10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2020

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	63-0851141
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

802 Southeast Plaza Ave., Suite 200, Bentonville, Arkansas 72712

(Address of principal executive offices) (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	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CRMT	NASDAQ Global Select Market

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒   No ☐

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.

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 Exchange Act). Yes ☐    No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	Outstanding at
Title of Each Class	March 10, 2020
Common stock, par value $.01 per share	6,614,110

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements America’s Car-Mart, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands except share and per share amounts)

	January 31, 2020			April 30, 2019
Assets:
Cash and cash equivalents	$	2,083		$	1,752
Accrued interest on finance receivables		2,603			2,348
Finance receivables, net		467,255			415,486
Inventory		54,026			37,483
Prepaid expenses and other assets		4,720			4,634
Income taxes receivable, net		783			1,947
Right-of-use asset		37,248			-
Goodwill		355			355
Property and equipment, net		28,820			28,537
Total Assets	$	597,893		$	492,542
Liabilities, mezzanine equity and equity:
Liabilities:
Accounts payable	$	16,330		$	13,659
Deferred payment protection plan revenue		23,566			21,367
Deferred service contract revenue		11,392			10,592
Accrued liabilities		15,061			18,837
Deferred income tax liabilities, net		15,827			14,259
Lease liability		39,247			-
Debt facilities		184,300			152,918
Total liabilities		305,723			231,632
Commitments and contingencies (Note J)
Mezzanine equity:
Mandatorily redeemable preferred stock		400			400
Equity:
Preferred stock, par value $.01 per share, 1,000,000 shares authorized; none issued or outstanding		-			-
Common stock, par value $.01 per share, 50,000,000 shares authorized; 13,466,707 and 13,376,030 issued at January 31, 2020 and April 30, 2019, respectively, of which 6,610,116 and 6,699,421 were outstanding at January 31, 2020 and April 30, 2019, respectively		135			134
Additional paid-in capital		86,633			81,605
Retained earnings		451,627			409,573
Less:  Treasury stock, at cost, 6,856,591 and 6,676,609 shares at January 31, 2020 and April 30, 2019, respectively		(246,725	)		(230,902	)
Total stockholders' equity		291,670			260,410
Non-controlling interest		100			100
Total equity		291,770			260,510
Total Liabilities, Mezzanine Equity and Equity	$	597,893		$	492,542

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Condensed Consolidated Statements of Operations America’s Car-Mart, Inc.

(Unaudited)

(Dollars in thousands except share and per share amounts)

	Three Months Ended January 31,						Nine Months Ended January 31,
	2020			2019			2020			2019
Revenues:
Sales	$	163,253		$	139,803		$	481,070		$	430,315
Interest and other income		23,481			21,251			67,852			61,925
Total revenue		186,734			161,054			548,922			492,240
Costs and expenses:
Cost of sales		97,504			81,740			286,215			251,274
Selling, general and administrative		30,331			26,488			87,298			79,068
Provision for credit losses		40,233			35,555			112,885			111,619
Interest expense		2,024			2,110			6,109			5,895
Depreciation and amortization		975			985			2,913			2,949
Loss (gain) on disposal of property and equipment		-			(100	)		39			(88	)
Total costs and expenses		171,067			146,778			495,459			450,717
Income before taxes		15,667			14,276			53,463			41,523
Provision for income taxes		2,981			3,381			11,379			8,464
Net income	$	12,686		$	10,895		$	42,084		$	33,059
Less:  Dividends on mandatorily redeemable preferred stock		(10	)		(10	)		(30	)		(30	)
Net income attributable to common stockholders	$	12,676		$	10,885		$	42,054		$	33,029
Earnings per share:
Basic	$	1.92		$	1.61		$	6.34		$	4.82
Diluted	$	1.83		$	1.55		$	6.03		$	4.66
Weighted average number of shares used in calculation:
Basic		6,597,643			6,751,026			6,634,496			6,846,707
Diluted		6,940,124			7,003,389			6,969,848			7,087,430

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Condensed Consolidated Statements of Cash Flows America’s Car-Mart, Inc.

(Unaudited)

(In thousands)

	Nine Months Ended January 31,
Operating Activities:	2020			2019
Net income	$	42,084		$	33,059
Adjustments to reconcile net income to net cash used in operating activities:
Provision for credit losses		112,885			111,619
Losses on claims for payment protection plan		13,141			12,148
Depreciation and amortization		2,913			2,949
Amortization of debt issuance costs		191			198
Loss (gain) on disposal of property and equipment		39			(88	)
Stock based compensation		3,150			2,270
Deferred income taxes		1,568			1,609
Excess tax benefit from share based compensation		1,338			1,527
Change in operating assets and liabilities:
Finance receivable originations		(446,093	)		(399,089	)
Finance receivable collections		229,973			206,620
Accrued interest on finance receivables		(255	)		(267	)
Inventory		21,782			32,194
Prepaid expenses and other assets		(86	)		(318	)
Accounts payable and accrued liabilities		1,116			1,320
Deferred payment protection plan revenue		2,199			925
Deferred service contract revenue		800			(108	)
Income taxes, net		(174	)		(1,723	)
Net cash provided by (used in) operating activities		(13,429	)		4,845
Investing Activities:
Purchase of property and equipment		(3,244	)		(3,042	)
Proceeds from sale of property and equipment		9			-
Net cash used in investing activities		(3,235	)		(3,042	)
Financing Activities:
Exercise of stock options		1,738			3,827
Issuance of common stock		141			103
Purchase of common stock		(15,823	)		(24,087	)
Dividend payments		(30	)		(30	)
Change in cash overdrafts		(222	)		814
Debt issuance costs		(459	)		(372	)
Payments on note payable		(374	)		(284	)
Proceeds from revolving credit facilities		384,690			337,842
Payments on revolving credit facilities		(352,666	)		(319,014	)
Net cash provided by (used in) financing activities		16,995			(1,201	)
Increase in cash and cash equivalents		331			602
Cash and cash equivalents, beginning of period		1,752			1,022
Cash and cash equivalents, end of period	$	2,083		$	1,624

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Condensed Consolidated Statements of Equity America’s Car-Mart, Inc.

(Unaudited)

(In thousands except share amounts)

					Additional								Non-
	Common Stock				Paid-In		Retained			Treasury			Controlling		Total
	Shares		Amount		Capital		Earnings			Stock			Interest		Equity
Balance at April 30, 2019		13,376,030	$	134	$	81,605	$	409,573		$	(230,902	)	$	100	$	260,510
Issuance of common stock		552		-		40		-			-			-		40
Stock options exercised		15,815		-		80		-			-			-		80
Purchase of 55,507 treasury shares		-		-		-		-			(4,715	)		-		(4,715	)
Stock-based compensation		-		-		1,620		-			-			-		1,620
Dividends on subsidiary preferred stock		-		-		-		(10	)		-			-		(10	)
Net income		-		-		-		15,511			-			-		15,511
Balance at July 31, 2019		13,392,397	$	134	$	83,345	$	425,074		$	(235,617	)	$	100	$	273,036
Issuance of common stock		631		-		50		-			-			-		50
Stock options exercised		17,500		-		785		-			-			-		785
Purchase of 112,091 treasury shares		-		-		-		-			(9,981	)		-		(9,981	)
Stock-based compensation		-		-		592		-			-			-		592
Dividends on subsidiary preferred stock		-		-		-		(10	)		-			-		(10	)
Net income		-		-		-		13,887			-			-		13,887
Balance at October 31, 2019		13,410,528	$	134	$	84,772	$	438,951		$	(245,598	)	$	100	$	278,359
Issuance of common stock		545		-		51		-			-			-		51
Stock options exercised		55,634		1		872		-			-			-		873
Purchase of 12,384 treasury shares		-		-		-		-			(1,127	)		-		(1,127	)
Stock-based compensation		-		-		938		-			-			-		938
Dividends on subsidiary preferred stock		-		-		-		(10	)		-			-		(10	)
Net income		-		-		-		12,686			-			-		12,686
Balance at January 31, 2020		13,466,707	$	135	$	86,633	$	451,627		$	(246,725	)	$	100	$	291,770

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Condensed Consolidated Statements of Equity America’s Car-Mart, Inc.

(Unaudited)

(In thousands except share amounts)

					Additional								Non-
	Common Stock				Paid-In		Retained			Treasury			Controlling		Total
	Shares		Amount		Capital		Earnings			Stock			Interest		Equity
Balance at April 30, 2018		13,147,143	$	131	$	72,641	$	361,987		$	(204,325	)	$	100	$	230,534
Issuance of common stock		544		-		29		-			-			-		29
Stock options exercised		131,357		2		2,711		-			-			-		2,713
Purchase of 115,999 treasury shares		-		-		-		-			(7,377	)		-		(7,377	)
Stock-based compensation		-		-		1,094		-			-			-		1,094
Dividends on subsidiary preferred stock		-		-		-		(10	)		-			-		(10	)
Net income		-		-		-		10,884			-			-		10,884
Balance at July 31, 2018		13,279,044	$	133	$	76,475	$	372,861		$	(211,702	)	$	100	$	237,867
Issuance of common stock		580		-		38		-			-			-		38
Stock options exercised		46,776		-		1,035		-			-			-		1,035
Purchase of 89,656 treasury shares		-		-		-		-			(6,495	)		-		(6,495	)
Stock-based compensation		-		-		594		-			-			-		594
Dividends on subsidiary preferred stock		-		-		-		(10	)		-			-		(10	)
Net income		-		-		-		11,281			-			-		11,281
Balance at October 31, 2018		13,326,400	$	133	$	78,142	$	384,132		$	(218,197	)	$	100	$	244,310
Issuance of common stock		-		-		35		-			-			-		35
Stock options exercised		3,750		0		79		-			-			-		79
Purchase of 141,500 treasury shares		-		-		-		-			(10,215	)		-		(10,215	)
Stock-based compensation		-		-		583		-			-			-		583
Dividends on subsidiary preferred stock		-		-		-		(10	)		-			-		(10	)
Net income		-		-		-		10,895			-			-		10,895
Balance at January 31, 2019		13,330,150	$	133	$	78,839	$	395,017		$	(228,412	)	$	100	$	245,677

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Notes to Consolidated Financial Statements (Unaudited) 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” or “ACM”), and Colonial Auto Finance, Inc., an Arkansas corporation (“Colonial”). 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 January 31, 2020, the Company operated 145 dealerships located primarily in small cities throughout the South-Central United States.

B – Summary of Significant Accounting Policies

General

The accompanying condensed consolidated balance sheet as of April 30, 2019, which has been derived from audited financial statements, and the unaudited interim condensed financial statements as of January 31, 2020 and 2019, have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended January 31, 2020 are not necessarily indicative of the results that may be expected for the year ending April 30, 2020. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended April 30, 2019.

Principles of Consolidation

The condensed 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 are 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 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 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 28% of current period revenues resulting from sales to Arkansas customers.

Periodically, the Company maintains cash in financial institutions in excess of the amounts insured by the federal government. The Company’s revolving credit facilities mature on September 30, 2022.

7

Restrictions on Distributions/Dividends

The Company’s revolving credit facilities generally restrict distributions by the Company to its shareholders. The distribution limitations under the credit facilities allow the Company to repurchase the Company’s stock so long as either: (a) the aggregate amount of such repurchases after September 30, 2019 does not exceed $50 million, net of proceeds received from the exercise of stock options, and the total availability under the credit facilities is equal to or greater than 20% of the sum of the borrowing bases, in each case after giving effect to such repurchases (repurchases under this item are excluded from fixed charges for covenant calculations), or (b) the aggregate amount of such repurchases does not exceed 75% of the consolidated net income of the Company measured on a trailing twelve month basis; provided that immediately before and after giving effect to the stock repurchases, at least 12.5% of the aggregate funds committed under the credit facilities remain available. Thus, the Company is limited in its ability to pay dividends or make other distributions to its shareholders without the consent of the Company’s lenders.

Cash Equivalents

The Company considers all highly liquid debt 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 16.4% 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%. 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 ($2.6 million at January 31, 2020 and $2.3 million at April 30, 2019 on the Condensed Consolidated Balance Sheets), 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 Condensed 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 76% 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 January 31, 2020, 3.6% of the Company’s finance receivable balances were 30 days or more past due, compared to 3.2% at January 31, 2019.

Substantially all of the Company’s automobile contracts involve contracts made to individuals with impaired or limited credit histories or higher debt-to-income ratios than permitted by traditional lenders. Contracts made with buyers who are restricted in their ability to obtain financing from traditional lenders generally entail a higher risk of delinquency, default and repossession, and higher losses than contracts made with buyers with better credit.

The Company strives to keep its delinquency percentages low, and not to repossess vehicles. Accounts three days late are contacted by telephone. Notes from each telephone contact are electronically maintained in the Company’s computer system. The Company also utilizes text messaging notifications which allow customers to elect and receive reminders on their due dates and late notifications, if applicable. 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.

8

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. For the quarter ended January 31, 2020, on average, accounts were approximately 69 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 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 January 31, 2020, 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 January 31, 2020, $140.3 million, was 24.5% of the principal balance in finance receivables of $607.5 million, less unearned payment protection plan revenue of $23.6 million and unearned service contract revenue of $11.4 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.  About 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 for the eighteen-month period ended January 31, 2020 was 12.7 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, effective 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.

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 contract, 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 January 31, 2020 or April 30, 2019.

Inventory

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 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. There was no impairment of goodwill during fiscal 2019, and to date, there has been no impairment during fiscal 2020.

9

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 using the straight-line method, generally over the following estimated useful lives:

Furniture, fixtures and equipment (years)	3	to	7
Leasehold improvements (years)	5	to	15
Buildings and improvements (years)	18	to	39

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 the revolving credit facilities. Any cash overdraft balance principally represents outstanding checks that as of the balance sheet date had not yet been presented for payment, net of any deposits in transit. Any cash overdraft balance is reflected in accrued liabilities on the Company’s Condensed 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 Condensed 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. The quarterly provision for income taxes is determined using an estimated annual effective tax rate, which is based on expected annual taxable income, statutory tax rates and the Company’s best estimate of nontaxable and nondeductible items of income and expense. The effective income tax rates were 21.3% and 20.4% for the nine months ended January 31, 2020 and January 31, 2019, respectively. Total income tax expense for the nine months ended January 31, 2020 differed from amounts computed by applying the United States federal statutory tax rates to pre-tax income primarily due to state income taxes and the impact of permanent differences between book and taxable income. The Company recorded a discrete income tax benefit of approximately $1.3 million and $1.5 million for the nine months ended January 31, 2020 and January 31, 2019, respectively, related to excess tax benefits on share based compensation, which is recorded in the income tax provision.

Occasionally, the Company is audited by taxing authorities. These audits could result in proposed assessments of additional taxes. The Company believes that its tax positions comply in all material respects with applicable tax law. However, tax law is subject to interpretation, and interpretations by taxing authorities could be different from those of the Company, which could result in the imposition of additional taxes.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applies this methodology to all tax positions for which the statute of limitations remains open.

The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for the years before fiscal 2016.

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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 January 31, 2020 or April 30, 2019.

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, 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. The amount of revenue recognized for the nine months ended January 31, 2020 that was included in the April 30, 2019 deferred service contract revenue was $9.4 million. 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:

	Three Months Ended January 31,				Nine Months Ended January 31,
(In thousands)	2020		2019		2020		2019
Sales – used autos	$	142,136	$	119,955	$	417,079	$	371,465
Wholesales – third party		6,810		6,460		22,236		19,205
Service contract sales		7,983		7,600		23,283		22,655
Payment protection plan revenue		6,324		5,788		18,472		16,990
Total	$	163,253	$	139,803	$	481,070	$	430,315

At January 31, 2020 and 2019, finance receivables more than 90 days past due were approximately $2.6 million and $1.5 million, respectively. Late fee revenues totaled approximately $1.5 million for the nine months ended January 31, 2020 and 2019. Late fees are recognized when collected and are reflected in interest and other income on the Condensed Consolidated Statements of Operations.

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 I. 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. The Company recorded a discrete income tax benefit of approximately $1.3 million and $1.5 million for the nine months ended January 31, 2020 and January 31, 2019, respectively. The Company elects to account for forfeitures as they occur and 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, 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.

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Treasury Stock

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 14,000 shares of treasury stock for its subsidiary, ACM Insurance Company, in accordance with the requirements of the Arkansas Department of Insurance.

