0.89
0.87
0.64
0.62
138,784
49,427
2,836
2,826
0.36
0.35
$
152,917
56,451
5,242
5,232
0.68
0.66
First
Quarter
Second
Quarter
Year Ended April 30, 2016
Third
Quarter
Fourth
Quarter
142,690
52,508
4,616
$
133,004
46,074
(485)
$
4,606
(495)
0.54
0.52
(0.06)
(0.06)
137,463
49,089
4,102
4,092
0.49
0.47
$
154,749
53,960
3,363
3,353
0.41
0.40
$
$
Total
587,751
215,222
20,205
20,165
2.57
2.49
Total
567,906
201,631
11,596
11,556
1.38
1.33
57
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Based on management’s evaluation (with the participation of the Company’s Chief Executive Officer and
Chief Financial Officer), as of April 30, 2017, the Company’s Chief Executive Officer and Chief Financial Officer
have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-
15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), are effective to provide
reasonable assurance that information required to be disclosed by the Company in the reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SEC rules and forms, and that such information is accumulated and communicated to management, including the
Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial
officer), to allow timely decisions regarding required disclosure.
58
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal
control over financial reporting is designed to provide reasonable assurance regarding the reliability of the
Company’s financial reporting and the preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of
April 30, 2017. In making this assessment, management used the criteria set forth in The 2013 Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
Based on management’s assessment, management believes that the Company maintained effective internal
control over financial reporting as of April 30, 2017.
The Company’s independent registered public accounting firm independently assessed the effectiveness of
the Company’s internal control over financial reporting and has issued their report on the effectiveness of the
Company’s internal control over financial reporting at April 30, 2017. That report appears below.
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
America’s Car-Mart, Inc.
We have audited the internal control over financial reporting of America’s Car-Mart, Inc. (a Texas corporation) and
subsidiaries (the “Company”) as of April 30, 2017, based on criteria established in the 2013 Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of April 30, 2017, based on criteria established in the 2013 Internal Control—Integrated Framework issued by
COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements of the Company as of and for the year ended April 30, 2017, and our
report dated June 13, 2017 expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
June 13, 2017
60
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-
15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
Item 9B. Other Information
None.
61
PART III
Except as to information with respect to executive officers which is contained in a separate heading under
Part I, Item 1 of this Form 10-K, the information required by Items 10 through 14 of this Form 10-K is, pursuant to
General Instruction G(3) of Form 10-K, incorporated by reference herein from the Company's definitive proxy
statement to be filed pursuant to Regulation 14A for the Company's Annual Meeting of Stockholders to be held in
August 2017 (the “Proxy Statement”). The Company will, within 120 days of the end of its fiscal year, file with
the SEC a definitive proxy statement pursuant to Regulation 14A.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item will be contained in the Proxy Statement and such information is
incorporated herein by reference. Information regarding the executive officers of the Company is set forth under
the heading "Executive Officers" in Part I, Item 1 of this report.
Item 11. Executive Compensation
The information required by this item will be contained in the Proxy Statement and such information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item will be contained in the Proxy Statement and such information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be contained in the Proxy Statement and such information is
incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information required by this item will be contained in the Proxy Statement and such information is
incorporated herein by reference.
62
Item 15. Exhibits, Financial Statement Schedules
(a)1. Financial Statements
PART IV
The following financial statements and accountant’s report are included in Item 8 of this report:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of April 30, 2017 and 2016
Consolidated Statements of Operations for the years ended April 30, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended April 30, 2017, 2016 and 2015
Consolidated Statements of Equity for the years ended April 30, 2017, 2016 and 2015
Notes to Consolidated Financial Statements
(a)2. Financial Statement Schedules
The financial statement schedules are omitted since the required information is not present, or is not present
in amounts sufficient to require submission of the schedules, or because the information required is included in the
Consolidated Financial Statements and Notes thereto.
(a)3. Exhibits
The exhibits listed in the accompanying Exhibit Index (following the Signature section of this Annual
Report on Form 10-K) are filed or incorporated by reference as part of this Annual Report on Form 10-K.
