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 July 31, ~~2022~~2023

☐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~~’SAMERICA’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.)

~~1805 North 2~~^nd ~~Street, Suite 401~~~~, Rogers, Arkansas 72756~~

~~(Address of principal executive offices) (zip code)~~

1805 North 2nd Street, Suite 401, Rogers, Arkansas 72756

(Address of principal executive offices) (zip code)

~~(479) 464-9944~~

~~(Registrant's telephone number, including area 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 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.

Title of Each Class

Outstanding at

~~August 29, 2022~~September 8, 2023

Common stock, par value $.01 per share

~~6,367,605~~6,381,989

(Dollars in thousands except share and per share amounts)	July 31, 2022			April 30, 2022			July 31, 2023			April 30, 2023
Assets:	(Unaudited)						(Unaudited)
Cash and cash equivalents	$	4,362		$	6,916		$	6,314		$	9,796
Restricted cash		37,521			35,671			85,887			58,238
Accrued interest on finance receivables		5,032			4,926			6,757			6,115
Finance receivables, net		919,458			854,290			1,126,992			1,074,464
Inventory		145,181			115,302			117,186			109,290
Income tax receivable, net		-			274			5,142			9,259
Prepaid expenses and other assets		9,748			9,044			22,298			20,729
Right-of-use asset		59,822			58,828			61,769			59,142
Goodwill		8,623			8,623			11,716			11,716
Property and equipment, net		58,526			51,438			60,660			61,682
Total Assets	$	1,248,273		$	1,145,312		$	1,504,721		$	1,420,431

Liabilities, mezzanine equity and equity:
Liabilities:
Accounts payable	$	29,380		$	20,055		$	31,897		$	27,196
Income tax payable, net		328			-
Deferred accident protection plan revenue		46,896			43,936			54,716			53,065
Deferred service contract revenue		53,459			48,555			70,883			67,404
Accrued liabilities		31,100			32,630			30,362			33,606
Deferred income tax liabilities, net		31,315			28,233			36,098			39,315
Lease liability		62,688			61,481			64,882			62,300
Non-recourse notes payable		323,105			395,986
Revolving line of credit		188,921			44,670
Non-recourse notes payable, net								711,789			471,367
Revolving line of credit, net								(1,035	)		167,231
Total liabilities		767,192			675,546			999,592			921,484

Commitments and contingencies (Note J)

Mezzanine equity:
Mandatorily redeemable preferred stock		400			400			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; 13,695,669 and 13,642,185 issued at July 31, 2022 and April 30, 2022, respectively, of which 6,367,605 and 6,371,977 were outstanding at July 31, 2022 and April 30, 2022, respectively		137			136
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; 13,710,882 and 13,701,468 issued at July 31, 2023 and April 30, 2023, respectively, of which 6,381,954 and 6,373,404 were outstanding at July 31, 2023 and April 30, 2023, respectively								137			137
Additional paid-in capital		106,391			103,113			112,003			109,929
Retained earnings		671,474			658,242			689,978			685,802
Less: Treasury stock, at cost, 7,328,064 and 7,270,208 shares at July 31, 2022 and April 30, 2022, respectively		(297,421	)		(292,225	)
Less: Treasury stock, at cost, 7,328,928 and 7,328,064 shares at July 31, 2023 and April 30, 2023, respectively								(297,489	)		(297,421	)
Total stockholders' equity		480,581			469,266			504,629			498,447
Non-controlling interest		100			100			100			100
Total equity		480,681			469,366			504,729			498,547

Total Liabilities, Mezzanine Equity and Equity	$	1,248,273		$	1,145,312		$	1,504,721		$	1,420,431

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

	Three Months Ended July 31,						Three Months Ended July 31,
(In thousands)	2022			2021			2023			2022
	(Unaudited)						(Unaudited)
Operating Activities:
Net income	$	13,242		$	24,967		$	4,186		$	13,697
Adjustments to reconcile net income to net cash used in operating activities:
Provision for credit losses		82,903			54,108			96,323			76,241
Losses on claims for accident protection plan		6,108			4,518			7,769			6,108
Depreciation and amortization		1,151			915			1,693			1,151
Amortization of debt issuance costs		1,955			120			1,286			1,955
Loss on disposal of property and equipment		8			2			166			8
Impairment of fixed asset								12			-
Stock based compensation		1,978			2,972			2,451			1,978
Deferred income taxes		3,082			1,972			(3,217	)		3,225
Excess tax benefit from share based compensation		206			644			130			206
Change in operating assets and liabilities:
Finance receivable originations		(287,416	)		(234,893	)		(297,732	)		(287,416	)
Loan origination costs								(27	)		(18	)
Finance receivable collections		103,879			97,342			109,291			103,879
Accrued interest on finance receivables		(106	)		(162	)		(642	)		(106	)
Inventory		(521	)		683			23,953			(521	)
Prepaid expenses and other assets		(703	)		(737	)		(1,571	)		(2,013	)
Accounts payable and accrued liabilities		6,900			2,295			1,413			6,900
Deferred accident protection plan revenue		2,960			3,084			1,651			6,570
Deferred service contract revenue		4,904			6,600			3,479			7,358
Income taxes, net		396			4,175			3,987			396
Net cash used in operating activities		(59,074	)		(31,395	)		(45,399	)		(60,402	)

Investing Activities:
Purchase of property and equipment		(8,248	)		(1,689	)		(1,379	)		(6,920	)
Proceeds from sale of property and equipment								529			-
Net cash used in investing activities		(8,248	)		(1,689	)		(850	)		(6,920	)

Financing Activities:
Exercise of stock options		1,216			(1,007	)		(455	)		1,216
Issuance of common stock		85			81			78			85
Purchase of common stock		(5,196	)		(11,618	)		(68	)		(5,196	)
Dividend payments		(10	)		(10	)		(10	)		(10	)
Change in cash overdrafts		1,108			(316	)		-			1,108
Debt issuance costs		(89	)		-			(4,091	)		(89	)
Payments on note payable		(74,532	)		-
Issuances of non-recourse notes payable								360,340			-
Payments on non-recourse notes payable								(116,862	)		(74,532	)
Proceeds from revolving line of credit		148,386			76,335			104,803			148,386
Payments on revolving line of credit		(4,350	)		(30,555	)		(273,319	)		(4,350	)
Net cash provided by financing activities		66,618			32,910			70,416			66,618

Decrease in cash, cash equivalents, and restricted cash		(704	)		(174	)
Increase (Decrease) in cash, cash equivalents, and restricted cash								24,167			(704	)
Cash, cash equivalents, and restricted cash beginning of period		42,587			2,893			68,034			42,587

Cash, cash equivalents, and restricted cash end of period	$	41,883		$	2,719		$	92,201		$	41,883

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

America’s Car-Mart, Inc., a Texas corporation (the “Company”), is one of the largest publicly held automotive retailers in the United States focused exclusively on the “Integrated Auto Sales and Finance” segment of the used car market. References to the Company typically include the Company’s consolidated subsidiaries. The Company’s operations are principally conducted through its two operating subsidiaries, America’s Car Mart, Inc., an Arkansas corporation (“Car-Mart of Arkansas”), and Colonial Auto Finance, Inc., an Arkansas corporation (“Colonial”). 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 difficulties. As of July 31, ~~2022,~~ 2023, the Company operated 154 dealerships located primarily in small cities throughout the South-Central United States.

The accompanying condensed consolidated balance sheet as of April 30, ~~2022,~~ 2023, which has been derived from audited financial statements, and the unaudited interim condensed financial statements as of July 31, ~~2022~~ 2023 and ~~2021,~~2022, have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q10-Q and Article 10 of Regulation S-X.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 months ended July 31, ~~2022~~ 2023 are not necessarily indicative of the results that may be expected for the year ending April 30, ~~2023.~~ 2024. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K10-K for the year ended April 30, ~~2022.~~2023.

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.

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 individual dealership is similar in nature and only engages in the selling and financing of used vehicles. All individual dealerships have similar operating characteristics. As such, individual dealerships have been aggregated into one reportable segment.

Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassification had no effect on the prior year net income or shareholder’s equity.

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.

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, Illinois, Kentucky, Mississippi, Missouri, Oklahoma, Tennessee, and Texas, with approximately ~~28.3%~~27.6% of current period revenues resulting from sales to Arkansas customers.

As of July 31, ~~2022,~~ 2023, and periodically throughout the period, the Company maintained cash in financial institutions in excess of the amounts insured by the federal government. The cash is held in several highly rated banking institutions. The Company regularly monitors its counterparty credit risk and mitigates exposure by limiting the amount it invests in one institution. ~~The Company’s revolving credit facilities mature in~~ ~~September 2024.~~

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, 2021 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 Company’s stock repurchases, at least 12.5% of the aggregate funds committed under the credit facilities remain available. Thus, although the Company 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.

The Company considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents.

Restricted cash is related to the financing and securitization transaction discussed below and is held by the securitization trust.

Restricted cash from collections on auto finance receivables includes collections of principal, interest, and fee payments on auto finance receivables that are restricted for payment to holders of non-recourse notes payable pursuant to the applicable agreements.

The restricted cash on deposit in reserve accounts is for the benefit of holders of non-recourse notes payable, and these funds are not expected to be available to the Company or its creditors. If the cash generated by the related receivables in a given period was insufficient to pay the interest, principal, and other required payments, the balances on deposit in the reserve accounts would be used to pay those amounts.

Restricted cash consisted of the following at July 31, ~~2022~~ 2023 and April 30, ~~2022:~~2023:

The Company utilizes a term ~~securitization~~securitizations to provide long-term funding for a portion of the auto finance receivables initially funded through the debt facilities. In these transactions, a pool of auto finance receivables is sold to a special purpose entity that, in turn, transfers the receivables to a special purpose securitization trust. The securitization trust issues asset-backed securities, secured or otherwise supported by the transferred receivables, and the proceeds from the sale of the asset-backed securities are used to finance the securitized receivables.

The Company is required to evaluate term securitization trusts for consolidation. In the Company’s role as servicer for each securitization, it possesses non-substantive voting rights and has the power to direct the activities of the trust that most significantly impact the economic performance of the trust. In addition, the obligation to absorb losses (subject to limitations) and the rights to receive any returns of the trust, remain with the Company. Accordingly, the Company is the primary beneficiary of the trust and is required to consolidate it.