Recent Accounting Pronouncements

Occasionally, new accounting pronouncements are issued by the 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.

Leases. In February 2016, the FASB issued ASU 2016-02, Leases. The new guidance requires that lessees recognize all leases, including operating leases, with a term greater than 12 months on-balance sheet and also requires disclosure of key information about leasing transactions. The guidance in ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those years. The Company adopted this ASU and related amendments for its fiscal year beginning May 1, 2019 and elected certain practical expedients permitted under the transition guidance, including to retain the historical lease classification as well as relief from reviewing expired or existing contracts to determine if they contain leases. The adoption of this ASU and related amendments resulted in total assets and liabilities increasing $34.5 million at the time of adoption. The Company’s Consolidated Statements of Income and Consolidated Statements of Cash Flows were not materially impacted.

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.

Cloud Computing Arrangement. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). ASU 2018-15 aligns the requirements for capitalizing implementation costs in a cloud computing arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for annual reporting periods beginning after December 15, 2019, 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 but does not expect such impact to be material.

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 as of the contract origination date), are collateralized by the vehicle sold and typically provide for payments over periods ranging from 18 to 48 months. The weighted average interest rate for the portfolio was approximately 16.4% at January 31, 2020. The Company’s finance receivables are defined as one segment and one class of loans in sub-prime consumer automobile contracts. The level of risks inherent in the Company’s financing receivables is managed as one homogeneous pool.

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The components of finance receivables are as follows:

(In thousands)	January 31, 2020			April 30, 2019
Gross contract amount	$	706,014		$	631,681
Less unearned finance charges		(98,477	)		(88,353	)
Principal balance		607,537			543,328
Less allowance for credit losses		(140,282	)		(127,842	)
Finance receivables, net	$	467,255		$	415,486

Changes in the finance receivables, net are as follows:

	Nine Months Ended January 31,
(In thousands)	2020			2019
Balance at beginning of period	$	415,486		$	383,617
Finance receivable originations		446,093			399,089
Finance receivable collections		(229,973	)		(206,620	)
Provision for credit losses		(112,885	)		(111,619	)
Losses on claims for payment protection plan		(13,141	)		(12,148	)
Inventory acquired in repossession and payment protection plan claims		(38,325	)		(37,406	)
Balance at end of period	$	467,255		$	414,913

Changes in the finance receivables allowance for credit losses are as follows:

	Nine Months Ended January 31,
(In thousands)	2020			2019
Balance at beginning of period	$	127,842		$	117,821
Provision for credit losses		112,885			111,619
Charge-offs, net of recovered collateral		(100,445	)		(101,460	)
Balance at end of period	$	140,282		$	127,980

The factors which influenced management’s judgment in determining the amount of the current period provision for credit losses are described below.

The level of charge-offs, net of recovered collateral, is the most important factor in determining 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 decreased to 17.5% for the nine months ended January 31, 2020, compared to 19.2% for the prior year period. Both the frequency and severity of losses improved as a result of a higher quality vehicle, improved deal structures and consistent collections practices.

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 40.0% for the nine months ended January 31, 2020 compared to 39.2% for the same period in the prior year. The increase in collections as a percentage of average finance receivables resulted primarily from improved and consistent efforts in the collections process. Delinquencies greater than 30 days were 3.6% for January 31, 2020 and 3.2% at January 31, 2019.

As a result of the improvements in our net charge-offs as a percentage of average receivables, the quality of the portfolio and our allowance analysis, a decrease to the allowance for credit losses from 25% to 24.5% was made in the first quarter of fiscal 2020, which resulted in a $2.6 million credit to the provision for credit losses, a $2.0 million after tax increase to net income.

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Macro-economic factors, the competitive environment on the funding side, 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.

Credit quality information for finance receivables is as follows:

(Dollars in thousands)	January 31, 2020					April 30, 2019					January 31, 2019
	Principal		Percent of			Principal		Percent of			Principal		Percent of
	Balance		Portfolio			Balance		Portfolio			Balance		Portfolio
Current	$	513,053		84.44	%	$	435,603		80.17	%	$	450,931		83.05	%
3 - 29 days past due		72,971		12.01	%		91,747		16.89	%		74,788		13.78	%
30 - 60 days past due		14,504		2.39	%		11,362		2.09	%		12,062		2.22	%
61 - 90 days past due		4,413		0.73	%		3,429		0.63	%		3,619		0.67	%
> 90 days past due		2,596		0.43	%		1,187		0.22	%		1,493		0.28	%
Total	$	607,537		100.00	%	$	543,328		100.00	%	$	542,893		100.00	%

Accounts one and two days past due are considered current for this analysis, due to the varying payment dates and variation in the day of the week at each period end. Delinquencies may vary from period to period based on the average age of the portfolio, seasonality within the calendar year, the day of the week and overall economic factors. The above categories are consistent with internal operational measures used by the Company to monitor credit results.

Substantially all of the Company’s automobile contracts involve contracts made to individuals with impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders; such contracts generally entail a higher risk of delinquency, default, repossession, and losses than contracts made with buyers with better credit. The Company monitors contract term length, down payment percentages, and collections as credit quality indicators.

	Nine Months Ended January 31,
	2020			2019
Principal collected as a percent of average finance receivables		40.0	%		39.2	%
Average down-payment percentage		5.9	%		5.8	%
Average originating contract term (in months)		30.8			29.4

	January 31, 2020		January 31, 2019
Portfolio weighted average contract term, including modifications (in months)		32.5		32.0

The increase in collections as a percentage of average finance receivables resulted primarily from improved and consistent efforts in the collections process. The portfolio weighted average contract term increased slightly primarily due to the increased average selling price. As the average selling price increases and in order to remain competitive, term lengths may increase.

D – Property and Equipment

A summary of property and equipment is as follows:

(In thousands)	January 31, 2020			April 30, 2019
Land	$	7,799		$	7,413
Buildings and improvements		12,535			11,815
Furniture, fixtures and equipment		13,977			13,307
Leasehold improvements		27,352			26,064
Construction in progress		1,498			1,523
Less accumulated depreciation and amortization		(34,341	)		(31,585	)
Total	$	28,820		$	28,537

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E – Accrued Liabilities

A summary of accrued liabilities is as follows:

(In thousands)	January 31, 2020		April 30, 2019
Employee compensation	$	6,059	$	6,321
Cash overdrafts (see Note B)		1,052		1,274
Deferred sales tax (see Note B)		2,611		3,571
Reserve for PPP claims		2,882		2,433
Health insurance		1,052		1,256
Other		1,405		3,982
Total	$	15,061	$	18,837

The decrease in deferred sales tax is due to timing differences in deferred sales tax payments. The decrease in other is primarily related to ASU 2016-02, Leases, as deferred rent is no longer reported in this category.

F – Debt Facilities

A summary of debt facilities is as follows:

(In thousands)	January 31, 2020			April 30, 2019
Revolving lines of credit	$	184,464		$	152,440
Notes payable		109			194
Finance lease		550			839
Debt issuance costs		(823	)		(555	)
Debt facilities	$	184,300		$	152,918

On September 30, 2019, the Company and its subsidiaries, Colonial, ACM and Texas Car-Mart, Inc., a Texas Corporation (“TCM”) entered into the Third Amended and Restated Loan and Security Agreement (the “Agreement”). Under the Agreement, BMO Harris Bank, N.A. replaced Bank of America, N.A. as agent, lead arranger and book manager. Wells Fargo Bank, N.A. also joined the group of lenders. The Agreement also extended the term of the Company’s revolving credit facilities to September 30, 2022 and increased the total permitted borrowings from $215 million to $241 million, including an increase in the Colonial revolving line of credit from $205 million to $231 million. The ACM-TCM revolving line of credit commitment remained the same at $10 million. The Agreement also increased the accordion feature from $50 million to $100 million.

The revolving credit facilities are collateralized primarily by finance receivables and inventory, are cross collateralized and contain a guarantee by the Company. The Company also granted a security interest in the equity ownership interests of its subsidiaries. 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 4.00% at January 31, 2020 and 4.73% at April 30, 2019. The credit facilities contain various reporting and performance covenants including (i) maintenance of certain financial ratios and tests, (ii) limitations on borrowings from other sources, (iii) restrictions on certain operating activities and (iv) restrictions on the payment of dividends or distributions.

The distribution limitations under the credit facilities allow the Company to repurchase the Company’s stock so long as either: (a) the aggregate amount of such repurchases after September 30, 2019 does not exceed $50 million, net of proceeds received from the exercise of stock options, and the total availability under the credit facilities is equal to or greater than 20% of the sum of the borrowing bases, in each case after giving effect to such repurchases (repurchases under this item are excluded from fixed charges for covenant calculations), or (b) the aggregate amount of such repurchases does not exceed 75% of the consolidated net income of the Company measured on a trailing twelve month basis; provided that immediately before and after giving effect to the stock repurchases, at least 12.5% of the aggregate funds committed under the credit facilities remain available.

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The Company was in compliance with the covenants at January 31, 2020. 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 January 31, 2020, the Company had additional availability of approximately $56 million under the revolving credit facilities.

The Company recognized approximately $191,000 and $198,000 of amortization for the nine months ended January 31, 2020 and 2019, respectively, related to debt issuance costs. The amortization is reflected as interest expense in the Company’s Condensed Consolidated Statements of Operations.

During the first nine months of fiscal 2020 and fiscal 2019, the Company incurred $458,000 and $372,000 in debt issuance costs related to the Agreement. Debt issuance costs of approximately $823,000 and $555,000 as of January 31, 2020 and April 30, 2019, respectively, are shown as a deduction from the debt facilities in the Condensed Consolidated Balance Sheets.

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 $109,000 and $194,000 as of January 31, 2020 and April 30, 2019, respectively.

On March 29, 2018, the Company entered into a lease classified as a finance lease. The present value of the minimum lease payments was approximately $550,000 and $839,000 as of January 31, 2020 and April 30, 2019, respectively, 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 January 31, 2020, and April 30, 2019, there was approximately $298,000 and $177,000, respectively, in accumulated depreciation related to the leased equipment.

G – Fair Value Measurements

The table below summarizes information about the fair value of financial instruments included in the Company’s financial statements at January 31, 2020 and April 30, 2019:

	January 31, 2020				April 30, 2019
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash	$	2,083	$	2,083	$	1,752	$	1,752
Finance receivables, net		467,255		373,635		415,486		334,147
Accounts payable		16,330		16,330		13,659		13,659
Debt facilities		184,300		184,300		152,918		152,918

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 estimates 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 had a third-party appraisal in January 2019 that indicated a range of 34% to 39% 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 January 31, 2020, 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.

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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.
Debt facilities	The fair value approximates carrying value due to the variable interest rates charged on the revolving credit facilities, which reprice frequently.

H – 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:

	Three Months Ended January 31,				Nine Months Ended January 31,
	2020		2019		2020		2019
Weighted average shares outstanding-basic		6,597,643		6,751,026		6,634,496		6,846,707
Dilutive options and restricted stock		342,481		252,363		335,352		240,723
Weighted average shares outstanding-diluted		6,940,124		7,003,389		6,969,848		7,087,430
Antidilutive securities not included:
Options		200,000		120,000		83,333		80,000
Restricted stock		4,224		-		3,408		-

I – Stock-Based Compensation

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 stock-based compensation plans being utilized at January 31, 2020 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 approximately $3.2 million ($2.4 million after tax effects) and $2.3 million ($1.8 million after tax effects) for the nine months ended January 31, 2020 and 2019, respectively. Tax benefits were recognized for these costs at the Company’s overall effective tax rate, excluding discrete income tax benefits related to excess benefits on share-based compensation.

Stock Option Plan

The Company has options outstanding under a stock option plan approved by the shareholders, 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 to 1,800,000 shares. On August 29, 2018, the shareholders of the Company approved an amendment to the Restated Option Plan increasing the number of shares of common stock reserved for issuance under the plan by an additional 200,000 shares to 2,000,000 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 2020 through 2029.

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	Restated Option Plan
Minimum exercise price as a percentage of fair market value at date of grant		100	%
Last expiration date for outstanding options		December 30, 2029
Shares available for grant at January 31, 2020		75,000

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.

	Nine Months Ended January 31,
	2020			2019
Expected term (years)		5.5			5.5
Risk-free interest rate		1.75	%		2.79	%
Volatility		39	%		36	%
Dividend yield		-			-

The expected term of the options is based on evaluations of historical actual and future expected 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 any dividends and does not expect to do so in the foreseeable future.

There were 225,000 options granted during the nine months ended January 31, 2020 and 145,000 options granted during the nine months ended January 31, 2019. The grant-date fair value of options granted during the nine months ended January 31, 2020 and 2019 was $9.3 million and $3.0 million, respectively. The options were granted at fair market value on the date of grant.

Stock option compensation expense was $2.3 million ($1.8 million after tax effects) and $1.5 million ($1.2 million after tax effects) for the nine months ended January 31, 2020 and 2019, respectively. As of January 31, 2020, the Company had approximately $10.0 million of total unrecognized compensation cost related to unvested options that are expected to vest. These unvested outstanding options have a weighted-average remaining vesting period of 1.9 years.

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 Condensed Consolidated Statements of Cash Flows.

	Nine Months Ended January 31,
(Dollars in thousands)	2020		2019
Options exercised		112,250		224,500
Cash received from option exercises	$	2,849	$	4,373
Intrinsic value of options exercised	$	6,861	$	8,506

During the nine months ended January 31, 2020, there were 50,000 options exercised through net settlements in accordance with plan provisions, wherein the shares issued were reduced by 23,301 shares to satisfy the exercise price and income taxes to acquire 26,699 shares.

The aggregate intrinsic value of outstanding options at January 31, 2020 and 2019 was $28.1 million and $15.2 million, respectively. As of January 31, 2020, there were 104,250 vested and exercisable stock options outstanding with an aggregate intrinsic value of $5.4 million, a weighted average remaining contractual life of 6.1 years, and a weighted average exercise price of $58.44.

Stock Incentive Plan

On August 5, 2015, the shareholders of the Company approved the Amended and Restated Stock Incentive Plan (the “Restated Incentive Plan”), which extended the term of the Company’s Stock Incentive Plan to June 10, 2025. On August 29, 2018, the shareholders of the Company approved an amendment to the Restated Stock Incentive Plan that increased the number of shares of common stock that may be issued under the Restated Incentive Plan by 100,000 shares to 450,000. 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.

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There were 7,224 restricted shares granted during the nine months ended January 31, 2020 and 3,000 shares granted during the nine months ended January 31, 2019. A total of 99,303 shares remained available for award at January 31, 2020. There were 186,724 unvested restricted shares outstanding as of January 31, 2020 with a weighted average grant date fair value of $48.48.

As of January 31, 2020, the Company had approximately $6.6 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 6.4 years. The Company recorded compensation cost of approximately $798,000 ($611,000 after tax effects) and $756,000 ($575,000 after tax effects) related to the Restated Incentive Plan during the nine months ended January 31, 2020 and 2019, respectively.

There were no modifications to any of the Company’s outstanding share-based payment awards during fiscal 2019 or during the first nine months of fiscal 2020.

J – Commitments and Contingencies

The Company has entered into operating leases for approximately 81% 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. Rent expense for all operating leases amounted to approximately $5.1 million for the nine months ended January 31, 2020 and $5.0 million for the prior year period.

Scheduled amounts and timing of cash flows arising from operating lease payments as of January 31, 2020, discounted at the interest rate in effect on April 30, 2019 of approximately 4.73%, are as follows:

Maturity of lease liabilities
2020 (remaining)	$	1,644
2021		6,053
2022		5,889
2023		5,875
2024		5,351
Thereafter	$	24,457
Total undiscounted operating lease payments		49,269
Less: imputed interest		(10,022	)
Present value of operating lease liabilities	$	39,247

The Company has one standby letter of credit relating to an insurance policy totaling $250,000 at January 31, 2020.

Car-Mart of Arkansas and Colonial do not meet the affiliation standard for filing consolidated income tax returns, and as such they file separate federal and state income tax returns. Car-Mart of Arkansas routinely sells its finance receivables to Colonial at what the Company believes to be fair market value and is able to take a tax deduction at the time of sale for the difference between the tax basis of the receivables sold and the sales price. These types of transactions, based upon facts and circumstances, have been permissible under the provisions of the Internal Revenue Code as described in the Treasury Regulations. For financial accounting purposes, these transactions are eliminated in consolidation, and a deferred income tax liability has been recorded for this timing difference. The sale of finance receivables from Car-Mart of Arkansas to Colonial provides certain legal protection for the Company’s finance receivables and, principally because of certain state apportionment characteristics of Colonial, also has the effect of reducing the Company’s overall effective state income tax rate. The actual interpretation of the regulations is in part a facts and circumstances matter. The Company believes it satisfies the material provisions of the regulations. Failure to satisfy those provisions could result in the loss of a tax deduction 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.

