The top two executives at Bentonville-based America’s Car-Mart did without bonuses and incentive performance pay in fiscal 2014 to the tune of $126,338 for CEO Hank Henderson and $76,749 for chief financial officer Jeff Williams, according to a recent proxy filing with federal regulators.
Henderson earned a total of $467,859 last year, which included car usage, country club membership, insurance premiums and matching retirement funds. The base salary of $440,000 was unchanged from fiscal 2013, and there was no performance bonus pay.
Williams’ total income in fiscal 2014 was $373,268, comprised on a base salary totaling $346,500. The base salary increased 5% from the prior year and other compensation for car usage and retirement funding decreased 14% from the prior year.
Former chief operating office Eddie Hight, who stepped back from that role in November, earned a total of $309,491 in fiscal 2014. Hight did receive a $10,000 bonus and he now serves as associate development manager and a board member.
Car-Mart plans to hold its annual shareholder meeting at its corporate offices in Bentonville on July 30. The business agenda will include the election of seven directors to a one year term. Board candidates are:
• Daniel Englander, 47, managing partner with Ursula Investors;
• Kenny Gunderman, 43, executive vice president with Stephens Inc.;
• Hank Henderson, 50, CEO at Car-Mart;
• Eddie Hight, 51, associate development manager at Car-Mart;
• John David SImmons, 78, president of Simmons & Associates;
• Cameron Smith, 63, CEO of Cameron Smith & Associates; and
• Jeff Williams, 51, chief financial officer at Car-Mart.
Independent directors earn $40,000 base annual retainer for their services, stipends of $5,000 and $10,000 are paid to the lead director (Simmons) and the chairman of the audit committee (Englander), respectively. Each director also receives stock option awards which were valued at $96,435 last year.
In related party transactions last year Car-Mart states that on Dec. 12, it repurchased 100,000 shares for one of its directors, William Sams, for $4.101 million, and 100,000 shares from the Marlin Sams Fund, in which William Sams was a general partner. That purchase was also valued at $4.101 million. The company notes the repurchased price paid was determined according to the conditions of Rule 10b-19 under the Exchange act.
For the fiscal year ending April 30, 2014, Car-Mart says it had no other related-party transactions.
Car-Mart investors have had a bumpy ride this past year with the share price losing 13.6% of its value over the past 52-week period. Shares traded down 1.5% on Thursday (June 12) at $36.28. The bulk of that decline occurred following the recent earnings miss reported May 28. That one day shares sunk 12.4%, or $5.03, to $35.50.
The buy-here, pay-here used-car company reported fiscal year net income of $21.1 million, down 34% compared to the previous fiscal year. Total revenue rose 5.3% to $489 million, despite slightly negative same-store sales for the year. The company sold and financed 42,551 cars and trucks in fiscal 2014, up 4.4% more than in the prior year. The average sales price rose less than 1% to $9,768.
Shares rallied to $40.53 ahead of the May 27 earnings report, but retreated immediately following the disappointing financial report. Fiscal year income was $2.25 per share, which missed the consensus estimate of $2.31. The company was also estimated to earn $499.97 million, which was below the reported $489 million.
CORPORATE GAME PLAN
Henderson was upbeat in the earnings call in part because of the company’s clean balance sheet. He did say the company would slow its expansion pace this year from earlier projections as it works to improve sagging sales in many of its dealerships.
The sluggish sales growth has been attributed to an onslaught on competition in the subprime auto finance sector as more lenders are chasing the higher yields. Car-Mart charges 15% on its car loans, and says the rate is justified because of the risk involved lending to consumers with very low credit scores.
Part of the reason Car-Mart’s total results slid was because the company experienced a higher-than-normal rate of repossessions and delinquencies brought on by consumers taking their Car-Mart purchases back to the dealership and then going with another lender offering a better interest rate.
Henderson said Car-Mart has been in the business long enough to know what it takes to make a deal work and that’s the plan they are sticking with despite the competition.
Car-Mart seeks to keep the terms below 36 months (29 months on average) in order for the customer have build quicker equity in their purchase.
The automobiles sold by Car-Mart have between 90,000 and 140,000 miles and range in age from six to 10 years old with an average wholesale price between $3,000 and $7,000. Given these metrics, Car-Mart said it believes the 36 month term is as long as it can go, and believes the business model has served the company well for the past three decades as nearly 20% of its new business comes from referrals.
WIlliams said stretching the term longer like some competitors allows for lower monthly payments which look good on the front-end but leave the borrower with little to no equity for a long time.
Car-Mart’s core mission involves getting repeat business, which it does largely because its customers get their vehicles paid for much sooner while there is still life left in the car.