The Company recognizes transfers of auto finance receivables into the term ~~securitization~~securitizations as secured borrowings, which result in recording the auto finance receivables and the related non-recourse notes payable on our consolidated balance sheet. These auto finance receivables can only be used as collateral to settle obligations of the related non-recourse notes payable. The term securitization investors have no recourse to the Company’s assets beyond the related auto finance receivables, the amounts on deposit in the reserve account, and the restricted cash from collections on auto finance receivables. See Notes C and F for additional information on auto finance receivables and non-recourse notes payable.

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 ana weighted average interest rate of approximately ~~16.5%~~16.78% using the simple effective interest method including any deferred fees. In December 2022, the Company changed the interest rate on new originations of installment sale contracts to 18% (from 16.5%) in all states in which it operates, except for Arkansas (remains at 16.5%), Illinois (19.5 – 21.5%) and Smart Auto dealerships in Tennessee (which originate at up to 23.0%). 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 ($~~5.0~~6.8 million at July 31, ~~2022~~ 2023 and ~~$4.9~~$6.1 million at April 30, ~~2022~~ 2023 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 79% 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 On July 31, ~~2022,~~ ~~3.6%~~2023, 4.4% of the Company’s finance receivable balances were 30 days or more past due, compared to ~~3.0%~~3.6% at April 30, ~~2022.~~2023.

Substantially all of the Company’s automobile contracts involve contracts made to individuals with impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders. Contracts made with buyers who are restricted in their ability to obtain financing from traditional lenders generally entail a higher risk of delinquency, default and repossession, and higher losses than contracts made with buyers with better credit. At the time of originating a finance agreement, the Company requires customers to meet certain criteria that demonstrate their intent and ability to pay for the financed principal and interest on the vehicle they are purchasing. However, the Company recognizes that their customer base is at a higher risk of default given their impaired or limited credit histories.

The Company strives to keep its delinquency percentages low, and not to repossess vehicles. Accounts one to three days late are contacted by telephone or text messaging notifications. Notes from each contact are electronically maintained in the Company’s computer system. The Company also utilizes text messaging notifications that allow customers the option to receive due date reminders 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 money 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~~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.~~auctions following the expiration of a statutory notice period for repossessed accounts.

The Company takes steps to repossess a vehicle when the customer becomes delinquent in his or her payments and management determines that timely collection of future payments is not probable. Accounts are charged-off after the expiration of a statutory notice period for repossessed accounts and liquidation of the vehicle, or when management determines that the timely collection of future payments is not probable for accounts where the Company has been unable to repossess the vehicle. For accounts with respect to which the vehicle was repossessed, the fair value of the repossessed vehicle is charged as a reduction of the gross finance receivables balance charged-off. On average, accounts are approximately 6869 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 amount of the net repossession and charge-off loss is also reduced by any deferred service contract and accident protection plan revenue at the time of charge-off.

The Company maintains an allowance for credit losses on an aggregate basis at an amount it considers sufficient to cover net credit losses expected ~~to be incurred on~~over the remaining life of the contracts in the portfolio at the measurement date. ~~The Company accrues an estimated loss for the amount it believes will~~ ~~not~~ ~~be collected.~~ At July 31, ~~2022,~~ 2023, the weighted average total contract term was ~~44.0~~46.9 months with ~~35.0~~36.6 months remaining. The ~~reserve amount in the~~ allowance for credit losses at July 31, ~~2022,~~ ~~$266~~2023, $314 million, was ~~24.5%~~23.91% of the principal balance in finance receivables of ~~$1.2~~$1.4 billion, less ~~unearned~~deferred accident protection plan revenue of ~~$46.9~~$54.7 million and ~~unearned~~deferred service contract revenue of ~~$53.5~~$70.9 million. The allowance for credit losses represents management’s best estimate of lifetime expected losses based on reasonable and supportable forecasts, historical credit loss experience and ~~other quantitative~~qualitative considerations, such as changes in contract characteristics (i.e., average amount financed, greater than 30 day delinquencies, term, and ~~term)~~interest rates), ~~delinquency levels,~~credit quality trends, collateral values, current and forecasted inflationary economic conditions, ~~and~~ underwriting and collection ~~practices.~~practices, concentration risk, credit review, and other external trends. The allowance for credit losses is periodically reviewed by management with any changes reflected in current operations. ~~Although credit losses remained low in fiscal year~~ ~~2022,~~ credit losses did begin to normalize to pre-pandemic levels during the back half of the fiscal year and there is still possible further deterioration in economic conditions due to high inflation and lingering COVID-19 ~~impacts.~~ 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 as of July 31, ~~2022.~~ 2023.

The calculation of the allowance for credit losses uses the following primary factors:

A historical ~~point~~ loss rate is produced by this analysis which is then adjusted by qualitative factors and to reflect current and forecasted inflationary economic conditions ~~and~~over the Company’s reasonable and supportable forecast period of one-year.

The Company considers qualitative macro-economic factors that would affect its customers non-discretionary income, such as changes in inflation, which impact gasoline prices and prices for staple items, to develop reasonable and supportable forecasts for the lifetime expected losses. These economic forecasts are utilized alongside historical loss information in order to estimate expected losses ~~for a period of~~ ~~one~~ year, including the review of static pools coupled with any positive or negative subjective factors to arrive at an overall reserve amount that management considers to be a reasonable estimate of losses to be incurred onin the portfolio over the following twelve-month period, at which point the ~~measurement date. While challenging economic conditions can negatively impact credit~~Company will immediately revert to the point estimate produced by the Company’s analysis of historical loss information to estimate expected losses from the ~~effectiveness~~portfolio for the remaining contractual lives of the execution of internal policies and procedures within the collections area and the competitive environment on the lending side have historically had a more significant effect on collection results than macro-economic issues.its finance receivables.

In most states, the Company offers retail customers who finance their vehicle the option of purchasing an accident protection plan product as an add-on to the installment sale contract. This product contractually obligates the Company to cancel the remaining principal outstanding for any contract where the retail customer has totaled the vehicle, as defined by the product, or the vehicle has been stolen. The Company periodically evaluates anticipated losses to ensure that if anticipated losses exceed deferred accident protection plan revenues, an additional liability is recorded for such difference. At July 31, 2023, anticipated losses did not exceed deferred accident protection plan revenues. No such liability was required at July 31, ~~2022~~ 2023 or April 30, ~~2022.~~2023.

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 reflects the excess of purchase price over the fair value of specifically identified net assets purchased. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to qualitative annual impairment tests at the Company’s year-end. The impairment tests are based on the comparison of the fair value of the reporting unit to the carrying value of such unit. The implied goodwill is compared to the carrying value of the goodwill to determine the impairment, if any. There was no impairment of goodwill during the three months ended July 31, ~~2022~~ 2023 or during the ~~2022~~2023 fiscal year.

Goodwill totaled ~~$8.6~~$11.7 million at July 31, ~~2022~~ 2023 and $11.7 million at April 30, ~~2022.~~2023.

Property and equipment are stated at cost, less accumulated depreciation. Expenditures for additions, remodels and improvements are capitalized. Costs of repairs and maintenance are expensed as incurred. Leasehold improvements are amortized over the shorter of the estimated life of the improvement or the lease period. The lease period includes the primary lease term plus any extensions that are reasonably assured. Depreciation is computed principally using the straight-line method generally over the following estimated useful lives:

Long-lived assets, such as property and equipment, capitalized internal-use software and operating lease right-of-use assets 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~~If circumstances require a long-lived asset or asset group be ~~held and used is measured by a comparison of~~tested for possible impairment, the ~~carrying amount of an asset to future~~Company first compares the undiscounted ~~net~~ cash flows expected to be generated by that asset or asset group to its carrying value. If the ~~asset. If~~carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, such assets are considered to be impaired, and the impairment is recognized to ~~be recognized is measured by~~ the ~~amount by which~~extent that the carrying ~~values~~value exceeds its fair value. There were approximately $12,000 of impairment charges recognized for the ~~impaired assets exceed~~three months ended July 31, 2023. There were no impairment charges recognized for 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.~~three months ended July 31, 2022.

The Company enters into cloud computing service contracts to support its sales, inventory management, and administrative activities. The Company capitalizes certain implementation costs for cloud computing arrangements that meet the definition of a service contract. The Company includes these capitalized implementation costs within prepaid expenses and other assets on the Condensed Consolidated Balance Sheets. Once placed in service, the Company amortizes these costs over the remaining subscription term to the same caption on the Condensed Consolidated Statement of Operations as the related cloud subscription.

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 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 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 basis 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 ~~22.7%~~19.8% and ~~21.4%~~22.7% for the three months ended July 31, 2023 and July 31, 2022, ~~and~~ ~~July 31, 2021,~~ respectively. Total income tax expense for the three months ended July 31, ~~2022~~ 2023 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 ~~$206,000~~$130,000 and ~~$644,000~~$206,000 for the three months ended July 31, ~~2022~~ 2023 and ~~2021,~~2022, respectively, related to excess tax benefits on share based compensation.

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~~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 ~~2018.~~2019.

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 July 31, ~~2022~~ 2023 or April 30, ~~2022.~~2023.

Revenues are generated principally from the sale of used vehicles, which in most cases includes a service contract and an accident protection plan product, as well as 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. Accident 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. Accident protection plan revenues are included in sales and related losses are included in cost of sales as incurred. Any unearned revenue from ancillary products is charged-off at the time of repossession. 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 for the three months ended July 31, ~~2022~~ 2023 and ~~2021~~2022 consisted of the following:

At July 31, ~~2022~~ 2023 and ~~2021,~~2022, finance receivables more than 90 days past due were approximately ~~$2.7~~$4.9 million and ~~$4.0~~$2.7 million, respectively. Late fee revenues totaled approximately ~~$970,000~~$1.2 million and ~~$640,000~~$970,000 for the three months ended July 31, ~~2022~~ 2023 and ~~2021,~~2022, respectively. Late fees are recognized when collected and are reflected in interest and other income on the Condensed Consolidated Statements of Operations.

The amount of revenue recognized for the three months ended July 31, ~~2022~~ 2023 that was included in the April 30, ~~2022~~ 2023 deferred service contract revenue was ~~$9.6~~$12.3 million.

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.

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 accounts for forfeitures as they occur and records any excess tax benefits or deficiencies from its equity awards in its Condensed Consolidated Statements of Operations in the reporting period in which the exercise occurs. The Company recorded a discrete income tax benefit of approximately ~~$206,000~~$130,000 and ~~$644,000~~$206,000 for the three months ended July 31, ~~2022~~ 2023 and ~~2021,~~2022, respectively. 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 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.

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.