19

K - Supplemental Cash Flow Information

Supplemental cash flow disclosures are as follows:

	Nine Months Ended January 31,
(in thousands)	2020		2019
Supplemental disclosures:
Interest paid	$	6,566	$	5,191
Income taxes paid, net		8,652		7,050
Non-cash transactions:
Inventory acquired in repossession and payment protection plan claims		38,325		37,406
Net settlement option exercises		1,224		2,359

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company's Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this report.

Forward-Looking Information

This Quarterly Report on Form 10-Q contains “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;

• compliance with tax regulations;

• the Company’s business and growth strategies;

• financing the majority of growth from profits; and

• having adequate liquidity to satisfy its 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 and in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2019, 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;

• ability to attract, develop and retain qualified general managers;

• 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;

• 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;

• business and economic uncertainty associated with the developing situation with the novel coronavirus; and

• security breaches, cyber-attacks, or fraudulent activity.

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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.

Overview

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. 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”). References to the Company include the Company’s consolidated subsidiaries. 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 January 31, 2020, the Company operated 145 dealerships located primarily in small cities throughout the South-Central United States.

The Company has grown its revenues between 3% and 13% per year over the last ten fiscal years (8% on average). Growth results from same dealership revenue growth and the addition of new dealerships. Revenue increased 11.5% for the first nine months of fiscal 2020 compared to the same period of fiscal 2019 due to a 9.6% increase in interest income, a 4.7% increase in the average retail sales price and a 6.6% increase in the number of retail units sold.

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% in fiscal 2019 to 28.7% in fiscal 2017 (average of 27.7%). For the first nine months of fiscal 2020, credit losses as a percentage of sales were 23.5%, compared to 25.9% for the first nine months of fiscal 2019. The decrease in the provision for credit losses as a percentage of sales is primarily due to a higher percentage of collections of finance receivables, resulting from the improved and consistent efforts in the collections process. A decrease to the allowance for credit losses from 25% to 24.5% was made in the first quarter of fiscal 2020, which resulted in a $2.6 million credit to the provision for credit losses.

Historically, credit losses, on a percentage basis, tend to be higher at new and developing dealerships than at mature dealerships. Generally, this is the case 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. A substantial factor affecting the Company’s credit loss experience in recent years has been competition for used vehicle financing. To a lesser extent, negative macro-economic issues can but do not always adversely impact credit loss results because the Company provides basic affordable transportation which in many cases is not a discretionary expenditure for customers. In recent years, the Company believes that competition for used vehicle financing and general inflation, particularly within staple items such as groceries and gasoline, as well as overall unemployment levels and stagnant personal income levels for the Company’s customer base, have negatively affected the Company’s collections results and charge-offs. These factors, however, have stabilized within the past two fiscal years and remained stable during the first nine months of fiscal 2020.

In an ongoing effort to reduce credit losses, improve collection levels and 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 has implemented credit reporting and the use of GPS units on vehicles. Additionally, the Company places significant focus on the collection area; the Company’s training department continues to spend significant time and effort on collections improvements. The Chief Operating Officer oversees the collections department and provides timely oversight and additional accountability on a consistent basis. In addition, the Company has a vice president 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.

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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 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 efforts to purchase higher quality vehicles) and higher operating costs, mostly related to increased vehicle repair costs and higher fuel costs. For the first nine months of fiscal 2020 the gross margin was 40.5% of sales compared to 41.6% for the first nine months of fiscal 2019. The decrease in gross profit as a percentage of sales was primarily a result of the higher average selling price due to a focus to increase the quality of vehicles and overall strengths of used car values in our markets. Gross profit dollars per retail unit sold increased $103, or 2.1%, to $4,921 for the nine months ended January 31, 2020, compared to January 31, 2019. The Company expects that its gross margin percentage will continue to remain in the historical range over the near term.

Hiring, training and retaining qualified associates is critical to the Company’s success. The extent to which the Company is able to add new dealerships and 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 for dealership manager positions. The Company expects to continue to invest in the development of its workforce.

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Three months ended January 31, 2020 vs. Three months ended January 31, 2019

Consolidated Operations

(Operating Statement Dollars in Thousands)

							% Change			As a % of Sales
	Three Months Ended January 31,						2020 vs.			Three Months Ended January 31,
	2020			2019			2019			2020		2019
Revenues:
Sales	$	163,253		$	139,803			16.8	%		100.0		100.0
Interest income		23,481			21,251			10.5			14.4		15.2
Total		186,734			161,054			15.9
Costs and expenses:
Cost of sales, excluding depreciation shown below		97,504			81,740			19.3			59.7		58.5
Selling, general and administrative		30,331			26,488			14.5			18.6		18.9
Provision for credit losses		40,233			35,555			13.2			24.6		25.4
Interest expense		2,024			2,110			(4.1	)		1.2		1.5
Depreciation and amortization		975			985			(1.0	)		0.6		0.7
Gain on disposal of property and equipment		-			(100	)		(100.0	)		-		(0.1	)
Total		171,067			146,778			16.5
Pretax income	$	15,667		$	14,276						9.6		10.2
Operating Data:
Retail units sold		13,314			11,963
Average stores in operation		145			143
Average units sold per store per month		30.6			27.9
Average retail sales price	$	11,750		$	11,146
Gross profit per retail unit	$	4,938		$	4,854
Same store revenue change		15.1	%		8.5	%
Period End Data:
Stores open		145			143
Accounts over 30 days past due		3.6	%		3.2	%

Revenues increased by approximately $25.7 million, or 15.9%, for the three months ended January 31, 2020 as compared to the same period in the prior fiscal year. The increase resulted from revenue growth at dealerships that operated a full three months in both current and prior year quarter ($24.2 million) and revenue growth from dealerships opened during or after the prior year quarter ($2.3 million), partially offset by the loss of revenues from dealerships closed during or after the quarter ended January 31, 2019 ($758,000). Interest income increased approximately $2.2 million for the three months ended January 31, 2020, as compared to the same period in the prior fiscal year due to the $55.9 million increase in average finance receivables.

Cost of sales, as a percentage of sales, increased to 59.7% for the three months ended January 31, 2020 compared to 58.5% for the same period of the prior fiscal year, resulting in a gross margin as a percentage of sales of 40.3% for the current year period compared to 41.5% for the prior year period. The lower gross margin percentage primarily relates to the increase in average retail sales price due to the increased quality of vehicles purchased for resale and overall strength of used car values in our markets.

Gross margin as a percentage of sales is significantly impacted by the average retail sales price of the vehicles the Company sells, which is largely a function of the Company’s purchase cost. The average retail sales price for the third quarter of fiscal 2020 was $11,750, a $604 increase over the prior year quarter. The Company’s purchase costs remain relatively high from 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. When 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. Therefore, we continue to focus efforts on minimizing the average retail sales price of our vehicles in order to help keep contract terms shorter, which helps customers maintain appropriate equity in their vehicles and reduces credit losses and resulting wholesale volumes.

23

Selling, general and administrative expenses, as a percentage of sales, were 18.6% for the three months ended January 31, 2020, a decrease of 0.3% from the same period of the prior fiscal year. Selling, general and administrative expenses are, for the most part, more fixed in nature. In dollar terms, overall selling, general and administrative expenses increased approximately $3.8 million in the third quarter of fiscal 2020 compared to the same period of the prior fiscal year. The majority of this increase is in the payroll and benefits area for additional associate count and continued investment in pay, benefits and training, as well as a $357,000 increase in stock compensation. The Company continues to focus on controlling costs, while at the same time ensuring a solid infrastructure to ensure a high level of support for our customers.

Provision for credit losses as a percentage of sales was 24.6% for the three months ended January 31, 2020 compared to 25.4% for the three months ended January 31, 2019. Net charge-offs as a percentage of average finance receivables were 5.9% for the three months ended January 31, 2020 and 6.2% for the prior year period. The decrease in the provision for credit losses is primarily due to increased early payoffs and a lower frequency of losses due to improved and consistent collections practices. The Company believes that the proper execution of its business practices remains the single most important determinant of its long-term credit loss experience.

Interest expense as a percentage of sales decreased slightly to 1.2% for the three months ended January 31, 2020, compared to 1.5% for the prior year period. Interest expense overall decreased $86,000, primarily due to the decrease in interest rates.

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Nine months ended January 31, 2020 vs. Nine months ended January 31, 2019

Consolidated Operations

(Operating Statement Dollars in Thousands)

							% Change			As a % of Sales
	Nine Months Ended January 31,						2020 vs.			Nine Months Ended January 31,
	2020			2019			2019			2020			2019
Revenues:
Sales	$	481,070		$	430,315			11.8	%		100.0			100.0
Interest income		67,852			61,925			9.6			14.1			14.4
Total		548,922			492,240			11.5
Costs and expenses:
Cost of sales, excluding depreciation shown below		286,215			251,274			13.9			59.5			58.4
Selling, general and administrative		87,298			79,068			10.4			18.1			18.4
Provision for credit losses		112,885			111,619			1.1			23.5			25.9
Interest expense		6,109			5,895			3.6			1.3			1.4
Depreciation and amortization		2,913			2,949			(1.2	)		0.6			0.7
Loss (gain) on disposal of property and equipment		39			(88	)		(144.3	)		-			-
Total		495,459			450,717			9.9
Pretax income	$	53,463		$	41,523						11.1	%		9.6	%
Operating Data:
Retail units sold		39,600			37,163
Average stores in operation		145			141
Average units sold per store per month		30.3			29.3
Average retail sales price	$	11,587		$	11,062
Gross profit per retail unit	$	4,921		$	4,818
Same store revenue change		9.8	%		10.5	%
Period End Data:
Stores open		145			143
Accounts over 30 days past due		3.6	%		3.2	%

Revenues increased by approximately $56.7 million, or 11.5%, for the nine months ended January 31, 2020 as compared to the same period in the prior fiscal year. The increase resulted from revenue growth at dealerships that operated a full nine months in both current and prior year period ($47.4 million) and revenue growth from dealerships opened during or after the prior year quarter ($11.7 million), partially offset by the loss of revenues from dealerships closed during or after the quarter ended January 31, 2019 ($2.4 million). Interest income increased approximately $5.9 million for the nine months ended January 31, 2020, as compared to the same period in the prior fiscal year due to the $47.2 million increase in average finance receivables.

Cost of sales, as a percentage of sales, increased to 59.5% for the nine months ended January 31, 2020 compared to 58.4% for the same period of the prior fiscal year, resulting in a gross margin as a percentage of sales of 40.5% for the current year period compared to 41.6% for the prior year period. The lower gross margin percentage primarily relates to the increase in average retail sales price due to the increased quality of vehicles purchased for resale and overall strength of used car values in our markets. The average retail sales price for the nine months ended January 31, 2020 was $11,587, a $525 increase over the prior year period.

Selling, general and administrative expenses, as a percentage of sales, were 18.1% for the nine months ended January 31, 2020, a decrease of 0.3% from the same period of the prior fiscal year. In dollar terms, overall selling, general and administrative expenses increased approximately $8.2 million in the nine months ended January 31, 2020, compared to the same period of the prior fiscal year. The majority of this increase is in the payroll and benefits area, including stock-based compensation, as we continue to invest in our associates as we train, develop and recruit qualified associates, all in an effort to provide excellent customer service, as well as additional bonus and commissions related to the higher net income levels as several of our associates (especially the general managers) are compensated on net income.

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Provision for credit losses as a percentage of sales was 23.5% for the nine months ended January 31, 2020 compared to 25.9% for the nine months ended January 31, 2019. Net charge-offs as a percentage of average finance receivables were 17.5% for the nine months ended January 31, 2020 and 19.2% for the prior year period. The decrease in the provision for credit losses as a percentage of sales is primarily due to a higher percentage of collections of finance receivables, a lower level of modifications, increased early payoffs and improved and consistent collections practices. As a result of the improved credit results, a decrease to the allowance for credit losses from 25% to 24.5% was made in the first quarter of fiscal 2020, which resulted in a $2.6 million credit to the provision for credit losses.

Interest expense as a percentage of sales decreased slightly to 1.3% for the nine months ended January 31, 2020, compared to 1.4% for the same period of the prior fiscal year. Although interest expense as a percentage of sales remained relatively flat, interest expense increased $214,000, primarily due to a 5.8% increase in average borrowings.

Financial Condition

The following table sets forth the major balance sheet accounts of the Company as of the dates specified (in thousands):

	January 31, 2020		April 30, 2019
Assets:
Finance receivables, net	$	467,255	$	415,486
Inventory		54,026		37,483
Income taxes receivable, net		783		1,947
Property and equipment, net		28,820		28,537
Liabilities:
Accounts payable and accrued liabilities		31,391		32,496
Deferred revenue		34,958		31,959
Deferred tax liabilities, net		15,827		14,259
Debt facilities		184,300		152,918

Since April 30, 2019, finance receivables, net, have increased 12.5%, while revenues have grown 11.5% compared to the prior year period. Historically, the growth in finance receivables has been slightly higher than overall revenue growth on an annual basis due to overall term length increases partially offset by improvements in underwriting and collection procedures in an effort to reduce credit losses.

During the first nine months of fiscal 2020, inventory increased by $16.5 million compared to inventory at April 30, 2019. The Company strives to improve the quality of the inventory while maintaining inventory levels to ensure adequate supply of vehicles, in volume and mix, and to meet and attract sales demand.

Income taxes receivable, net, was $783,000 at January 31, 2020 as compared to $1.9 million at April 30, 2019, due to credits from the prior year being used or refunded.

Property and equipment, net, increased by $283,000 at January 31, 2020 as compared to property and equipment, net, at April 30, 2019. The Company added $3.2 million in capital expenditures to open new dealerships, refurbish and expand existing locations, partially offset by $2.9 million of depreciation expense.

Accounts payable and accrued liabilities decreased by $1.1 million during the first nine months of fiscal 2020 as compared to accounts payable and accrued liabilities at April 30, 2019, related primarily to the adoption of ASU 2016-02, Leases, as deferred rent is no longer included in accrued liabilities but is included in the lease liability.

Deferred revenue increased $3.0 million at January 31, 2020 as compared to April 30, 2019, primarily resulting from increased sales of the payment protection plan product and service contracts.

Deferred income tax liabilities, net, increased approximately $1.6 million at January 31, 2020 as compared to April 30, 2019, due primarily to stock compensation.

Borrowings on the Company’s revolving credit facilities fluctuate primarily based upon a number of factors including (i) net income, (ii) finance receivables changes, (iii) income taxes, (iv) capital expenditures, and (v) common stock repurchases.  Historically, income from 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 the first nine months of fiscal 2020, the Company funded finance receivables growth of $64.2 million, inventory growth of $16.5 million, capital expenditures of $3.2 million, and common stock repurchases of $15.8 million with income from operations and a $31.3 million increase in total debt.

26

Liquidity and Capital Resources

The following table sets forth certain summarized historical information with respect to the Company’s Condensed Consolidated Statements of Cash Flows (in thousands):

	Nine Months Ended January 31,
	2020			2019
Operating activities:
Net income	$	42,084		$	33,059
Provision for credit losses		112,885			111,619
Losses on claims for payment protection plan		13,141			12,148
Depreciation and amortization		2,913			2,949
Stock based compensation		3,150			2,270
Finance receivable originations		(446,093	)		(399,089	)
Finance receivable collections		229,973			206,620
Inventory		21,782			32,194
Accounts payable and accrued liabilities		1,116			1,320
Deferred payment protection plan revenue		2,199			925
Deferred service contract revenue		800			(108	)
Income taxes, net		(174	)		(1,723	)
Deferred income taxes		1,568			1,609
Accrued interest on finance receivables		(255	)		(267	)
Other		1,482			1,319
Total		(13,429	)		4,845
Investing activities:
Purchase of property and equipment		(3,244	)		(3,042	)
Proceeds from sale of property and equipment		9			-
Total		(3,235	)		(3,042	)
Financing activities:
Revolving credit facilities, net		32,024			18,828
Payments on note payable		(374	)		(284	)
Change in cash overdrafts		(222	)		814
Debt issuance costs		(459	)		(372	)
Purchase of common stock		(15,823	)		(24,087	)
Dividend payments		(30	)		(30	)
Exercise of stock options and issuance of common stock		1,879			3,930
Total		16,995			(1,201	)
Increase in cash	$	331		$	602

The primary drivers of operating profits and cash flows include (i) top line sales (ii) interest income 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 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, generally the Company increases its borrowings under its revolving credit facilities.  The majority of the Company’s growth has been self-funded.

