2018 Annual Report
OUR MISSION
We strive to earn the
repeat business of our
customers by providing
quality vehicles,
affordable payment terms,
and excellent service.
OUR VISION
To be the most respected
Buy-Here Pay-Here
organization in the country.
OUR VALUES
Integrity • Respect
Compassion • Excellence
To Our Fellow Shareholders:
We are proud of our current financial and opera-
650
tional positions and are very excited about our future.
600
We are not here by accident but as the result of years
550
significantly improving in a changing industry. After the
financial crisis, we initially had some very good credit
results as funding to our industry, as well as to many
of focus, commitment, hard work and dedication. The
other industries, was constricted. By financing cus-
500
consensus view within our management team is that
450
we still have a long way to go and many improvements
400
to make, but collectively we have a clear vision of
tomer receivables on our own balance sheet, in some
respects we may have been “the only game in town.”
At a minimum, the competitive landscape was histori-
350
where we are going and what it’s going to take to get
cally much less crowded. In fact, our single best year
there. We are enthusiastically committed to excellence
300
in recent history for credit losses was 2010, a year that
in our work by focusing on attracting, training and
250
included the tail end of the great recession. However,
developing people with the goal of earning repeat busi-
200
the longer that world-wide ultra-low interest rates con-
ness by improving the customer experience. We see
150
tinued, the more yield-seeking investors became inter-
so many opportunities in our future, and we have a real
100
ested in the deep subprime automobile securitization
sense of urgency in our work as our customers deserve
50
market, with its higher returns, significant credit
to be served at the very highest levels. We believe that
0
enhancements and its fresh history of performing well
the time is now for us to maximize the opportunities
2006
2004
2002
2005
2007
2003
2008
2009
2010
2013
2016
before, during and after the recession.
2015
2012
2014
2011
2017
2018
before us and to get better every single day.
It took a few years for our market segment to be
It is hard to talk about our future without first reflect-
affected, but we began to see a new and significant
ing on our recent past and the challenges we have
increase in competition from the used car divisions of
faced and continue to face in not only adapting to, but
franchised new car dealerships and independent
Significant Top-Line Growth
$650
$600
$550
$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
0
$612
$588
$568
$530
0 . 9 %
$489
$465
$430
8
1
0
2
–
2
0
0
2
C A G R : 1
$379
$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
2018
14
12
10
8
6
4
2
0
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Return on Average Assets
11.38%
10.68%
11.22%
9.60%
8.52%
7.71%
5.85%
8.29%
4.86%
2.87%
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
dealerships, via special finance, in the spring and
execution. We believe that we are well positioned for
summer of 2012. Quality inventory that previously
future market opportunities.
flowed into our market was getting stuck above us as
We believe that the financing market has been
many customers were now qualifying for aggressive
underpricing the servicing aspect of the business.
financing options that were not previously available.
However, with credit enhancement providing excess
Several newly formed private equity supported finance
cushion for securitizations, the math may still work to a
companies as well as more established securitizers
degree. There appears to be no shortage of investor
worked through Wall Street to aggressively target our
demand for securitized subprime automobile loans,
customer base, which led to a race to the bottom and a
with lower yield spreads offsetting recent interest rate
scramble for market share for all participants. Even
increases. Our job is to always ensure that, even
captive finance companies began to move into our
though we are an integrated company, our two operat-
segment subsidizing credit risks.
ing businesses—the finance company and the dealer-
We chose to view these industry changes as perma-
ship company—are functioning at levels that compete
nent, which has proven to be wise. Interest rates have
with profitable, successful, well-respected stand-alone
remained historically low and the availability of capital
companies in these businesses. We must look at our
to our market is still high, although somewhat more
business from the lenses of a securitizer even though
rational as of late. As we adjusted to these market
we do not securitize or sell our finance receivables.
changes and the increased competition, our contract
With that backdrop, we are convinced that our cash-
terms have lengthened, our customer interest rates are
on-cash returns are solid and compare very favorably
higher and recovery rates for repossessions are lower,
to the competition. In addition to our solid cash-on-
all resulting in higher credit risks. The market may end
cash returns, we believe that from an operating cost
up moving favorably for us down the road, but we are
standpoint, we match up nicely with the best dealer-
not waiting on that as we move the business forward
ship companies, indirect finance companies and
by focusing on people and excellence in operational
independent Buy-Here-Pay-Here companies. With our
20
18
16
14
12
10
8
6
4
2
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Return on Average Equity
16.08%
15.51%
17.74%
16.61%
15.73%
13.32%
10.16%
8.73%
5.05%
20.00%
18.00%
16.00%
14.00%
12.17%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
solid cost structure, an expanding market and, above
“captive” finance arrangement, we are in a unique
all, the value we add from the consumers’ viewpoint by
position to control our own destiny in terms of our book
providing face-to-face customer service, we believe
of business in the towns we serve. Our business is
we are in a very good spot as we look forward.
very personal as we establish face-to-face relation-
We decided early to plow through the industry
ships in a world that is moving in the opposite direc-
changes, strengthen our infrastructure and focus on
tion. We are, in effect, a small-town character lender
improving operationally. Rather than crawl into a shell
that truly cares about the success of each customer,
to try to wait out the storm, we hit the challenges
and we are prepared to go the extra mile to help a cus-
head-on. We invested heavily in our infrastructure with
tomer in need. This approach is in stark contrast to
confidence that, even if the competition got worse, we
most finance companies looking strictly for yield on a
had an important role to play in our communities and
pool of loans. Our customer service levels, the key
could earn strong returns by focusing on collections
advantage over indirect lenders, are good but can
and serving our customers. We committed to creating
always be better. Even though brand loyalty has
an infrastructure that would support a much larger
decreased for most businesses over the last several
business to give us continuing cost advantages in an
years, we believe that if we operate our company at
industry that was changing rapidly and moving from
the highest standards, continue to invest in the com-
lower volumes, higher margins to higher volumes,
munities we serve, and focus on customer success,
lower margins. We are proud of our efforts thus far and
we can positively affect that trend for our company.
know that we will continue to improve as we move the
Earning the repeat business of our customers is our
business forward.
top priority.
We are convinced that our model represents the
Significant efforts will continue to be aimed at
best way to serve this “high-touch” customer and the
attracting, training and retaining the very best people,
challenges they face with their local transportation
especially for the General Manager position. We have
needs. With our “bricks and mortar” presence and our
always known the importance of the General Manager
500
450
400
350
300
250
200
150
100
50
0
$500
$450
$400
$350
$300
$250
$200
$150
2002
2003
2004
2005
2006
2007
2008
2009
20010
20011
2012
2013
2014
2015
2016
2017
2018
90
80
70
60
50
40
30
20
10
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Self-Funded Growth
43.3%
$185
$179
$152
$129
$112
$100
$92
$501
$467
$437
$417
$379
$363
$317
$282
$261
$231
$208
30.4%
$118
$152
$100
$97
$103
$108
$78
$50
0
$40
$26
$23
$29
$44
$41
$40
$39
$48
$30
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Gross AR
Debt
Debt/Receivables
to the success of our business but, as the business
performers. Leveraging these General Managers will
has changed, this fact has become even more critical.
help grow our overall talent pool. Again, our market
The General Manager job requires a higher initial skill
potential is large but can only be maximized if we
set and then outstanding support and training after
attract, train and retain great General Managers. Our
hire. We are working hard to catch up in this area, with
offering to recruits is appealing as our General
the goal of building a bench of talented and qualified
Manager pay structure rewards performance. The
candidates who are ready, willing, able and “demand-
recent corporate income tax reduction will benefit our
ing” keys to their own dealerships. This will not only
General Managers, and, as we leverage our top per-
provide healthy upward pressure for existing dealer-
formers, they will participate accordingly in our healthy
ships, some of which are not reaching potential, but
growth efforts and our improvements with operational
also allow us to eventually open new stand-alone deal-
excellence and resulting profitability.
erships. We are convinced that there is no shortage of
To be a great company we must always strive to per-
towns that could benefit from having a Car-Mart. As we
form at a higher level. We must always focus on our
are building our bench, we do have several high-
operational non-negotiables which relate to facilities
performing, experienced and seasoned General
and associates, inventory, collections and expense
Managers that have the capacity and the desire, as
management, all with the one overriding consideration
well as market opportunities, to grow the number of
of strong customer relations. We must put all that
customers they serve. We are fully committed to
we have into our work every day, hold each other
increasing the number of customers served by our top
accountable and have enthusiasm for the grind that
performers. During this last fiscal year, we opened
comes with the territory. We must go “all-in,” as there
three new dealerships and have four more currently in
is real purpose in our work. We are trying hard to ensure
process which will operate under some of our top
every associate has an ownership mentality. There are
huge value to a decentralized, local market business like
ours and we will continue to pursue opportunities to
improve customer and community engagement.