In March 2022, the FASB issued and accounting pronouncement (ASU 2022-02) related to troubled debt restructurings (“TDRs”) and vintage disclosures for financing receivables. The amendments in this update eliminate the accounting guidance for TDRs by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty. The amendments also require disclosure of current period gross write-offs by year of origination for financing receivables. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. In regard to troubled debt restructurings (“TDRs”), Management notes that the Company primarily modifies a customer’s loan to allow for significant payment delays. This type of modification is generally done to account for payday changes for the customer and minor vehicle repairs.

The Company originates installment sale contracts from the sale of used vehicles at its dealerships. These installment sale contracts, which carry a fixed interest rate of ~~16.5% per annum (19.5%~~18.0% for all states except Arkansas (which is subject to a usury cap of 17.0%),Illinois (where dealerships originate at 19.5% to 21.5%) and Smart Auto dealerships in ~~Illinois)~~Tennessee (which originate at up to 23.0%), are collateralized by the vehicle sold and typically provide for payments over periods ranging from 18 to 5469 months. The Company’s finance receivables are defined as one segment and one class of loans, which is sub-prime consumer automobile contracts. The level of risks in the Company’s finance receivables is managed as one homogeneous pool.

Amounts recovered from previously written-off accounts were approximately ~~$587,000~~$640,000 and ~~$582,000~~$587,000 for the three months ended July 31, ~~2022~~ 2023 and ~~2021,~~ ~~respectively.~~2022.

~~The factors which influenced management’s judgment~~Our allowance for credit losses increased during the quarter by $14.8 million or 5%. Structural changes to our portfolio driven by higher vehicle costs and longer term lengths continue to drive an increase in ~~determining~~ the ~~amount of the current period~~ provision for credit ~~losses are described below.~~

losses. The ~~historical level of actual~~ 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~~were impacted by 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 percentagehigher frequency of ~~average finance receivables increased to 5.6% for the~~ ~~three~~ ~~months ended~~ ~~July 31, 2022,~~ losses compared to ~~4.3% for~~ the prior year ~~period. The primary driver of the increase in net charge-offs compared to the same quarter in the prior year was an increased frequency~~as well as a higher severity of losses ~~coupled with a slight increase in~~driven by the ~~relative severity of losses.~~higher selling price and longer term contracts.

Collections and delinquency levels can have a significant effect on additions to the allowance and are reviewed frequently. Principle collections as a percentage of average finance receivables were 9.1% for the ~~three~~ ~~months ended~~ ~~July 31, 2022~~ ~~compared to 11.5% for the same period in the prior year. Principal collections decreased due to the term extensions coupled with the~~ ~~first~~ ~~quarter of fiscal~~ ~~2022~~ ~~being positively impacted by the last of the stimulus payments and~~ ~~two~~ ~~fewer collection days in the current year quarter. Delinquencies greater than~~ 30 ~~days were 3.6% and 3.3% at~~ ~~July 31, 2022~~ ~~and~~ ~~2021,~~ ~~respectively.~~

In addition to the objective factors discussed above, the Company also considers macro-economic factors that would affect its customers non-discretionary income, such as changes in unemployment levels, gasoline prices, and prices for staple items to develop reasonable and supportable forecasts for the lifetime expected losses. These economic forecasts are utilized alongside historical loss information in order to estimate expected losses in the portfolio over the following ~~twelve~~-month period, at which point the Company will immediately revert to the point estimate produced by the Company’s analysis of historical loss information to estimate expected losses from the portfolio for the remaining contractual lives of its finance receivables. See “Finance Receivables, Repossessions and Charge-offs and Allowance for Credit Losses” in Note B for a description of the historical data included in this analysis.

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. Contracts made with buyers who are restricted in their ability to obtain financing from traditional lenders generally entail a higher risk of delinquency, default and repossession, and higher losses than contracts made with buyers with better credit. The Company monitors customer scores, contract term length, down payment percentages, and collections for credit quality indicators.

~~The reduction~~Although total dollars collected per active customer increased 3.7% year over year, principal collections as a percentage of ~~principal collected was~~average finance receivables were lower in ~~line with~~ the ~~expected change~~current year quarter compared to the prior year quarter primarily due to the average term ~~increases and~~ ~~two~~ ~~less collection days in~~increases. Overall collections have also been negatively impacted by the current ~~year quarter. The prior year quarter included the impact of the pandemic related stimulus payments which contributed to a higher collection percentage.~~inflationary environment. The portfolio weighted average contract term increased primarily due to the increased average selling price, up ~~$3,050~~$734 or ~~19.8%~~4.1%, from the prior year period.

When customers apply for financing, the Company’s proprietary scoring model relies on the customers’ credit histories and certain application information to evaluate and rank their risk. The Company obtains credit histories and other credit data that includes information such as number of different addresses, age of oldest record, high risk credit activity, job time, time at residence and other factors. The application information that is used includes income, collateral value and down payment. The scoring models yield credit grades that represent the relative likelihood of repayment. Customers with the highest probability of repayment are 6rated ~~customers.~~6. Customers assigned a lower grade are determined to have a lower probability of repayment. For loans that are approved, the credit grade influences the terms of the agreement, such as the maximum amount financed, term length and minimum down payment. After origination, credit grades are generally not updated.

The Company uses a combination of the initial credit grades and historical performance to monitor the credit quality of the finance receivables on an ongoing basis, and the accuracy of the scoring model is validated periodically. Loan performance is reviewed on a recurring basis to identify whether the assigned grades adequately reflect the customers’ likelihood of repayment.

The following table presents a summary of finance receivables by credit quality indicator ~~as of~~ ~~July 31, 2022,~~ segregated by customer ~~score.~~score and charge-offs as of July 31, 2023.

The following table presents a summary of finance receivables by credit quality indicator, as of July 31, ~~2021,~~ 2022, segregated by customer score.

On ~~September 30, 2019,~~ At July 31, 2023, the Company and its subsidiaries ~~Colonial, Car-Mart~~have $600.0 million of Arkansas (“ACM”) and Texas Car-Mart, Inc. (“TCM”) entered into a Third Amended and Restated Loan and Security Agreement (the “Agreement”), which amended and restated the Company’s revolving credit facilities. Under the Agreement, BMO Harris Bank, N.A. replaced Bank of America, N.A. as agent, lead arranger and book manager, and Wells Fargo Bank, N.A. 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~~under a 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.

On ~~October 29, 2020,~~ ~~the Company and its subsidiaries entered into Amendment~~ ~~No.~~1 to the Agreement to expand the Company’s borrowing base by removing the limitations on the inclusion in the borrowing base of finance receivable balances on medium- and long-term vehicle contracts (those having an original contract term between 36 and 42 months or between 42 and 60 months, respectively), which were previously limited to 15% and 5%, respectively, and an aggregate of 15% of the eligible finance receivable balances for purposes of determining the Company’s borrowing base. Under Amendment ~~No.~~1, ~~finance receivables from vehicle contracts~~ ~~not~~ ~~exceeding~~ 60 ~~months in duration that meet certain other conditions are eligible for inclusion in the borrowing base calculation.~~

~~Amendment~~ ~~No.~~1 also allows the Company to make certain strategic business acquisitions and expanded the Company’s ability to dispose of real estate, equipment, and other property, subject to certain limitations. Amendment ~~No.~~1 permits the Company to acquire strategic targets engaged in the same or a reasonably related business to the Company’s business, provided that, among other requirements, the aggregate consideration paid for all acquired businesses in any ~~one~~ ~~fiscal year does~~ ~~not~~ ~~exceed $20.0 million. Amendment~~ ~~No.~~1 ~~also permits the Company to dispose of up to $5.0 million and $1.0 million of real estate and other property, respectively, subject to certain conditions, and also permits the Company to select~~ ~~one~~ or more additional lenders, subject to the written consent of BMO Harris Bank, N.A., as agent, to participate in any increase of the Colonial revolving line of credit under the Agreement’s accordion feature.

On ~~December 31, 2020,~~ ~~the Company through its operating subsidiaries exercised an option under the Agreement to increase its total revolving credit facilities by $85 million from~~ ~~$241~~ million to $326 million pursuant to the Agreement’s accordion feature. In connection with this increase, MUFG Union Bank, N.A. joined the lending group as a new lender. In addition to the increased permitted borrowings, the Company designated BOKF, NA d/b/a BOK Financial and Wells Fargo Bank, N.A. as co-syndication agents and First Horizon Bank and MUFG Union Bank, N.A. as co-documentation agents under the Agreement.

On ~~February 10, 2021,~~ ~~the Company and its subsidiaries entered into Amendment~~ ~~No.~~2 ~~to the Agreement to increase the Company’s permissible capital expenditure amount from $10 million to $25 million in the aggregate during any fiscal year.~~

On ~~September 29, 2021,~~ ~~the Company and its subsidiaries entered into Amendment~~ ~~No.~~3 ~~to the Agreement, which extends the term of the revolving credit facilities to~~ ~~September 29, 2024~~ and increases the total permitted borrowings by $274 million from $326 million to $600 million. In connection with the increase, CIBC Bank USA and Axos Bank joined the group of lenders. Additionally, Amendment ~~No.~~3 amended the distribution limitation to renew the aggregate limit on the Company’s repurchases of its common stock, increased the Company’s permissible capital expenditure amount from $25 million to $35 million in the aggregate, during any fiscal year, restored the accordion feature back to $100 million, and added certain mechanics for the replacement of LIBOR as the applicable benchmark interest rate under the Agreement, including mechanics to transition upon the cessation of LIBOR to a rate based upon the secured overnight financing rate published by the Federal Reserve Bank of New York.

On ~~April 22, 2022,~~ ~~the Company and its subsidiaries entered into Amendment~~ ~~No.~~4 to the Agreement, which permits the sale, contribution, or transfer of vehicle contracts to, and certain repurchases of such contracts from, a special purpose subsidiary of the Company in connection with a securitization transaction, in each case subject to specified conditions. Amendment ~~No.~~4 also replaces LIBOR as the applicable benchmark interest rate with SOFR and increases the unused line fee rate from 0.25% to 0.375% if the average daily amount outstanding during the preceding month is less than ~~50%~~ ~~of the revolver commitments.~~

credit. The revolving credit facilities are collateralized primarily by finance receivables and inventory, are cross collateralized and contain a guarantee by the Company. Interest is payable monthly under the revolving credit ~~facilities.~~facilities with a scheduled maturity date of September 29, 2024. 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 SOFR plus ~~2.35%~~2.75%, with a minimum of 2.25%~~. The interest~~ or for non-SOFR amounts the base rate ~~under the credit facilities was 5.5%~~of 8.50% at July 31, ~~2022~~ 2023 and ~~2.85%~~8.25% at April 30, ~~2022.~~ 2023. 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 (see note B).