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Cash flows from operations for the nine months ended January 31, 2020 compared to the same period in the prior fiscal year decreased primarily as a result of (i) larger finance receivables originations, (ii) a larger increase in inventory, and (iii) a decrease in stock option exercises and issuance of common stock, partially offset by (i) improved finance receivables collections, (ii) an increase in revolving credit facilities, (iii) an increase in net income, and (iv) decrease in common stock repurchases. Finance receivables, net, increased by $51.8 million from April 30, 2019 to January 31, 2020.

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. These factors have caused purchase costs to increase generally over the last five years. In addition, management has made efforts to purchase higher quality vehicles in recent periods, which has also increased purchase costs. The higher vehicle purchase costs resulted in an increase in the average sales price of $525, or 4.7%, during the first nine months of fiscal 2020 compared to the same period in the prior fiscal year. Management expects the supply of vehicles to remain tight during the near term and, along with efforts to purchase higher quality vehicles, to result in further modest increases in vehicle purchase costs, with strong new car sales levels in recent years helping to provide additional supply and mitigate expected cost increases.

The Company believes that the amount of credit available for the sub-prime auto industry has remained elevated for several years, and management expects the availability of consumer credit within the automotive industry to continue at current levels over the near term. 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 can result in lower down payments and longer terms, which can have a negative effect on collection percentages, liquidity and credit losses.

Macro-economic factors such as inflation within groceries and other staple items, as well as overall unemployment levels, can also affect the Company’s collection results, credit losses and resulting liquidity. The Company anticipates that, despite generally positive overall economic trends, the challenges facing the Company’s customer base, coupled with the extended terms and decreased recovery rates, will continue to weigh onto credit losses in the near term. Management continues to focus on improved execution at the dealership level, specifically as related to working individually with customers to address collection issues in an effort to offset the consistent macro-economic challenges facing the Company’s customers and availability of competitive funding in the sub-prime auto industry.

The Company has generally leased the majority of the properties where its dealerships are located. As of January 31, 2020, the Company leased approximately 81% of its dealership properties. The Company expects to continue to lease the majority of the properties where its dealerships are located.

The Company’s revolving credit facilities generally restrict distributions by the Company to its shareholders. The distribution limitations under the credit facilities allow the Company to repurchase the Company’s stock so long as either: (a) the aggregate amount of such repurchases after September 30, 2019 does not exceed $50 million, net of proceeds received from the exercise of stock options, and the total availability under the credit facilities is equal to or greater than 20% of the sum of the borrowing bases, in each case after giving effect to such repurchases (repurchases under this item are excluded from fixed charges for covenant calculations), or (b) the aggregate amount of such repurchases does not exceed 75% of the consolidated net income of the Company measured on a trailing twelve month basis; provided that immediately before and after giving effect to the stock repurchases, at least 12.5% of the aggregate funds committed under the credit facilities remain available. Thus, 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 January 31, 2020, the Company had approximately $2.1 million of cash on hand and approximately an additional $56 million of availability under its revolving credit facilities (see Note F to the Condensed Consolidated Financial Statements).  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 September 2022. 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.

28

The Company expects to use cash from operations and borrowings to (i) grow its finance receivables portfolio, (ii) purchase property and equipment of approximately $6.5 million in the next 12 months in connection with refurbishing existing dealerships and adding new dealerships, (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

There have been no material changes outside of the ordinary course of business in the Company’s contractual payment obligations from those reported at April 30, 2019 in the Company’s Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

The Company has one standby letter of credit relating to an insurance policy totaling $250,000 at January 31, 2020.

Other than 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 274 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 January 31, 2020.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires the Company to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the Company’s estimates. The Company believes the most significant estimate made in the preparation of the accompanying Condensed Consolidated Financial Statements 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 Condensed Consolidated Financial Statements.

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 January 31, 2020, 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 January 31, 2020, $140.3 million, was 24.5% of the principal balance in finance receivables of $607.5 million, less unearned payment protection plan revenue of $23.6 million and unearned service contract revenue of $11.4 million.

29

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.  About 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 for the eighteen-month period ended January 31, 2020 was 12.7 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 adjustment of $5.7 million.

As a result of the improvements in our net charge-offs as a percentage of average receivables, the quality of the portfolio and our allowance analysis, a decrease to the allowance for credit losses from 25% to 24.5% was made in the first quarter of fiscal 2020, which resulted in a $2.6 million credit to the provision for credit losses, a $2.0 million after tax increase to net income.

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.

Leases. In February 2016, the FASB issued ASU 2016-02, Leases. The new guidance requires that lessees recognize all leases, including operating leases, with a term greater than 12 months on-balance sheet and also requires disclosure of key information about leasing transactions. The guidance in ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those years. The Company adopted this ASU and related amendments for its fiscal year beginning May 1, 2019 and elected certain practical expedients permitted under the transition guidance, including to retain the historical lease classification as well as relief from reviewing expired or existing contracts to determine if they contain leases. The adoption of this ASU and related amendments resulted in total assets and liabilities increasing $34.5 million at the time of adoption. The Company’s Consolidated Statements of Income and Consolidated Statements of Cash Flows were not materially impacted.

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.

Cloud Computing Arrangement. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). ASU 2018-15 aligns the requirements for capitalizing implementation costs in a cloud computing arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for annual reporting periods beginning after December 15, 2019, 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 but does not expect such impact to be material.

30

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 four fiscal years. The Company expects this pattern to continue in future years.

If conditions arise that impair vehicle sales during the first, third or fourth fiscal quarters, the adverse effect on the Company’s revenues and operating results for the year could be disproportionately large.

Item 3. 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 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 is primarily related to its debt obligations. The Company is exposed to changes in interest rates as a result of its revolving credit facilities. 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 indebtedness of $184.5 million outstanding under its revolving credit facilities at January 31, 2020. The impact of a 1% increase in interest rates on this amount of debt would result in increased annual interest expense of approximately $1.8 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, while its revolving credit facilities contain variable interest rates that fluctuate with market interest rates.

Item 4. Controls and Procedures

a) Evaluation of 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 January 31, 2020, 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.

b) 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.

31

PART II

Item 1. 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 1A. Risk Factors

Except as noted below, there have been no material changes to the Company’s risk factors as previously disclosed in Item 1A to Part 1 of the Company’s Form 10-K for the fiscal year ended April 30, 2019.

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, including as a result of the recent outbreak of the novel coronavirus, 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 currently developing situation with the coronavirus and other the most recent global economic conditions on consumer demand in our markets or on the Company’s costs.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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:

Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1)
November 1, 2019 through November 30, 2019		12,384		90.95		12,384		125,109
December 1, 2019 through December 31, 2019		-		-		-		125,109
January 1, 2020 through January 31, 2020		-		-		-		125,109
Total		12,384		90.95		12,384

(1) The above described stock repurchase program has no expiration date.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

Not applicable.

32

Item 6. Exhibits

Exhibit
Number Description of Exhibit

3.1	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)).
3.2	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).
3.3	Amendment No. 1 to the Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Report on Form 8-K filed with the SEC on February 19, 2014).
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act.
32.1	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

33

SIGNATURES

Pursuant to the requirements 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.

America’s Car-Mart, Inc.
By:	/s/ Jeffrey A. Williams
	Jeffrey A. Williams
	President and Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ Vickie D. Judy
	Vickie D. Judy
	Chief Financial Officer
	(Principal Financial Officer)

Dated: March 16, 2020

34

EX-31.1

Exhibit 31.1

Certification

I, Jeffrey A. Williams, certify that:

1. I have reviewed this quarterly report on Form 10-Q of America’s Car-Mart, Inc. for the period ended January 31, 2020;

2. 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;

3. 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;

4. 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) 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;

(b) 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;

(c) 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

(d) 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) 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

(b) 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.

March 16, 2020	/s/ Jeffrey A. Williams
	Jeffrey A. Williams
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

I, Vickie D. Judy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of America’s Car-Mart, Inc. for the period ended January 31, 2020;

2. 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;

3. 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;

4. 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) 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;

(b) 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;

(c) 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

(d) 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) 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

(b) 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.

March 16, 2020	/s/ Vickie D. Judy
	Vickie D. Judy
	Chief Financial Officer

EX-32.1

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 Quarterly Report of America’s Car-Mart, Inc. (the “Company”) on Form 10-Q for the quarter ended January 31, 2020 filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Jeffrey A. Williams, 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) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) 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 and Chief Executive Officer
	March 16, 2020
By:	/s/ Vickie D. Judy
	Vickie D. Judy
	Chief Financial Officer
	March 16, 2020

XML

Note J - Commitments and Contingencies (Tables)

9 Months Ended

Jan. 31, 2020

Notes Tables

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

Maturity of lease liabilities
2020 (remaining)	$	1,644
2021		6,053
2022		5,889
2023		5,875
2024		5,351
Thereafter	$	24,457
Total undiscounted operating lease payments		49,269
Less: imputed interest		(10,022	)
Present value of operating lease liabilities	$	39,247

XML

Note F - Debt Facilities (Tables)

9 Months Ended

Jan. 31, 2020

Notes Tables

Schedule of Long-term Debt Instruments [Table Text Block]

(In thousands)	January 31, 2020			April 30, 2019
Revolving lines of credit	$	184,464		$	152,440
Notes payable		109			194
Finance lease		550			839
Debt issuance costs		(823	)		(555	)
Debt facilities	$	184,300		$	152,918

XML

Note B - Summary of Significant Accounting Policies (Tables)

9 Months Ended

Jan. 31, 2020

Notes Tables

Property, Plant, and Equipment Useful Life [Table Text Block]

Furniture, fixtures and equipment (years)	3	to	7
Leasehold improvements (years)	5	to	15
Buildings and improvements (years)	18	to	39

Revenue from External Customers by Products and Services [Table Text Block]

	Three Months Ended January 31,				Nine Months Ended January 31,
(In thousands)	2020		2019		2020		2019
Sales – used autos	$	142,136	$	119,955	$	417,079	$	371,465
Wholesales – third party		6,810		6,460		22,236		19,205
Service contract sales		7,983		7,600		23,283		22,655
Payment protection plan revenue		6,324		5,788		18,472		16,990
Total	$	163,253	$	139,803	$	481,070	$	430,315

XML

Note D - Property and Equipment - Property and Equipment (Details) - USD ($) $ in Thousands	Jan. 31, 2020	Apr. 30, 2019
Less accumulated depreciation and amortization	$ (34,341)	$ (31,585)
Property and equipment, net	28,820	28,537
Land [Member]
Property and equipment	7,799	7,413
Building and Building Improvements [Member]
Property and equipment	12,535	11,815
Furniture, Fixtures and Equipment [Member]
Property and equipment	13,977	13,307
Leasehold Improvements [Member]
Property and equipment	27,352	26,064
Construction in Progress [Member]
Property and equipment	$ 1,498	$ 1,523

XML

Note G - Fair Value Measurements (Details Textual)	1 Months Ended
	Jan. 31, 2019
Fair Value Inputs, Discount Rate, Intercompany Transactions	38.50%
Minimum [Member] | Measurement Input, Discount Rate [Member]
Receivables, Measurement Input	0.34
Maximum [Member] | Measurement Input, Discount Rate [Member]
Receivables, Measurement Input	0.39

XML

Note I - Stock-based Compensation - Stock Option Plan Comparison (Details) - Restated Option Plan [Member]	9 Months Ended
	Jan. 31, 2020 shares
Minimum exercise price as a percentage of fair market value at date of grant	100.00%
Last expiration date for outstanding options	Dec. 30, 2029
Shares available for grant (in shares)	75,000

XML

Note K - Supplemental Cash Flow Information - Supplemental Cash Flow Disclosures (Details) - USD ($) $ in Thousands	9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Interest paid	$ 6,566	$ 5,191
Income taxes paid, net	8,652	7,050
Non-cash transactions:
Inventory acquired in repossession and payment protection plan claims	38,325	37,406
Net settlement option exercises	$ 1,224	$ 2,359

XML

Note I - Stock-based Compensation - Options Valuation Assumptions (Details)	9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Expected term (years) (Year)	5 years 182 days	5 years 182 days
Risk-free interest rate	1.75%	2.79%
Volatility	39.00%	36.00%
Dividend yield

XML

Condensed Consolidated Statements of Equity (Unaudited) (Parentheticals) - shares shares in Thousands	3 Months Ended
	Jan. 31, 2020	Oct. 31, 2019	Jul. 31, 2019	Jan. 31, 2019	Oct. 31, 2018	Jul. 31, 2018
Purchase of treasury shares (in shares)	12,384	112,091	55,507	141,500	89,656	115,999

XML

Note I - Stock-based Compensation

9 Months Ended

Jan. 31, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

I – Stock-Based Compensation

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 stock-based compensation plans being utilized at

January 31, 2020

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 approximately

$3.2

million (

$2.4

million after tax effects) and

$2.3

million (

$1.8

million after tax effects) for the

nine

months ended

January 31, 2020

and

2019,

respectively. Tax benefits were recognized for these costs at the Company’s overall effective tax rate, excluding discrete income tax benefits related to excess benefits on share-based compensation.

Stock Option Plan

The Company has options outstanding under a stock option plan approved by the shareholders, 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 to

1,800,000

shares. On

August 29, 2018,

the shareholders of the Company approved an amendment to the Restated Option Plan increasing the number of shares of common stock reserved for issuance under the plan by an additional

200,000

shares to

2,000,000

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

2020

through

2029.

	Restated Option Plan
Minimum exercise price as a percentage of fair market value at date of grant		100	%
Last expiration date for outstanding options		December 30, 2029
Shares available for grant at January 31, 2020		75,000

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.

	Nine Months Ended January 31,
	2020			2019
Expected term (years)		5.5			5.5
Risk-free interest rate		1.75	%		2.79	%
Volatility		39	%		36	%
Dividend yield		-			-

The expected term of the options is based on evaluations of historical actual and future expected 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 any dividends and does

not

expect to do so in the foreseeable future.

There were

225,000

options granted during the

nine

months ended

January 31, 2020

and

145,000

options granted during the

nine

months ended

January 31, 2019.

The grant-date fair value of options granted during the

nine

months ended

January 31, 2020

and

2019

was

$9.3

million and

$3.0

million, respectively. The options were granted at fair market value on the date of grant.

Stock option compensation expense was

$2.3

million (

$1.8

million after tax effects) and

$1.5

million (

$1.2

million after tax effects) for the

nine

months ended

January 31, 2020

and

2019,

respectively. As of

January 31, 2020,

the Company had approximately

$10.0

million of total unrecognized compensation cost related to unvested options that are expected to vest. These unvested outstanding options have a weighted-average remaining vesting period of

1.9

years.

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 Condensed Consolidated Statements of Cash Flows.

	Nine Months Ended January 31,
(Dollars in thousands)	2020		2019
Options exercised		112,250		224,500
Cash received from option exercises	$	2,849	$	4,373
Intrinsic value of options exercised	$	6,861	$	8,506

During the

nine

months ended

January 31, 2020,

there were

50,000

options exercised through net settlements in accordance with plan provisions, wherein the shares issued were reduced by

23,301

shares to satisfy the exercise price and income taxes to acquire

26,699

shares.

The aggregate intrinsic value of outstanding options at

January 31, 2020

and

2019

was

$28.1

million and

$15.2

million, respectively. As of

January 31, 2020,

there were

104,250

vested and exercisable stock options outstanding with an aggregate intrinsic value of

$5.4

million, a weighted average remaining contractual life of

6.1

years, and a weighted average exercise price of

$58.44.

Stock Incentive Plan

On

August 5, 2015,

the shareholders of the Company approved the Amended and Restated Stock Incentive Plan (the “Restated Incentive Plan”), which extended the term of the Company’s Stock Incentive Plan to

June 10, 2025.

On

August 29, 2018,

the shareholders of the Company approved an amendment to the Restated Stock Incentive Plan that increased the number of shares of common stock that

may

be issued under the Restated Incentive Plan by

100,000

shares to

450,000.

