crmt20220731

crmt20220731_10q.htm

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

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

For the transition period from ________ to ________

Commission file number: 0-14939

AMERICA’S CAR-MART, INC.

(Exact name of registrant as specified in its charter)

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

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

(Address of principal executive offices) (zip code)

(479) 464-9944

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T 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

Common stock, par value $.01 per share

6,367,605

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

America’s Car-Mart, Inc.

Condensed Consolidated Balance Sheets

July 31, 2022 and April 30, 2022

(Dollars in thousands except share and per share amounts)	July 31, 2022			April 30, 2022
Assets:	(Unaudited)
Cash and cash equivalents	$	4,362		$	6,916
Restricted cash		37,521			35,671
Accrued interest on finance receivables		5,032			4,926
Finance receivables, net		919,458			854,290
Inventory		145,181			115,302
Income tax receivable, net		-			274
Prepaid expenses and other assets		9,748			9,044
Right-of-use asset		59,822			58,828
Goodwill		8,623			8,623
Property and equipment, net		58,526			51,438
Total Assets	$	1,248,273		$	1,145,312

Liabilities, mezzanine equity and equity:
Liabilities:
Accounts payable	$	29,380		$	20,055
Income tax payable, net		328			-
Deferred accident protection plan revenue		46,896			43,936
Deferred service contract revenue		53,459			48,555
Accrued liabilities		31,100			32,630
Deferred income tax liabilities, net		31,315			28,233
Lease liability		62,688			61,481
Non-recourse notes payable		323,105			395,986
Revolving line of credit		188,921			44,670
Total liabilities		767,192			675,546

Commitments and contingencies (Note J)

Mezzanine equity:
Mandatorily redeemable preferred stock		400			400

Equity:
Preferred stock, par value $.01 per share, 1,000,000 shares authorized; none issued or outstanding		-			-
Common stock, par value $.01 per share, 50,000,000 shares authorized; 13,695,669 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
Additional paid-in capital		106,391			103,113
Retained earnings		671,474			658,242
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	)
Total stockholders' equity		480,581			469,266
Non-controlling interest		100			100
Total equity		480,681			469,366

Total Liabilities, Mezzanine Equity and Equity	$	1,248,273		$	1,145,312

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

Condensed Consolidated Statements of Operations

Three Months Ended July 31, 2022 and 2021

America’s Car-Mart, Inc.

	Three Months Ended July 31,
(Dollars in thousands except share and per share amounts)	2022			2021
Revenues:	(Unaudited)
Sales	$	300,540		$	246,742
Interest and other income		44,342			33,587

Total revenues		344,882			280,329

Costs and expenses:
Cost of sales		193,115			152,764
Selling, general and administrative		43,234			38,800
Provision for credit losses		82,903			54,108
Interest expense		7,345			1,982
Depreciation and amortization		1,151			915
Loss on disposal of property and equipment		8			2
Total costs and expenses		327,756			248,571

Income before taxes		17,126			31,758

Provision for income taxes		3,884			6,791

Net income	$	13,242		$	24,967

Less: Dividends on mandatorily redeemable preferred stock		(10	)		(10	)

Net income attributable to common stockholders	$	13,232		$	24,957

Earnings per share:
Basic	$	2.08		$	3.78
Diluted	$	2.00		$	3.57

Weighted average number of shares used in calculation:
Basic		6,373,326			6,604,194
Diluted		6,601,586			6,997,935

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

Condensed Consolidated Statements of Cash Flows

Three Months Ended July 31, 2022 and 2021

America’s Car-Mart, Inc.