Over the past five years, we have increased finance
receivables by over $95 million, repurchased $110 mil-
lion of our common stock and funded $21 million in
capital expenditures, a total of $226 million, with only a
$53 million increase in debt. Our balance sheet is very
strong and we will continue to drive long-term share-
holder value. With only 6.8 million shares outstanding,
(11.7 million at February 1, 2010), over 71,000 custom-
ers and $501 million in finance receivables, even small
improvements can show up in a big way. We are work-
ing hard in a very tough business, but we wouldn’t
have it any other way and consider it an honor and
privilege to be here at this time in our history with such
opportunities laying out there in front of us. There will
be credit cycles in the future and we will always have
to play the cards we are dealt, but as we have stated in
the past, this business is just too hard, and we add too
much value to not strive for closer to a 10% return on
assets and to be consistently above a 15% return on
equity. We would like to thank our customers for sup-
porting us, our associates for always giving our cus-
tomers their best and you, our fellow shareholders, for
your support. We are proud to be part of such a great
company and our future is bright.
Jeffrey A. Williams
President and Chief Executive Officer
places to earn a pay check and then there are places
like Car-Mart that can have a profound effect on your
life, by helping others succeed. There is most certainly
less room for error today. We can’t assume we are
immune to pricing pressures in the market, so we must
always focus on getting better and being more efficient
in all areas. Above all, our customers must see value in
our offering. Competitive people are drawn to competi-
tive careers, which makes us optimistic about our future.
We were very happy to be named to the 2018 Forbes
list of Best Midsize Employers. We believe that this
award is the result of the passion, hard work and dedi-
cation of our associates as they support each other
and work tirelessly to help our customers succeed.
Obviously, our culture is very important to us and we
care deeply about the relationships we have with our
customers. We are making good strides with our com-
munity engagement efforts, especially on the digital
front. As a local “bricks and mortar” company, positive
community engagement is the most important adver-
tising we can do, and we will continue to push forward
with this effort. Measuring how we are doing in our
communities will allow us to get better and to react
quickly if we fall short on taking care of a customer at
Vickie D. Judy
the highest level. We believe a digital presence has
Chief Financial Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2018
OR
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 No
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 No
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 No
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 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.
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):
Large accelerated filer Accelerated filer
Non-accelerated filer
Smaller reporting company Emerging growth company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates on October 31, 2017 was $307,543,577
(7,177,213 shares), based on the closing price of the registrant’s common stock on October 30, 2017 of $42.85.
There were 6,957,518 shares of the registrant’s common stock outstanding as of June 6, 2018.
Portions of the registrant’s Proxy Statement to be furnished to stockholders in connection with its 2018 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, 2018, the
Company operated 139 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 36 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. The Company has a director of collection services
and support staff at the corporate level to work with field operators to improve credit results. This team monitors
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
25.5% in fiscal 2015 to a high of 28.7% in fiscal 2017 (average of 27.6%). The Company’s credit loss as a
percentage of sales was 27.7% in fiscal 2018. 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 added three new dealerships during the year while also closing four under-performing dealerships.
The Company ended fiscal 2018 with 139 locations, a decrease of one location 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 $10,604 per unit in fiscal 2018. 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, 2018, the
Company’s debt to equity ratio (Revolving credit facilities and notes payable divided by Total equity on the
Consolidated Balance Sheet) was 0.66 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 one or as many as 23 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, 2018, 2017 and 2016:
5
201820172016Dealerships at beginning of year140143141New dealerships opened3-6Dealerships closed(4)(3)(4) Dealerships at end of year139140143Years Ended April 30,
Below is a summary of dealership locations by state as of April 30, 2018, 2017 and 2016:
Dealerships are typically located in smaller communities. As of April 30, 2018, approximately 75% 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 between 6 and 12 years of age with 90,000
to 140,000 miles, and pay between $3,000 and $11,000 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, Dodge Charger, Chrysler
Mini-Van, Ford Focus, Ford Taurus, Ford Fusion, Dodge Ram Pickup 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
where the vehicle has been totaled, as defined in the plan, or the vehicle has been stolen. This product is available
6
Dealerships by State201820172016Arkansas353637Oklahoma252525Missouri181919Alabama151515Texas121212Kentucky121112Georgia9910Tennessee666Mississippi555Indiana111Iowa111 Total139140143As of April 30,
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. The Company
uses an outside marketing firm and has recently hired a Director of Digital Experience in order to broaden and
increase 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, 2018 typically include down payments ranging from 0% to 20% (average
of 6.4%), 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 16.3%). The Company increased its interest rate on all originating contracts to 16.5% from 15% beginning 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. The Company also utilizes text messaging notifications 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. Recently, the Company has opened
new dealerships under experienced top performing general managers and may continue to do so in order to grow
and leverage the talents of these experienced managers.
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 are 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
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.
8
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 can be 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
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.
9
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, 2018, the Company, including its consolidated subsidiaries, employed approximately 1,504
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,
2018:
Name
Age
Position with the Company
Jeffrey A. Williams………………..
55
President, Chief Executive Officer, Secretary
and Director
Vickie D. Judy…... ……………….
52
Chief Financial Officer
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Jeffrey A. Williams has served as Chief Executive Officer of the Company since January 2018, President
of the Company since March 2016, as a director since 2011 and as Secretary of the Company since October 2005.
Before becoming President in March 2016, Mr. Williams served as Chief Financial Officer and Vice President
Finance of the Company since October 2005. 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. Mr. Williams’ qualifications to serve on the Board include his financial and operational
experience.
Vickie D. Judy has served as Chief Financial Officer of the Company since January 2018. Before
becoming Chief Financial Officer in January 2018, Ms. Judy served a Principal Accounting Officer since March
2016 and Vice President of Accounting since August 2015. Since joining the Company in May 2010, Ms. Judy has
also served as Controller and Director of Financial Reporting. Ms. Judy is a Certified Public Accountant and prior
to joining the Company her experience included approximately five years in public accounting with Arthur
Andersen & Co. and approximately 17 years at National Home Center, Inc., a home improvement products and
building materials retailer, most recently as Vice President of Financial Reporting.
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
information is misappropriated from its computer systems. Any compromise of security, including security breaches
14
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 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 / or the availability of funds become restricted,
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:
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.
15
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.
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.
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.
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.
Item 1B. Unresolved Staff Comments
Not applicable.
16
Item 2. Properties
As of April 30, 2018, the Company leased approximately 89% 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.
As of June 6, 2018, there were approximately 889 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, 2018:
18
Fiscal 2018Fiscal 2017HighLowHighLowFirst quarter$40.60$33.80$35.89$19.49Second quarter44.0033.0543.0732.01Third quarter49.4040.1547.7536.50Fourth quarter54.2542.2043.8530.20Number of securities to be issued upon exercise of outstanding options, warrants and rightsWeighted-average exercise price of outstanding options, warrants and rightsNumber of securities remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a))Plan Category(a)(b)(c)Equity compensation plans approved by the stockholders695,500$33.51305,527Equity 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, 2013 and ending on April 30, 2018.
The graph assumes that the value of the investment in the Company’s common stock and each index was
$100 on April 30, 2013.
* $100 invested on 4/30/2013 in stock or index, including reinvestment of dividends.
Fiscal year ending April 30.
The dollar value at April 30, 2018 of $100 invested in the Company’s common stock on April 30, 2013
was $115.19, compared to $160.10 for the automobile index described above and $224.10 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.
19
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 November 16, 2017 the
authorization to repurchase up to an additional one million shares along with the balance remaining under its
previous authorization approved in July 2016. 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:
(1) The above described stock repurchase program has no expiration date.
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”.
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.
20
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal 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)February 1, 2018 through February 28, 2018121,884$47.17121,884889,384March 1, 2018 through March 31, 2018171,530$49.88171,530717,854April 1, 2018 through April 30, 201834,136$49.7934,136683,718 Total327,550$48.86327,550683,71820182017201620152014Revenues$612,201$587,751$567,906$530,321$489,187Net income attributable to common stockholders$36,469$20,165$11,556$29,450$21,089Diluted earnings per share from continuing operations$4.90$2.49$1.33$3.25$2.2520182017201620152014Total assets$455,584$424,258$406,296$400,361$363,297Total debt$152,367$117,944$107,902$102,685$97,032Mandatorily redeemable preferred stock$400$400$400$400$400Total equity$230,535$233,008$228,817$229,132$213,006Shares outstanding6,8497,6088,0748,5298,736(In thousands, except per share amounts)Years Ended April 30,April 30,(In thousands)
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, 2018, the Company operated 139 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
13% per year over the last ten years (average 8%). Growth results from same dealership revenue growth and the
addition of new dealerships. Revenue increased 4.2% for the fiscal year ended April 30, 2018 compared to fiscal
2017 primarily due to a 0.6% increase in average retail sales price, a 2.5% increase in units sold and a 10.5%
increase in interest income. Although three new dealerships were added in fiscal 2018, the Company also closed
four underperforming dealerships.