63
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: June 13, 2017
AMERICA’S CAR-MART, INC.
By: /s/ Jeffrey A. Williams
Jeffrey A. Williams
President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ William H. Henderson
William H. Henderson
/s/ Jeffrey A. Williams
Jeffrey A. Williams
/s/ Vickie D. Judy
Vickie D. Judy
*
Jim von Gremp
*
Daniel J. Englander
*
Kenny Gunderman
*
Robert Cameron Smith
*
Eddie L. Hight
* By/s/ Jeffrey A. Williams
Jeffrey A. Williams
As Attorney-in-Fact
Pursuant to Powers of
Attorney filed herewith
Chief Executive Officer,
and Director
(Principal Executive Officer)
President,
Chief Financial Officer,
Secretary and Director
(Principal Financial Officer)
Date
June 13, 2017
June 13, 2017
Vice President, Accounting
(Principal Accounting Officer)
June 13, 2017
Chairman of the Board
June 13, 2017
June 13, 2017
June 13, 2017
June 13, 2017
June 13, 2017
Director
Director
Director
Director
64
Exhibit
Number
Description of Exhibit
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Articles of Incorporation of the Company, as amended. (Incorporated by reference to Exhibits
4.1-4.8 to the Company's Registration Statement on Form S-8 filed with the SEC on November
16, 2005 (File No. 333-129727))
Amended and Restated Bylaws of the Company dated December 4, 2007. (Incorporated by
reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter
ended October 31, 2007 filed with the SEC on December 7, 2007)
Amendment No. 1 to the Amended and Restated Bylaws of the Company dated February 18,
2014. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-
K filed with the SEC on February 19, 2014)
Specimen stock certificate. (Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended April 30, 1994 (File No. 000-14939))
Second Amended and Restated Loan and Security Agreement dated December 12, 2016,
among America’s Car-Mart, Inc., a Texas corporation, as Parent; Colonial Auto Finance, Inc.,
an Arkansas corporation, America’s Car Mart, Inc., an Arkansas corporation, and Texas Car-
Mart, Inc., a Texas corporation, as Borrowers; and certain financial institutions, as Lenders,
with Bank of America N.A., as Agent, Lead Arranger and Book Manager (Incorporated by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on
December 15, 2016).
Colonial Third Amended and Restated Revolver Note dated September 20, 2012, by Colonial
Auto Finance, Inc. in favor of Bank of America, N.A., as Lender (Incorporated by reference
to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed with the SEC on September
21, 2012).
Colonial Revolver Note dated December 12, 2016 by Colonial Auto Finance, Inc. in favor of
BOKF, NA d/b/a Bank of Arkansas, as Lender (Incorporated by reference to Exhibit 4.3 to the
Company’s Current Report on Form 8-K filed with the SEC on December 15, 2016).
Colonial Revolver Note dated December 12, 2016 by Colonial Auto Finance, Inc. in favor of
Commerce Bank, as Lender (Incorporated by reference to Exhibit 4.4 to the Company’s
Current Report on Form 8-K filed with the SEC on December 15, 2016).
Colonial Revolver Note dated December 12, 2016 by Colonial Auto Finance, Inc. in favor of
First Tennessee Bank, as Lender (Incorporated by reference to Exhibit 4.5 to the Company’s
Current Report on Form 8-K filed with the SEC on December 15, 2016).
Colonial Revolver Note dated December 12, 2016 by Colonial Auto Finance, Inc. in favor of
Arvest Bank, as Lender (Incorporated by reference to Exhibit 4.6 to the Company’s Current
Report on Form 8-K filed with the SEC on December 15, 2016).
ACM-TCM Amended and Restated Revolver Note dated March 9, 2012, by America’s Car
Mart, Inc., an Arkansas corporation, and Texas Car-Mart, Inc., as Borrowers, in favor of Bank
of America, N.A., as Lender (Incorporated by reference to Exhibit 4.7 to the Company’s
Current Report on Form 8-K filed with the SEC on March 12, 2012).
