America’s Car Mart (CRMT)

I started a position in America’s Car Mart at ~ 33$.

Management

The insiders hold 12.9% of the shares according to the 2015 proxy and the CEO William H. Henderson holds 5.3%.
The management has been quite stable with Mr Henderson as CEO since 2002.
The company pays no dividends and the management wants to return value to shareholders via share buybacks. The shares-outstanding has gone from ~12M to ~9M in the last 10 years.
The management sees the company as “growth” and has target numbers in terms of dealerships going forward.

Balance Sheet

The company has a safe balance sheet with ~ $100M long term debt financed by revolving credit facility.
The company has $229M in equity with book value $25.44/share.

Business

The company gives cars to people with bad credit scores (default risk is ~ 30%). Then, it concentrates on collection. This is a finance and people relations business.

For fiscal year 2015, we increased unit sales by almost 10% and grew revenues by 8.4%, added over 5,000 active accounts and $38 million in finance receivables, opened seven great new dealerships and completed our software conversion with capital expenditures of $4 million, increased inventory levels by $4 million to support higher sales volumes and repurchased another 5% of our company for $20 million. These investments totaled $66 million and only required $5.7 million in additional borrowings.

Our current plans are to have 200 dealerships by the end of 2020. Even though we admittedly operational improvements to make, we want to plant trees for our future in the form of new dealerships. We believe we can get dealerships and at the same time improve operations at our existing dealerships by focusing on general manager turnover rates, controlling expenses and improving our lot level blocking and tackling in the collections area of our business.

The Company’s average retail sales price was $9,680 per unit in fiscal 2015.

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 30.2 months), while requiring relatively low payments.

 

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