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
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, over recent years, also focuses
on providing a good mix of vehicles in various price ranges 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
21
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 25.5% in fiscal 2015 to 28.7% in fiscal 2017 (average of
27.6%). 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 2016 and 2017 were 28.5% and 28.7%, respectively, as competitive pressures
remained elevated and the increased number of newer dealerships weighed on credit loss results. Credit losses for
fiscal 2018 improved slightly to 27.7% as the frequency of losses declined while 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. 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
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 2018, the allowance remained at 25% as
credit losses remained elevated.
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 a negative effect on collections
and charge-offs.
In an effort to offset the elevated credit losses 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 42%. 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
22
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 2014, gross margin was 42.2% as a percentage of sales and remained relatively flat for fiscal 2015
compared to 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, and remained relatively
flat for fiscal 2018 compared to 2017; 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.
Consolidated Operations
(Operating Statement Dollars in Thousands)
23
20182017vs.vs.20182017201620172016Operating Statement:Revenues: Sales$537,528 $520,149 $506,517 3.3%2.7%100.0%100.0%100.0% Interest and other income74,673 67,602 61,389 10.510.1 13.9 13.0 12.1 Total612,201 587,751 567,906 4.2 3.5 113.9 113.0 112.1 Costs and expenses: Cost of sales, excluding depreciation shown below315,273 304,927 304,886 3.4 %0.0 %58.7 58.6 60.2 Selling, general and administrative99,023 91,940 92,242 7.7 (0.3)18.4 17.7 18.2 Provision for credit losses149,059 149,097 144,397 (0.0)3.3 27.7 28.7 28.5 Interest expense5,599 4,069 3,306 37.6 23.1 1.0 0.8 0.7 Depreciation and amortization4,250 4,272 4,208 (0.5)1.5 0.8 0.8 0.8 Loss on disposal of property and equipment91 1,204 369 (92.4)226.3 0.0 0.2 0.10 Total573,295 555,509 549,408 3.2 1.1 106.6 106.8 108.5 Income before income taxes$38,906 $32,242 $18,498 7.2 %6.2 %3.7 %Operating Data (Unaudited): Retail units sold48,27147,11646,4832.5 %1.4 % Average dealerships in operation140142145(1.4)(2.1) Average units sold per dealership3453323213.9 3.4 Average retail sales price$10,604 $10,540 $10,361 0.6 1.7 Same store revenue growth5.2%3.5%2.7% Receivables average yield15.2%14.5%14.2%Years Ended April 30,As a % of Sales201820172016% Change
2018 Compared to 2017
Total revenues increased $24.5 million, or 4.2%, in fiscal 2018, as compared to revenue growth of 3.5% in
fiscal 2017, principally as a result of (i) revenue growth from dealerships that operated a full twelve months in both
fiscal years ($30.1 million), (ii) revenue from stores opened in fiscal 2018 ($4.5 million), which is offset by (iii)
revenue decrease from dealerships closed after the year ended April 30, 2017 ($10.1 million). The increase in
revenue for fiscal 2018 is attributable to (i) a 0.6% increase in average retail sales price, (ii) a 2.5% increase in retail
units sold and (iii) a 10.5% increase in interest and other income.
Cost of sales, as a percentage of sales, remained relatively consistent at 58.7% in fiscal 2018 compared to
58.6% in fiscal 2017. The average retail sales price for fiscal 2018 was $10,604, a $64 increase over the prior fiscal
year, reflecting relatively stable average purchase costs year-over-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 Company experienced a substantial increase in purchase costs
during fiscal 2016, reflecting a combination of consumer demand for the types of vehicles the Company purchases
for resale and a strategic management decision to purchase higher quality vehicles for our customers, with more
modest increases during fiscal years 2017 and 2018. Demand for the vehicles we purchase for resale has remained
high relative to supply largely due 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.
Selling, general and administrative expenses, as a percentage of sales, increased 0.7% to 18.4% in fiscal
2018, from 17.7% in fiscal 2017. Selling, general and administrative expenses are, for the most part, more fixed in
nature. In dollar terms, overall selling, general and administrative expenses increased $7.1 million from fiscal 2017.
The increase is primarily focused on general manager recruitment, training and collections support along with
improvements in sales and marketing, especially digital marketing.
Provision for credit losses as a percentage of sales decreased to 27.7% for fiscal 2018 compared to 28.7%
for fiscal 2017. Net charge-offs as a percentage of average finance receivables decreased to 28.8% for fiscal 2018
compared to 30.5% for the prior year. The decrease in net charge-offs for fiscal 2018 primarily resulted from a
lower frequency of losses primarily due to improvements in collections processes. 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 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 2018 as a percentage of sales increased slightly to 1% compared to 0.8% for
fiscal 2017, due to higher average borrowings during the fiscal year 2018 ($136.7 million compared to $118.2
million in the prior year) and increased interest rates.
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 was attributable to (i) a 1.7% increase
in average retail sales price, and (ii) a 10.1% increase in interest and other income.
24
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. 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.
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.
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).
Financial Condition
The following table sets forth the major balance sheet accounts of the Company at April 30, 2018, 2017
and 2016 (in thousands):
25
April 30, Assets: Finance receivables, net$383,617$357,161$334,793 Inventory33,61030,12929,879 Property and equipment, net28,59430,13934,755Liabilities: Accounts payable and accrued liabilities29,56925,02023,558 Deferred revenue30,15528,08327,339 Income taxes payable (receivable), net (1,450) 885 (894) Deferred income tax liabilities, net12,55818,91818,280 Debt facilities152,367117,944107,902201820172016
The following table shows receivables growth compared to revenue growth during each of the past three
fiscal years. For fiscal year 2018, growth in finance receivables of 7.4% exceeded growth in revenue of 4.2%. 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, 2018 and 2017 was 32.5.
At fiscal year-end 2018, inventory increased 11.6% ($3.4 million), compared to fiscal year-end 2017. 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 $1.5 million as of April 30, 2018 as compared to
fiscal 2017. The decrease is attributable to $4.3 million in depreciation expense, partially offset by additions of
$3.3 million.
Accounts payable and accrued liabilities increased approximately $4.5 million at April 30, 2018 as
compared to April 30, 2017 due primarily to increased payables related to increased inventory levels and the timing
and payment of employee compensation.
Income taxes payable (receivable), net, decreased approximately $2.3 million at April 30, 2018 compared
to April 30, 2017 primarily due to the timing of income tax payments and refunds and the effect of the enactment
of the Tax Cuts and Jobs Act (“Tax Act”).
Deferred revenue increased $2.1 million at April 30, 2018 over April 30, 2017, primarily resulting from the
increase in sales of the payment protection plan and service contract products.
Deferred income tax liabilities, net, decreased approximately $6.4 million at April 30, 2018 as compared to
April 30, 2017 due primarily to the revaluation of deferred tax assets and liabilities to the new federal statutory rate
as required by the Tax Act.
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 2018 the Company had a $34.4 million net increase in total debt used to
contribute to the funding of finance receivables growth of $34.6 million, $3.5 million increase in inventory, net
capital expenditures of $2.3 million and common stock repurchases of $42.3 million.
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Years Ended April 30,201820172016Growth in finance receivables, net of deferred revenue7.4%7.0%4.5%Revenue growth4.2%3.5%7.1%
Liquidity and Capital Resources
The following table sets forth certain historical information with respect to the Company’s Statements of
Cash Flows (in thousands):
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 2018 compared to fiscal 2017 increased primarily as a result of net
income offset by a decrease in deferred income taxes and income taxes payable, net. Finance receivables, net,
increased by $26.5 million during fiscal 2018.
27
Operating activities: Net income$36,509 $20,205 $11,596 Provision for credit losses Losses on claims for payment protection plan Depreciation and amortization Amortization of debt issuance costs260 252 214 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 TotalInvesting activities: Purchase of property and equipment Proceeds from sale of property and equipment554 932 7 TotalFinancing 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 stock1,756 3,220 824 Total Increase (decrease) in cash$588 $(168) $(188) 14,286 (4,526) (4,519) 415 1,519 (460,499) 248,166 48,154 1,115 (14,214) (40) (9,955) 450 4,208 (40) (20,486) 5,062 (1,587) 1,653 (11) (898) 286 (42,301) (7,702) (6,847) (40) (163) 669 33,046 9,790 (1,704) (655) (2,258) (1,587) Years Ended April 30, 9,994 7,334 (689) (709) (91) (382) 2018201716,748 15,627 (494,641) (479,099) 249,264 4,272 4,712 676 2016144,397 13,521 149,059 149,097 (6,360) 638 (2,335) 2,963 1,351 1,167 1,603 1,293 4,250 38,793 42,493 260,104 721 (423)
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.