65
Exhibit
Number
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
Description of Exhibit
ACM-TCM Revolver Note dated December 12, 2016 by America’s Car Mart, Inc., an
Arkansas corporation, and Texas Car-Mart, Inc., as Borrowers, in favor of BOKF, NA d/b/a
Bank of Arkansas, as Lender (Incorporated by reference to Exhibit 4.8 to the Company’s
Current Report on Form 8-K filed with the SEC on December 15, 2016).
ACM-TCM Revolver Note dated December 12, 2016 by America’s Car Mart, Inc., an
Arkansas corporation, and Texas Car-Mart, Inc., as Borrowers, in favor of Commerce Bank,
as Lender (Incorporated by reference to Exhibit 4.9 to the Company’s Current Report on Form
8-K filed with the SEC on December 15, 2016).
ACM-TCM Revolver Note dated December 12, 2016 by America’s Car Mart, Inc., an
Arkansas corporation, and Texas Car-Mart, Inc., as Borrowers, in favor of First Tennessee
Bank, as Lender (Incorporated by reference to Exhibit 4.10 to the Company’s Current Report
on Form 8-K filed with the SEC on December 15, 2016).
ACM-TCM Revolver Note dated December 12, 2016 by America’s Car Mart, Inc., an
Arkansas corporation, and Texas Car-Mart, Inc., as Borrowers, in favor of Arvest Bank, as
Lender (Incorporated by reference to Exhibit 4.11 to the Company’s Current Report on Form
8-K filed with the SEC on December 15, 2016).
Amended and Restated Continuing Guaranty dated as of March 9, 2012, by America’s Car-
Mart, Inc., a Texas corporation, as Guarantor, in favor of Bank of America, N.A. as Agent for
the Lenders (Incorporated by reference to Exhibit 4.12 to the Company’s Current Report on
Form 8-K filed with the SEC on March 12, 2012).
Amended and Restated Continuing Guaranty dated as of March 9, 2012, by America’s Car
Mart, Inc., an Arkansas corporation, and Texas Car-Mart, Inc., a Texas corporation, as
Guarantors, in favor of Bank of America, N.A., as Agent for the Lenders (Incorporated by
reference to Exhibit 4.13 to the Company’s Current Report on Form 8-K filed with the SEC
on March 12, 2012).
Amended and Restated Continuing Guaranty dated as of March 9, 2012, by Colonial Auto
Finance, Inc., as Guarantor, in favor of Bank of America, N.A., as Agent for the Lenders
(Incorporated by reference to Exhibit 4.14 to the Company’s Current Report on Form 8-K filed
with the SEC on March 12, 2012).
Amended and Restated Security Agreement dated as of March 9, 2012, between America’s
Car-Mart, Inc., a Texas corporation, as Grantor, and Bank of America, N.A., as Agent for
Lenders (Incorporated by reference to Exhibit 4.15 to the Company’s Current Report on Form
8-K filed with the SEC on March 12, 2012).
Amended and Restated Security Agreement dated as of March 9, 2012, by and among
America’s Car Mart, Inc., an Arkansas corporation, and Texas Car-Mart, Inc., a Texas
corporation, as Grantors, and Bank of America, N.A., as Agent for Lenders (Incorporated by
reference to Exhibit 4.16 to the Company’s Current Report on Form 8-K filed with the SEC
on March 12, 2012).
66
4.18
Amended and Restated Security Agreement dated as of March 9, 2012, between Colonial Auto
Finance, Inc., as Grantor, and Bank of America, N.A., as Agent for Lenders (Incorporated by
reference to Exhibit 4.17 to the Company’s Current Report on Form 8-K filed with the SEC
on March 12, 2012).
10.1*
Amended and Restated Stock Incentive Plan (Incorporated by reference to Appendix A to the
Company’s Proxy Statement on Schedule 14A filed with the SEC on June 23, 2015).
10.2*
Amended and Restated Stock Option Plan (Incorporated by reference to Appendix B to the
Company’s Proxy Statement on Schedule 14A filed with the SEC on June 23, 2015).