The Company had no outstanding borrowings under its revolving line of credit at July 31, 2023 as it was paid off with the funding of the 2023-2 non-recourse notes payable. However, $1 million of amortized debt issuance costs is being reflected at the period end, which would have normally netted against the carrying balance. The Company was in compliance with the covenants at July 31, ~~2022.~~ 2023. 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 July 31, ~~2022,~~ 2023, the Company had additional availability of approximately ~~$125~~$159.0 million under the revolving credit facilities.

~~The Company recognized approximately $289,000 and $120,000 of amortization for the~~ ~~three~~ ~~months ended~~ ~~July 31, 2022~~ ~~and~~ ~~2021,~~ respectively, related to debt issuance costs associated with the credit facilities. The amortization is reflected as interest expense in the Company’s Condensed Consolidated Statements of Operations.

The Company has issued three separate series of asset-backed non-recourse notes ~~payable were~~(known as the “2022 Issuance”, “2023-1 Issuance” and “2023-2 Issuance”). The 2022 Issuance consists of $400.0 million in principal amount of non-recourse asset-back notes issued in four classes on ~~April 27, 2022~~ with a weighted average fixed coupon rate of 5.14% per annum. The 2023-1 Issuance consists of $400.2 million in principal amount of non-recourse asset-back notes issued in four classes with a weighted average fixed coupon rate of 8.68% per annum, and the 2023-2 Issuance consists of $360.3 million in principal amount of non-recourse asset-back notes issued in two classes with a weighted averaged fixed coupon rate of 8.80% per annum. All three issuances are collateralized by auto loans directly originated by the Company. Credit enhancement for the non-recourse notes payable consists of overcollateralization, a reserve account funded with an initial amount of not less than 2.0% of the pool balance, excess interest on the auto finance receivables, and in some cases, the subordination of certain payments to noteholders of less senior classes of notes. The timing of principal payments on the non-recourse notes payable is based on the timing of principal collections and defaults on the related auto finance receivables. Notes payable related to the term securitization ~~transaction~~transactions accrue interest predominately at fixed rates and have scheduled maturities through April 20, 2029, January 22, 2030, and June 20, 2030, respectively, but may mature earlier, depending upon repayment rate of the underlying auto finance receivables. ~~See Note B for additional information.~~

~~The Company recognized $1.7 million of amortization for the~~ ~~three~~ ~~months ended~~ ~~July 31, 2022~~ ~~related to debt issuance costs associated with the non-recourse notes payable. The amortization is reflected as interest expense in the Company’s Condensed Consolidated Statements of Operations.~~

Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance also establishes a fair value hierarchy that requires the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Topic 820 describes three levels of inputs that may be used to measure fair value:

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:

The estimated fair values, and related carrying amounts, of the financial instruments included in the Company’s financial statements at July 31, ~~2022~~ 2023 and April 30, ~~2022~~ 2023 are as follows:

Weighted average shares of common stock outstanding used in the calculation of basic and diluted earnings per share were as follows:

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 July 31, ~~2022~~ 2023 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 $2.5 million ($1.9 million after tax effects) and $2.0 million ($1.5 million after tax effects) ~~and $3.0 million ($2.3 million after tax effects)~~ for the three months ended July 31, ~~2022~~ 2023 and ~~2021,~~2022, 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.

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 Stock Option Plan to June 10, 2025 and increased the number of shares of common stock reserved for issuance under the plan by an additional 300,000 shares to 1,800,000 ~~shares.~~shares.. On August 29, 2018, August 26, 2020, and August 30, 2022, the shareholders of the Company approved ~~an amendment~~amendments to the Restated Option Plan increasing the number of shares of common stock reserved for issuance under the plan by an additional 200,000, 200,000 and 185,000 shares, ~~to 2,000,000 shares. On~~ ~~August 26, 2020,~~ ~~the shareholders~~respectively. Currently, a total of ~~the Company approved an amendment to the Restated Option Plan increasing the number of~~2,385,000 shares of common stock are reserved for issuance under the ~~plan by an additional~~ ~~200,000~~ ~~shares to 2,200,000 shares. On~~ ~~August 30, 2022,~~ 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 185,000 shares to 2,385,000 shares.plan. 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 outstanding under the Company’s stock option plans expire in the calendar years 2023 through ~~2032.~~2033.

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.

The expected term of the options is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date. Volatility is based on historical volatility of the Company’s common stock. The Company has not historically issued any dividends and does not expect to do so in the foreseeable future.

There were 35,000 and 30,000 options granted during the three months ended July 31, ~~2022~~ 2023 and ~~2021,~~2022, respectively. The grant-date fair value of options granted during the three months ended July 31, 2023 and 2022 ~~and~~ ~~2021~~was ~~$1.2~~$1.5 million and ~~$2.1~~$1.2 million, respectively. The options were granted at fair market value on the date of grant.

Stock option compensation expense was $1.9 million ($1.5 million after tax effects) and $1.6 million ($1.3 million after tax effects) ~~and $2.8 million ($2.1 million after tax effects)~~ for the three months ended July 31, ~~2022~~ 2023 and ~~2021,~~2022, respectively. As of July 31, ~~2022,~~ 2023, the Company had approximately ~~$2.0~~$3.5 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 ~~0.6~~1.6 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.

There were no options exercised through net settlements during the quarter ended July 31, 2022. During the quarter ended July 31, ~~2021,~~ 2023, there were 30,000 options exercised through net settlements in accordance with plan provisions, wherein the shares issued were reduced by ~~21,219~~23,507 shares to satisfy the exercise price and applicable withholding taxes to acquire ~~8,781~~6,493 shares. ~~There were~~ no ~~options exercised through net settlements during the quarter ended~~ ~~July 31, 2022.~~

The aggregate intrinsic value of outstanding options at July 31, 2023 and 2022 ~~and~~ ~~2021~~was ~~$14.4~~$25.8 million and ~~$46.2~~$14.4 million, respectively. As of July 31, ~~2022,~~ 2023, there were ~~268,400~~423,400 vested and exercisable stock options outstanding with an aggregate intrinsic value of ~~$8.5~~$19.0 million, a weighted average remaining contractual life of ~~6.0~~5.6 years, and a weighted average exercise price of ~~$77.40.~~$77.70.

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.~~450,000 shares. 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 no restricted shares granted during the three months ended July 31, 2023 and 7,132 restricted shares granted during the three months ended July 31, ~~2022~~ ~~and 4,500 restricted shares granted during the~~ ~~three~~ ~~months ended~~ ~~July 31, 2021.~~ 2022. A total of ~~84,704~~63,787 shares remained available for award at July 31, ~~2022.~~ 2023. There were ~~158,323~~177,240 unvested restricted shares outstanding as of July 31, ~~2022~~ 2023 with a weighted average grant date fair value of ~~$60.68.~~$61.36.

As of July 31, ~~2022,~~ 2023, the Company had approximately ~~$5.6~~$5.2 million of total unrecognized compensation cost related to unvested awards granted under the Restated Incentive Plan, which the Company expects to recognize over a weighted-average remaining period of ~~5.0~~3.7 years. The Company recorded compensation cost of approximately ~~$313,000~~$509,000 ($~~242,000~~396,000 after tax effects) and ~~$197,000~~$313,000 ($~~151,000~~242,000 after tax effects) related to the Restated Incentive Plan during the three months ended July 31, ~~2022~~ 2023 and ~~2021,~~2022, respectively.

There were no modifications to any of the Company’s outstanding share-based payment awards during fiscal ~~2022~~2023 or during the firstthree months of fiscal ~~2023.~~2024.

The Company has entered into operating leases for approximately ~~81%~~87% 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 ~~$2.7~~$2.2 million and ~~$2.0~~$2.7 million for the three month periods ended July 31, ~~2022~~ 2023 and ~~2021,~~2022, respectively.

Scheduled amounts and timing of cash flows arising from operating lease payments as of July 31, ~~2022,~~ 2023, discounted at the weighted average interest rate in effect as of July 31, ~~2022~~ 2023 of approximately 4.4%, are as follows:

The Company has two standby letters of credit relating to insurance policies totaling ~~$750,000~~$2.9 million at July 31, ~~2022.~~2023.

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.

L – Correction of an Immaterial Error in Previously Issued Financial Statements

Subsequent to the issuance of our interim financial statements for the period ended July 31, 2022, certain immaterial errors were identified and have been corrected in our historical information related to the classification of deferred revenue of ancillary products at the time an account is charged off and the calculation for allowance for credit losses. The amount of deferred revenue related to ancillary products for a customer account that is charged off has historically been recognized as sales revenue at the time of charge-off because the performance obligations for the deferred revenue are no longer required to be delivered by the Company at the time of charge-off. It was determined that this amount should be recorded as a reduction to customer accounts receivable at the time of charge-off, thus reducing the amounts historically reported in sales revenue, net charge-offs, the provision for credit losses and the allowance for credit losses as well as the corresponding deferred tax liability. As a result, certain amounts for sales revenue, provision for credit losses, charge-offs, net of collateral recovered, the allowance for credit losses and other related amounts have been revised from the amounts previously reported to correct these errors. Management has evaluated the materiality of these corrections to its prior period financial statements from a quantitative and qualitative perspective and has concluded that this change was not material to any prior annual or interim period.

The effects of the corrections to each of the individual affected line items in our Condensed Consolidated Statements of Operations were as follows (in thousands):

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

The following discussion will provide a comprehensive review of our financial and operational performance for the first quarter of the fiscal year. We will discuss the key drivers behind our results, explore the market dynamics that have influenced our position, and discuss the strategies we've employed to navigate challenges and capitalize on opportunities. This discussion should be read in conjunction with the Company's Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this report.

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:

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, ~~2022,~~2023, as well as:

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.

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 difficulties. As of July 31, ~~2022,~~2023, the Company operated 154 dealerships located primarily in small cities throughout the South-Central United States.

The Company has grown its revenues between approximately 4% and 32% per year over the last ten fiscal years (average ~~11%~~12%). Growth results from same dealership revenue growth and the addition of new dealerships. Revenue increased ~~23.0%~~8.6% for the ~~first~~ three months of fiscal ~~2023~~2024 compared to the same period of fiscal ~~2022,~~2023, due to a ~~32.0%~~27.3% increase in interest income, a ~~19.8%~~4.1% increase in the average retail sales price and a ~~2.1%~~2.4% increase in retail units sold. ~~The first quarter of~~Our dealership volume productivity averaged 34.2 sales per month, up from 33.6 last year.