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 2016. 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.
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The Company has generally leased the majority of the properties where its dealerships are located. As of
April 30, 2018, the Company leased approximately 89% 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 shares of its
common stock up to certain limits. Under the current limits, the aggregate amount of repurchases after October 25,
2017 cannot exceed the greater of: (a) $50 million, net of proceeds received from the exercise of stock options
(plus any repurchases made during the first six months after October 25, 2017, in an aggregate amount up to the
remaining availability under the $40 million repurchase limit in effect immediately prior to October 25, 2017, net
of proceeds received from the exercise of stock options), provided that the sum of the borrowing bases combined
minus the principal balances of all revolver loans after giving effect to such repurchases is equal to or greater than
20% of the sum of the borrowing bases; or (b) 75% of the consolidated net income of the Company measured on a
trailing twelve month basis. In addition, immediately before and after giving effect to the Company’s stock
repurchases, at least 12.5% of the aggregate funds committed under the credit facilities must remain available.
Thus, although the Company currently does routinely repurchase stock, 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, 2018, the Company had approximately $1 million of cash on hand and $46 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, 2018,
including renewal periods under operating leases that are reasonably assured (in thousands):
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Less ThanMore ThanTotal1 Year1-3 Years3-5 Years5 YearsRevolving lines of credit$151,380 - 151,380 - - Notes payable305 105 200 - - Capital lease1,117 278 839 - - Operating leases50,516 6,419 12,255 11,194 20,648 Interest on debt facilities10,943 6,442 4,501 - - Total$214,261 13,244 169,175 11,194 20,648 Payments Due by Period
The previous table includes estimated interest payments on the Company’s revolving lines of credit. We
have assumed $151,380 remains outstanding under our revolving lines of credit until the maturity date of December
12, 2019, using the interest rate in effect on April 30, 2018, which was approximately 4.25%. The estimated interest
payments on notes payable have been calculated based on the amortization of the notes in accordance with the
respective agreements. The $50.5 million of operating lease commitments includes $14.3 million of non-cancelable
lease commitments under the lease terms, and $36.2 million of lease commitments for renewal periods at the
Company’s option that are reasonably assured.
Off-Balance Sheet Arrangements
The Company has entered into operating leases for approximately 89% 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, 2018, 2017 and 2016, rent expense for all
operating leases amounted to approximately $6.2 million, $6.2 million and $6.1 million, respectively.
The Company has a standby letter of credit relating to an insurance policy totaling $1 million at April 30,
2018.
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
234 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,
2018.
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
30
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, 2018, the weighted average total contract term was 32.5 months with 23.6
months remaining. The reserve amount in the allowance for credit losses at April 30, 2018, $117.8 million, was
25.0% of the principal balance in finance receivables of $501.4 million, less unearned payment protection plan
revenue of $19.8 million and unearned service contract revenue of $10.3 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:
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.
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 12 months.
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 $4.7 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.
31
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 will adopt this standard for its fiscal year beginning
May 1, 2018 and plans to apply the modified retrospective transition method with a cumulative effect adjustment,
if any, recognized at the date of adoption. While the Company continues to evaluate all potential impacts of this
standard, management generally does not expect adoption of the standard to have a material impact on the
Company’s consolidated financial statements. The Company’s evaluation process includes, but is not limited to,
identifying contracts within the scope of the guidance and reviewing and documenting its accounting for these
contracts. The Company primarily sells products and recognizes revenue at the point of sale or delivery to
customers, at which point the earnings process is deemed to be complete. The Company’s performance obligations
are clearly identifiable, and management does not anticipate significant changes to the assessment of such
performance obligations or the timing of the Company’s revenue recognition upon adoption of the new standard.
The Company’s primary business processes are consistent with the principles contained in the ASU, and the
Company does not expect significant changes to those processes or its internal controls or systems. We have
evaluated the impact of the adoption of this guidance and we do not expect the new guidance to materially impact
our consolidated financial statements other than additional disclosure requirements.
Leases. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). 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.
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, but does not expect such an impact to be material.
Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15 — Statement of Cash Flows
(Topic 230). ASU 2016-15 aims to eliminate diversity in the practice of how certain cash receipts and cash payments
are presented and classified in the statement of cash flows. The guidance is effective for annual reporting periods
beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted and the
retrospective transition method should be applied. The Company is currently evaluating the potential effects of the
adoption of this guidance on the consolidated financial statements.
Income Taxes. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740). ASU 2016-
16 requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than
inventory, in the period in which the transfer occurs. The guidance is effective for annual reporting periods
beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted and the
32
modified retrospective transition method should be applied. The Company is currently evaluating the impact this
guidance will have on our 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
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 $151.4 million outstanding at April 30, 2018. The impact of
a 1% increase in interest rates on this amount of debt would result in increased annual interest expense of
approximately $1.5 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.
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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, 2018 and 2017
Consolidated Statements of Operations for the years ended April 30, 2018, 2017 and 2016
Consolidated Statements of Cash Flows for the years ended April 30, 2018, 2017 and 2016
Consolidated Statement of Equity for the years ended April 30, 2018, 2017 and 2016
Notes to Consolidated Financial Statements
34
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
America’s Car-Mart, Inc.
Opinion on the financial statements
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, 2018 and 2017, the related consolidated statements of operations, equity,
and cash flows for each of the three years in the period ended April 30, 2018, and the related notes (collectively referred
to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of April 30, 2018 and 2017, and the results of its operations and its cash flows for
each of the three years in the period ended April 30, 2018, 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) (“PCAOB”), the Company’s internal control over financial reporting as of April 30, 2018, 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, 2018 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2000.
Tulsa, Oklahoma
June 13, 2018
35
Consolidated Balance Sheets
America’s Car-Mart, Inc.
(Dollars in thousands)
The accompanying notes are an integral part of these consolidated financial statements.
36
Assets:Cash and cash equivalents$1,022$434Accrued interest on finance receivables2,1892,098Finance receivables, net383,617357,161Inventory33,61030,129Prepaid expenses and other assets4,7473,942Income taxes receivable, net1,450 - Goodwill355355Property and equipment, net28,59430,139Total Assets$455,584$424,258Liabilities, mezzanine equity and equity:Liabilities:Accounts payable $13,609$11,224Deferred payment protection plan revenue19,82318,472Deferred service contract revenue10,3329,611Accrued liabilities15,96013,796Income tax payable, net- 885 Deferred income tax liabilities, net12,55818,918Debt facilities152,367117,944Total liabilities224,649190,850Commitments and contingencies (Note L)Mezzanine equity:Mandatorily redeemable preferred stock400 400Equity: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;13,147,143 and 12,927,413 issued at April 30, 2018 and April 30, 2017, respectively, of which 6,849,161 and 7,608,471 were outstanding at April 30, 2018 and April 30, 2017, respectively131129Additional paid-in capital72,64169,284Retained earnings361,988325,519Less: Treasury stock, at cost, 6,297,982 and 5,318,942shares at April 30, 2018 and April 30, 2017, respectively(204,325)(162,024)Total stockholders' equity230,435232,908Non-controlling interest100100Total equity230,535233,008Total Liabilities, mezzanine equity and equity$455,584$424,258April 30, 2017April 30, 2018
Consolidated Statements of Operations
America’s Car-Mart, Inc.
(Dollars in thousands except per share amounts)
The accompanying notes are an integral part of these consolidated financial statements.
37
Years Ended April 30, Revenues:Sales$537,528$520,149$506,517Interest and other income74,67367,60261,389Total revenues612,201587,751567,906Costs and expenses:Cost of sales, excluding depreciation315,273304,927304,886Selling, general and administrative 99,02391,94092,242Provision for credit losses149,059149,097144,397Interest expense5,5994,0693,306Depreciation and amortization4,2504,2724,208Loss on disposal of property and equipment911,204369Total costs and expenses573,295555,509549,408Income before income taxes38,90632,24218,498Provision for income taxes2,39712,0376,902Net income$36,509$20,205$11,596Less: Dividends on mandatorily redeemable preferred stock404040Net income attributable to common stockholders$36,469 $20,165 $11,556 Earnings per share:Basic$5.04$2.57$1.38Diluted$4.90$2.49$1.33Weighted average number of shares outstanding:Basic7,232,0147,854,2388,370,478Diluted7,441,3588,110,7778,666,031201720182016
Consolidated Statements of Cash Flows
America’s Car-Mart, Inc.