	Three Months Ended July 31,
(In thousands)	2022			2021
	(Unaudited)
Operating Activities:
Net income	$	13,242		$	24,967
Adjustments to reconcile net income to net cash used in operating activities:
Provision for credit losses		82,903			54,108
Losses on claims for accident protection plan		6,108			4,518
Depreciation and amortization		1,151			915
Amortization of debt issuance costs		1,955			120
Loss on disposal of property and equipment		8			2
Stock based compensation		1,978			2,972
Deferred income taxes		3,082			1,972
Excess tax benefit from share based compensation		206			644
Change in operating assets and liabilities:
Finance receivable originations		(287,416	)		(234,893	)
Finance receivable collections		103,879			97,342
Accrued interest on finance receivables		(106	)		(162	)
Inventory		(521	)		683
Prepaid expenses and other assets		(703	)		(737	)
Accounts payable and accrued liabilities		6,900			2,295
Deferred accident protection plan revenue		2,960			3,084
Deferred service contract revenue		4,904			6,600
Income taxes, net		396			4,175
Net cash used in operating activities		(59,074	)		(31,395	)

Investing Activities:
Purchase of property and equipment		(8,248	)		(1,689	)
Net cash used in investing activities		(8,248	)		(1,689	)

Financing Activities:
Exercise of stock options		1,216			(1,007	)
Issuance of common stock		85			81
Purchase of common stock		(5,196	)		(11,618	)
Dividend payments		(10	)		(10	)
Change in cash overdrafts		1,108			(316	)
Debt issuance costs		(89	)		-
Payments on note payable		(74,532	)		-
Proceeds from revolving line of credit		148,386			76,335
Payments on revolving line of credit		(4,350	)		(30,555	)
Net cash provided by financing activities		66,618			32,910

Decrease in cash, cash equivalents, and restricted cash		(704	)		(174	)
Cash, cash equivalents, and restricted cash beginning of period		42,587			2,893

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

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

Condensed Consolidated Statements of Equity

Three Months Ended July 31, 2022

America’s Car-Mart, Inc.

					Additional								Non-
	Common Stock				Paid-In		Retained			Treasury			Controlling		Total
(In thousands, except share data)	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

Issuance of common stock		30,484		1		84		-			-			-		85
Stock options exercised		23,000		-		1,216		-			-			-		1,216
Purchase of 57,856 treasury shares		-		-		-		-			(5,196	)		-		(5,196	)
Stock based compensation		-		-		1,978		-			-			-		1,978
Dividends on subsidiary preferred stock		-		-		-		(10	)		-			-		(10	)
Net income		-		-		-		13,242			-			-		13,242
Balance at July 31, 2022 (Unaudited)		13,695,669	$	137	$	106,391	$	671,474		$	(297,421	)	$	100	$	480,681

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

Condensed Consolidated Statements of Equity

Three Months Ended July 31, 2021

America’s Car-Mart, Inc.

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

Balance at April 30, 2021		13,591,889	$	136	$	98,812		$	564,975		$	(257,527	)	$	100	$	406,496

Issuance of common stock		673		-		81			-			-			-		81
Stock options exercised		15,281		-		(1,007	)		-			-			-		(1,007	)
Purchase of 81,742 treasury shares		-		-		-			-			(11,618	)		-		(11,618	)
Stock based compensation		-		-		2,972			-			-			-		2,972
Dividends on subsidiary preferred stock		-		-		-			(10	)		-			-		(10	)
Net income		-		-		-			24,967			-			-		24,967
Balance at July 31, 2021 (Unaudited)		13,607,843	$	136	$	100,858		$	589,932		$	(269,145	)	$	100	$	421,881

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

Notes to Consolidated Financial Statements (Unaudited) America’s Car-Mart, Inc.

A – Organization and Business

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

B – Summary of Significant Accounting Policies

General

The accompanying condensed consolidated balance sheet as of April 30, 2022, which has been derived from audited financial statements, and the unaudited interim condensed financial statements as of July 31, 2022 and 2021, have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended July 31, 2022 are not necessarily indicative of the results that may be expected for the year ending April 30, 2023. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended April 30, 2022.

Principles of Consolidation

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

Segment Information

Each dealership is an operating segment with its results regularly reviewed by the Company’s chief operating decision maker in an effort to make decisions about resources to be allocated to the segment and to assess its performance. Individual dealerships meet the aggregation criteria for reporting purposes under the current accounting guidance. The Company operates in the Integrated Auto Sales and Finance segment of the used car market, also referred to as the Integrated Auto Sales and Finance industry. In this industry, the nature of the sale and the financing of the transaction, financing processes, the type of customer and the methods used to distribute the Company’s products and services, including the actual servicing of the contracts as well as the regulatory environment in which the Company operates, all have similar characteristics. Each 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.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Significant estimates include, but are not limited to, the Company’s allowance for credit losses.