10.2.1*
10.2.2*
10.2.3*
10.2.4*
10.3*
10.4*
10.5*
10.6*
14.1
Option Agreement for Amended and Restated Stock Option Plan, dated August 5, 2015,
between America’s Car-Mart, Inc., a Texas corporation, and William H. Henderson
(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
with the SEC on August 10, 2015).
Option Agreement for Amended and Restated Stock Option Plan, dated August 5, 2015,
between America’s Car-Mart, Inc., a Texas corporation, and William H. Henderson
(Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed
with the SEC on August 10, 2015).
Option Agreement for Amended and Restated Stock Option Plan, dated August 5, 2015,
between America’s Car-Mart, Inc., a Texas corporation, and Jeffrey A. Williams (Incorporated
by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC
on August 10, 2015).
Option Agreement for Amended and Restated Stock Option Plan, dated August 5, 2015,
between America’s Car-Mart, Inc., a Texas corporation, and Jeffrey A. Williams (Incorporated
by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC
on August 10, 2015).
Form of Indemnification Agreement between the Company and certain officers and directors
of the Company. (Incorporated by reference to the Company's Quarterly Report on Form 10-
Q for the quarter ended July 31, 1993)
Employment Agreement, dated as of May 1, 2015, between America’s Car Mart, Inc., an
Arkansas corporation, and William H. Henderson (Incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K filed with the SEC on June 23, 2015).
Employment Agreement, dated as of May 1, 2015, between America’s Car Mart, Inc., an
Arkansas corporation, and Jeffrey A. Williams (Incorporated by reference to Exhibit 10.2 to
the Company’s Current Report on Form 8-K filed with the SEC on June 23, 2015).
America’s Car-Mart, Inc. Nonqualified Deferred Compensation Plan (Incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC
on October 10, 2014).
Code of Business Conduct and Ethics. (Incorporated by reference to Exhibit 14.1 to the
Company’s Annual Report on Form 10-K for the year ended April 30, 2004 filed with the SEC
on July 8, 2004)
21.1
Subsidiaries of America’s Car-Mart, Inc.
67
23.1
24.1
24.2
24.3
24.4
24.5
31.1
31.2
32.1
Consent of Independent Registered Public Accounting Firm
Power of Attorney of Kenny Gunderman
Power of Attorney of Daniel J. Englander
Power of Attorney of Robert Cameron Smith
Power of Attorney of Eddie L. Hight
Power of Attorney of Jim von Gremp
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-
14(b) of the Exchange Act and 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Labels Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
Indicates management contract or compensatory plan or arrangement covering executive officers or
*
directors of the Company.
68
Exhibit 21.1
Subsidiaries of America’s Car-Mart, Inc.
Crown Delaware Investments Corp. (a Delaware corporation)
America’s Car Mart, Inc. (an Arkansas Corporation)
Colonial Auto Finance, Inc. (an Arkansas Corporation)
Colonial Underwriting, Inc. (an Arkansas Corporation)
Texas Car-Mart, Inc. (a Texas corporation)
Auto Finance Investors, Inc. (a Texas corporation)
ACM Insurance Company (an Arkansas corporation)
69
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated June 13, 2017, with respect to the consolidated financial statements and internal control over
financial reporting included in the Annual Report of America’s Car-Mart, Inc. on Form 10-K for the year ended April 30, 2017.
We consent to the incorporation by reference of said reports in the Registration Statements of America’s Car-Mart, Inc. on
Forms S-8 (File Nos. 333-139270, 333-139269, 333-208414, 333-208416).
/s/ GRANT THORNTON LLP
Tulsa, OK
June 13, 2017
70
STATE OF ARKANSAS §
COUNTY OF PULASKI §
Exhibit 24.1
POWER OF ATTORNEY
Know all men by these presents, that I, KENNY GUNDERMAN, a Director of AMERICA’S CAR-MART, INC., a
Texas corporation, do constitute and appoint WILLIAM H. HENDERSON and JEFFREY A. WILLIAMS my true and lawful
attorneys-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the
Securities Exchange Act of 1934, the Annual Report on Form 10-K for AMERICA’S CAR-MART, INC. for the fiscal year
ended April 30, 2017 and to file the same with the Securities and Exchange Commission and National Association of Securities
Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in
my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said attorneys-in-
fact deem appropriate, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes may do
or cause to be done by virtue hereof.