Used vehicle pricing continued to increase due to the ~~prior year was impacted by the pandemic, resulting in lower sales volumes. The increasing sales price results from the~~high demand and tight supply ~~and high~~of used vehicles. In general, the demand for quality, used vehicles has increased due to a shortage of new vehicles leading to inventory constraints in both the ~~vehicles the Company sells.~~

~~Demand for the vehicles we purchase for resale has remained high~~new and used vehicle markets. Management expects continued pressure on the supply ~~has continued to be restricted due to lower repossessions~~ and ~~lower levels of new car production. While the long-term impact of COVID-19 and the ongoing microchip supply shortages on new car production and sales and the availability~~price of used vehicles ~~in our market is undetermined at this time,~~for the near term. The Company ~~has seen disruptions~~focuses on providing a quality vehicle with affordable payment terms while maintaining relatively shorter term lengths compared to others in the ~~supply of vehicles since the beginning of the pandemic and expects the supply to remain tight in the near-term relative to demand, resulting in the continuation of elevated purchase costs.~~industry on its installment sales contracts.

Over the last five fiscal years, the Company’s provision for credit losses as a percentage of sales has ranged from approximately ~~20.3%~~29.20% in fiscal ~~2021~~2023 to ~~28.7%~~23.71% in fiscal ~~2018~~2019 (average of ~~24.4%~~23.74%). ~~Credit~~During fiscal 2023, credit losses ~~began~~continued to normalize to pre-pandemic levels, ~~in late fiscal year 2022.~~partially due to the inflationary pressure on customers and increasing interest rates from federal monetary policy. For the first three months of fiscal ~~2023,~~2024, provision for credit losses as a percentage of sales was ~~27.6%~~30.9%.

Historically, credit losses, on a percentage basis, tend to be higher at new and developing dealerships than at mature dealerships. Generally, this is because the management at new and developing dealerships tends to be less experienced in making credit decisions and collecting customer accounts and the customer base is less seasoned. Normally more mature dealerships have more repeat customers and, on average, repeat customers are a better credit risk than non-repeat customers. Credit losses and charge-offs can also be impacted by market and economic factors, including a competitive used vehicle financing environment and macro-economic conditions such as inflation in the price of gasoline, groceries and other staple items and overall unemployment levels, as well as the personal income levels of the Company’s customers. Negative macro-economic issues, however, do not always lead to higher credit loss results for the Company because the Company provides basic affordable transportation, which in many cases is not a discretionary expenditure for customers.

~~In an effort to offset credit losses and~~The Company continuously looks for ways to operate more efficiently, ~~the Company continues to look for improvements to~~improve its business practices ~~including better~~and adjust underwriting and ~~better~~ collection procedures. The Company has a proprietary credit scoring system which enables the Company to monitor the quality of contracts. Corporate office personnel monitor proprietary credit scores and work with dealerships when the distribution of scores falls outside of prescribed thresholds. ~~The Company also uses credit reporting and the use of global positioning system (“GPS”) units on vehicles.~~ Additionally, the Company has placed significant focus on the collection area as the Company’s training department continues to spend significant time and effort on collections improvements. The Company’s vice president of collections oversees the collections ~~department~~area and provides timely oversight and additional accountability on a consistent basis. The Company believes that the proper execution of its business practices is the single most important determinant of its long-term credit loss experience.

The Company’s gross profit dollars per retail unit sold increased by ~~$740,~~$244, or ~~12.0%~~3.7%, during the first three months of fiscal ~~2023~~2024 compared to the first three months of fiscal ~~2022, while~~2023, and gross margin as a percentage of sales for the first three months of fiscal ~~2023 decreased~~2024 slightly increased to ~~35.7%~~34.6% of sales from ~~38.1%~~34.4% in the prior year period. The increase in gross profit dollars per retail unit sold ~~and the corresponding decrease in the gross margin percentage were~~was primarily related to the increase in average retail sales price of the vehicles sold during the respective ~~periods coupled with inflationary pressures and increased cost of sale expenses.~~periods. The Company’s gross margin is based upon the cost of the vehicle purchased, with higher-priced vehicles typically having higher gross margin dollars but lower gross margin percentages. Gross margin 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. The ~~Company expects that increasing vehicle purchase costs and sales prices will~~biggest driver of quarterly gross margin improvements was a 11% reduction in the cost of repairing vehicles. In addition, wholesale losses continue to ~~put pressure on its gross margin percentage over the near term as the demand for the vehicles the Company purchases remains high. However, the~~diminish. The Company plans to continue to focus on managing gross margin dollars in the near term, as demonstrated by the increases during fiscal 2024 as well as continuing to focus on improving wholesale results, cost controls, and operational improvement around the ~~first quarter~~acquisition and disposal of ~~fiscal 2023 and the entire fiscal year 2022 in the gross margin dollars per retail unit sold.~~vehicles.

The Company consistently focuses on collections. Each dealership is responsible for its own collections with supervisory involvement of the corporate office. Total collections of principal, interest, and late fees for the first ~~quarter~~three months of fiscal ~~2023~~2024 increased by ~~$17.3~~$17.5 million, or ~~13.2%~~11.8%, over the prior ~~year quarter.~~year. Principal collections, as a percentage of average finance receivables, were ~~in line with expectations at 9.1%~~7.8%, compared to ~~11.5%~~9.1% for the same period in prior year, reflecting an increase in the weighted average contract term compared to the prior year period.

Hiring, training and retaining qualified associates is critical to the Company’s success. The rate at which the Company adds new dealerships and is able to implement operating initiatives is limited by the Company’s number of trained managers and support ~~personnel the Company has at its disposal.~~personnel. Excessive turnover, particularly at the dealership manager level, could impact the Company’s ability to add new dealerships and to meet operational initiatives. The landscape for hiring remains very competitive as ~~the~~ business activity and workforce participation continue to adjust post-pandemic. The Company has continued to add resources to recruit, train, and develop personnel, especially personnel targeted to fill dealership manager positions. The Company expects to continue to invest in the development of its workforce.

The Company will continue to prioritize its investments in areas that will allow it to improve its product and service, while operating more efficiently to support a larger, more profitable business over time. ~~The~~

Certain historical financial information presented in this quarterly report has been revised to correct immaterial errors in certain amounts reported in the Company’s ~~investments~~prior financial statements related to the classification of deferred revenue of ancillary products at the time an account is charged off and the calculation for allowance for credit losses. Management has concluded that these corrections did not materially impact the Company’s operating results or financial condition in ~~its people, digital/technology, procurement/inventory management, and customer experience are critical as it moves forward~~any prior annual or interim period. See Note L to ~~serve an ever-increasing customer base.~~

Three months ended July 31, ~~2022~~2023 vs. Three months ended July 31, ~~2021~~2022

																						% Change			As a % of Sales
							% Change			As a % of Sales						Three Months Ended July 31,						2023			Three Months Ended July 31,
	Three Months Ended July 31,						2022 vs			Three Months Ended July 31,												vs.
	2022			2021			2021			2022			2021			2023			2022			2022			2023			2022
Revenues:
Sales	$	300,540		$	246,742			21.8	%		100.0	%		100.0	%	$	311,569		$	294,476			5.8	%		100.0	%		100.0	%
Interest income		44,342			33,587			32.0			14.8			13.6			56,456			44,342			27.3			18.1			15.1
Total		344,882			280,329			23.0									368,025			338,818			8.6

Costs and expenses:
Cost of sales, excluding depreciation shown below		193,115			152,764			26.4			64.3			61.9			203,879			193,115			5.6			65.4			65.6
Selling, general and administrative		43,234			38,800			11.4			14.4			15.7			46,470			43,234			7.5			14.9			14.7
Provision for credit losses		82,903			54,108			53.2			27.6			21.9			96,323			76,241			26.3			30.9			25.9
Interest expense		7,345			1,982			270.6			2.4			0.8			14,274			7,345			94.3			4.6			2.5
Depreciation and amortization		1,151			915			25.8			0.4			0.4			1,693			1,151			47.1			0.5			0.4
Loss on disposal of property and equipment		8			2			-			-			-			166			8			-			-			-
Total		327,756			248,571			31.9	%								362,805			321,094			13.0	%

Pretax income	$	17,126		$	31,758						5.7	%		12.9	%	$	5,220		$	17,724						1.7	%		6.0	%

Operating Data:
Retail units sold		15,536			15,219												15,912			15,536
Average dealerships in operation		154			151												155			154
Average units sold per dealership per month		33.6			33.6												34.2			33.6
Average retail sales price	$	18,455		$	15,405											$	18,799		$	18,065
Gross profit per retail unit sold	$	6,915		$	6,175											$	6,768		$	6,524
Same store revenue growth		21.5	%		46.7	%											8.2	%		21.5	%

Period End Data:
Dealerships open		154			151												154			154
Accounts over 30 days past due		3.6	%		3.3	%											4.4	%		3.6	%

Revenues increased by approximately ~~$64.6~~$29.2 million, or ~~23.0%~~8.6%, for the three months ended July 31, ~~2022~~2023 as compared to the same period in the prior fiscal year. The increase resulted from revenue growth at dealerships that operated a full three months in both current and prior year quarter ($~~60.2~~26.8 million) and revenue from dealerships opened after the prior year quarter ($~~4.4~~2.4 million). Revenue growth was related to a ~~32.0%~~27.3% increase in interest income, a ~~19.8%~~4.1% increase in the average retail sales price and a ~~2.1%~~2.4% increase in retail units sold. Interest income increased approximately ~~$10.8~~$12.1 million for the three months ended July 31, ~~2022,~~2023, as compared to the same period in the prior fiscal year, due to the ~~$295.1~~$259.3 million increase in average finance receivables.

Cost of sales, as a percentage of sales, ~~increased~~decreased to ~~64.3%~~65.4% for the three months ended ~~July 31, 2022~~July31, 2023 compared to ~~61.9%~~65.6% for the same period of the prior fiscal year, resulting in a gross margin as a percentage of sales of ~~35.7%~~34.6% for the current year period compared to ~~38.1%~~34.4% for the prior year period. ~~During~~The primary drivers of this decrease were a reduction in the ~~first quarter of the current year, the Company experienced increased costs for repair parts, transportation fees, fuel costs and other~~ cost of ~~sale expenses.~~repairing vehicles and a decrease in wholesale losses.

