America's CAR-MART Inc (CRMT) 2013 Q4 法說會逐字稿

Welcome to America's Car-Mart fourth quarter 2013 conference call. The topic of this call will be the earnings and operating results for the Company's fiscal fourth quarter and full year 2013. Before we begin, I'd like to remind everyone that this call is being recorded and will be available for replay for the next 30 days. The dial-in number and access information are included in this morning's press release which can be found on America's Car-Mart website at www.car-mart.com. As you all know, some of the Management's comments today may include forward-looking statements, which inherently involve risks and uncertainties that could cause actual results to differ materially from Management's present view.

These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company cannot guarantee the accuracy of any forecast or estimate nor does it undertake any obligation to update such forward-looking statements. For more information regarding forward-looking information, please see Item 1 of Part 1 of the Company's annual report on Form 10-K for the fiscal year ended April 30, 2012 and its current and quarterly reports furnished to or filed with the Securities and Exchange Commission on Forms 8-K and 10-Q. Participating on the call this morning are Hank Henderson, the Company's Chief Executive Officer and President; and Jeff Williams, Chief Financial Officer.

And now I'd like to turn the call over to the Company's Chief Executive Officer, Hank Henderson.

Well, good morning, everyone. We appreciate you joining us today. You know, we're well aware that there have been many questions and concerns raised throughout this past year as to how we might be impacted by competitive pressures with the increased availability of subprime financing out there. And the competition has indeed been stiffer and I think that, that makes us even more proud of our results for both this most recent quarter and for the whole year. For this recent quarter, unit sales were up 10% over the prior year quarter; and for the year, they were up 8% going from 37,722 to 40,737. And as we were able to hold our average sales price relatively flat in the interest of affordability, we had a commensurate rise in revenue of 8% as well going from $430 million in the prior year to $465 million for this most recent.

On our last call, we explained that while repeat business has always been a core focus for us, we had put even more intense efforts into customer retention to assure that we weren't losing good customers during this time of increased competition. And I am very happy to report that those efforts are paying off. And for this past quarter, we actually experienced an increase in our sales through repeat customers as a percentage of our overall sales compared with the same time last year. Our associates are to be commended for their extra efforts and dedication of taking great care of our customers.

In our efforts to assure the highest possible level of customer retention, we were more aggressive with repeat customers with regard to down payments and term length and while this does have somewhat of a negative effect on cash flow, which Jeff will explain in more detail in a bit, we do feel we have been more aggressive with the right group of customers. And they're much more of a proven risk and we do have a solid understanding of the value of keeping the business of our good customers.

All in all, this was a solid year for us. We have a lot of very positive things going for us now as we were able to accomplish several big projects this year in preparation for future growth. And I'll tell you about a few of those in just a moment, but right now I'll go ahead and turn it over to Jeff to give you the details on our results from this past quarter and year.

Jeff?

Okay, thanks, Hank. Revenues for the fourth quarter were right at $126 million, up almost 11% from the prior year. Same-store revenues increased 5.3%. We're especially pleased with top line results. Given the overall macroeconomic environment, it remains challenging for our customers and funding to the used auto industry has certainly increased. We continue to perform well because we're focused on affordability and helping our customers succeed and differentiating our offering from that of the competition. As Hank mentioned, average retail sales price for the full year was basically flat, $9,721 compared to $9,675 and it was up $179, or 1.8% for the quarter versus the prior year fourth quarter.

As we look forward we do expect some sales price increases more in line with historical experience on a comparable quarter basis. Our model does allow us the ability to take advantage of overall lower wholesale pricing trends to put our customers in a little higher quality car as we move forward. As always, we will work very hard to keep our price increases to a minimum for obvious affordability reasons. Our down payment percentage was 8.7% for the quarter, down from 9.5%, and around $75 per unit from the prior year quarter and down to 6.6% for the full year compared to 7% for the prior year, or about $42 per unit. The average down payment amount for all contracts at the end of the year was $642 which was down slightly from $644 at the end of April 2013.