(In thousands)
The accompanying notes are an integral part of these consolidated financial statements.
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Years Ended April 30, Operating activities:201820172016Net income$36,509 $20,205 $11,596 Adjustments to reconcile net income to net cashprovided by operating activities:Provision for credit losses149,059 149,097 144,397 Losses on claims for payment protection plan16,748 15,627 13,521 Depreciation and amortization4,250 4,272 4,208 Amortization of debt issuance costs260 252 214 Loss on disposal of property and equipment91 1,204 369 Stock-based compensation1,603 1,293 1,519 Deferred income taxes(6,360) 638 (898) Excess tax benefit from stock based compensation- (1,183) (238) Change in operating assets and liabilities:Finance receivable originations(494,641) (479,099) (460,499) Finance receivable collections260,104 249,264 248,166 Accrued interest on finance receivables(91) (382) 286 Inventory38,793 42,493 48,154 Prepaid expenses and other assets(780) (730) 284 Accounts payable and accrued liabilities4,712 676 1,115 Deferred payment protection plan revenue1,351 1,167 1,653 Deferred service contract revenue721 (423) 450 Income taxes, net(2,335) 2,963 (11) Net cash provided by operating activities9,994 7,334 14,286 Investing Activities:Purchases of property and equipment(2,258) (1,587) (4,526) Proceeds from sale of property and equipment554 932 7 Net cash used in investing activities(1,704) (655) (4,519) Financing Activities:Exercise of stock options1,641 1,895 400 Excess tax benefits from stock based compensation- 1,183 238 Issuance of common stock115 142 186 Purchase of common stock(42,301) (20,486) (14,214) Dividend payments(40) (40) (40) Debt issuance costs(103) (449) 146 Change in cash overdrafts(163) 669 (1,587) Prinicipal payments on notes payable(107) (104) (34) Proceeds from revolving credit facilities433,818 387,050 374,214 Payments on revolving credit facilities(400,562) (376,707) (369,264) Net cash used in financing activities(7,702) (6,847) (9,955) Increase (decrease) in cash and cash equivalents588 (168) (188) Cash and cash equivalents, beginning of period434 602 790 Cash and cash equivalents, end of period$1,022 $434 $602
Consolidated Statements of Equity
America’s Car-Mart, Inc.
(Dollars in thousands)
For the Years Ended April 30, 2018, 2017 and 2016
The accompanying notes are an integral part of these consolidated financial statements.
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SharesBalance at April 30, 201512,688,890$127 $62,428 $293,798 $(127,321)$100 $229,132 Issuance of common stock6,920-186 ---186 Stock options exercised30,750-400 ---400 Purchase of 493,073 treasury shares----(14,214)-(14,214)Tax benefit of stock based compensation--238 ---238 Stock based compensation--1,519 ---1,519 Dividends on subsidiary preferred stock---(40)--(40)Net income---11,596 --11,596 Balance at April 30, 201612,726,560$127 $64,771 $305,354 $(141,535)$100 $228,817 Issuance of common stock4,750-142 ---142 Stock options exercised196,1032 1,895 --- 1,897 Purchase of 666,202 treasury shares----(20,489)-(20,489)Tax benefit of stock based compensation--1,183 ---1,183 Stock based compensation--1,293 ---1,293 Dividends on subsidiary preferred stock---(40)--(40)Net income---20,205 --20,205 Balance at April 30, 201712,927,413$129 $69,284 $325,519 $(162,024)$100 $233,008 Issuance of common stock3,096-115 ---115 Stock options exercised216,6342 1,639 --- 1,641 Purchase of 979,040 treasury shares----(42,301)-(42,301)Stock based compensation--1,603 ---1,603 Dividends on subsidiary preferred stock---(40)--(40)Net income---36,509 --36,509 Balance at April 30, 201813,147,143$131 $72,641 $361,988 $(204,325)$100 $230,535 AdditionalNon- Common StockPaid-InRetainedTreasuryControllingTotalAmountCapitalEarningsStockInterestEquity
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, 2018, the Company operated 139 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.
As of April 30, 2018, and periodically throughout the year, the Company maintained 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.
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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 shares of its
common stock up to certain limits. Under the current limits, the aggregate amount of repurchases after October 25,
2017 cannot exceed the greater of: (a) $50 million, net of proceeds received from the exercise of stock options
(plus any repurchases made during the first six months after October 25, 2017, in an aggregate amount up to the
remaining availability under the $40 million repurchase limit in effect immediately prior to October 25, 2017, net
of proceeds received from the exercise of stock options), provided that the sum of the borrowing bases combined
minus the principal balances of all revolver loans after giving effect to such repurchases is equal to or greater than
20% of the sum of the borrowing bases; or (b) 75% of the consolidated net income of the Company measured on a
trailing twelve month basis. In addition, immediately before and after giving effect to the Company’s stock
repurchases, at least 12.5% of the aggregate funds committed under the credit facilities must 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 16.3% 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 ($2.2 million at April 30, 2018 and $2.1 million at April 30, 2017), and as such, have 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 75%
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, 2018, 3.5% of the
Company’s finance receivables balances were 30 days or more past due compared to 3.6% at April 30, 2017.
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. At the time of originating a finance agreement, the Company requires customers to meet certain criteria that
demonstrate their intent and ability to pay for the financed principle and interest on the vehicle they are purchasing.
However, the Company recognizes that their customer base is at a higher risk of default given their impaired or
limited credit histories.
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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.
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
for the amount it believes will not be collected. 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:
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.
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 12 months.
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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
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. The allowance remained at 25% at April 30, 2018.
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, 2018 or 2017.
Inventory
In July 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-11, Simplifying the
Measurement of Inventory, which requires entities to measure most inventory at the lower of cost or net realizable
value. The updated guidance was effective for us on May 1, 2017 and did not materially impact our consolidated
financial statements. Inventory consists of used vehicles and is valued at the lower of cost or net realizable value
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 2018 or fiscal 2017.
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
43
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
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.
On December 22, 2017, President Trump signed into law the "Tax Cuts and Jobs Act" (the "Tax Act"). The
Tax Act includes significant changes to the U.S. tax code that affected our fiscal year ending April 30, 2018, and
future periods. Changes in the tax laws from the Tax Act had a material impact on our financial statements in fiscal
2018. Under generally accepted accounting principles ("U.S. GAAP") specifically ASC Topic 740, Income Taxes,
the tax effects of changes in tax laws must be recognized in the period in which the law is enacted, or December
22, 2017, for the Tax Act. ASC 740 also requires deferred tax assets and liabilities to be measured at the enacted
tax rate expected to apply when temporary differences are to be realized or settled. Thus, at the date of enactment,
the Company’s deferred taxes were re-measured based upon the new tax rates. The change in deferred taxes is
recorded as an adjustment to our deferred tax provision. The Tax Act reduced the corporate tax rate from 35% to
21%, effective January 1, 2018. This results in a blended federal corporate tax rate of approximately 30.4% in fiscal
year 2018 and 21% thereafter. In the third quarter of fiscal 2018, we recorded a discrete net deferred income tax
benefit of $8.1 million with a corresponding provisional reduction to our net deferred income tax liability. This
estimate may change as we receive additional information about the timing of deferred income tax reversal.
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.
44
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 2015.
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, 2018
and 2017, 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
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, 2018, 2017 and 2016:
At April 30, 2018 and 2017, finance receivables more than 90 days past due were approximately $1.6
million and $1.5 million, respectively. Late fee revenues totaled approximately $1.9 million, $2.0 million and $2.0
million for the fiscal years ended 2018, 2017 and 2016, 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 $3.8 million, $4.0 million and $4.2 million for the years ended
April 30, 2018, 2017 and 2016, respectively.
45
(In thousands)201820172016Sales – used autos$462,956$448,183$436,080Wholesales – third party25,63823,55424,917Service contract sales28,48228,66827,323Payment protection plan revenue20,45219,74418,197Total$537,528$520,149$506,517Years Ended April 30,
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 $465,000, $437,000,
and $403,000 to the plans for the years ended April 30, 2018, 2017 and 2016, 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, included in stock-based compensation. Amounts for fiscal years
2018, 2017 and 2016 were not material individually or in the aggregate. A total of 200,000 shares were registered
and 144,790 remain available for issuance under this plan at April 30, 2018.