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.

There were

7,224

restricted shares granted during the

nine

months ended

January 31, 2020

and

3,000

shares granted during the

nine

months ended

January 31, 2019.

A total of

99,303

shares remained available for award at

January 31, 2020.

There were

186,724

unvested restricted shares outstanding as of

January 31, 2020

with a weighted average grant date fair value of

$48.48.

As of

January 31, 2020,

the Company had approximately

$6.6

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

6.4

years. The Company recorded compensation cost of approximately

$798,000

(

$611,000

after tax effects) and

$756,000

(

$575,000

after tax effects) related to the Restated Incentive Plan during the

nine

months ended

January 31, 2020

and

2019,

respectively.

There were

no

modifications to any of the Company’s outstanding share-based payment awards during fiscal

2019

or during the

first

nine

months of fiscal

2020.

XML

Note E - Accrued Liabilities

9 Months Ended

Jan. 31, 2020

Notes to Financial Statements

Other Liabilities Disclosure [Text Block]

E – Accrued Liabilities

A summary of accrued liabilities is as follows:

(In thousands)	January 31, 2020		April 30, 2019
Employee compensation	$	6,059	$	6,321
Cash overdrafts (see Note B)		1,052		1,274
Deferred sales tax (see Note B)		2,611		3,571
Reserve for PPP claims		2,882		2,433
Health insurance		1,052		1,256
Other		1,405		3,982
Total	$	15,061	$	18,837

The decrease in deferred sales tax is due to timing differences in deferred sales tax payments. The decrease in other is primarily related to ASU

2016

-

02,

Leases, as deferred rent is

no

longer reported in this category.

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Jan. 31, 2020	Apr. 30, 2019
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	13,466,707	13,376,030
Common stock, shares outstanding (in shares)	6,610,116	6,699,421
Treasury stock, shares (in shares)	6,856,591	6,676,609

XML

Note B - Summary of Significant Accounting Policies (Details Textual) - USD ($) $ in Thousands			3 Months Ended		9 Months Ended		12 Months Ended	18 Months Ended
	May 31, 2016	May 30, 2016	Jan. 31, 2020	Jan. 31, 2019	Jan. 31, 2020	Jan. 31, 2019	Apr. 30, 2019	Jan. 31, 2020	May 01, 2019	Apr. 30, 2018
Number of Reportable Segments					1
Average Finance Receivable Interest Rate					16.40%
Interest Receivable			$ 2,603		$ 2,603		$ 2,348	$ 2,603
Finance Receivables, Customer Payments Due Either Weekly or Bi-Weekly, Percentage					76.00%
Financing Receivable, Greater Than or Equal to 30 Days Past Due, Percent of Portfolio			3.60%	3.20%	3.60%	3.20%		3.60%
Financing Receivable, Weighted Average Total Contract Term					2 years 255 days
Financing Receivable, Remaining Contract Term					1 year 348 days
Financing Receivable, Allowance for Credit Loss, Ending Balance			$ 140,282	$ 127,980	$ 140,282	$ 127,980	127,842	$ 140,282		$ 117,821
Finance Receivables, Allowance, Percent of Principle Balance			24.50%		24.50%			24.50%
Finance Receivable Principal Balance			$ 607,537	542,893	$ 607,537	$ 542,893	543,328	$ 607,537
Percent of Chargeoffs in the First 10 to 11 Months of a Contract			50.00%		50.00%			50.00%
Average Age of Account at Charge-Off Date								1 year 21 days
Payment Protection Plan Liability, Anticipated Losses in Excess of Deferred Revenues			$ 0		$ 0		0	$ 0
Goodwill, Impairment Loss					$ 0		0
Effective Income Tax Rate Reconciliation, Percent, Total					21.30%	20.40%
Tax Adjustments, Settlements, and Unusual Provisions					$ 1,300	$ 1,500
Income Tax Examination, Penalties and Interest Accrued, Total			0		0		0	0
Contract with Customer, Liability, Revenue Recognized					9,400
Financing Receivable, Recorded Investment Greater Than 90 Days Past Due			2,596	1,493	2,596	1,493	1,187	2,596
Late Fee Income Generated by Servicing Financial Assets, Amount					1,500	1,500
Income Tax Expense (Benefit), Total			2,981	$ 3,381	$ 11,379	8,464
Treasury Stock Shares to Establish Reserve Account to Secure Service Contracts					10,000
Liabilities, Total			305,723		$ 305,723		231,632	305,723
Assets, Total			597,893		$ 597,893		492,542	597,893
ACM Insurance Company [Member]
Treasury Stock, Shares to Establish Reserve Account to Meet Regulatory Requirements for Insurance Company					14,000
Accounting Standards Update 2016-09 [Member]
Income Tax Expense (Benefit), Total					$ 1,300	$ 1,500
Accounting Standards Update 2016-02 [Member]
Liabilities, Total									$ 34,500
Assets, Total									$ 34,500
Payment Protection Plan [Member]
Contract with Customer, Liability, Total			23,566		23,566		21,367	23,566
Service Contract [Member]
Contract with Customer, Liability, Total			$ 11,392		$ 11,392		$ 10,592	$ 11,392
Maximum [Member]
Financing Receivable Interest Rate	16.50%	15.00%			16.50%
Allowance for Credit Losses, Primary Factor Units Repossessed or Charged Off Evaluation Period					5 years
Minimum [Member]
Financing Receivable Interest Rate					15.00%
Allowance for Credit Losses, Primary Factor Units Repossessed or Charged Off Evaluation Period					1 year
Revolving Credit Facility [Member]
Line of Credit Facility, Distribution Limitations, Maximum Aggregate Amount of Stock Repurchases					$ 50,000
Line of Credit Facility, Distribution Limitations Percentage of Sum of Borrowing Bases					20.00%
Line of Credit Facility, Distribution Limitations Percentage of Consolidated Net Income					75.00%
Line of Credit Facility Distribution Limitations Minimum Percentage of Aggregate Funds Available					12.50%
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Arkansas, USA [Member]
Concentration Risk, Percentage					28.00%

XML

Note C - Finance Receivables, Net - Components of Finance Receivables (Details) - USD ($) $ in Thousands	Jan. 31, 2020	Apr. 30, 2019	Jan. 31, 2019	Apr. 30, 2018
Gross contract amount	$ 706,014	$ 631,681
Less unearned finance charges	(98,477)	(88,353)
Principal balance	607,537	543,328	$ 542,893
Less allowance for credit losses	(140,282)	(127,842)	(127,980)	$ (117,821)
Finance receivables, net	$ 467,255	$ 415,486	$ 414,913	$ 383,617

XML

Note C - Finance Receivables, Net - Financing Receivables Analysis (Details)	9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Principal collected as a percent of average finance receivables	40.00%	39.20%
Average down-payment percentage	5.90%	5.80%
Average originating contract term (in months) (Month)	2 years 204 days	2 years 162 days

XML

Note I - Stock-based Compensation - Options Exercised (Details) - USD ($) $ in Thousands	9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Options exercised (in shares)	112,250	224,500
Cash received from option exercises	$ 2,849	$ 4,373
Intrinsic value of options exercised	$ 6,861	$ 8,506

XML

Condensed Consolidated Statements of Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Noncontrolling Interest [Member]	Total
Balance (in shares) at Apr. 30, 2018	13,147,143
Balance at Apr. 30, 2018	$ 131	$ 72,641	$ 361,987	$ (204,325)	$ 100	$ 230,534
Issuance of common stock (in shares)	544
Issuance of common stock		29				29
Stock options exercised (in shares)	131,357
Stock options exercised	$ 2	2,711				2,713
Purchase of treasury shares				(7,377)		(7,377)
Stock-based compensation		1,094				1,094
Dividends on subsidiary preferred stock			(10)			(10)
Net income			10,884			10,884
Balance (in shares) at Jul. 31, 2018	13,279,044
Balance at Jul. 31, 2018	$ 133	76,475	372,861	(211,702)	100	237,867
Balance (in shares) at Apr. 30, 2018	13,147,143
Balance at Apr. 30, 2018	$ 131	72,641	361,987	(204,325)	100	230,534
Net income						33,059
Balance (in shares) at Jan. 31, 2019	13,330,150
Balance at Jan. 31, 2019	$ 133	78,839	395,017	(228,412)	100	245,677
Balance (in shares) at Jul. 31, 2018	13,279,044
Balance at Jul. 31, 2018	$ 133	76,475	372,861	(211,702)	100	237,867
Issuance of common stock (in shares)	580
Issuance of common stock		38				38
Stock options exercised (in shares)	46,776
Stock options exercised		1,035				1,035
Purchase of treasury shares				(6,495)		(6,495)
Stock-based compensation		594				594
Dividends on subsidiary preferred stock			(10)			(10)
Net income			11,281			11,281
Balance (in shares) at Oct. 31, 2018	13,326,400
Balance at Oct. 31, 2018	$ 133	78,142	384,132	(218,197)	100	244,310
Issuance of common stock (in shares)
Issuance of common stock		35				35
Stock options exercised (in shares)	3,750
Stock options exercised	$ 0	79				79
Purchase of treasury shares				(10,215)		(10,215)
Stock-based compensation		583				583
Dividends on subsidiary preferred stock			(10)			(10)
Net income			10,895			10,895
Balance (in shares) at Jan. 31, 2019	13,330,150
Balance at Jan. 31, 2019	$ 133	78,839	395,017	(228,412)	100	245,677
Balance (in shares) at Apr. 30, 2019	13,376,030
Balance at Apr. 30, 2019	$ 134	81,605	409,573	(230,902)	100	260,510
Issuance of common stock (in shares)	552
Issuance of common stock		40				40
Stock options exercised (in shares)	15,815
Stock options exercised		80				80
Purchase of treasury shares				(4,715)		(4,715)
Stock-based compensation		1,620				1,620
Dividends on subsidiary preferred stock			(10)			(10)
Net income			15,511			15,511
Balance (in shares) at Jul. 31, 2019	13,392,397
Balance at Jul. 31, 2019	$ 134	83,345	425,074	(235,617)	100	273,036
Balance (in shares) at Apr. 30, 2019	13,376,030
Balance at Apr. 30, 2019	$ 134	81,605	409,573	(230,902)	100	260,510
Net income						42,084
Balance (in shares) at Jan. 31, 2020	13,466,707
Balance at Jan. 31, 2020	$ 135	86,633	451,627	(246,725)	100	291,770
Balance (in shares) at Jul. 31, 2019	13,392,397
Balance at Jul. 31, 2019	$ 134	83,345	425,074	(235,617)	100	273,036
Issuance of common stock (in shares)	631
Issuance of common stock		50				50
Stock options exercised (in shares)	17,500
Stock options exercised		785				785
Purchase of treasury shares				(9,981)		(9,981)
Stock-based compensation		592				592
Dividends on subsidiary preferred stock			(10)			(10)
Net income			13,887			13,887
Balance (in shares) at Oct. 31, 2019	13,410,528
Balance at Oct. 31, 2019	$ 134	84,772	438,951	(245,598)	100	278,359
Issuance of common stock (in shares)	545
Issuance of common stock		51				51
Stock options exercised (in shares)	55,634
Stock options exercised	$ 1	872				873
Purchase of treasury shares				(1,127)		(1,127)
Stock-based compensation		938				938
Dividends on subsidiary preferred stock			(10)			(10)
Net income			12,686			12,686
Balance (in shares) at Jan. 31, 2020	13,466,707
Balance at Jan. 31, 2020	$ 135	$ 86,633	$ 451,627	$ (246,725)	$ 100	$ 291,770

XML

Note J - Commitments and Contingencies

9 Months Ended

Jan. 31, 2020

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

J – Commitments and Contingencies

The Company has entered into operating leases for approximately

81%

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. Rent expense for all operating leases amounted to approximately

$5.1

million for the

nine

months ended

January 31, 2020

and

$5.0

million for the prior year period.

Scheduled amounts and timing of cash flows arising from operating lease payments as of

January 31, 2020,

discounted at the interest rate in effect on

April 30, 2019

of approximately

4.73%,

are as follows:

Maturity of lease liabilities
2020 (remaining)	$	1,644
2021		6,053
2022		5,889
2023		5,875
2024		5,351
Thereafter	$	24,457
Total undiscounted operating lease payments		49,269
Less: imputed interest		(10,022	)
Present value of operating lease liabilities	$	39,247

The Company has

one

standby letter of credit relating to an insurance policy totaling

$250,000

at

January 31, 2020.

Car-Mart of Arkansas and Colonial do

not

meet the affiliation standard for filing consolidated income tax returns, and as such they file separate federal and state income tax returns. Car-Mart of Arkansas routinely sells its finance receivables to Colonial at what the Company believes to be fair market value and is able to take a tax deduction at the time of sale for the difference between the tax basis of the receivables sold and the sales price. These types of transactions, based upon facts and circumstances, have been permissible under the provisions of the Internal Revenue Code as described in the Treasury Regulations. For financial accounting purposes, these transactions are eliminated in consolidation, and a deferred income tax liability has been recorded for this timing difference. The sale of finance receivables from Car-Mart of Arkansas to Colonial provides certain legal protection for the Company’s finance receivables and, principally because of certain state apportionment characteristics of Colonial, also has the effect of reducing the Company’s overall effective state income tax rate. The actual interpretation of the regulations is in part a facts and circumstances matter. The Company believes it satisfies the material provisions of the regulations. Failure to satisfy those provisions could result in the loss of a tax deduction 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.

XML

Note F - Debt Facilities

9 Months Ended

Jan. 31, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

F – Debt Facilities

A summary of debt facilities is as follows:

(In thousands)	January 31, 2020			April 30, 2019
Revolving lines of credit	$	184,464		$	152,440
Notes payable		109			194
Finance lease		550			839
Debt issuance costs		(823	)		(555	)
Debt facilities	$	184,300		$	152,918

On

September 30, 2019,

the Company and its subsidiaries, Colonial, ACM and Texas Car-Mart, Inc., a Texas Corporation (“TCM”) entered into the Third Amended and Restated Loan and Security Agreement (the “Agreement”). Under the Agreement, BMO Harris Bank, N.A. replaced Bank of America, N.A. as agent, lead arranger and book manager. Wells Fargo Bank, N.A. also joined the group of lenders. The Agreement also extended the term of the Company’s revolving credit facilities to

September 30, 2022

and increased the total permitted borrowings from

$215

million to

$241

million, including an increase in the Colonial revolving line of credit from

$205

million to

$231

million. The ACM-TCM revolving line of credit commitment remained the same at

$10

million. The Agreement also increased the accordion feature from

$50

million to

$100

million.

The revolving credit facilities are collateralized primarily by finance receivables and inventory, are cross collateralized and contain a guarantee by the Company. The Company also granted a security interest in the equity ownership interests of its subsidiaries. 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

4.00%

at

January 31, 2020

and

4.73%

at

April 30, 2019.

The credit facilities contain various reporting and performance covenants including (i) maintenance of certain financial ratios and tests, (ii) limitations on borrowings from other sources, (iii) restrictions on certain operating activities and (iv) restrictions on the payment of dividends or distributions.

The distribution limitations under the credit facilities allow the Company to repurchase the Company’s stock so long as either: (a) the aggregate amount of such repurchases after

September 30, 2019

does

not

exceed

$50

million, net of proceeds received from the exercise of stock options, and the total availability under the credit facilities is equal to or greater than

20%

of the sum of the borrowing bases, in each case after giving effect to such repurchases (repurchases under this item are excluded from fixed charges for covenant calculations), or (b) the aggregate amount of such repurchases does

not

exceed

75%

of the consolidated net income of the Company measured on a trailing

twelve

month basis; provided that immediately before and after giving effect to the stock repurchases, at least

12.5%

of the aggregate funds committed under the credit facilities remain available.

The Company was in compliance with the covenants at

January 31, 2020.

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

January 31, 2020,

the Company had additional availability of approximately

$56

million under the revolving credit facilities.

The Company recognized approximately

$191,000

and

$198,000

of amortization for the

nine

months ended

January 31, 2020

and

2019,

respectively, related to debt issuance costs. The amortization is reflected as interest expense in the Company’s Condensed Consolidated Statements of Operations.

During the

first

nine

months of fiscal

2020

and fiscal

2019,

the Company incurred

$458,000

and

$372,000

in debt issuance costs related to the Agreement. Debt issuance costs of approximately

$823,000

and

$555,000

as of

January 31, 2020

and

April 30, 2019,

respectively, are shown as a deduction from the debt facilities in the Condensed Consolidated Balance Sheets.