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 first quarter of fiscal ~~2023~~2024 was ~~$18,455,~~$18,799, a ~~$3,050~~$734 increase over the prior year ~~quarter, reflecting~~quarter. Approximately half of the price increase was related to the vehicle and half was related to ancillary product pricing. The increase in average retail sales price reflects the high demand for used cars, especially in the market we serve. As purchase costs increase, the margin between the purchase cost and the sales price of the vehicles we sell generally narrows on a percentage basis because the Company must offer affordable prices to its customers.

Selling, general and administrative expenses, as a percentage of sales, were ~~14.4%~~14.9% for the three months ended July 31, ~~2022, a decrease~~2023, an increase of ~~1.3%~~0.2% from the same period of the prior fiscal year. Selling, general and administrative expenses are, for the most part, more fixed in nature. However, the Company has recently made increasing investments in several areas including ~~recruiting, training and retention,~~our senior management, inventory procurement and management, customer experience and digital efforts. In dollar terms, overall selling, general and administrative expenses increased approximately ~~$4.4~~$3.3 million in the first quarter of fiscal ~~2023~~2024 compared to the same period of the prior fiscal year. ~~The~~Most of this increase ~~is primarily focused on continued~~relates to the investments in ~~the Company’s associates in the~~ wages and ~~benefit areas~~benefits for Company associates, including costs to fund new key positions and ~~building its customer experience~~to maintain competitive compensation for existing associates. Increased collections costs due primarily to the higher frequency of repossessions, the addition of new dealerships since last year and ~~collections teams and investing in procurement. The Company continues~~the continuing impact of general inflation contributed to ~~focus on controlling costs, while at~~ the ~~same time ensuring a solid infrastructure to ensure a high level of support for its customers.~~remaining increase.

Provision for credit losses as a percentage of sales was ~~27.6%~~30.9% for the three months ended July 31, ~~2022~~2023 compared to ~~21.9%~~25.9% for the prior year period. The provision for credit losses as a percentage of sales was higher during the current year period primarily due to the growth in the ~~principal~~ balance of finance receivables, net of ~~$83.8 million.~~deferred revenue of $230.2, million relative to growth in sales of $17.1 million over the prior year period. An increase in net charge-offs also contributed to the higher provision. Net charge-offs as a percentage of average finance receivables increased to ~~5.6%~~5.8% for the three months ended July 31, ~~2022~~2023 compared to the prior year period of ~~4.3%~~5.1%. The ~~stimulus payments during fiscal 2021 had positive impacts on collections~~Company experienced an increase in both the frequency and ~~net charge-off metrics. From a long-term historical perspective, the current quarter net charge-offs were comparable~~severity of losses. Structural changes to ~~historical first quarter levels despite the~~our portfolio driven by higher vehicle costs and longer term lengths continue to drive an increase in the average retail sales price. This is consistent with some expected normalization after the unsustainable historic low resulting from stimulus payments and other factors in the prior year. The Company believes that the proper execution of its business practices is the single most important determinant ofprovision for credit ~~loss experience and will continue to focus on improvements in oversight and accountability provided by the Company’s investments in its corporate infrastructure within the collections area.~~ losses.

Interest expense as a percentage of sales increased to ~~2.4%~~4.6% for the three months ended July 31, ~~2022,~~2023, compared to ~~0.8%~~2.5% for the prior year period. In dollar terms, interest expense increased ~~$5.4~~$6.9 million due to increasing interest rates and an increase in the average borrowings of approximately ~~$241.6~~$187.2 million during the ~~three month~~three-month period ended July 31, ~~2022.~~2023. Approximately 60% of the increase in interest expense was related to the increase in rates over the prior year quarter and the remainder a result of the increased borrowings.

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

Finance receivables, net, have increased ~~7.6%,~~5.0% and ~~33.5%~~21.3% since April 30, ~~2022~~2023 and July 31, ~~2021,~~2022, respectively, while revenues have grown ~~23.0%~~8.6% 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. Most recently, the Company’s percent growth in finance receivables, net, as compared to percent growth in revenue has increased above the norm due to higher used car prices, longer terms, and higher rate of past due balances. Management expects the growth rate of finance receivables, net to normalize as the economic environment improves.

During the first three months of fiscal ~~2023,~~2024, inventory increased by ~~$29.9~~$7.9 million compared to inventory at April 30, ~~2022.~~2023. The increase in inventory is due to the Company increasing its investment in inventory quantities to accommodate the higher sales volumes and provide customers a quality mix of vehicles, combined with higher costs in preparing vehicles for resale primarily related to supply chain issues and other shop delays. Annualized inventory turns improved for the first quarter at 7.2 vs. the prior year’s first quarter turns of 5.9.

Property and equipment, net, ~~increased~~decreased by ~~$7.1~~$1.0 million at July 31, ~~2022~~2023 as compared to property and equipment, net, at April 30, ~~2022.~~2023. The Company incurred ~~$8.2~~$1.4 million in expenditures during the first three months of fiscal ~~2023~~2024 primarily related to ~~technology investments, designed to attract additional sales opportunities, and~~ remodeling or relocating existing locations in order to support growth. The ~~net increase to property and equipment, net, was partially offset by $1.2~~Company incurred $1.7 million in depreciation ~~expense.~~expense during the first three months of fiscal 2024.

Accounts payable and accrued liabilities increased by ~~$7.8~~$1.5 million during the first three months of fiscal ~~2023~~2024 as compared to accounts payable and accrued liabilities at April 30, ~~2022,~~2023, related primarily to the increased selling, general and administrative expenditures and ~~the increase in inventory.~~increased inventories.

Income taxes ~~payable,~~receivable, net, was ~~$328,000~~$5.1 million at July 31, ~~2022~~2023 compared to income taxes receivable, net, of ~~$274,000~~$9.3 million at April 30, ~~2022,~~2023, primarily due to the timing of quarterly tax ~~payments.~~payments and bonus depreciation taken during the first three months of 2024.

Deferred revenue increased ~~$7.9~~$5.1 million at July 31, ~~2022~~2023 as compared to April 30, ~~2022,~~2023, primarily resulting from increased sales of the accident protection plan product and service contracts.

Deferred income tax liabilities, net, ~~increased~~decreased approximately ~~$3.1~~$3.2 million at July 31, ~~2022~~2023 as compared to April 30, ~~2022,~~2023, due primarily to a current year net operating loss.

On July 6, 2023, the ~~increase~~Company completed an asset-backed securitization offering through which an indirect subsidiary of the Company issued two classes of non-recourse notes payable in ~~finance receivables, net.~~an aggregate principal amount of $360.3 million, with a weighted average fixed coupon rate of 8.8% per annum and scheduled maturities through June 20, 2030. The notes are collateralized by auto loans directly originated by the Company’s operating subsidiaries. Net proceeds from the offering (after deducting original issue discounts, the underwriting discount payable to the initial purchasers and other expenses) were approximately $356.4 million and were used to pay outstanding debt under the Company’s revolving credit facilities, provide additional operating liquidity, and make the initial deposits into collection and reserve accounts for the benefit of noteholders. See Note F for further details on these non-recourse notes payable.

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.~~repurchases, and (vi) other sources of financing, such as our recent asset-backed non-recourse notes 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.~~repurchases; the Company has recently engaged in borrowing through securitization as another means of funding its growth initiatives and has completed its third series of asset-back securitization in July of 2023. The increased borrowings during the first quarter of fiscal ~~2023~~2024 are primarily due to an increase in finance receivables, with longer terms, and a growing customer base. In the first three months of fiscal ~~2023,~~2024, the Company funded finance receivables growth of ~~$83.8~~$67.3 million, inventory growth of ~~$29.9~~$7.9 million, ~~$5.2 million in common stock repurchases,~~ and capital expenditures of ~~$8.2~~$1.4 million with income from operations and a ~~$72.1~~$48.0 million increase in total debt, net of cash. These investments reflect the Company’s commitment to providing the necessary inventory and facilities to support a growing customer base.

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

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~~the cash isgenerated from operations has been used to fund finance receivables growth, capital expenditures and common stock repurchases. To the extent finance receivables ~~grow,~~growth, capital expenditures and common stock repurchases exceed income from operations, ~~generally the Company increases its~~we have historically increased our borrowings under ~~its~~our revolving credit ~~facilities. The majority of~~facilities and more recently utilized the ~~Company’s growth has been self-funded.~~securitization market.

Cash flows ~~from operations~~used in operating activities for the three months ended July 31, ~~2022~~2023 compared to the same period in the prior fiscal year ~~decreased~~increased primarily as a result of (i) ~~larger finance receivable originations~~a decrease in inventory and (ii) deferred ~~revenue,~~taxes, partially offset by (iii) an increase in finance receivable ~~collections.~~originations. Finance receivables, net, increased by ~~$65.2~~$52.5 million from April 30, ~~2022~~2023 to July 31, ~~2022.~~2023.

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 generally 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.

Sustained macro-economic pressures affecting our customers have helped keep demand high in recent years for the types of vehicles we purchase. This strong demand, coupled with modest levels of new vehicle sales in recent years, have led to a generally ongoing tight supply of used vehicles available to the Company in both quality and quantity. The impacts of the COVID-19 pandemic on the business operations of auctions and wholesalers as well as slowdowns in new car production and sales during the fiscal year 2022 and the first quarter of fiscal 2023 dueWholesale prices have begun to ~~the pandemic and other supply chain issues further increased the price and reduced the quantity of used cars available for purchase~~soften but remain high by ~~the Company.~~historical standards. The Company expects ~~these effects on~~the tight used vehicle supply and strong demand for the types of vehicles we purchase to continue to keep purchase costs and resulting sales prices elevated for the ~~short term.~~short-term but anticipates that continuing strong wage increases for our customers will cause affordability to improve gradually over the next couple of years.

The Company ~~believes~~has devoted significant efforts to improving its purchasing processes to ensure adequate supply at appropriate prices, including expanding its purchasing territories to larger cities in close proximity to its dealerships and forming relationships with reconditioning partners to reduce purchasing costs. The Company has also increased the level of accountability for its purchasing agents including updates to sourcing and pricing guidelines. The Company continues to build relationships with national vendors that ~~the amount~~can supply a large quantity of ~~credit available for the sub-prime auto industry will remain relatively consistent~~high-quality vehicles. Even with ~~levels in recent years, which management expects will contribute to continued strong overall demand for most, if not all, of the vehicles~~these efforts, the Company ~~purchases for resale. Increased competition resulting from availability of funding~~expects gross margin percentages to remain under pressure over the sub-prime auto industry generally contributes to lower down payments and longer terms, which can have a negative effect on collection percentages, liquidity and credit losses when compared to historical periods. The availability of credit was somewhat dampened for consumers during fiscal year 2022 and the first quarter of fiscal 2023, although with the high demand of used vehicles and related financing, the availability of credit has loosened.near term.