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
awards. Stock-based compensation plans, related expenses, and assumptions used in the Black-Scholes option
pricing model are more fully described in Note K. If an award contains a performance condition, expense is
recognized only for those shares for which it is considered reasonably probable as of the current period end that the
performance condition will be met. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee
Share-Based Payment Accounting, to simplify the accounting for share-based payment transactions. The Company
adopted the guidance prospectively on May 1, 2017. The Company recognized a $1.7 million tax benefit during
fiscal 2018. In connection with the adoption, we elected to account for forfeitures as they occur; previously, we
were required to record stock compensation expense based on awards that were expected to vest, which had required
us to apply an estimated forfeiture rate. The differential between the amount of compensation previously recorded
and the amount that would have been recorded, if we did not assume a forfeiture rate, was not material to our
consolidated financial statements. Also, in connection with the adoption, the Company now records any excess tax
benefits or deficiencies from its equity awards in its Consolidated Statements of Operations in the reporting period
in which the exercise occurs. As a result, going forward, the Company’s income tax expenses and associated
effective tax rate will be impacted by fluctuations in stock price between the grant dates and exercise dates of equity
awards.
Treasury Stock
The Company purchased 979,040, 666,202, and 493,073 shares of its common stock to be held as treasury
stock for a total cost of $42.3 million, $20.5 million and $14.2 million during the years ended April 30, 2018, 2017
and 2016, respectively. Treasury stock may be used for issuances under the Company’s stock-based compensation
plans or for other general corporate purposes. The Company has 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 and 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.
46
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 will adopt this standard for its fiscal year beginning
May 1, 2018 and plans to apply the modified retrospective transition method with a cumulative effect adjustment,
if any, recognized at the date of adoption. While the Company continues to evaluate all potential impacts of this
standard, management generally does not expect adoption of the standard to have a material impact on the
Company’s consolidated financial statements. The Company’s evaluation process includes, but is not limited to,
identifying contracts within the scope of the guidance and reviewing and documenting its accounting for these
contracts. The Company primarily sells products and recognizes revenue at the point of sale or delivery to
customers, at which point the earnings process is deemed to be complete. The Company’s performance obligations
are clearly identifiable, and management does not anticipate significant changes to the assessment of such
performance obligations or the timing of the Company’s revenue recognition upon adoption of the new standard.
The Company’s primary business processes are consistent with the principles contained in the ASU, and the
Company does not expect significant changes to those processes or its internal controls or systems. We have
evaluated the impact of the adoption of this guidance and we do not expect the new guidance to materially impact
our consolidated financial statements other than additional disclosure requirements.
Leases. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). 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.
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, but does not expect such impact to be material.
Statement of Cash Flows. In August 2016, the FASB issued ASU 2016-15 — Statement of Cash Flows
(Topic 230). ASU 2016-15 aims to eliminate diversity in the practice of how certain cash receipts and cash payments
are presented and classified in the statement of cash flows. The guidance is effective for annual reporting periods
beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted and the
47
retrospective transition method should be applied. The Company is currently evaluating the potential effects of the
adoption of this guidance on the consolidated financial statements.
Income Taxes. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740). ASU 2016-
16 requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than
inventory, in the period in which the transfer occurs. The guidance is effective for annual reporting periods
beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted and the
modified retrospective transition method should be applied. The Company is currently evaluating the impact this
guidance will have on our 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, 2018 and 2017 are as follows:
Changes in the finance receivables, net for the years ended April 30, 2018, 2017 and 2016 are as follows:
48
(In thousands)Gross contract amount$584,682 $545,916 Less unearned finance charges(83,244)(79,062) Principal balance 501,438 466,854 Less allowance for credit losses(117,821)(109,693)Finance receivables, net$383,617 $357,161 April 30, 2018April 30, 2017(In thousands)201820172016Balance at beginning of period$357,161$334,793$324,144Finance receivable originations494,641479,099460,499Finance receivable collections(260,104)(249,264)(248,166)Provision for credit losses(149,059)(149,097)(144,397)Losses on claims for payment protection plan(16,748)(15,627)(13,521)Inventory acquired in repossession and payment protection plan claims(42,274)(42,743)(43,766) Balance at end of period$383,617$357,161$334,793Years Ended April 30,
Changes in the finance receivables allowance for credit losses for the years ended April 30, 2018, 2017 and
2016 are as follows:
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 28.8% for fiscal 2018 as compared
to 30.5% for fiscal 2017. The decrease in net charge-offs for fiscal 2018 primarily resulted from a lower frequency
of losses primarily due to improvements in the collections process. 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 53.1% for the year ended
April 30, 2018 compared to 53.6% for the year ended April 30, 2017. Delinquencies greater than 30 days remained
relatively consistent at 3.5% for April 30, 2018 compared to 3.6% at April 30, 2017.
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,
GPS technology on vehicles sold and text messaging payment reminders.
Credit quality information for finance receivables is as follows:
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.
49
(In thousands)201820172016Balance at beginning of period$109,693$102,485$93,224Provision for credit losses149,059149,097144,397Charge-offs, net of recovered collateral(140,931)(141,889)(135,136) Balance at end of period$117,821$109,693$102,485Years Ended April 30, (Dollars in thousands)Percent of Percent of PortfolioPortfolioCurrent $424,511 84.67%$397,341 85.12% 3 - 29 days past due59,544 11.87%52,869 11.32%30 - 60 days past due12,448 2.48%11,658 2.50%61 - 90 days past due3,331 0.66%3,516 0.75% > 90 days past due1,604 0.32%1,470 0.31% Total $501,438 100.00%$466,854 100.00%PrincipalApril 30, 2018April 30, 2017PrincipalBalanceBalance
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.
The decrease in collections as a percentage of average finance receivables was primarily due to the longer
overall contract term 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:
50
Principal collected as a percent of average finance receivables53.1%53.6%Average down-payment percentage6.4%6.0%Average originating contract term (in months)29.729.5Portfolio weighted average contract term, including modifications (in months)32.532.5Twelve Months EndedApril 30,April 30, 201820182017April 30, 2017(In thousands)Land$6,402 $6,742 Buildings and improvements11,569 11,972 Furniture, fixtures and equipment12,874 13,143 Leasehold improvements24,567 24,464 Construction in progress 1,259 - Accumulated depreciation and amortization(28,077)(26,182)Property and equipment, net$28,594 $30,139 April 30, 2018April 30, 2017
E - Accrued Liabilities
A summary of accrued liabilities is as follows:
F – Debt Facilities
A summary of debt facilities is as follows:
On December 12, 2016, the Company entered into a Second Amended and Restated Loan and Security
Agreement (the “Agreement”) which amended and restated the Company’s credit facilities. The 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%.
On October 25, 2017, the Company entered into Amendment No. 1 (the “Amendment”) to the Agreement.
The Amendment, among other things, (i) increased the aggregate limit on repurchases beginning with the effective
date of the Amendment to $50 million, net of proceeds received from the exercise of stock options, plus for a period
of six months after October 25, 2017, the amount of repurchases available to the Company immediately prior to the
effective date of the Amendment (net of proceeds received from exercise of stock options), and (ii) reduced the
upper threshold to 20% from 25% for minimum net availability of the borrowing base for financial covenant testing
and limitations on distributions. The Amendment also provides for a 0.025% decrease in the second pricing tier and
a 0.125% decrease in the third pricing tier for determining the applicable interest rate. The Amendment also added
a fourth pricing tier at LIBOR plus 2.875%, based on the Company’s consolidated leverage ratio if greater than
1.75:1.00 for the preceding fiscal quarter. The Amendment did not change the first pricing tier. Pricing tiers are
based on the Company’s consolidated leverage ratio for the preceding fiscal quarter.
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 four 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 2.35%, or 4.25% at April 30, 2018 and 3.37% at April 30, 2017. The
51
(In thousands)Employee compensation$6,539 $5,406 Cash overdrafts (see Note B)506 669 Deferred sales tax (see Note B)3,270 2,894 Reserve for PPP claims2,101 1,884 Other3,544 2,943 Accrued liabilities$15,960 $13,796 April 30, 2017April 30, 2018(In thousands)Revolving lines of credit$151,380 $118,124 Notes payable305 413 Capital lease1,117 - Debt issuance costs(435)(593) Debt facilities$152,367 $117,944 20182017
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 shares of its
common stock up to certain limits. Under the current limits, the aggregate amount of repurchases after October 25,
2017 cannot exceed the greater of: (a) $50 million, net of proceeds received from the exercise of stock options
(plus any repurchases made during the first six months after October 25, 2017, in an aggregate amount up to the
remaining availability under the $40 million repurchase limit in effect immediately prior to October 25, 2017, net
of proceeds received from the exercise of stock options), provided that the sum of the borrowing bases combined
minus the principal balances of all revolver loans after giving effect to such repurchases is equal to or greater than
20% of the sum of the borrowing bases; or (b) 75% of the consolidated net income of the Company measured on a
trailing twelve month basis. In addition, immediately before and after giving effect to the Company’s stock
repurchases, at least 12.5% of the aggregate funds committed under the credit facilities must remain available.