Collections as a percentage of average finance receivables was 17.6% compared to 19.2% last year. For the full year, collections as a percentage of average finance receivables was 60.6% compared to 65.6% for fiscal 2012. For the quarter, our initial average contract term was 27.7 months compared to 26.7 months for the prior year quarter but down slightly from 27.8 months sequentially. Our weighted average contract term for the entire portfolio, including modifications, was 29.3 months compared to 28.1 months at this time last year and compared to 28.7 months sequentially.

The increases in term are primarily related to our efforts to keep our payments affordable for competitive reasons and to continue to work with our customers when they experience financial difficulty. In order to remain competitive, our term lengths may continue to increase some into the future. We are aware of the downside that comes with lower down payments and increased term lengths but we're confident that we can manage that risk appropriately and that our expected cash on cash returns will support our decisions.

We are committed to not stretching terms or reducing downs any more than we think is absolutely necessary to attract and retain our target customers. The quality of our cars is high and our reputation and service levels are excellent, which will allow us to continue to attract the better customers and to manage the credit risk side in a profitable manner. The current competitive and macroeconomic environment continues to present some headwinds for us but by staying focused on customer success and earning repeat business, our future is bright.

The overall average retail units sold per month per lot for the quarter was 29.4 compared to 28.9 for the prior year period. At quarter end, 33, or 27%, of our dealerships, were from zero to 5 years old; 27, or 22%, were from 5 to 10 years old, with the remaining 64 dealerships being 10 years old or older. Our 10-year plus lots produced 32.7 units sold per month per lot for the quarter compared to 33.4 for the prior year quarter, a 2% decrease. Our lots in the 5 to 10 year category produced 27.3 compared to 24.1, a 13% increase and the lots in the 5 year of age and less category produced 24.4 compared to 21.8 for the fourth quarter of last year, or a 12% increase.

The productivity in our older dealerships has been a little more affected by macro and competitive factors but we're moving in the right direction and focused on customer retention and earning repeat business, which is extremely important in our more mature dealerships that have a deep pool of past and current customers. We have significant room for future volume increases for our existing store base and we will continue to highlight the benefits of our excellent service in our local face-to-face offering to the market.

Interest income was up $1.5 million for the quarter due to the $46 million increase in average finance receivables. The weighted average interest rate for all receivables at year-end was approximately 14.9%, basically flat with this time last year. For the quarter, our gross profit margin percentage was 41.8% compared to 41.7% for the fourth quarter of last year. The improved gross margin percentage resulted from slight improvements in pricing efficiencies and improved wholesale results offset by higher losses under the payment protection plan. Our goal is to balance affordability for our customers with appropriate gross margin percentages to enhance customer success. We expect gross margin percentages to remain in the current range over the near term.

For the quarter, SG&A as a percentage of sales decreased to 16.9% compared to 17.1% for the prior year quarter. The $1.5 million increase in overall SG&A dollars related primarily to higher payroll costs and other incremental costs related to new lot openings. We do expect some SG&A leveraging in the future as we grow our revenues and we're committed to leveraging the infrastructure investments we've made over the last several years. The timing of leveraging, especially on a quarter-to-quarter basis, is a little harder to pin down but it was certainly nice to see leveraging for the fourth quarter. We will continue to invest in our infrastructure to support our growth.

For the quarter, net charge-offs as a percentage of average finance receivables was 7.1%, flat with the prior year quarter. Principal collections as a percentage of receivables for the quarter was 17.6%, down from 19.2% for the prior year quarter. The decrease in principal collected percentage between periods can be attributed to the increase in the average term of about one month. The fact that we did modify a higher number of accounts and we had more delinquent accounts during the quarter related in part to the delay in IRS refunds compared to prior periods. Also our managers were given some additional leeway on deal structures for certain target customers during the quarter based on competitive factors. Also, we did have an increased number of special payments scheduled for tax time 2013 when compared to prior years.