The Company’s liquidity is also impacted by our credit losses. Macro-economic factors such as unemployment levels and general inflation can significantly affect our collection results and ultimately credit losses. Currently, as our customers look to cover rising costs of non-discretionary items, such as groceries and gasoline, it may impact their ability to make their car payments. ~~Additionally, the long-term economic impact of the COVID-19 pandemic and the resulting effects on the Company’s collections and credit loss results remains uncertain.~~ The Company has made improvements to its business processes within the last few years to strengthen controls and provide stronger infrastructure to support its collections efforts. The Company continues to strive to reduce credit losses in spite of the current economic challenges and continued competitive pressures by improving deal structures. Management continues to focus on improved execution at the dealership level, specifically as related to working individually with customers concerning collection issues.

The Company has generally leased the majority of the properties where its dealerships are located. As of July 31, ~~2022,~~2023, the Company leased approximately ~~81%~~87% of its dealership properties. The Company expects to continue to lease the majority of the properties where its dealerships are located.

The Company’s revolving credit facilities generally restrict distributions by the Company to its shareholders. The distribution limitations under the credit facilities allow the Company to repurchase shares of its common stock so long as either: (a) the aggregate amount of repurchases after September 30, 2021 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 Company’s stock repurchases, at least 12.5% of the aggregate funds committed under the credit facilities remains available. Thus, although the Company 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 July 31, ~~2022,~~2023, the Company had approximately ~~$4.4~~$6.3 million of cash on hand and approximately an additional ~~$125.0~~$159.0 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~~long-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.~~loans and proceeds from the issuance of non-recourse asset-backed notes. The Company’s revolving credit facilities mature in September 2024 and the Company expects that it will be able to renew or refinance its revolving credit facilities on or before the date they mature. The Company has ~~also~~ recently accessed the securitization market with ~~an inaugural issuance in April 2022~~issuances of ~~$400~~$400.0 million, $400.2 million and $360.3 million in aggregate principal ~~amount~~amounts of non-recourse asset-backed ~~notes.~~notes in April 2022, January 2023 and July 2023, respectively. The Company expects that it will continue to access this market in diversifying and growing the business. Furthermore, while the Company has no other specific plans to issue further debt or equity securities, the Company believes, if necessary, it could raise additional capital through the issuance of such securities.

The Company expects to use cash from operations and borrowings to (i) grow its finance receivables portfolio, (ii) purchase fixed assets of approximately ~~$25~~$12 million in the next 12 months ~~to add technology improvements~~as we complete facility updates and ~~to refurbish existing dealerships and adding new dealerships, subject to strong operating results,~~general fixed asset requirements, (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.

The Company has two standby letters of credit relating to insurance policies totaling ~~$750,000~~$2.9 million at July 31, ~~2022.~~2023.

Other than its letters 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.

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 250 basis points.~~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.

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 expected to be incurred on the portfolio at the measurement date in the collection of its finance receivables currently outstanding. At July 31, ~~2022,~~2023, the weighted average ~~total~~ contract term was ~~44.0~~46.9 months with ~~35.0~~36.6 months remaining. The ~~reserve amount in the~~ allowance for credit losses at July 31, ~~2022, $266~~2023 of $314.4 million, was ~~24.5%~~23.91% of the principal balance in finance receivables of ~~$1.2~~$1.4 billion, less unearned accident protection plan revenue of ~~$46.9~~$54.7 million and unearned service contract revenue of ~~$53.5~~$70.9 million. In the first quarter of fiscal 2024, the Company kept the allowance for credit losses as a percentage of finance receivables steady at 23.91%.

The ~~estimated reserve amount is~~allowance for credit losses represents the Company’s ~~anticipated~~expectation of future net charge-offs ~~for losses expected to be incurred on the portfolio~~ at the measurement date. The allowance takes into account quantitative and qualitative factors such as 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,~~greater than 30-day delinquencies, term, and ~~age of portfolio)~~interest rates), ~~delinquency levels,~~credit quality trends, collateral values, current and forecasted inflationary economic conditions, ~~and~~ underwriting and collection ~~practices. The allowance for~~practices, concentration risk, credit ~~losses is reviewed at least quarterly by management with any changes reflected in current operations.~~ review, and other external factors.

The calculation of the allowance for credit losses uses the following primary factors:

A historical ~~point~~ loss rate is produced by this analysis, which is then adjusted by qualitative factors and to reflect current and forecasted inflationary economic conditions ~~and~~over the Company’s reasonable and supportable forecast of ~~expected losses for a~~ period of one ~~year, including~~year.

The Company considers qualitative macro-economic factors that would affect its customers’ non-discretionary income, such as changes in inflation, which impact gasoline prices and prices for staple items, to develop reasonable and supportable forecasts for the ~~review of static pools coupled with any positive or negative subjective factors~~lifetime expected losses. These economic forecasts are utilized alongside historical loss information in order to ~~arrive at an overall reserve amount that management considers to be a reasonable~~ estimate ofexpected losses ~~to be incurred on~~in the portfolio over the following 12-month period, at which point the ~~measurement date. While challenging economic conditions can negatively impact credit~~Company will immediately revert to the point estimate produced by the Company’s analysis of historical loss information to estimate expected losses from the ~~effectiveness~~portfolio for the remaining contractual lives of the execution of internal policies and procedures within the collections area and the competitive environment on the lending side have historically had a more significant effect on collection results than macro-economic issues.its finance receivables.

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.

In March 2022, the FASB issued an accounting pronouncement (ASU 2022-02) related to troubled debt restructurings (“TDRs”) and vintage disclosures for financing receivables. The amendments in this update eliminate the accounting guidance for TDRs by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial difficulty. The amendments also require disclosure of current period gross write-offs by year of origination for financing receivables. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. In regard to troubled debt restructurings (“TDRs”), Management notes that the Company primarily modifies a customer’s loan to allow for insignificant payment delays. This type of modification is generally done to account for payday changes for the customer and minor vehicle repairs.

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

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

The Company is exposed to market risk on its financial instruments from changes in interest rates. In particular, the Company has historically had exposure to changes in the federal primary credit rate and has exposure to changes in the prime interest rate of its lender. The Company does not use financial instruments for trading purposes but has in the past entered into an interest rate swap agreement to manage interest rate risk.

Interest rate risk. The Company’s exposure to changes in interest rates relates primarily to its debt obligations. The Company is exposed to changes in interest rates as a result of its revolving credit facilities, and the interest rates charged to the Company under its credit facilities fluctuate based on its primary lender’s base rate of interest. The Company did not have an outstanding balance on its revolving line of credit at July 31, 2023; however, assuming the Company had an outstanding balance on its revolving line of credit of ~~$188.9~~$159.0 million ~~at July 31, 2022. The~~(the amount of additional availability), the impact of a 1% increase in interest rates on this amount of debt would result in increased annual interest expense of approximately ~~$1.9~~$1.6 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 annual interest rate of 16.5% ~~per annum (19.5%~~(prior to December 2022) to 18.0% (effective December 2022) for all states except Arkansas (which is subject to a usury cap of 17.0%) and Illinois (where dealerships originate at 19.5% to 21.5%), and Smart Auto dealerships in ~~Illinois)~~Tennessee (which originate at up to 23.0%), based on the Company’s contract interest rate as of the contract origination date, while its revolving credit facilities contain variable interest rates that fluctuate with market interest rates.

~~Based on management’s evaluation (with~~Management, with the participation of the Company’s Chief Executive Officer and Chief Financial ~~Officer), as~~Officer, has evaluated the effectiveness of ~~July 31, 2022, 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~~as of July 31, 2023. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of July 31, 2023, the Company’s disclosure controls and procedures were 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.

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.

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.

There have been no material changes to the Company’s risk factors as previously disclosed in Item 1A to Part I of the Company’s Form 10-K for the fiscal year ended April 30, ~~2022.~~2023.

The Company is authorized to repurchase shares of its common stock under its common stock repurchase program. On December 14, 2020, the Board of Directors authorized the repurchase of up to an additional one million shares along with the balance remaining under its previous authorization approved and announced on November 16, 2017.

~~The following table sets forth information with respect to purchases made by or on behalf of the Company of~~ No shares ofwere repurchased under the Company’s ~~common~~ stock repurchase program during the ~~periods indicated:~~first quarter of fiscal 2024.

The Company has not historically issued any dividends and does not expect to do so in the foreseeable future. Payment of cash dividends in the future will be determined by the Company’s Board of Directors and will depend upon, among other things, the Company’s future earnings, operations, capital requirements and surplus, general financial condition, contractual restrictions that may exist, and such other factors as the Board of Directors may deem relevant. The Company is also limited in its ability to pay dividends or make other distributions to its shareholders without the consent of its lender. Please see “Liquidity and Capital Resources” under Item 2 of Part I for more information regarding this limitation.

During the three months ended July 31, 2023, none of the Company’s directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”, as each term is defined in Item 408(a) of Regulation S-K.

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.