The Company was in compliance with the covenants at April 30, 2018. 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, 2018, the Company had additional availability of approximately $46 million
under the revolving credit facilities.
The Company recognized $260,000 and $252,000 of amortization for the twelve months ended April 30,
2018 and 2017, respectively, related to debt issuance costs. The amortization is reflected as interest expense in the
Company’s Consolidated Statements of Operations.
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 $435,000 and $593,000 as of April 30,
2018 and 2017, respectively, are shown as a deduction from the revolving credit facilities in the Consolidated
Balance Sheet.
During the years ended April 30, 2018 and April 30, 2017, the Company incurred approximately $103,000
and $449,000, respectively, in debt issuance costs related to the Second Amended and Restated Loan and Security
Agreement.
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 $305,000 as of
April 30, 2018.
On March 29, 2018, the Company entered into a lease classified as a capital lease. The present value of the
minimum lease payments is approximately $1.1 million, which is included in Debt facilities in the Consolidated
Balance Sheet. The leased equipment is amortized on a straight-line basis over three years. As of April 30, 2018,
there is approximately $14,000 in accumulated depreciation related to the leased equipment.
52
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, 2018 and 2017:
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
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, 2018, 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.
53
(In thousands)Cash$ 1,022 $ 1,022 $ 434 $ 434 Finance receivables, net 383,617 308,384 357,161 287,115 Accounts payable 13,609 13,609 11,224 11,224 Debt facilities 152,367 152,367 117,944 117,944 FairValueFairValueCarryingValueApril 30, 2018April 30, 2017CarryingValue
H - Income Taxes
The provision for income taxes was as follows:
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:
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:
54
(In thousands)201820172016Provision for income taxes Current$8,757$11,399$7,800 Deferred(6,360)638(898)Total$2,397$12,037$6,902Years Ended April 30,(In thousands)Tax provision at statutory rate$11,827$11,285$6,474State taxes, net of federal benefit1,077868443Tax benefit from option exercises(1,721)- - Deferred tax adjustment related to Tax Act(8,083)- - Other, net(703)(116)(15)Total$2,397$12,037$6,902Years Ended April 30,201820172016(In thousands)20182017Deferred income tax liabilities related to: Finance receivables$ 17,764 $ 26,524 Goodwill 61 131 Total 17,825 26,655 Deferred income tax assets related to: Accrued liabilities 1,894 2,371 Inventory 120 149 Share based compensation 2,144 3,964 Property and equipment 82 - State net operating loss 69 - Deferred revenue 958 1,253 Total 5,267 7,737 Deferred income tax liabilities, net$ 12,558 $ 18,918 Years Ended April 30,
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:
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 $1.6 million ($1.1
million after tax effects), $1.3 million ($811,000 after tax effects) and $1.5 million ($952,000 after tax effects) for
the years ended April 30, 2018, 2017 and 2016, 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 2018 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, 2018
100%
May 1, 2027
297,500
Restated Option Plan
55
201820172016Weighted average shares outstanding-basic7,232,0147,854,2388,370,478Dilutive options and restricted stock209,344256,539295,553Weighted average shares outstanding-diluted7,441,3588,110,7778,666,031Antidilutive securities not included: Options 229,000359,250325,125Years Ended April 30,
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, 2018
5.5
1.81%
36%
-
April 30, 2017
5.5
1.47%
36%
-
April 30, 2016
5.5
1.55%
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,
2015 to April 30, 2018:
Stock option compensation expense on a pre-tax basis was $1.2 million ($773,000 after tax effects), $1.2
million ($728,000 after tax effects) and $1.4 million ($870,000 after tax effects) for the years ended April 30, 2018,
2017 and 2016, respectively. As of April 30, 2018, the Company had approximately $1.7 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 1.9 years.
There were 25,000 options granted during fiscal 2018. The grant-date fair value of all options granted
during fiscal 2018, 2017 and 2016 was $336,000, $461,000 and $5.6 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, 2018, there were 126,500 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, 2018, the Company had $1 million in unrecognized compensation expense related to
61,000 of these options that are not currently expected to vest.
56
NumberofOptions(in thousands)Outstanding at April 30, 2015981,750$ 11.90 to $ 53.02$23,608$24.05 Granted338,750$ 26.37 to $ 53.0216,47148.62 Exercised(30,750)$ 11.90 to $ 23.34(400)13.00 Cancelled(11,500)$ 41.86 to $ 53.02(598)52.05Outstanding at April 30, 20161,278,250$39,081$30.57 Granted45,000$ 26.42 to $ 34.091,30128.90 Exercised(264,500)$ 11.90 to $ 28.13(4,739)17.92 Cancelled(30,250)$ 41.86 to $ 53.02(1,559)51.55Outstanding at April 30, 20171,028,500$34,084$33.51 Granted25,000$ 37.3093337.30 Exercised(323,000)$ 11.90 to $ 37.94(6,692)20.72 Expired(15,000)$44.52 - $51.81(710)47.26 Cancelled(20,000)$ 41.86 to $ 53.02(932)46.61Outstanding at April 30, 2018695,500$26,683$30.50PriceonExercise Price perper ShareExerciseShareExerciseProceedsWeighted Average
The aggregate intrinsic value of outstanding options at April 30, 2018 and 2017 was $10.4 million and $8.7
million, respectively.
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.
During the year ended April 30, 2018, there were 187,000 options exercised through net settlements in
accordance with plan provisions, wherein the shares issued were reduced by 106,366 shares to satisfy the exercise
price and applicable withholding taxes to acquire 80,634 shares.
As of April 30, 2018, there were 367,500 vested and exercisable stock options outstanding with an
aggregate intrinsic value of $8.4 million and a weighted average remaining contractual life of 2.66 years and a
weighted average exercise price of $30.50.
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:
The fair value at vesting for awards under the stock incentive plan was $8.2 million, $763,000 and $495,000
in fiscal 2018, 2017 and 2016, respectively.
57
(Dollars in thousands)201820172016Options Exercised323,000264,50030,750Cash Received from Options Exercised$2,832$2,609$400Intrinsic Value of Options Exercised$8,381$6,439$943Years Ended April 30,Unvested shares at April 30, 20159,500$52.10Shares granted - - Shares vested - - Shares cancelled - - Unvested shares at April 30, 20169,500$52.10Shares granted 10,000 39.14 Shares vested - - Shares cancelled (2,500) 49.51 Unvested shares at April 30, 201717,000$44.86Shares granted 166,500 45.86 Shares vested - - Shares cancelled (4,500) 38.28 Unvested shares at April 30, 2018179,000$45.96NumberofSharesWeighted AverageGrant DateFair Value
During the fiscal year 2018, 132,000 restricted shares were granted with a fair value of $48.70 per share
and 34,500 shares were granted with a fair value of $35.00 per share. 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. A total of 8,027 shares remain available for award at April 30, 2018.
The Company recorded compensation cost of $430,000 ($288,000 after tax effects), $107,000 ($67,000
after tax effects) and $99,000 ($62,000 after tax effects) related to the Stock Incentive Plan during the years ended
April 30, 2018, 2017 and 2016, respectively. As of April 30, 2018, the Company had $7.6 million 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 8.2 years.
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, 2018.
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, 2018, the aggregate rentals due under such leases, including renewal options that are reasonably assured,
were as follows:
The $50.5 million of lease commitments includes $14.3 million of non-cancelable lease commitments under
the lease terms and $36.2 million of lease commitments for renewal periods at the Company’s option that are
reasonably assured. The lease commitments also include $14.6 million of lease commitments associated with
entities owned or controlled by one of the preferred shareholders. For the years ended April 30, 2018, 2017 and
2016, rent expense for all operating leases amounted to approximately $6.2 million, $6.2 million and $6.1 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
58
Years EndingApril 30,2019$6,4192020202120222023ThereafterTotal$50,5165,55620,648Amount(In thousands)6,3175,9385,638
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
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, 2018, 2017 and 2016 are as follows:
N - Quarterly Results of Operations (unaudited)
A summary of the Company’s quarterly results of operations for the years ended April 30, 2018 and 2017
is as follows (in thousands, except per share information):
59
(in thousands)201820172016Supplemental disclosures: Interest paid$5,599 $4,069 $3,536 Income taxes paid, net11,092 8,435 7,811 Non-cash transactions: Inventory acquired in repossession and payment protection plan claims42,274 42,743 43,766 Purchase of property and equipment using the issuance of debt1,151 - 550 Loss accrued on disposal of property and equipment - 797300 Net settlement option exercises3,8592,130- Years Ended April 30, Revenues$146,418$149,118$147,214$169,451$612,201Gross profitNet income Net income attributable to common stockholdersEarnings per share: Basic DilutedRevenues$145,840$150,210$138,784$152,917$587,751Gross profit54,17155,17349,42756,451215,222Net income 7,1095,0182,8365,24220,205Net income attributable to common stockholdersEarnings per share: Basic0.890.640.360.682.57 Diluted0.870.620.350.662.49QuarterQuarterQuarterQuarterTotalYear Ended April 30, 2017FirstSecondThirdFourth0.92 0.82 1.881.475.040.90 0.79 1.821.434.9010,15936,4696,982 5,959 13,36953,06854,80453,21561,168222,2556,992 5,969 13,37910,16936,509QuarterQuarterQuarterQuarterTotalYear Ended April 30, 2018FirstSecondThirdFourth7,0995,008 2,8265,23220,165
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, 2018, 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.
