America’s Car Mart F1Q10 (Qtr End 7/31/09) Earnings Call Transcript

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America's Car-Mart, Inc. (CRMT)

F1Q10 Earnings Call

September 1, 2009 11:00 am ET

Executives

Tilman J. Falgout III - Chairman of the Board, General Counsel

Jeffrey A. Williams - Chief Financial Officer, Vice President - Finance, Secretary

William H. Henderson - Vice Chairman of the Board, President, Chief Executive Officer

Analysts

David Berkloff - Seasons Incorporated

Bill Armstrong - C.L. King & Associates

John Hecht - JMP Securities

Daniel Furtado - Jefferies

Brian Roman - Ruboko Investment Management

Dennis Skenell - Ritabuga Capital

Presentation

Operator

Good morning, everyone. Thank you for holding and welcome to America’s Car Mart first quarter 2010 conference call. The topic of this call will be the earnings and operating results for the company’s fiscal first quarter ended July 31, 2009. Before we begin, I would like to remind everyone that this call is being recorded and will be available for replay for the next 30 days. The dial-in number and access information are included in this morning’s press release which can be found on America’s Car Mart's website at www.car-mart.com.

As you all know, some of management’s comments today may include forward-looking statements which inherently involve risks and uncertainties that could cause actual results to differ materially from management’s present view. These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The company cannot guarantee the accuracy of the forecast or estimates, nor does it undertake any obligation to update such forward-looking statements.

For more information regarding forward-looking statements information, please see item one of part one of the company’s annual report on Form 10-K for the fiscal year ended April 30, 2009, and its current and quarterly reports furnished to or filed with the Securities and Exchange Commission on Forms 8-K and 10-Q.

Participating on the call this morning are Skip Falgout, Car Mart’s Chairman of the Board; Hank Henderson, the company’s Chief Executive Officer and President; and Jeff Williams, Chief Financial Officer.

And now I would like to turn the call over to the company’s Chairman of the Board, Skip Falgout.

Tilman J. Falgout III

Thank you, Operator and good morning, everyone. We announced earlier this morning outstanding results for the first quarter of fiscal 2010, which is our 10th consecutive quarter of solid profits and is a continuation of our 28 plus years of profitability. Included in that announcement was a 33% increase in net income to $7 million, or $0.60 per share, versus net income of $5.3 million, or $0.45 per share for the prior year first quarter. Our top line increased by 10.7% to $83.8 million on strong retail unit sales increase of 11.3%, and same-store sales increase of 8.5%.

As a reminder, last year’s first quarter sales were bolstered somewhat by economic stimulus checks that our customer base received in April -- in May of last year. When you consider that incentive to benefit our customers, I believe this year’s first quarter sales and revenue increases are even more impressive. And not to take away from Jeff’s discussion to follow but we were able to achieve the sales gains this quarter while at the same time continuing to not only maintain but significantly improve our delinquency and credit loss metrics.

For example, our over 30 day delinquencies improved over last year’s first quarter to 3.5%. Net charge-offs decreased to 5.1% from 5.7% and provision for credit losses as a percentage of sales was well below 20%, the best level in recent years. Folks, this is a cornerstone and harbinger of solid, good, and growing earnings. As Hank and Jeff mentioned in today’s press release, and they will elaborate on more in a moment, we have continued to make huge strides in building our company for maximizing our results at our existing store base and laying a strong foundation for accelerated but controlled future new store growth. I am very confident we will continue to build on the momentum we have generated over the last two years of positive growth and you will see sustained strong growth and results here at Car Mart in the future.

Now I will turn it over to Jeff.

Jeffrey A. Williams

Thanks, Skip. Once again, as mentioned in the press release, our top line revenues for the quarter increased by 10.7% compared to the first quarter of last year. The increase was a result of an 11.3% increase in unit volume, a 1% increase in average retail sales price, a $300,000 increase in interest income, offset by a $360,000 decrease in wholesale sales. Same-store sale revenue increased by 8.5%. Our down payment percentage for the quarter was 7% this year compared to 6.5% for the first quarter of last year. Our initial loan term was approximately 26 months, which is flat with the first quarter of 2009. Our weighted average note term for the entire portfolio, including contract modifications, was 27.6 months at July 31, 2009 compared to 27.5 months at July 31, 2008. Considering the slight increase in average retail sales price, the initial term was actually slightly down between years. This is an indication that our lot managers continue to do an outstanding job of keeping the terms down, which is so important in ensuring that our customers maintain equity in their vehicles.

The average retail sales price increased slightly to $9,041 from $8,952 for the first quarter of last fiscal year. Sequentially, the average retail sales price was actually down $148 or 1.6%, something that we are very happy about. Demand for used vehicles we are purchasing remains very high. Wholesale price trends have been increasing for several months now. To be able to hold down purchase prices and resulting sales prices and to maintain required quantities, quality, and mix in this environment is a testament to our lot managers, their purchasing agents, and our corporate purchasing support team led by John Sims.

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