We had improved results in terms of the percentage of accounts that paid. However, the overall dollar amount collected was less as a percentage of AR, due in part to the delays in refunds and what appears to be a change in customer behavior is related to making extra payments during tax time. Also the overall push out of the timing of the refunds within the quarter did affect the calculation of the percentage collected brought it down some. We believe that the quality of the portfolio at April 30, 2013, is good, even though net charge-offs as a percentage of average AR is flat, credit losses on the income statement is higher for the quarter and for the full year by approximately 110 basis points and 90 basis points, respectively, due to the lower percentage collected for the reasons discussed.

We have several operational initiatives in place for the collections area of the business and we feel good about the performance of the portfolio into the future but we do expect credit losses to be a little higher than historical averages due to continuing macroeconomic and competitive factors. The frequency of our losses continues to be good by historical standards and the severity, while up some, has leveled off a little recently, as we really work hard to help our customers succeed. Overall wholesale price decreases have put some pressure on severity but we are doing a nice job of offsetting that through some operational improvements.

At April 30, our total debt was $100 million and we had $41 million in additional availability under our revolving credit facilities. Our balance sheet is very healthy and we are committed to keeping it that way. We believe it is prudent to maintain a very conservative balance sheet at all times but especially in the current operating environment. Our current debt-to-equity ratio was 49.2% and our debt-to-finance receivables ratio is 27.4%. Although we did not repurchase any common stock during the quarter, we did repurchase 17.3 million during the year and since February 1, 2010, we've repurchased $88 million in common stock, or right at 25% of the Company.

We do plan to allocate some capital to repurchases in the future but our priority will be to grow the business in a healthy manner. We're very proud of the fact that for the full fiscal year, we funded $5.5 million in net CapEx which included the 10 new dealerships, a $46.5 million increase in finance receivables, $5.6 million in additional inventory to support higher sales levels, and $17.3 million in common stock repurchases all with a $21.7 million increase in total debt.

Now I'll turn it back over Hank.

Okay, thanks, Jeff. You know, for the past several years we've been working diligently to build out the best possible team and infrastructure to take us to the next level. We've been focused on being prepared ahead of our growth and we have made some significant changes and additions this past year for that purpose and I'd like to just highlight a few of those for you. Jon Sims, who joined us back in '06 after a long successful career with Wal-Mart, came to us to head up our purchasing department. He was recently promoted to oversee all of our support operations, meaning he's now working with each department head of our support teams for sales, collections and purchasing to assure that each of these groups come to realize the same high level of efficiency that Jon was able to achieve within our purchasing department under his leadership.

In this past quarter, our associate development team completed the rollout of a comprehensive training program that has long been in the works. We now have in place online courses for each lot level position, complete with a step by step training plan or owners' manual, as we call it, and video training for each task along with proficiency testing that must be completed before moving forward in the course work. In total, 43 training videos were produced this past year. This team has truly done some excellent work and we are already beginning to see some very positive results.

Another major project that we took on this past year was a complete rewrite of our proprietary operational software. It manages all of our purchasing, inventory management, sales, financing, collections and all of the associated reporting. This was a substantial undertaking and a significant investment and we're confident that this new system is second to none in the industry and will greatly enhance our operations. We begin rollout this next month and plan to have it fully in place at all stores by October.

And while our prior system was very good, this new system is even more intuitive and it greatly speeds up our sales process, has more efficient screens for collections and will provide us with an improved customer management system, giving us even more tools for our ultimate purpose of assuring the highest possible level of repeat business. Very importantly, as well to note is that this new system has been developed in a modular fashion so that we will be able to make changes and enhance our software much more quickly as we move forward than we could with our past system.