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

$109,000

and

$194,000

as of

January 31, 2020

and

April 30, 2019,

respectively.

On

March 29, 2018,

the Company entered into a lease classified as a finance lease. The present value of the minimum lease payments was approximately

$550,000

and

$839,000

as of

January 31, 2020

and

April 30, 2019,

respectively, 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

January 31, 2020,

and

April 30, 2019,

there was approximately

$298,000

and

$177,000,

respectively, in accumulated depreciation related to the leased equipment.

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jan. 31, 2020	Apr. 30, 2019
Assets:
Cash and cash equivalents	$ 2,083,000	$ 1,752,000
Accrued interest on finance receivables	2,603,000	2,348,000
Finance receivables, net	467,255,000	415,486,000
Inventory	54,026,000	37,483,000
Prepaid expenses and other assets	4,720,000	4,634,000
Income taxes receivable, net	783,000	1,947,000
Right-of-use asset	37,248,000
Goodwill	355,000	355,000
Property and equipment, net	28,820,000	28,537,000
Total Assets	597,893,000	492,542,000
Liabilities:
Accounts payable	16,330,000	13,659,000
Accrued liabilities	15,061,000	18,837,000
Deferred income tax liabilities, net	15,827,000	14,259,000
Lease liability	39,247,000
Debt facilities	184,300,000	152,918,000
Total liabilities	305,723,000	231,632,000
Commitments and contingencies (Note J)
Mezzanine equity:
Mandatorily redeemable preferred stock	400,000	400,000
Equity:
Preferred stock, par value $.01 per share, 1,000,000 shares authorized; none issued or outstanding
Common stock, par value $.01 per share, 50,000,000 shares authorized; 13,466,707 and 13,376,030 issued at January 31, 2020 and April 30, 2019, respectively, of which 6,610,116 and 6,699,421 were outstanding at January 31, 2020 and April 30, 2019, respectively	135,000	134,000
Additional paid-in capital	86,633,000	81,605,000
Retained earnings	451,627,000	409,573,000
Less: Treasury stock, at cost, 6,856,591 and 6,676,609 shares at January 31, 2020 and April 30, 2019, respectively	(246,725,000)	(230,902,000)
Total stockholders' equity	291,670,000	260,410,000
Non-controlling interest	100,000	100,000
Total equity	291,770,000	260,510,000
Total Liabilities, Mezzanine Equity and Equity	597,893,000	492,542,000
Payment Protection Plan [Member]
Liabilities:
Deferred revenue	23,566,000	21,367,000
Service Contract [Member]
Liabilities:
Deferred revenue	$ 11,392,000	$ 10,592,000

XML

Note C - Finance Receivables, Net - Credit Quality Information for Finance Receivables (Details) - USD ($) $ in Thousands	Jan. 31, 2020	Apr. 30, 2019	Jan. 31, 2019
Current, principal balance	$ 513,053	$ 435,603	$ 450,931
Current	84.44%	80.17%	83.05%
3 - 29 days past due, principal balance	$ 72,971	$ 91,747	$ 74,788
3 - 29 days past due	12.01%	16.89%	13.78%
30 - 60 days past due, principal balance	$ 14,504	$ 11,362	$ 12,062
30 - 60 days past due	2.39%	2.09%	2.22%
61 - 90 days past due, principal balance	$ 4,413	$ 3,429	$ 3,619
61 - 90 days past due	0.73%	0.63%	0.67%
> 90 days past due, principal balance	$ 2,596	$ 1,187	$ 1,493
> 90 days past due	0.43%	0.22%	0.28%
Total, principal balance	$ 607,537	$ 543,328	$ 542,893
Total	100.00%	100.00%	100.00%

XML

Note A - Organization and Business (Details Textual)	9 Months Ended
	Jan. 31, 2020
Number of Operating Subsidiaries	2
Number of Dealerships Operated	145

XML

Note C - Finance Receivables, Net (Details Textual) - USD ($) $ in Millions			3 Months Ended	9 Months Ended		12 Months Ended
	May 31, 2016	May 30, 2016	Jul. 31, 2019	Jan. 31, 2020	Jan. 31, 2019	Apr. 30, 2019
Finance Receivables, Weighted Average Interest Rate				16.40%
Finance Receivables, Number of Loan Classes				1
Finance Receivables, Number of Risk Pools				1
Net Charge Offs as Percentage of Average Finance Receivables				17.50%	19.20%
Collections as Percentage of Average Financing Receivables				40.00%	39.20%
Delinquencies Greater Than 30 Days as Percentage of Average Financing Receivables				3.60%	3.20%
Financing Receivable, Allowance for Credit Loss, Percentage			24.50%			25.00%
Financing Receivable, Allowance for Credit Loss, Recovery			$ 2.6
Financing Receivable, Credit Loss, Expense (Reversal), Net of Tax, From Change in Allowance Percentage			$ (2.0)
Minimum [Member]
Financing Receivable Interest Rate				15.00%
Financing Receivable Payment Period				1 year 180 days
Maximum [Member]
Financing Receivable Interest Rate	16.50%	15.00%		16.50%
Financing Receivable Payment Period				4 years

XML

Note G - Fair Value Measurements (Tables)

9 Months Ended

Jan. 31, 2020

Notes Tables

Fair Value, by Balance Sheet Grouping [Table Text Block]

	January 31, 2020				April 30, 2019
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash	$	2,083	$	2,083	$	1,752	$	1,752
Finance receivables, net		467,255		373,635		415,486		334,147
Accounts payable		16,330		16,330		13,659		13,659
Debt facilities		184,300		184,300		152,918		152,918

XML

Note C - Finance Receivables, Net (Tables)

9 Months Ended

Jan. 31, 2020

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

(In thousands)	January 31, 2020			April 30, 2019
Gross contract amount	$	706,014		$	631,681
Less unearned finance charges		(98,477	)		(88,353	)
Principal balance		607,537			543,328
Less allowance for credit losses		(140,282	)		(127,842	)
Finance receivables, net	$	467,255		$	415,486

Change In Finance Receivables Net [Table Text Block]

	Nine Months Ended January 31,
(In thousands)	2020			2019
Balance at beginning of period	$	415,486		$	383,617
Finance receivable originations		446,093			399,089
Finance receivable collections		(229,973	)		(206,620	)
Provision for credit losses		(112,885	)		(111,619	)
Losses on claims for payment protection plan		(13,141	)		(12,148	)
Inventory acquired in repossession and payment protection plan claims		(38,325	)		(37,406	)
Balance at end of period	$	467,255		$	414,913

Financing Receivable, Allowance for Credit Loss [Table Text Block]

	Nine Months Ended January 31,
(In thousands)	2020			2019
Balance at beginning of period	$	127,842		$	117,821
Provision for credit losses		112,885			111,619
Charge-offs, net of recovered collateral		(100,445	)		(101,460	)
Balance at end of period	$	140,282		$	127,980

Financing Receivable, Past Due [Table Text Block]

(Dollars in thousands)	January 31, 2020					April 30, 2019					January 31, 2019
	Principal		Percent of			Principal		Percent of			Principal		Percent of
	Balance		Portfolio			Balance		Portfolio			Balance		Portfolio
Current	$	513,053		84.44	%	$	435,603		80.17	%	$	450,931		83.05	%
3 - 29 days past due		72,971		12.01	%		91,747		16.89	%		74,788		13.78	%
30 - 60 days past due		14,504		2.39	%		11,362		2.09	%		12,062		2.22	%
61 - 90 days past due		4,413		0.73	%		3,429		0.63	%		3,619		0.67	%
> 90 days past due		2,596		0.43	%		1,187		0.22	%		1,493		0.28	%
Total	$	607,537		100.00	%	$	543,328		100.00	%	$	542,893		100.00	%

Financing Receivable Credit Quality Indicators [Table Text Block]

	Nine Months Ended January 31,
	2020			2019
Principal collected as a percent of average finance receivables		40.0	%		39.2	%
Average down-payment percentage		5.9	%		5.8	%
Average originating contract term (in months )		30.8			29.4

Financing Receivable Contract Terms [Table Text Block]

	January 31, 2020		January 31, 2019
Portfolio weighted average contract term, including modifications (in months )		32.5		32.0

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Note K - Supplemental Cash Flow Information (Tables)

9 Months Ended

Jan. 31, 2020

Notes Tables

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	Nine Months Ended January 31,
(in thousands)	2020		2019
Supplemental disclosures:
Interest paid	$	6,566	$	5,191
Income taxes paid, net		8,652		7,050
Non-cash transactions:
Inventory acquired in repossession and payment protection plan claims		38,325		37,406
Net settlement option exercises		1,224		2,359

XML

Note I - Stock-based Compensation (Details Textual) - USD ($)			9 Months Ended
	Aug. 29, 2018	Aug. 05, 2015	Jan. 31, 2020	Jan. 31, 2019
Share-based Payment Arrangement, Expense			$ 3,200,000	$ 2,300,000
Share-based Payment Arrangement, Expense, after Tax			$ 2,400,000	1,800,000
Share-based Compensation Arrangement by Share-based Payment Award, Options Exercised Through Net Settlements			50,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Reduction in Shares Issued to Satisfy the Exercise Price and Applicable Withholding Taxes			23,301
Share-based Compensation Arrangement by Share-based Payment Award, Options Exercised Through Net Settlements, Net of Shares to Satisfy the Exercise Price and Applicable Withholding Taxes			26,699
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value			$ 28,100,000	15,200,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Number			104,250
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Aggregate Intrinsic Value			$ 5,400,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Weighted Average Remaining Contractual Term			6 years 36 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Weighted Average Exercise Price			$ 58.44
Share-based Payment Arrangement, Option [Member]
Share-based Payment Arrangement, Expense			$ 2,300,000	1,500,000
Share-based Payment Arrangement, Expense, after Tax			$ 1,800,000	$ 1,200,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			225,000	145,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Grant Date Fair Value			$ 9,300,000	$ 3,000,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total			$ 10,000,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition			1 year 328 days
Restated Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	2,000,000	1,800,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized	200,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant			75,000
Restated Option Plan [Member] | Share-based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		10 years
Stock Incentive Plan [Member]
Share-based Payment Arrangement, Expense			$ 798,000	756,000
Share-based Payment Arrangement, Expense, after Tax			611,000	$ 575,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	450,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized	100,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total			$ 6,600,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition			6 years 146 days
Stock Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			7,224	3,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant			99,303
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Ending Balance			186,724
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value			$ 48.48

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Note C - Finance Receivables, Net - Average Financing Receivable Contract Terms (Details)	9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Portfolio weighted average contract term, including modifications (Month)	2 years 255 days	2 years 240 days

XML

Note F - Debt Facilities - Summary of Debt Facilities (Details) - USD ($) $ in Thousands	Jan. 31, 2020	Apr. 30, 2019
Debt issuance costs	$ (823)	$ (555)
Debt facilities	184,300	152,918
Line of Credit [Member]
Debt facilities, gross	184,464	152,440
Notes Payable [Member]
Debt facilities, gross	109	194
Capital Lease Obligations [Member]
Debt facilities, gross	$ 550	$ 839

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Note J - Commitments and Contingencies - Future Lease Obligations (Details) - USD ($) $ in Thousands	Jan. 31, 2020	Apr. 30, 2019
2020 (remaining)	$ 1,644
2021	6,053
2022	5,889
2023	5,875
2024	5,351
Thereafter	24,457
Total undiscounted operating lease payments	49,269
Less: imputed interest	(10,022)
Lease liability	$ 39,247

XML

Note B - Summary of Significant Accounting Policies - Property and Equipment, Estimated Useful Lives (Details)	9 Months Ended
	Jan. 31, 2020
Furniture, Fixtures and Equipment [Member] | Minimum [Member]
Property, and equipment (Year)	3 years
Furniture, Fixtures and Equipment [Member] | Maximum [Member]
Property, and equipment (Year)	7 years
Leasehold Improvements [Member] | Minimum [Member]
Property, and equipment (Year)	5 years
Leasehold Improvements [Member] | Maximum [Member]
Property, and equipment (Year)	15 years
Building and Building Improvements [Member] | Minimum [Member]
Property, and equipment (Year)	18 years
Building and Building Improvements [Member] | Maximum [Member]
Property, and equipment (Year)	39 years

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Note C - Finance Receivables, Net - Changes in Finance Receivables (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019	Jan. 31, 2020	Jan. 31, 2019
Balance			$ 415,486	$ 383,617
Finance receivable originations			446,093	399,089
Finance receivable collections			(229,973)	(206,620)
Provision for credit losses	$ (40,233)	$ (35,555)	(112,885)	(111,619)
Losses on claims for payment protection plan			(13,141)	(12,148)
Inventory acquired in repossession and payment protection plan claims			(38,325)	(37,406)
Balance	$ 467,255	$ 414,913	$ 467,255	$ 414,913

XML

Significant Accounting Policies (Policies)

9 Months Ended

Jan. 31, 2020

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The condensed consolidated financial statements include the accounts of America’s Car-Mart, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated.

Segment Reporting, Policy [Policy Text Block]

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 are 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, Policy [Policy Text Block]

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 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 period. Actual results could differ from those estimates. Significant estimates include, but are

not

limited to, the Company’s allowance for credit losses.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

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

28%

of current period revenues resulting from sales to Arkansas customers.

Periodically, the Company maintains cash in financial institutions in excess of the amounts insured by the federal government. The Company’s revolving credit facilities mature on

September 30, 2022.

Line of Credit Facility, Dividend Restrictions [Policy Text Block]

Restrictions on Distributions/Dividends

The Company’s revolving credit facilities generally restrict distributions by the Company to its shareholders. The distribution limitations under the credit facilities allow the Company to repurchase the Company’s stock so long as either: (a) the aggregate amount of such repurchases after

September 30, 2019

does

not

exceed

$50

million, net of proceeds received from the exercise of stock options, and the total availability under the credit facilities is equal to or greater than

20%

of the sum of the borrowing bases, in each case after giving effect to such repurchases (repurchases under this item are excluded from fixed charges for covenant calculations), or (b) the aggregate amount of such repurchases does

not

exceed

75%

of the consolidated net income of the Company measured on a trailing

twelve

month basis; provided that immediately before and after giving effect to the stock repurchases, at least

12.5%

of the aggregate funds committed under the credit facilities remain available. Thus, the Company is limited in its ability to pay dividends or make other distributions to its shareholders without the consent of the Company’s lenders.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash Equivalents

The Company considers all highly liquid debt instruments purchased with original maturities of

three

months or less to be cash equivalents.

Financing Receivable [Policy Text Block]

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

16.4%

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%.

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 (

$2.6

million at

January 31, 2020

and

$2.3

million at

April 30, 2019

on the Condensed Consolidated Balance Sheets), 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 Condensed 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

76%

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

January 31, 2020,

3.6%

of the Company’s finance receivable balances were

30

days or more past due, compared to

3.2%

at

January 31, 2019.

Substantially all of the Company’s automobile contracts involve contracts made to individuals with impaired or limited credit histories or higher debt-to-income ratios than permitted by traditional lenders. Contracts made with buyers who are restricted in their ability to obtain financing from traditional lenders generally entail a higher risk of delinquency, default and repossession, and higher losses than contracts made with buyers with better credit.

The Company strives to keep its delinquency percentages low, and

not

to repossess vehicles. Accounts

three

days late are contacted by telephone. Notes from each telephone contact are electronically maintained in the Company’s computer system. The Company also utilizes text messaging notifications which allow customers to elect and receive reminders on their due dates and late notifications, if applicable. 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.

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. For the quarter ended

January 31, 2020,

on average, accounts were approximately

69

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 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

January 31, 2020,

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

January 31, 2020,

$140.3

million, was

24.5%

of the principal balance in finance receivables of

$607.5

million, less unearned payment protection plan revenue of

$23.6

million and unearned service contract revenue of

$11.4

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.  About 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 for the eighteen -month period ended January 31, 2020 was 12.7 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, effective 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.

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 contract, 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

January 31, 2020

or

April 30, 2019.

Inventory, Policy [Policy Text Block]

Inventory

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 and Intangible Assets, Goodwill, Policy [Policy Text Block]

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 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. There was

no

impairment of goodwill during fiscal

2019,

and to date, there has been

no

impairment during fiscal

2020.