In witness whereof, I have hereunto set my hand and seal this 12th day of June, 2017.
/s/ Kenny Gunderman
KENNY GUNDERMAN
Before me this 12th day of June, 2017, came KENNY GUNDERMAN, personally known to me, who in my presence
did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed.
ACKNOWLEDGMENT
/s/ Shannon Karpoff
NOTARY PUBLIC
71
STATE OF NEW YORK §
COUNTY OF SUFFOLK §
Exhibit 24.2
POWER OF ATTORNEY
Know all men by these presents, that I, DANIEL J. ENGLANDER, a Director of AMERICA’S CAR-MART, INC.,
a Texas corporation, do constitute and appoint WILLIAM H. HENDERSON and JEFFREY A. WILLIAMS my true and lawful
attorneys-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the
Securities Exchange Act of 1934, the Annual Report on Form 10-K for AMERICA’S CAR-MART, INC. for the fiscal year
ended April 30, 2017 and to file the same with the Securities and Exchange Commission and National Association of Securities
Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in
my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said attorneys-in-
fact deem appropriate, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes may do
or cause to be done by virtue hereof.
In witness whereof, I have hereunto set my hand and seal this 7th day of June, 2017.
/s/ Daniel J. Englander
DANIEL J. ENGLANDER
Before me this 7th day of June, 2017, came DANIEL J. ENGLANDER, personally known to me, who in my presence
did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed.
ACKNOWLEDGMENT
/s/ Deborah R. Washburn
NOTARY PUBLIC
72
STATE OF ARKANSAS §
COUNTY OF BENTON §
Exhibit 24.3
POWER OF ATTORNEY
Know all men by these presents, that I, ROBERT CAMERON SMITH, a Director of AMERICA’S CAR-MART,
INC., a Texas corporation, do constitute and appoint WILLIAM H. HENDERSON and JEFFREY A. WILLIAMS my true and
lawful attorneys-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements
of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for AMERICA’S CAR-MART, INC. for the fiscal
year ended April 30, 2017 and to file the same with the Securities and Exchange Commission and National Association of
Securities Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my
behalf and in my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said
attorneys-in-fact deem appropriate, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or
substitutes may do or cause to be done by virtue hereof.
In witness whereof, I have hereunto set my hand and seal this 12th day of June, 2017.
/s/ Robert Cameron Smith
ROBERT CAMERON SMITH
Before me this 12th day of June, 2017, came ROBERT CAMERON SMITH, personally known to me, who in my
presence did sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed.
ACKNOWLEDGMENT
/s/ Jill Bright
NOTARY PUBLIC
73
STATE OF ARKANSAS §
COUNTY OF BENTON §
Exhibit 24.4
POWER OF ATTORNEY
Know all men by these presents, that I, EDDIE L. HIGHT, a Director of AMERICA’S CAR-MART, INC., a Texas
corporation, do constitute and appoint WILLIAM H. HENDERSON and JEFFREY A. WILLIAMS my true and lawful
attorneys-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the
Securities Exchange Act of 1934, the Annual Report on Form 10-K for AMERICA’S CAR-MART, INC. for the fiscal year
ended April 30, 2017 and to file the same with the Securities and Exchange Commission and National Association of Securities
Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in
my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said attorneys-in-
fact deem appropriate, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes may do
or cause to be done by virtue hereof.
In witness whereof, I have hereunto set my hand and seal this 12th day of June, 2017.
/s/ Eddie L. Hight
EDDIE L. HIGHT
Before me this 12th day of June, 2017, came EDDIE L. HIGHT, personally known to me, who in my presence did
sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed.