Actually becoming even more nimble in this regard as we grow is very exciting because we are indeed growing. This past fiscal year, we hit our mark of adding 10 new stores with 3 in Alabama, 3 in Missouri and then 1 each in Arkansas, Tennessee, Georgia and Mississippi. Spreading out these openings helped in that by not putting all the new stores into the same region, we're able to spread out the new additions to assure they each get the extra added attention that new stores require to assure the very best possible starts.

In this upcoming year, we have our sights set on opening 12 new locations, 4 of which are already underway and we actually hope to have these open within our first quarter and that would be 1 each in Oklahoma, Tennessee, Georgia and Mississippi.

So that concludes our prepared remarks. We'd like to move on to your questions. Operator?

Thank you. At this time, the participants will now answer questions from callers. I'd like to reiterate that my earlier comments regarding forward-looking statements apply both to the participants' prepared remarks and to anything that may come up during the Q&A.

(Operator Instructions)

John Hecht, Stephens.

Congratulations, guys, on a good quarter in a pretty strong competitive environment. Just a couple questions. First one is what's the mileage and average year of your -- the cars you're selling now and has there been any meaningful change in that statistic over the past year or two?

Yes, the average age is right at nine years and the mileage is a little over 100,000. We've recently seen some nice decreases in the age with, wholesale prices coming down some but the mileage is still up when we look at prior years but again, we feel like the quality of car -- every year that goes by, the quality of car we're putting out there gets a little better.

Okay. And what's the percentage of purchasing directly from dealerships now that you use inventory versus the auctions?

Well, I would -- the actual direct from new car dealerships has gone down over the years, certainly more coming from wholesalers, I don't have the exact number for you on that. I will tell you that we've, in the past, talked about our percentage coming from auctions being under 10%. It's a little bit above that now at this point. We have bought -- this past year, we bought more cars actually out of Florida in an effort to get some more lower-mileage vehicles. Certainly since we've moved more to the East, we're closer to there so that has bumped our auction purchases up a little above that 10% mark.

Okay. And final question. Your balance sheet leverage is still very low but it has been coming up over the past bit of time. I wonder is there -- do you have any capital plans or leverage goals or where would you be comfortable taking that?

Well, we haven't really -- we feel like the market itself, we want to be in a position, from a competitive standpoint, that if funding does go back out of the industry, we want to be in a very nice position to take advantage of that and so. And then with our new store growth plans, we just want to make sure that we're extremely conservative and healthy on the balance sheet side but we do plan to allocate some capital to share repurchases, but just not at the levels that we've seen recently. And we feel like it's just a good time to be really conservative on the balance sheet with what's going on in the world and the industry with the -- on the funding side.

So with that, would we expect the current leverage ratios to be consistent going forward or how do we think about that?

Yes, I think the -- as we look out, it would be fairly consistent with what we've got now.

Thank you. David Scharf, JMP Securities.

A couple of interesting metrics were put out there. Hank, I think you had mentioned that sales to repeat customers as a percentage of your total sales went up. Can you provide us with some numbers around that, give us a sense for how much the retention efforts have paid off?

Yes, well, keep in mind that we do have a lot of younger, newer stores out there that really don't get the benefit for a couple years of the repeat business until the pay-offs start coming. So, looking more at stores beyond that. I think we've talked about the Company as a whole even with the new stores, we've run at about one-third and then with some of our older stores actually can run above the 50% mark so when we look at our overall the Company as a whole comparing this past quarter to a year ago.

And it's something we particularly -- we've always looked at it but certainly even more focused on it because we know it's an increased competition or good proven customers certainly we don't want to lose those. And that's why I mentioned that again, it's been about one-third, but it -- we were actually a little bit higher than we were the prior year. It wasn't as significant, it wasn't a large amount but I think the point is that it did actually increase so I think it's a good reflection that we're keeping our customers.

Got it. That's helpful and Jeff, I think you had mentioned that customer behavior was a little different this tax season. I think you made reference to less willingness to make extra payments. Do you think it may be related to delays and quite frankly, people may have spent a little more in the intervening month before it took to get the refund or do you think it's indicative of some other macro factors? Any conclusions at this point that we can draw?