Property, Plant and Equipment, Policy [Policy Text Block]

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 using the straight-line method, generally over the following estimated useful lives:

Furniture, fixtures and equipment (years)	3	to	7
Leasehold improvements (years)	5	to	15
Buildings and improvements (years)	18	to	39

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 [Policy Text Block]

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 the revolving credit facilities. Any cash overdraft balance principally represents outstanding checks that as of the balance sheet date had

not

yet been presented for payment, net of any deposits in transit. Any cash overdraft balance is reflected in accrued liabilities on the Company’s Condensed Consolidated Balance Sheets.

Deferred Sales Tax [Policy Text Block]

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 Condensed Consolidated Balance Sheets.

Income Tax, Policy [Policy Text Block]

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. The quarterly provision for income taxes is determined using an estimated annual effective tax rate, which is based on expected annual taxable income, statutory tax rates and the Company’s best estimate of nontaxable and nondeductible items of income and expense. The effective income tax rates were

21.3%

and

20.4%

for the

nine

months ended

January 31, 2020

and

January 31, 2019,

respectively. Total income tax expense for the

nine

months ended

January 31, 2020

differed from amounts computed by applying the United States federal statutory tax rates to pre-tax income primarily due to state income taxes and the impact of permanent differences between book and taxable income. The Company recorded a discrete income tax benefit of approximately

$1.3

million and

$1.5

million for the

nine

months ended

January 31, 2020

and

January 31, 2019,

respectively, related to excess tax benefits on share based compensation, which is recorded in the income tax provision.

Occasionally, the Company is audited by taxing authorities. These audits could result in proposed assessments of additional taxes. The Company believes that its tax positions comply in all material respects with applicable tax law. However, tax law is subject to interpretation, and interpretations by taxing authorities could be different from those of the Company, which could result in the imposition of additional taxes.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than

not

sustain the position following an audit. For tax positions meeting the more-likely-than-

not

threshold, the amount recognized in the financial statements is the largest benefit that has a greater than

50

percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applies this methodology to all tax positions for which the statute of limitations remains open.

The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is

no

longer subject to U.S. federal, state and local income tax examinations by tax authorities for the years before fiscal

2016.

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

January 31, 2020

or

April 30, 2019.

Revenue from Contract with Customer [Policy Text Block]

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, 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. The amount of revenue recognized for the

nine

months ended

January 31, 2020

that was included in the

April 30, 2019

deferred service contract revenue was

$9.4

million. 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:

	Three Months Ended January 31,				Nine Months Ended January 31,
(In thousands)	2020		2019		2020		2019
Sales – used autos	$	142,136	$	119,955	$	417,079	$	371,465
Wholesales – third party		6,810		6,460		22,236		19,205
Service contract sales		7,983		7,600		23,283		22,655
Payment protection plan revenue		6,324		5,788		18,472		16,990
Total	$	163,253	$	139,803	$	481,070	$	430,315

At

January 31, 2020

and

2019,

finance receivables more than

90

days past due were approximately

$2.6

million and

$1.5

million, respectively. Late fee revenues totaled approximately

$1.5

million for the

nine

months ended

January 31, 2020

and

2019.

Late fees are recognized when collected and are reflected in interest and other income on the Condensed Consolidated Statements of Operations.

Earnings Per Share, Policy [Policy Text Block]

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.

Share-based Payment Arrangement [Policy Text Block]

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 I. 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. The Company recorded a discrete income tax benefit of approximately

$1.3

million and

$1.5

million for the

nine

months ended

January 31, 2020

and

January 31, 2019,

respectively. The Company elects to account for forfeitures as they occur and 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, 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 [Policy Text Block]

Treasury Stock

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

14,000

shares of treasury stock for its subsidiary, ACM Insurance Company, in accordance with the requirements of the Arkansas Department of Insurance.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Occasionally, new accounting pronouncements are issued by the 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.

Leases

. In

February 2016,

the FASB issued ASU

2016

-

02,

Leases

. The new guidance requires that lessees recognize all leases, including operating leases, with a term greater than

12

months on-balance sheet and also requires disclosure of key information about leasing transactions. The guidance in ASU

2016

-

02

is effective for annual reporting periods beginning after

December 15, 2018,

and interim reporting periods within those years. The Company adopted this ASU and related amendments for its fiscal year beginning

May 1, 2019

and elected certain practical expedients permitted under the transition guidance, including to retain the historical lease classification as well as relief from reviewing expired or existing contracts to determine if they contain leases. The adoption of this ASU and related amendments resulted in total assets and liabilities increasing

$34.5

million at the time of adoption. The Company’s Consolidated Statements of Income and Consolidated Statements of Cash Flows were

not

materially impacted.

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.

Cloud Computing Arrangement

. In

August 2018,

the FASB issued ASU

2018

-

15,

Intangibles – Goodwill and Other – Internal-Use Software

(Subtopic

350

-

40

). ASU

2018

-

15

aligns the requirements for capitalizing implementation costs in a cloud computing arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU

2018

-

15

is effective for annual reporting periods beginning after

December 15, 2019,

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 but does

not

expect such impact to be material.

XML

Note A - Organization and Business

9 Months Ended

Jan. 31, 2020

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

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” or “ACM”), and Colonial Auto Finance, Inc., an Arkansas corporation (“Colonial”). 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

January 31, 2020,

the Company operated

145

dealerships located primarily in small cities throughout the South-Central United States.

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019	Jan. 31, 2020	Jan. 31, 2019
Revenues:
Sales	$ 163,253	$ 139,803	$ 481,070	$ 430,315
Interest and other income	23,481	21,251	67,852	61,925
Total revenue	186,734	161,054	548,922	492,240
Costs and expenses:
Cost of sales	97,504	81,740	286,215	251,274
Selling, general and administrative	30,331	26,488	87,298	79,068
Provision for credit losses	40,233	35,555	112,885	111,619
Interest expense	2,024	2,110	6,109	5,895
Depreciation and amortization	975	985	2,913	2,949
Loss (gain) on disposal of property and equipment		(100)	39	(88)
Total costs and expenses	171,067	146,778	495,459	450,717
Income before taxes	15,667	14,276	53,463	41,523
Provision for income taxes	2,981	3,381	11,379	8,464
Net income	12,686	10,895	42,084	33,059
Less: Dividends on mandatorily redeemable preferred stock	(10)	(10)	(30)	(30)
Net income attributable to common stockholders	$ 12,676	$ 10,885	$ 42,054	$ 33,029
Earnings per share:
Basic (in dollars per share)	$ 1.92	$ 1.61	$ 6.34	$ 4.82
Diluted (in dollars per share)	$ 1.83	$ 1.55	$ 6.03	$ 4.66
Weighted average number of shares used in calculation:
Basic (in shares)	6,597,643	6,751,026	6,634,496	6,846,707
Diluted (in shares)	6,940,124	7,003,389	6,969,848	7,087,430

XML

Note H - Weighted Average Shares Outstanding

9 Months Ended

Jan. 31, 2020

Notes to Financial Statements

Weighted Average Shares Outstanding [Text Block]

H – 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:

	Three Months Ended January 31,				Nine Months Ended January 31,
	2020		2019		2020		2019
Weighted average shares outstanding-basic		6,597,643		6,751,026		6,634,496		6,846,707
Dilutive options and restricted stock		342,481		252,363		335,352		240,723
Weighted average shares outstanding-diluted		6,940,124		7,003,389		6,969,848		7,087,430
Antidilutive securities not included:
Options		200,000		120,000		83,333		80,000
Restricted stock		4,224		-		3,408		-

XML

Note D - Property and Equipment

9 Months Ended

Jan. 31, 2020

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

D – Property and Equipment

A summary of property and equipment is as follows:

(In thousands)	January 31, 2020			April 30, 2019
Land	$	7,799		$	7,413
Buildings and improvements		12,535			11,815
Furniture, fixtures and equipment		13,977			13,307
Leasehold improvements		27,352			26,064
Construction in progress		1,498			1,523
Less accumulated depreciation and amortization		(34,341	)		(31,585	)
Total	$	28,820		$	28,537

XML

Note I - Stock-based Compensation (Tables)

9 Months Ended

Jan. 31, 2020

Notes Tables

Stock Option Plan Comparison [Table Text Block]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Nine Months Ended January 31,
	2020			2019
Expected term (years)		5.5			5.5
Risk-free interest rate		1.75	%		2.79	%
Volatility		39	%		36	%
Dividend yield		-			-

Schedule of Share-based Compensation, Stock Options, Exercises [Table Text Block]

	Nine Months Ended January 31,
(Dollars in thousands)	2020		2019
Options exercised		112,250		224,500
Cash received from option exercises	$	2,849	$	4,373
Intrinsic value of options exercised	$	6,861	$	8,506

XML

Note E - Accrued Liabilities (Tables)

9 Months Ended

Jan. 31, 2020

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

(In thousands)	January 31, 2020		April 30, 2019
Employee compensation	$	6,059	$	6,321
Cash overdrafts (see Note B)		1,052		1,274
Deferred sales tax (see Note B)		2,611		3,571
Reserve for PPP claims		2,882		2,433
Health insurance		1,052		1,256
Other		1,405		3,982
Total	$	15,061	$	18,837

XML

Note E - Accrued Liabilities - Accrued Liabilities (Details) - USD ($) $ in Thousands	Jan. 31, 2020	Apr. 30, 2019
Employee compensation	$ 6,059	$ 6,321
Cash overdrafts (see Note B)	1,052	1,274
Deferred sales tax (see Note B)	2,611	3,571
Reserve for PPP claims	2,882	2,433
Health insurance	1,052	1,256
Other	1,405	3,982
Accrued liabilities	$ 15,061	$ 18,837

XML

Note G - Fair Value Measurements - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Jan. 31, 2020	Apr. 30, 2019
Reported Value Measurement [Member]
Cash	$ 2,083	$ 1,752
Finance receivables, net	467,255	415,486
Accounts payable	16,330	13,659
Debt facilities	184,300	152,918
Estimate of Fair Value Measurement [Member]
Cash	2,083	1,752
Finance receivables, net	373,635	334,147
Accounts payable	16,330	13,659
Debt facilities	$ 184,300	$ 152,918

XML

Note H - Weighted Average Shares Outstanding (Tables)

9 Months Ended

Jan. 31, 2020

Notes Tables

Schedule of Weighted Average Number of Shares [Table Text Block]

	Three Months Ended January 31,				Nine Months Ended January 31,
	2020		2019		2020		2019
Weighted average shares outstanding-basic		6,597,643		6,751,026		6,634,496		6,846,707
Dilutive options and restricted stock		342,481		252,363		335,352		240,723
Weighted average shares outstanding-diluted		6,940,124		7,003,389		6,969,848		7,087,430
Antidilutive securities not included:
Options		200,000		120,000		83,333		80,000
Restricted stock		4,224		-		3,408		-

XML

Note D - Property and Equipment (Tables)

9 Months Ended

Jan. 31, 2020

Notes Tables

Property, Plant and Equipment [Table Text Block]

(In thousands)	January 31, 2020			April 30, 2019
Land	$	7,799		$	7,413
Buildings and improvements		12,535			11,815
Furniture, fixtures and equipment		13,977			13,307
Leasehold improvements		27,352			26,064
Construction in progress		1,498			1,523
Less accumulated depreciation and amortization		(34,341	)		(31,585	)
Total	$	28,820		$	28,537

XML

Note F - Debt Facilities (Details Textual) - USD ($)			9 Months Ended
	Mar. 29, 2018	Dec. 15, 2015	Jan. 31, 2020	Jan. 31, 2019	Sep. 30, 2019	Sep. 29, 2019	Apr. 30, 2019
Amortization of Debt Issuance Costs and Discounts, Total			$ 191,000	$ 198,000
Debt Related Commitment Fees and Debt Issuance Costs			458,000	$ 372,000
Debt Issuance Costs, Gross			823,000				$ 555,000
Long-term Debt, Total			109,000				194,000
Capital Lease Obligations, Total			550,000				839,000
Capital Leases, Lessee Balance Sheet, Assets by Major Class, Accumulated Depreciation			298,000				$ 177,000
Assets Held under Capital Leases [Member]
Property, Plant and Equipment, Useful Life	3 years
Note Payable Related to the Property Purchase Agreement [Member]
Debt Instrument, Face Amount		$ 550,000
Debt Instrument, Periodic Payment, Total		$ 10,005
Debt Instrument, Interest Rate, Stated Percentage		3.50%
Revolving Credit Facility [Member]
Line of Credit Facility, Additional Borrowing Capacity, Accordion Feature			56,000,000
Dividend Restrictions Maximum Aggregate Amount of Stock Repurchases			$ 50,000,000
Line of Credit Facility, Distribution Limitations Percentage of Sum of Borrowing Bases			20.00%
Line of Credit Facility, Distribution Limitations Percentage of Consolidated Net Income			75.00%
Line of Credit Facility Distribution Limitations Minimum Percentage of Aggregate Funds Available			12.50%
Revolving Credit Facility [Member] | BMO Harris Bank [Member]
Line of Credit Facility, Maximum Borrowing Capacity					$ 241,000,000	$ 215,000,000
Line of Credit Facility, Additional Borrowing Capacity, Accordion Feature					100,000,000	50,000,000
Debt Instrument, Interest Rate, Effective Percentage			4.00%				4.73%
Revolving Credit Facility [Member] | BMO Harris Bank [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate			2.35%
Colonial Revolving Credit Facility [Member] | BMO Harris Bank [Member]
Line of Credit Facility, Maximum Borrowing Capacity					231,000,000	$ 205,000,000
ACM TCM Revolving Credit Facility [Member] | BMO Harris Bank [Member]
Line of Credit Facility, Maximum Borrowing Capacity					$ 10,000,000

XML

Note H - Weighted Average Shares Outstanding - Weighted Average Shares of Common Stock Outstanding (Details) - shares	3 Months Ended		9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019	Jan. 31, 2020	Jan. 31, 2019
Weighted average shares outstanding-basic (in shares)	6,597,643	6,751,026	6,634,496	6,846,707
Dilutive options and restricted stock (in shares)	342,481	252,363	335,352	240,723
Weighted average shares outstanding-diluted (in shares)	6,940,124	7,003,389	6,969,848	7,087,430
Share-based Payment Arrangement, Option [Member]
Antidilutive securities (in shares)	200,000	120,000	83,333	80,000
Restricted Stock [Member]
Antidilutive securities (in shares)	4,224		3,408

XML

Note J - Commitments and Contingencies (Details Textual) - USD ($)	9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019	Apr. 30, 2019
Operating Lease, Percent of Facilities Leased	81.00%
Operating Leases, Rent Expense, Total	$ 5,100,000	$ 5,000,000
Operating Lease, Weighted Average Discount Rate, Percent			4.73%
Letters of Credit Outstanding, Amount	$ 250,000
Minimum [Member]
Lessee, Operating Lease, Term of Contract	3 years
Maximum [Member]
Lessee, Operating Lease, Term of Contract	5 years

XML

Note B - Summary of Significant Accounting Policies - Sales (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019	Jan. 31, 2020	Jan. 31, 2019
Sales	$ 163,253	$ 139,803	$ 481,070	$ 430,315
Sales Used Autos [Member]
Sales	142,136	119,955	417,079	371,465
Wholesales Third Party [Member]
Sales	6,810	6,460	22,236	19,205
Service Contract Sales [Member]
Sales	7,983	7,600	23,283	22,655
Payment Protection Plan Revenue [Member]
Sales	$ 6,324	$ 5,788	$ 18,472	$ 16,990

XML

Note C - Finance Receivables, Net - Changes in the Finance Receivables Allowance for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019	Jan. 31, 2020	Jan. 31, 2019
Balance			$ 127,842	$ 117,821
Provision for credit losses	$ 40,233	$ 35,555	112,885	111,619
Charge-offs, net of recovered collateral			(100,445)	(101,460)
Balance	$ 140,282	$ 127,980	$ 140,282	$ 127,980