ACKNOWLEDGMENT
/s/ Christy Wilkerson
NOTARY PUBLIC
74
STATE OF ARKANSAS §
COUNTY OF BENTON §
Exhibit 24.5
POWER OF ATTORNEY
Know all men by these presents, that I, JIM VON GREMP, a Director of AMERICA’S CAR-MART, INC., a Texas
corporation, do constitute and appoint WILLIAM H. HENDERSON and JEFFREY A. WILLIAMS my true and lawful
attorneys-in-fact, with full power of substitution, for me in any and all capacities, to sign, pursuant to the requirements of the
Securities Exchange Act of 1934, the Annual Report on Form 10-K for AMERICA’S CAR-MART, INC. for the fiscal year
ended April 30, 2017 and to file the same with the Securities and Exchange Commission and National Association of Securities
Dealers, Inc., together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in
my stead, in any and all capacities, any amendments to said Annual Report, incorporating such changes as said attorneys-in-
fact deem appropriate, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes may do
or cause to be done by virtue hereof.
In witness whereof, I have hereunto set my hand and seal this 8th day of June, 2017.
/s/ Jim von Gremp
JIM VON GREMP
Before me this 8th day of June, 2017, came JIM VON GREMP, personally known to me, who in my presence did
sign and seal the above and foregoing Power of Attorney and acknowledged the same as his true act and deed.
ACKNOWLEDGMENT
/s/ Deborah R. Washburn
NOTARY PUBLIC
75
Exhibit 31.1
Certification
1.
2.
3.
4.
I, William H. Henderson, certify that:
I have reviewed this Annual Report on Form 10-K for the period ended April 30, 2017 of America’s Car-Mart, Inc.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
(a)
(b)
June 13, 2017
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ William H. Henderson
William H. Henderson
Chief Executive Officer
(Principal Executive Officer)
76
Exhibit 31.2
Certification
1.
2.
3.
4.
I, Jeffrey A. Williams, certify that:
I have reviewed this Annual Report on Form 10-K for the period ended April 30, 2017 of America’s Car-Mart, Inc.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
(a)
(b)
June 13, 2017
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ Jeffrey A. Williams
Jeffrey A. Williams
President, Chief Financial Officer and Secretary
(Principal Financial Officer)
77
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K for the period ended April 30, 2017 of America’s Car-Mart, Inc.
(the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned,
William H. Henderson, Chief Executive Officer of the Company, and Jeffrey A. Williams, President and Chief Financial
Officer of the Company, certify in our capacities as officers of the Company, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
By: /s/ William H. Henderson
William H. Henderson
Chief Executive Officer
June 13, 2017
By: /s/ Jeffrey A. Williams
Jeffrey A. Williams
President, Chief Financial Officer and Secretary
June 13, 2017
78
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America’s Cart-Mart, Inc.
2017 Annual Report
CORPORATE INFORMATION
Board of Directors
Jim von Gremp
Chairman of the Board
Retired Certified Public Accountant
William H. (“Hank”) Henderson
Chief Executive Officer
Kenny Gunderman
President and Chief Executive Officer
Communications Sales & Leasing, Inc.
Robert Cameron Smith
President, Cameron Smith & Associates, Inc.
Daniel J. Englander
Managing Partner, Ursula Investors
Jeffrey A. Williams
President and Chief Financial Officer
Eddie L. Hight
Retired Chief Operating Officer
Executive Officers
William H. (“Hank”) Henderson
Chief Executive Officer
Jeffrey A. Williams
President and Chief Financial Officer
Corporate Headquarters
802 SE Plaza Avenue, Suite 200
Bentonville, Arkansas 72712
(479) 464-9944
Annual Meeting
The annual meeting of stockholders will be held
at America’s Car-Mart Corporate Headquarters,
802 SE Plaza Avenue, Suite 200, Bentonville,
Arkansas at 10:00 a.m. Central Time on
Wednesday, August 2, 2017.
Transfer Agent and Registrar
Securities Transfer Corporation
2901 Dallas Parkway, Suite 380
Plano, Texas 75093
(469) 633-0101
Independent Public Accountants
Grant Thornton, LLP
Tulsa, Oklahoma
America’s Car-Mart currently operates 140 dealerships in eleven states,
with headquarters in Bentonville, Arkansas.
Corporate Headquarters
802 SE Plaza Avenue, Suite 200
Bentonville, Arkansas 72712
Phone: (479) 464-9944
Fax: (479) 273-7556
www.car-mart.com
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