I think it's fair to say that the delays had some effect there but the customer certainly, maybe chose to save a little bit of that money this year. Or do something else with it as opposed to getting a little ahead or paying some extra on the contracts with us but certainly, the delay itself had some effect on that behavior.

Got it. And is there a way to quantify maybe what that impact may have been, a more normalized payment behavior? What that 17.6% collection rate might normally be?

Yes, it's a little bit of guesswork on our point, but -- or on our part, but it was -- it may have been between $1.5 million, $2 million of effect this quarter, which would have brought that 17.6% up some.

Got it. Moving on, just on the discussion of term, just want to maybe circle back to in the past, you've commented that despite the competitive pressures and some of the moves you've had to take, that the goal is still to keep the total weighted term below 30 months. Is that still something we should expect going forward based on everything you're seeing competitively right now?

Yes, I think we're doing all we can to keep that as short as possible without losing the better customers and a lot of that's going to be driven by competition. But we're continuing to do things operationally to keep that term as short as possible and really looking at our deal structures and equity on the front end and special payments during tax time and everything that can contribute to a shorter term. But I think we're -- that we did see a sequential decrease although slight in the initial contract terms this quarter which was nice to see, but we think it's going to level off around 30 at some point and hopefully we keep it lower than that.

Okay. And speaking of the tax time, as far as your tax rate, a little lower this quarter. Should we still be thinking about a 37% rate for this current fiscal year and was there anything in Q4 that brought that down?

No, it's just the full-year expectation is -- came in at 36.5% so a little less than we thought after nine months so that the overall rate for the fourth quarter was a little less. But I think somewhere around 37% going forward is a good rate.

Got it, got it, and just one last question. The -- as far as the manager incentives, I believe when a lot of these were rolled out last quarter and in the January quarter, you had commented that the originations related to some of those incentives, such as the lower payments for first three months and the like. I think it accounted for about 7% of origination volume in the January quarter. Were there similar incentives in place during the April quarter and is there a figure for what percentage of your volumes they were attributed to?

We don't -- I don't have that number handy there. It certainly was less of a factor in the fourth quarter than it was in the third. The tax refund season and we didn't need to make as many of those individual decisions or structure deals with the customer base during the fourth quarter as we did during the third. I don't have an exact amount.

Thank you. Bill Armstrong, CL King & Associates.

So just getting back to that customer behavior issue, are you saying that when they got their refunds, were they not making the scheduled special payments or do you typically see them making maybe a little bit more than they're required to and then they're just not doing that now?

Yes, this year we were very successful on the percentage of customers who made their payments. Our -- we had an increase in percentage of those customers that made the payments but in prior years we had seen customers actually make more in terms of extra payments or payments in addition to what was required. That was not quite as prevalent this year and that could have been due to an extent on the delay in refunds.

Do you think maybe the higher payroll taxes might have contributed to that also?

That certainly could have contributed, yes.

We speculate on a few things. I think that, that could have been part of it.

Okay, and then going back to a previous question on repeat customers, what's the trend if we just isolate the mature stores? Are you seeing an increase or any change in the repeat customer mix in the mature stores?

Yes, we did, actually, specifically for that group. They were higher than the prior year. Yes, so that's something we feel really good about and certainly getting more aggressive with it, it helped. We know that customers have more alternatives right now. There's a lot more financing available and so we just stepped it up and have been more aggressive, so yes, but the older stores were up.

Eric Carter, Kobe Partners.

Just a quick question with regards to the year-over-year average change in productivity. Looked like it went from 28.6 to 28.8 cars. Considering that, with the extension in the contract terms, if it was deemed from a risk perspective to keep those contracts at 27 to 28 months and you didn't modify as many of the existing contracts, do you have any idea of what that potential downside could be from a productivity standpoint?