Concentration of Risk

The Company provides financing in connection with the sale of substantially all of its vehicles. These sales are made primarily to customers residing in Alabama, Arkansas, Georgia, Illinois, Kentucky, Mississippi, Missouri, Oklahoma, Tennessee, and Texas, with approximately 28.3% of current period revenues resulting from sales to Arkansas customers.

As of July 31, 2022, 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.

Restrictions on Distributions/Dividends

The Company’s revolving credit facilities generally restrict distributions by the Company to its shareholders. The distribution limitations under the credit facilities allow the Company to repurchase the Company’s stock so long as either: (a) the aggregate amount of such repurchases after September 30, 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.

Cash Equivalents

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

Restricted Cash

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 and April 30, 2022:

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

Restricted cash from collections on auto finance receivables	$	26,066	$	24,242
Restricted cash on deposit in reserve accounts		11,455		11,429

Restricted Cash	$	37,521	$	35,671

Financing and Securitization Transactions

The Company utilizes a term securitization 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, it 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 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 an average interest rate of approximately 16.5% using the simple effective interest method including any deferred fees. 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 million at July 31, 2022 and $4.9 million at April 30, 2022 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 July 31, 2022, 3.6% of the Company’s finance receivable balances were 30 days or more past due, compared to 3.0% at April 30, 2022.

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 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.

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, 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 68 days past due at the time of charge-off. For previously charged-off accounts that are subsequently recovered, the amount of such recovery is credited to the allowance for credit losses.

The Company maintains an allowance for credit losses on an aggregate basis at an amount it considers sufficient to cover losses expected to be incurred on 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, the weighted average total contract term was 44.0 months with 35.0 months remaining. The reserve amount in the allowance for credit losses at July 31, 2022, $266 million, was 24.5% of the principal balance in finance receivables of $1.2 billion, less unearned accident protection plan revenue of $46.9 million and unearned service contract revenue of $53.5 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 considerations, such as changes in contract characteristics (i.e., average amount financed and term), delinquency levels, collateral values, current economic conditions and underwriting and collection practices. 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. The calculation of the allowance for credit losses uses the following primary factors:

●

The number of units repossessed or charged-off as a percentage of total units financed over specific historical periods of time from one year to five years.

●

The average net repossession and charge-off loss per unit during the last eighteen months, segregated by the number of months since the contract origination date, and adjusted for the expected future average net charge-off loss per unit. Approximately 50% of the charge-offs that will ultimately occur in the portfolio are expected to occur within 10-12 months following the balance sheet date. The average age of an account at charge-off date is 12.1 months.

●

The timing of repossession and charge-off losses relative to the date of sale (i.e., how long it takes for a repossession or charge-off to occur) for repossessions and charge-offs occurring during the last eighteen months.

●

An adjustment to the previous twelve months to reflect the significant increase in the average amount financed and the resulting monthly payment and term length.

●

A forecast of expected losses for a period of one year, including considerations for the impact of forecasted levels of inflation and the discontinuation of COVID-19 pandemic government provided benefits.

A historical point loss rate is produced by this analysis which is then adjusted to reflect current conditions and the Company’s reasonable and supportable forecast of 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 on the portfolio at the measurement date. While challenging economic conditions can negatively impact credit losses, the effectiveness of the execution of internal policies and procedures within the collections area and the competitive environment on the lending side have historically had a more significant effect on collection results than macro-economic issues.

In most states, the Company offers retail customers who finance their vehicle the option of purchasing 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. No such liability was required at July 31, 2022 or April 30, 2022.

Inventory

Inventory consists of used vehicles and is valued at the lower of cost or net realizable value on a specific identification basis. Vehicle reconditioning costs are capitalized as a component of inventory. Repossessed vehicles and trade-in vehicles are recorded at fair value, which approximates wholesale value. The cost of used vehicles sold is determined using the specific identification method.

Goodwill

Goodwill reflects the excess of purchase price over the fair value of specifically identified net assets purchased. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to 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 or during the 2022 fiscal year.

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

Property and Equipment

SEC Form 10-Q filed by America's Car-Mart Inc