BENTONVILLE, Ark., and RICHMOND, Va. — Buy-here, pay-here auto group, America's Car-Mart, reported that it slowed sales to improve credit quality, which resulted in a decline in revenue and net income for its fourth quarter. Meanwhile, CarMax continued its expansion, opening another car-buying center, in addition to three superstores.

Starting with Car-Mart, executives said its fourth-quarter revenues declined 5.1 percent to $59.3 million, compared with $62.5 million in the same time frame of the previous year. Moreover, officials said the company posted $2.1 million in net income for the quarter, compared with $4.6 million in the same quarter of last year.

Retail-unit sales were down 16.6 percent to 5,917 vehicles for the quarter, compared with 7,096 in the same period of the previous year.

Additionally, executives reported that accounts more than 30 days past due declined to 3.4 percent, compared with 3.7 percent in the same period of 2006. Officials also noted that accounts more than 30 days overdue came in at 3.8 percent for the third quarter of this fiscal year.

Discussing finance receivables, executives said they had a provision for loan losses of $14.2 million, or 26.6 percent of sales, for the quarter, compared with 11.2 million, or 19.6 percent of sales, in the same quarter of 2006.

As for full-year results, the company said revenues increased 2.6 percent to $240 million, compared with $234 million for fiscal 2006. Meanwhile, income for the year came in at $4.2 million, compared with $16.7 million for fiscal 2006.

Executives went on to say that excluding the effects of the non-cash increase in the allowance for loan losses in the second quarter, along with the effects of the favorable income tax results recognized during the fourth quarter, Car-Mart posted annual profits of $6.96 million.

The company said its allowance for loan losses was 22 percent of finance receivables as of April 30, compared with 19.2 percent at the same time in 2006. Officials explained that the higher percentage comes in at about $5 million in net non-cash additions to the allowance to cover future credit losses. Executives noted there was $10 million less in finance receivables, when net compared to the previous year.

As for retail-unit sales, they were down 8.1 percent to 25,199 vehicles for the fiscal year, compared with 27,416 in fiscal 2006.

"As discussed in our second- and third-quarter comments, we have put in place numerous initiatives to enhance the quality of our accounts receivable portfolio," said T.J. ‘Skip' Falgout III, chairman and chief executive officer.

"We have been focused on improving credit quality, and by slowing our new-store growth, we can allocate more resources to improving all aspects of our credit quality and collections, with the result being increased profitability of our existing store base prior to accelerating new-store growth," he continued.

Falgout pointed out that the company's balance sheet remained strong with debt to equity of 33 percent and debt to finance receivables of 23 percent for the year. He also said cash flow from operations was strong in the fourth quarter, allowing the company to pay down an additional $2.5 million in debt.

"The decrease in retail unit sales is largely the result of our efforts to improve the quality of our sales," explained Hank Henderson, president. "In addition, the operational initiatives which we have instituted over the recent quarters are beginning to show some initial positive results.

"For example, we have continued to see significantly higher down payments than a year ago, and our over 30-day delinquency numbers have remained steady in an acceptable range," he added. "We know we have more work to do, and more time needs to elapse to fully evaluate our initiatives, but we remain encouraged by the results so far."

CarMax

CarMax reported that net earnings grew 16 percent to $65.4 million for the first quarter, compared with $56.8 million in the same quarter of fiscal 2007.

Helping this growth was the fact that total sales increased 14 percent to $2.15 billion, compared with $1.89 billion in the same period of the prior year.

As a part of the sales increase, executives said comparable-store used unit sales were up 6 percent for the time frame, and total used unit sales increased 15 percent.

"Comparable-store used unit sales growth of 6 percent kicked off another good first quarter and what we are confident will be another year of growth for CarMax," explained Tom Folliard, president and CEO of the company. "We are pleased with our sales performance this quarter, particularly given what we believe was a somewhat weak retail environment and the fact that we were up against 6 percent comparable-store used unit sales growth in the first quarter of each of the last two years.

"Broad-based increases in traffic, both in our stores and on our Web site, and solid execution by our store teams continued to positively affect our results," he continued. "Credit available via CarMax Auto Finance and our third-party finance providers remained consistent with prior quarters, also enabling our strong sales performance. We believe we continued to gain share in the late-model used-vehicle market."

Company executives went on to report that wholesale-unit sales were up 7 percent, which they said was in line with their expectations. Officials noted that expectations for wholesale-unit sales were challenging, as these results grew by 21 percent in the first quarter of the previous year.

Discussing the wholesale growth, the company attributed it to ongoing efforts to improve its car-buying process and in-store auctions.

Moving on, officials said other sales and revenues jumped 11 percent, supported by an 18-percent climb in the sales of extended service plans and a 10-percent net increase in third-party finance fees.

As for the gross profit for each retail unit, the company posted a $2,801 figure, which executives said was up modestly from the prior year.

"We had another strong quarter CAF," Folliard pointed out. "CAF income climbed 14 percent despite the inclusion of approximately $6 million of favorable items in last year's first quarter. CAF benefited from our solid sales growth, an improvement in the gain on loans originated and sold, and the increase in total managed receivables."

Moreover, the company said origination gains, as a percent of loans sold, were up by 4.2 percent for the first quarter, compared with 3.4 percent in the same time frame of the previous year.

Executives also noted that they have been gradually increasing the rates charged to consumers to match the company's increase in funds.

"Over the long term, we continue to expect that our gain percentage will generally be in the range of 3.5 percent to 4.5 percent," officials said.

CAF said net income was up by 15 percent to $65.4 million, compared with $56.8 million.

Executives also revealed that they opened three used-car superstores during the quarter. They entered the Tucson market with a standard superstore and the Milwaukee market with two satellite superstores.

"Vehicle reconditioning for the Milwaukee satellites is provided by our standard superstore in Kenosha, Wis., which has available capacity," officials reported.

Additionally, the company opened a car-buying center in the Raleigh, N.C., market, to expand the test started last year in Atlanta.

"The car-buying centers focus on appraisals and vehicle purchases and are part of our long-term effort to increase vehicle sourcing self-sufficiency," executives explained. "We plan to open an additional 10 used-car superstores and two car-buying centers during the remainder of fiscal 2008."