60
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, 2018. 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, 2018.
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, 2018. That report appears below.
61
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
America’s Car-Mart, Inc.
Opinion on internal control over financial reporting
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, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of April 30, 2018, 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) (“PCAOB”),
the consolidated financial statements of the Company as of and for the year ended April 30, 2018, and our report dated June 13, 2018
expressed an unqualified opinion on those financial statements.
Basis for opinion
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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and limitations of internal control over financial reporting
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.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
June 13, 2018
62
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.
63
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.
64
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, 2018 and 2017
Consolidated Statements of Operations for the years ended April 30, 2018, 2017 and 2016
Consolidated Statements of Cash Flows for the years ended April 30, 2018, 2017 and 2016
Consolidated Statements of Equity for the years ended April 30, 2018, 2017 and 2016
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
Exhibit
Number
Description of Exhibit
3.1
3.2
3.3
4.1
4.2
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).
65
Exhibit
Number
Description of Exhibit
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
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).
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).
66
Exhibit
Number
4.14
4.15
4.16
4.17
4.18
Description of Exhibit
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).
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*
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 10.1 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 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 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 10.3 to the Company’s Current Report on Form 8-K filed
with the SEC on August 10, 2015).
67
Exhibit
Number
10.2.4*
10.3*
10.4*
10.5*
10.6*
14.1
21.1
23.1
24.1
24.2
24.3
24.4
24.5
24.6
31.1
31.2
32.1
Description of Exhibit
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 10.4 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 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 14, 2017).
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).
Retirement and Transition Agreement, dated as of January 1, 2018, between America’s Car-
Mart, Inc. 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 January 11, 2018).
Code of Business Conduct and Ethics. (Incorporated by reference to Exhibit 14.1 to the
Company’s Current Report on Form 8-K filed with the SEC on July 22, 2016)
Subsidiaries of America’s Car-Mart, Inc.
Consent of Independent Registered Public Accounting Firm
Power of Attorney of William H. Henderson
Power of Attorney of Daniel J. Englander
Power of Attorney of Robert Cameron Smith
Power of Attorney of Ray C. Dillon
Power of Attorney of Jim von Gremp
Power of Attorney of Joshua G. Welch
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
68
Exhibit
Number
Description of Exhibit
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.
69
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, 2018
AMERICA’S CAR-MART, INC.
By: /s/ Vickie D. Judy
Vickie D. Judy
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/ Jeffrey A. Williams
Jeffrey A. Williams
/s/ Vickie D. Judy
Vickie D. Judy
*
Jim von Gremp
*
Daniel J. Englander
*
William H. Henderson
*
Robert Cameron Smith
*
Ray C. Dillon
*
Joshua G. Welch
* By/s/ Jeffrey A. Williams
Jeffrey A. Williams
As Attorney-in-Fact
Pursuant to Powers of
Attorney filed herewith
President, Chief Executive Officer
and Director
(Principal Executive Officer)
Chief Financial Officer,
Secretary
(Principal Financial Officer)
Date
June 13, 2018
June 13, 2018
Chairman of the Board
June 13, 2018
June 13, 2018
June 13, 2018
June 13, 2018
June 13, 2018
June 13, 2018
Director
Director
Director
Director
Director
70
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)
71
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated June 13, 2018, 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, 2018. 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, Oklahoma
June 13, 2018
72
STATE OF ARKANSAS §
COUNTY OF BENTON §
Exhibit 24.1
POWER OF ATTORNEY
Know all men by these presents, that I, WILLIAM H HENDERSON, a Director of AMERICA’S CAR-MART, INC.,
a Texas corporation, do constitute and appoint JEFFREY A. WILLIAMS and VICKIE D. JUDY 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, 2018 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, 2018.
/s/ William H. Henderson
WILLIAM HENDERSON
Before me this 12th day of June, 2018, came WILLIAM H HENDERSON, 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
73
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 JEFFREY A. WILLIAMS and VICKIE D. JUDY 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, 2018 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, 2018.
/s/ Daniel J. Englander
DANIEL J. ENGLANDER
Before me this 12th day of June, 2018, 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/ Leslie Ann Jacobi
NOTARY PUBLIC
74
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 JEFFREY A. WILLIAMS and VICKIE D. JUDY 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, 2018 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 13th day of June, 2018.
/s/ Robert Cameron Smith
ROBERT CAMERON SMITH
Before me this 13th day of June, 2018, 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/ Deanne Haley
NOTARY PUBLIC
75
STATE OF ARKANSAS §
COUNTY OF PULASKI §
Exhibit 24.4
POWER OF ATTORNEY
Know all men by these presents, that I, RAY C. DILLON, a Director of AMERICA’S CAR-MART, INC., a Texas
corporation, do constitute and appoint JEFFREY A. WILLIAMS and VICKIE D. JUDY 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, 2018
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 13th day of June, 2018.
/s/ Ray C. Dillon
RAY C. DILLON
Before me this 13th day of June, 2018, came RAY C. DILLON, 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/ Ashlee Vaughan
NOTARY PUBLIC
76
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 JEFFREY A. WILLIAMS and VICKIE D. JUDY 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, 2018
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 11th day of June, 2018.
/s/ Jim von Gremp
JIM VON GREMP
Before me this 11th day of June, 2018, 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
77
STATE OF CONNECTICUT §
COUNTY OF NEW LONDON §
Exhibit 24.6
POWER OF ATTORNEY
Know all men by these presents, that I, JOSHUA G. WELCH, a Director of AMERICA’S CAR-MART, INC., a Texas
corporation, do constitute and appoint JEFFREY A. WILLIAMS and VICKIE D. JUDY 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, 2018
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 13th day of June, 2018.
/s/ Joshua G. Welch
JOSHUA G. WELCH
Before me this 13th day of June, 2018, came JOSHUA G. WELCH, 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/ Stephen Bessette
NOTARY PUBLIC
78
Exhibit 31.1
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, 2018 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, 2018
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 Executive Officer
79
Exhibit 31.2
Certification
1.
2.
3.
4.
I, Vickie D. Judy, certify that:
I have reviewed this Annual Report on Form 10-K for the period ended April 30, 2018 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, 2018
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/ Vickie D. Judy
Vickie D. Judy
Chief Financial Officer and Secretary
(Principal Financial Officer)
80
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, 2018 of America’s Car-Mart, Inc.
(the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned,
Jeffrey A. Williams, President and Chief Executive Officer of the Company, and Vickie D. Judy, 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/ Jeffrey A. Williams
Jeffrey A. Williams
President, Chief Executive Officer
June 13, 2018
By: /s/ Vickie D. Judy
Vickie D. Judy
Chief Financial Officer and Secretary
June 13, 2018
81
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America’s Car-Mart, Inc.
2018 Annual Report
CORPORATE INFORMATION
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 29, 2018.
Transfer Agent and Registrar
Securities Transfer Corporation
2901 N Dallas Parkway, Suite 380
Plano, Texas 75093
Independent Public Accountants
Grant Thornton, LLP
Tulsa, Oklahoma
Board of Directors
Jim von Gremp
Chairman of the Board
Retired Certified Public Accountant
Jeffrey A. Williams
President and Chief Executive Officer
Ray C. Dillon
Retired Chief Executive Officer,
Deltic Timber Corporation
Daniel J. Englander
Managing Partner, Ursula Investors
William H. (“Hank”) Henderson
Retired Chief Executive Officer
Robert Cameron Smith
President, Cameron Smith & Associates, Inc.
Joshua G. Welch
Managing Partner, Vicuna Capital I, LP
Executive Officers
Jeffrey A. Williams
President and Chief Executive Officer
Vickie D. Judy
Chief Financial Officer
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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