			Page
			No.
PART I	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets (Unaudited) – July 31, 2023 and April 30, 2023	3
		Condensed Consolidated Statements of Operations (Unaudited) – Three Months Ended July 31, 2023 and 2022	4
		Condensed Consolidated Statements of Cash Flows (Unaudited) – Three Months Ended July 31, 2023 and 2022	5
		Condensed Consolidated Statements of Equity (Unaudited) – Three Months Ended July 31, 2023	6
		Condensed Consolidated Statements of Equity (Unaudited) – Three Months Ended July 31, 2022	7
		Notes to Consolidated Financial Statements (Unaudited)	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
	Item 4.	Controls and Procedures	37

PART II	OTHER INFORMATION
	Item 1.	Legal Proceedings	38
	Item 1A.	Risk Factors	38
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
	Item 3.	Defaults Upon Senior Securities	38
	Item 4.	Mine Safety Disclosure	38
	Item 5.	Other Information	38
	Item 6.	Exhibits	39

SIGNATURES			40

(In thousands)	July 31, 2022		April 30, 2022		July 31, 2023		April 30, 2023

Restricted cash from collections on auto finance receivables	$	26,066	$	24,242	$	50,712	$	34,442
Restricted cash on deposit in reserve accounts		11,455		11,429		35,175		23,796

Restricted Cash	$	37,521	$	35,671	$	85,887	$	58,238

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

	Three Months Ended July 31,				Three Months Ended July 31,
(In thousands)	2022		2021		2023		2022

Sales – used autos	$	262,015	$	216,590	$	273,468	$	259,051
Wholesales – third party		13,820		12,295		12,437		13,820
Service contract sales		15,640		10,161		16,347		13,186
Accident protection plan revenue		9,065		7,696		9,317		8,419

Total	$	300,540	$	246,742	$	311,569	$	294,476

(In thousands)	July 31, 2022			April 30, 2022			July 31, 2023			April 30, 2023

Gross contract amount	$	1,490,047		$	1,378,803		$	1,843,956		$	1,752,149
Less unearned finance charges		(304,771	)		(277,306	)		(403,249	)		(378,777	)
Principal balance		1,185,276			1,101,497			1,440,707			1,373,372
Less allowance for credit losses		(265,818	)		(247,207	)		(314,442	)		(299,608	)

Finance receivables, net	$	919,458		$	854,290			1,126,265			1,073,764
Loan origination costs								727			700
Finance receivables, net, including loan origination costs							$	1,126,992		$	1,074,464

					Additional								Non-									Additional									Non-
	Common Stock				Paid-In		Retained			Treasury			Controlling		Total			Common Stock				Paid-In			Retained			Treasury			Controlling		Total
(In thousands, except share data)	Shares		Amount		Capital		Earnings			Stock			Interest		Equity			Shares		Amount		Capital			Earnings			Stock			Interest		Equity

Balance at April 30, 2022		13,642,185	$	136	$	103,113	$	658,242		$	(292,225	)	$	100	$	469,366
Balance at April 30, 2023																			13,701,468	$	137	$	109,929		$	685,802		$	(297,421	)	$	100	$	498,547

Issuance of common stock		30,484		1		84		-			-			-		85			2,921		-		78			-			-			-		78
Stock options exercised		23,000		-		1,216		-			-			-		1,216			6,493		-		(455	)		-			-			-		(455	)
Purchase of 57,856 treasury shares		-		-		-		-			(5,196	)		-		(5,196	)
Purchase of treasury shares																			-		-		-			-			(68	)		-		(68	)
Stock based compensation		-		-		1,978		-			-			-		1,978			-		-		2,451			-			-			-		2,451
Dividends on subsidiary preferred stock		-		-		-		(10	)		-			-		(10	)		-		-		-			(10	)		-			-		(10	)
Net income		-		-		-		13,242			-			-		13,242			-		-		-			4,186			-			-		4,186
Balance at July 31, 2022 (Unaudited)		13,695,669	$	137	$	106,391	$	671,474		$	(297,421	)	$	100	$	480,681
Balance at July 31, 2023 (Unaudited)																			13,710,882	$	137	$	112,003		$	689,978		$	(297,489	)	$	100	$	504,729

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

(Dollars in thousands)	July 31, 2022					April 30, 2022					July 31, 2021					July 31, 2023					April 30, 2023					July 31, 2022

	Principal		Percent of			Principal		Percent of			Principal		Percent of			Principal		Percent of			Principal		Percent of			Principal		Percent of
	Balance		Portfolio			Balance		Portfolio			Balance		Portfolio			Balance		Portfolio			Balance		Portfolio			Balance		Portfolio
Current	$	990,391		83.56	%	$	958,808		87.05	%	$	767,375		86.18	%	$	1,151,275		79.91	%	$	1,166,860		84.96	%	$	990,391		83.56	%
3 - 29 days past due		151,953		12.82	%		109,873		9.97	%		93,712		10.53	%		226,600		15.73	%		156,943		11.43	%		151,953		12.82	%
30 - 60 days past due		33,576		2.83	%		22,477		2.04	%		19,328		2.17	%		48,650		3.38	%		37,214		2.71	%		33,576		2.83	%
61 - 90 days past due		6,675		0.56	%		7,360		0.67	%		6,096		0.68	%		9,294		0.65	%		8,407		0.61	%		6,675		0.56	%
> 90 days past due		2,681		0.23	%		2,979		0.27	%		3,956		0.44	%		4,888		0.34	%		3,948		0.29	%		2,681		0.23	%
Total	$	1,185,276		100.00	%	$	1,101,497		100.00	%	$	890,467		100.00	%	$	1,440,707		100.00	%	$	1,373,372		100.00	%	$	1,185,276		100.00	%

		July 31, 2022				July 31, 2021
Portfolio weighted average contract term, including modifications (in months)			44.0				38.7

	As of
	July 31, 2023		July 31, 2022
Portfolio weighted average contract term, including modifications (in months)		46.9		44.0

	As of July 31, 2022																	As of July 31, 2023

(Dollars in thousands)	Fiscal Year of Origination										Prior to							Fiscal Year of Origination										Prior to
Customer Rating	2023		2022		2021		2020		2019		2019		Total		%			2024		2023		2022		2021		2020		2020		Total		%
1-2	$	13,884	$	28,789	$	8,207	$	1,283	$	51	$	-	$	52,214		4.4	%	$	14,450	$	30,477	$	9,911	$	1,821	$	227	$	28	$	56,914		4.0	%
3-4	$	95,459	$	208,770	$	64,427	$	8,036	$	313	$	21	$	377,026		31.8	%	$	105,595	$	241,759	$	84,065	$	17,510	$	1,044	$	311	$	450,284		31.3	%
5-6	$	176,849	$	420,932	$	139,152	$	18,122	$	939	$	42	$	756,036		63.8	%	$	176,815	$	486,594	$	215,403	$	50,180	$	3,665	$	852	$	933,509		64.8	%
Total	$	286,192	$	658,491	$	211,786	$	27,441	$	1,303	$	63	$	1,185,276		100.0	%	$	296,860	$	758,830	$	309,379	$	69,511	$	4,936	$	1,191	$	1,440,707		100.0	%

Charge-offs																		$	3,239	$	75,308	$	28,036	$	5,577	$	441	$	144	$	112,745

	As of July 31, 2021																	As of July 31, 2022

(Dollars in thousands)	Fiscal Year of Origination										Prior to							Fiscal Year of Origination										Prior to
Customer Rating	2022		2021		2020		2019		2018		2018		Total		%			2023		2022		2021		2020		2019		2019		Total		%
1-2	$	13,031	$	27,001	$	8,695	$	697	$	35	$	-	$	49,459		5.6	%	$	13,884	$	28,789	$	8,207	$	1,283	$	51	$	-	$	52,214		4.4	%
3-4	$	79,135	$	176,149	$	48,573	$	4,551	$	201	$	23	$	308,632		34.7	%	$	95,459	$	208,770	$	64,427	$	8,036	$	313	$	21	$	377,026		31.8	%
5-6	$	137,320	$	299,843	$	83,001	$	11,155	$	977	$	80	$	532,376		59.7	%	$	176,849	$	420,932	$	139,152	$	18,122	$	939	$	42	$	756,036		63.8	%
Total	$	229,486	$	502,993	$	140,269	$	16,403	$	1,213	$	103	$	890,467		100.0	%	$	286,192	$	658,491	$	211,786	$	27,441	$	1,303	$	63	$	1,185,276		100.0	%

Financial Instrument	Valuation Methodology

Cash, cash equivalents, and restricted cash	The carrying amount is considered to be a reasonable estimate of fair value due to the short-term nature of the financial instruments (Level 1)1).

Finance receivables, net	The Company estimated the fair value of its receivables at what a ~~third~~~~-party~~third-party purchaser might be willing to pay. The Company has had discussions with third parties, ~~and has~~ bought and sold portfolios and ~~has~~ had a ~~third~~~~-party~~third-party appraisal in ~~January 2019~~ October 2022 that indicates a range of 34% to 39% discount to face would be a reasonable fair value in a negotiated ~~third~~~~-party~~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 (Level 2)2).

	Restated Option Plan

Minimum exercise price as a percentage of fair market value at date of grant		100%
Last expiration date for outstanding options	May 1, ~~2032~~2033
Shares available for grant at July 31, ~~2022~~2023		~~185,000~~	225,000

Maturity of lease liabilities
2023 (remaining)	$	5,683
2024		7,248
2024 (remaining)				$	6,485
2025		7,145			8,604
2026		6,575			8,157
2027		6,052			7,749
2028					7,130
Thereafter	$	51,064		$	45,003
Total undiscounted operating lease payments		83,767			83,128
Less: imputed interest		(21,079	)		(18,246	)
Present value of operating lease liabilities	$	62,688		$	64,882

	Three Months Ended July 31, 2022
(In thousands)	As Previously Reported		Corrections			As Corrected

Sales	$	300,540	$	(6,064	)	$	294,476
Provision for credit losses		82,903		(6,662	)		76,241
Provision for income taxes		3,884		143			4,027
Net income		13,242		455			13,697
Net income attributable to common shareholders		13,232		455			13,687
Earnings per share:
Basic		2.08		0.07			2.15
Diluted		2.00		0.07			2.07

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⁾
May 1, 2022 through May 31, 2022		32,856	$	82.15		32,856		681,459
June 1, 2022 through June 30, 202		20,000		99.43		20,000		661,459
July 1, 2022 through July 31, 2022		5,000		101.52		5,000		656,459
Total		57,856	$	89.80		57,856

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 Current Report on Form 8-K filed with the SEC on February 19, 2014).

~~31.1~~4.1		Indenture, dated July 6, 2023, by and between ACM Auto Trust 2023-2 and Wilmington Trust, National Association, as Indenture Trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 11, 2023).

10.1		Purchase Agreement, dated July 6, 2023, by and between Colonial Auto Finance, Inc. and ACM Funding, LLC (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 11, 2023).

10.2		Sale and Servicing Agreement, dated July 6, 2023, by and between ACM Auto Trust 2023-2, ACM Funding, LLC, America’s Car Mart, Inc. and Wilmington Trust, National Association, as Indenture Trustee, Backup Servicer, Calculation Agent, and Paying Agent (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 11, 2023).

10.3		America’s Car-Mart, Inc. Short-Term Incentive Plan, effective April 1, 2023 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 14, 2023).

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~~of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of0f 2002.

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101)

	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~~
	By:	/s/ Vickie D. Judy
		Vickie D. Judy
		Chief Financial Officer
		(Principal Financial Officer)