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Net income	$ 42,084,000	$ 33,059,000
Adjustments to reconcile net income to net cash used in operating activities:
Provision for credit losses	112,885,000	111,619,000
Losses on claims for payment protection plan	13,141,000	12,148,000
Depreciation and amortization	2,913,000	2,949,000
Amortization of debt issuance costs	191,000	198,000
Loss (gain) on disposal of property and equipment	39,000	(88,000)
Stock based compensation	3,150,000	2,270,000
Deferred income taxes	1,568,000	1,609,000
Excess tax benefit from share based compensation	1,338,000	1,527,000
Change in operating assets and liabilities:
Finance receivable originations	(446,093,000)	(399,089,000)
Finance receivable collections	229,973,000	206,620,000
Accrued interest on finance receivables	(255,000)	(267,000)
Inventory	21,782,000	32,194,000
Prepaid expenses and other assets	(86,000)	(318,000)
Accounts payable and accrued liabilities	1,116,000	1,320,000
Income taxes, net	(174,000)	(1,723,000)
Net cash provided by (used in) operating activities	(13,429)	4,845
Investing Activities:
Purchase of property and equipment	(3,244,000)	(3,042,000)
Proceeds from sale of property and equipment	9,000
Net cash used in investing activities	(3,235,000)	(3,042,000)
Financing Activities:
Exercise of stock options	1,738,000	3,827,000
Issuance of common stock	141,000	103,000
Purchase of common stock	(15,823,000)	(24,087,000)
Dividend payments	(30,000)	(30,000)
Change in cash overdrafts	(222,000)	814,000
Debt issuance costs	(459,000)	(372,000)
Payments on note payable	(374,000)	(284,000)
Proceeds from revolving credit facilities	384,690,000	337,842,000
Payments on revolving credit facilities	(352,666,000)	(319,014,000)
Net cash provided by (used in) financing activities	16,995,000	(1,201,000)
Increase in cash and cash equivalents	331,000	602,000
Cash and cash equivalents, beginning of period	1,752,000	1,022,000
Cash and cash equivalents, end of period	2,083,000	1,624,000
Payment Protection Plan [Member]
Change in operating assets and liabilities:
Increase (decrease) in deferred revenue	2,199,000	925,000
Service Contract [Member]
Change in operating assets and liabilities:
Increase (decrease) in deferred revenue	$ 800,000	$ (108,000)

XML

Note G - Fair Value Measurements

9 Months Ended

Jan. 31, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

G – Fair Value Measurements

The table below summarizes information about the fair value of financial instruments included in the Company’s financial statements at

January 31, 2020

and

April 30, 2019:

	January 31, 2020				April 30, 2019
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash	$	2,083	$	2,083	$	1,752	$	1,752
Finance receivables, net		467,255		373,635		415,486		334,147
Accounts payable		16,330		16,330		13,659		13,659
Debt facilities		184,300		184,300		152,918		152,918

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 estimates 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 had a third -party appraisal in January 2019 that indicated a range of 34% to 39% 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 January 31, 2020, 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.
Debt facilities	The fair value approximates carrying value due to the variable interest rates charged on the revolving credit facilities, which reprice frequently.

XML

Note C - Finance Receivables, Net

9 Months Ended

Jan. 31, 2020

Notes to Financial Statements

Financing Receivables [Text Block]

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 as of the contract origination date), are collateralized by the vehicle sold and typically provide for payments over periods ranging from

18

to

48

months. The weighted average interest rate for the portfolio was approximately

16.4%

at

January 31, 2020.

The Company’s finance receivables are defined as

one

segment and

one

class of loans in sub-prime consumer automobile contracts. The level of risks inherent in the Company’s financing receivables is managed as

one

homogeneous pool.

The components of finance receivables are as follows:

(In thousands)	January 31, 2020			April 30, 2019
Gross contract amount	$	706,014		$	631,681
Less unearned finance charges		(98,477	)		(88,353	)
Principal balance		607,537			543,328
Less allowance for credit losses		(140,282	)		(127,842	)
Finance receivables, net	$	467,255		$	415,486

Changes in the finance receivables, net are as follows:

	Nine Months Ended January 31,
(In thousands)	2020			2019
Balance at beginning of period	$	415,486		$	383,617
Finance receivable originations		446,093			399,089
Finance receivable collections		(229,973	)		(206,620	)
Provision for credit losses		(112,885	)		(111,619	)
Losses on claims for payment protection plan		(13,141	)		(12,148	)
Inventory acquired in repossession and payment protection plan claims		(38,325	)		(37,406	)
Balance at end of period	$	467,255		$	414,913

Changes in the finance receivables allowance for credit losses are as follows:

	Nine Months Ended January 31,
(In thousands)	2020			2019
Balance at beginning of period	$	127,842		$	117,821
Provision for credit losses		112,885			111,619
Charge-offs, net of recovered collateral		(100,445	)		(101,460	)
Balance at end of period	$	140,282		$	127,980

The factors which influenced management’s judgment in determining the amount of the current period provision for credit losses are described below.

The level of charge-offs, net of recovered collateral, is the most important factor in determining 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 decreased to

17.5%

for the

nine

months ended

January 31, 2020,

compared to

19.2%

for the prior year period. Both the frequency and severity of losses improved as a result of a higher quality vehicle, improved deal structures and consistent collections practices.

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

40.0%

for the

nine

months ended

January 31, 2020

compared to

39.2%

for the same period in the prior year. The increase in collections as a percentage of average finance receivables resulted primarily from improved and consistent efforts in the collections process. Delinquencies greater than

30

days were

3.6%

for

January 31, 2020

and

3.2%

at

January 31, 2019.

As a result of the improvements in our net charge-offs as a percentage of average receivables, the quality of the portfolio and our allowance analysis, a decrease to the allowance for credit losses from

25%

to

24.5%

was made in the

first

quarter of fiscal

2020,

which resulted in a

$2.6

million credit to the provision for credit losses, a

$2.0

million after tax increase to net income.

Macro-economic factors, the competitive environment on the funding side, 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.

Credit quality information for finance receivables is as follows:

(Dollars in thousands)	January 31, 2020					April 30, 2019					January 31, 2019
	Principal		Percent of			Principal		Percent of			Principal		Percent of
	Balance		Portfolio			Balance		Portfolio			Balance		Portfolio
Current	$	513,053		84.44	%	$	435,603		80.17	%	$	450,931		83.05	%
3 - 29 days past due		72,971		12.01	%		91,747		16.89	%		74,788		13.78	%
30 - 60 days past due		14,504		2.39	%		11,362		2.09	%		12,062		2.22	%
61 - 90 days past due		4,413		0.73	%		3,429		0.63	%		3,619		0.67	%
> 90 days past due		2,596		0.43	%		1,187		0.22	%		1,493		0.28	%
Total	$	607,537		100.00	%	$	543,328		100.00	%	$	542,893		100.00	%

Accounts

one

and

two

days past due are considered current for this analysis, due to the varying payment dates and variation in the day of the week at each period end. Delinquencies

may

vary from period to period based on the average age of the portfolio, seasonality within the calendar year, the day of the week and overall economic factors. The above categories are consistent with internal operational measures used by the Company to monitor credit results.

Substantially all of the Company’s automobile contracts involve contracts made to individuals with impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders; such contracts generally entail a higher risk of delinquency, default, repossession, and losses than contracts made with buyers with better credit. The Company monitors contract term length, down payment percentages, and collections as credit quality indicators.

	Nine Months Ended January 31,
	2020			2019
Principal collected as a percent of average finance receivables		40.0	%		39.2	%
Average down-payment percentage		5.9	%		5.8	%
Average originating contract term (in months )		30.8			29.4

	January 31, 2020		January 31, 2019
Portfolio weighted average contract term, including modifications (in months )		32.5		32.0

The increase in collections as a percentage of average finance receivables resulted primarily from improved and consistent efforts in the collections process. The portfolio weighted average contract term increased slightly primarily due to the increased average selling price. As the average selling price increases and in order to remain competitive, term lengths

may

increase.

XML

Document And Entity Information - shares	9 Months Ended
	Jan. 31, 2020	Mar. 10, 2020
Document Information [Line Items]
Entity Registrant Name	AMERICAS CARMART INC
Entity Central Index Key	0000799850
Trading Symbol	crmt
Current Fiscal Year End Date	--04-30
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		6,614,110
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jan. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false
Title of 12(b) Security	Common Stock, par value $0.01 per share

XML

Note K - Supplemental Cash Flow Information

9 Months Ended

Jan. 31, 2020

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

K - Supplemental Cash Flow Information

Supplemental cash flow disclosures are as follows:

	Nine Months Ended January 31,
(in thousands)	2020		2019
Supplemental disclosures:
Interest paid	$	6,566	$	5,191
Income taxes paid, net		8,652		7,050
Non-cash transactions:
Inventory acquired in repossession and payment protection plan claims		38,325		37,406
Net settlement option exercises		1,224		2,359

XML

Note B - Summary of Significant Accounting Policies

9 Months Ended

Jan. 31, 2020

Notes to Financial Statements

Significant Accounting Policies [Text Block]

B – Summary of Significant Accounting Policies

General

The accompanying condensed consolidated balance sheet as of

April 30, 2019,

which has been derived from audited financial statements, and the unaudited interim condensed financial statements as of

January 31, 2020

and

2019,

have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form

10

-Q and Article

10

of Regulation S-

X.

Accordingly, they do

not

include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the

three

and

nine

months ended

January 31, 2020

are

not

necessarily indicative of the results that

may

be expected for the year ending

April 30, 2020.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form

10

-K for the year ended

April 30, 2019.

Principles of Consolidation

The condensed 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 are 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 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 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

28%

of current period revenues resulting from sales to Arkansas customers.

Periodically, the Company maintains cash in financial institutions in excess of the amounts insured by the federal government. The Company’s revolving credit facilities mature on

September 30, 2022.

Restrictions on Distributions/Dividends

The Company’s revolving credit facilities generally restrict distributions by the Company to its shareholders. The distribution limitations under the credit facilities allow the Company to repurchase the Company’s stock so long as either: (a) the aggregate amount of such repurchases after

September 30, 2019

does

not

exceed

$50

million, net of proceeds received from the exercise of stock options, and the total availability under the credit facilities is equal to or greater than

20%

of the sum of the borrowing bases, in each case after giving effect to such repurchases (repurchases under this item are excluded from fixed charges for covenant calculations), or (b) the aggregate amount of such repurchases does

not

exceed

75%

of the consolidated net income of the Company measured on a trailing

twelve

month basis; provided that immediately before and after giving effect to the stock repurchases, at least

12.5%

of the aggregate funds committed under the credit facilities remain available. Thus, the Company is limited in its ability to pay dividends or make other distributions to its shareholders without the consent of the Company’s lenders.

Cash Equivalents

The Company considers all highly liquid debt 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

16.4%

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%.

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 (

$2.6

million at

January 31, 2020

and

$2.3

million at

April 30, 2019

on the Condensed Consolidated Balance Sheets), 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 Condensed 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

76%

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

January 31, 2020,

3.6%

of the Company’s finance receivable balances were

30

days or more past due, compared to

3.2%

at

January 31, 2019.

Substantially all of the Company’s automobile contracts involve contracts made to individuals with impaired or limited credit histories or higher debt-to-income ratios than permitted by traditional lenders. Contracts made with buyers who are restricted in their ability to obtain financing from traditional lenders generally entail a higher risk of delinquency, default and repossession, and higher losses than contracts made with buyers with better credit.

The Company strives to keep its delinquency percentages low, and

not

to repossess vehicles. Accounts

three

days late are contacted by telephone. Notes from each telephone contact are electronically maintained in the Company’s computer system. The Company also utilizes text messaging notifications which allow customers to elect and receive reminders on their due dates and late notifications, if applicable. 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.

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. For the quarter ended

January 31, 2020,

on average, accounts were approximately

69

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 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

January 31, 2020,

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

January 31, 2020,

$140.3

million, was

24.5%

of the principal balance in finance receivables of

$607.5

million, less unearned payment protection plan revenue of

$23.6

million and unearned service contract revenue of

$11.4

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.  About 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 for the eighteen -month period ended January 31, 2020 was 12.7 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, effective 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.

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 contract, 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

January 31, 2020

or

April 30, 2019.

Inventory

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 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. There was

no

impairment of goodwill during fiscal

2019,

and to date, there has been

no

impairment during fiscal

2020.

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 using the straight-line method, generally over the following estimated useful lives:

Furniture, fixtures and equipment (years)	3	to	7
Leasehold improvements (years)	5	to	15
Buildings and improvements (years)	18	to	39

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 the revolving credit facilities. Any cash overdraft balance principally represents outstanding checks that as of the balance sheet date had

not

yet been presented for payment, net of any deposits in transit. Any cash overdraft balance is reflected in accrued liabilities on the Company’s Condensed 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 Condensed 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. The quarterly provision for income taxes is determined using an estimated annual effective tax rate, which is based on expected annual taxable income, statutory tax rates and the Company’s best estimate of nontaxable and nondeductible items of income and expense. The effective income tax rates were

21.3%

and

20.4%

for the

nine

months ended

January 31, 2020

and

January 31, 2019,

respectively. Total income tax expense for the

nine

months ended

January 31, 2020

differed from amounts computed by applying the United States federal statutory tax rates to pre-tax income primarily due to state income taxes and the impact of permanent differences between book and taxable income. The Company recorded a discrete income tax benefit of approximately

$1.3

million and

$1.5

million for the

nine

months ended

January 31, 2020

and

January 31, 2019,

respectively, related to excess tax benefits on share based compensation, which is recorded in the income tax provision.

Occasionally, the Company is audited by taxing authorities. These audits could result in proposed assessments of additional taxes. The Company believes that its tax positions comply in all material respects with applicable tax law. However, tax law is subject to interpretation, and interpretations by taxing authorities could be different from those of the Company, which could result in the imposition of additional taxes.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than

not

sustain the position following an audit. For tax positions meeting the more-likely-than-

not

threshold, the amount recognized in the financial statements is the largest benefit that has a greater than

50

percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applies this methodology to all tax positions for which the statute of limitations remains open.

The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is

no

longer subject to U.S. federal, state and local income tax examinations by tax authorities for the years before fiscal

2016.

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

January 31, 2020

or

April 30, 2019.

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, 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. The amount of revenue recognized for the

nine

months ended

January 31, 2020

that was included in the

April 30, 2019

deferred service contract revenue was

$9.4

million. 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:

	Three Months Ended January 31,				Nine Months Ended January 31,
(In thousands)	2020		2019		2020		2019
Sales – used autos	$	142,136	$	119,955	$	417,079	$	371,465
Wholesales – third party		6,810		6,460		22,236		19,205
Service contract sales		7,983		7,600		23,283		22,655
Payment protection plan revenue		6,324		5,788		18,472		16,990
Total	$	163,253	$	139,803	$	481,070	$	430,315

At

January 31, 2020

and

2019,

finance receivables more than

90

days past due were approximately

$2.6

million and

$1.5

million, respectively. Late fee revenues totaled approximately

$1.5

million for the

nine

months ended

January 31, 2020

and

2019.

Late fees are recognized when collected and are reflected in interest and other income on the Condensed Consolidated Statements of Operations.

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 I. 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. The Company recorded a discrete income tax benefit of approximately

$1.3

million and

$1.5

million for the

nine

months ended

January 31, 2020

and

January 31, 2019,

respectively. The Company elects to account for forfeitures as they occur and 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, 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

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

14,000

shares of treasury stock for its subsidiary, ACM Insurance Company, in accordance with the requirements of the Arkansas Department of Insurance.

Recent Accounting Pronouncements

Occasionally, new accounting pronouncements are issued by the 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.

Leases

. In

February 2016,

the FASB issued ASU

2016

-

02,

Leases

. The new guidance requires that lessees recognize all leases, including operating leases, with a term greater than

12

months on-balance sheet and also requires disclosure of key information about leasing transactions. The guidance in ASU

2016

-

02

is effective for annual reporting periods beginning after

December 15, 2018,

and interim reporting periods within those years. The Company adopted this ASU and related amendments for its fiscal year beginning

May 1, 2019

and elected certain practical expedients permitted under the transition guidance, including to retain the historical lease classification as well as relief from reviewing expired or existing contracts to determine if they contain leases. The adoption of this ASU and related amendments resulted in total assets and liabilities increasing

$34.5

million at the time of adoption. The Company’s Consolidated Statements of Income and Consolidated Statements of Cash Flows were

not

materially impacted.

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.

Cloud Computing Arrangement

. In

August 2018,

the FASB issued ASU

2018

-

15,

Intangibles – Goodwill and Other – Internal-Use Software

(Subtopic

350

-

40

). ASU

2018

-

15

aligns the requirements for capitalizing implementation costs in a cloud computing arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU

2018

-

15

is effective for annual reporting periods beginning after

December 15, 2019,

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 but does

not

expect such impact to be material.