It's very difficult to quantify that exactly but it's possible to say that had we not stepped up and been more aggressive, we would have been more flat or even perhaps down a little bit.

Okay. And the main reason I ask is we haven't seen any softness, really, in the used car pricing and so with that 30% -- or that 30 months, are you willing to go beyond that or would you prefer to be at a 27 or 28 months or ultimately like where do you draw the line in the sand?

You know, for as long as we've been in business, it's just where to be on that cost versus quality curve that matches our customers' budget has always been a challenging point for us. But no, we don't want to see our term go out a lot farther. We're -- it is where it is. It's a combination both of where we need to be for affordability, for that payment to fit into our customers' budget but yet at the same time, to try to be a little bit more aggressive against the competition so no, we don't want to see it stretch out a lot farther. It may bump up a little bit and certainly, as Jeff mentioned earlier in his comments, we may see sales prices go up a little more this next year so that can put some pressure on that but our intent is to try to keep it short.

(multiple speakers) On the car, I think it's important to note that we're selling a nine-year-old car with around 100,000 miles on it; it's got a whole lot of economic life beyond 29 months.

Right.

So our main focus is making sure that customer has an asset on day 1 and an asset after 30 months so and the mechanical quality of our product increases every year.

Got it. Okay, and then just to clarify the reported 29.2 month average term, was that on new originations in the quarter or new and legacy installments on the book?

That was on the entire portfolio including modifications.

Okay and then what -- did you -- I'm sorry if I missed it, did you report the average term for new contracts for the quarter?

Yes, we did. The initial contract term was 27.7 months compared to 26.7 for last year's fourth quarter.

Okay.

But the third quarter was actually 27.8 initial contract terms so we're down just a little bit from the third quarter.

Sasha Kostadinov, Shaker Investments.

I believe you gave this as a percentage of receivables but what was the aggregate level of collections in the quarter, this -- in the fourth quarter this year and last year?

The dollar amounts?

Yes, the dollar amount.

Actually, I don't have that number in front of me. I can, if you can give me a call after the call, I can get you those numbers but they're both percentages of average finance receivables.

Okay, well, my percentages for last year didn't jive with yours. That's why I was asking. Okay, I'll call you after the call. Thanks.

Effie Wolle, GFI Investment Counsel.

With respect to the overdue by 30 days or more, we noticed that, that jumped up to about 5.1%. Is that a blip in underwriting? Can you explain that a bit? And second question is just surrounding competition. Is what you're seeing typical in terms of the cycles of ebbs and flows or is it worse than you've seen in the history of the Company? Thanks.

Well, certainly the 30%-plus is higher than we'd like it to be. We've had more delinquencies pretty much throughout the year. We're working harder with customers, macroeconomic environment certainly has an effect there, the payroll tax increase has an effect. So we are at any point in time, we're having more accounts being delinquent, having to work with customers more closely, but we're working through those issues one at a time. And while it is up, we feel good about the overall quality of the overall portfolio and we're doing all we can to help these folks succeed. As far as the competitive environment --

Yes, I can speak to that and I think, again, I think there's something, Jeff, you mentioned in your comments earlier with reference to the older stores. But yes, I think we definitely feel more competition, the larger the markets we're in. And it's simply obviously there's more competitors and even that many more, much more of other dealers that have some of this financing available so I think we feel the pressure in our larger markets.

Fortunately, we're also in a lot of smaller markets as well where we probably don't feel it quite so much and I would say that right now, this past year it's probably at an all-time high. I think you go back, I don't know, five, six years ago, we saw some of this financing availability increase at that time. It was short-lived but we felt it once before. Yes, I would say this past year is probably the most intense and most [valuable] we've ever seen it.

Dan Mazur, Harvest Capital.

Do you have any color on the increase on the term including mods, how much is off -- driven by the increases, driven by initial term versus increased modifications?

Yes, modifications are up about 6% to 7% through the quarter so we are seeing an increase in the modifications and those contracts that are getting modified are -- the time we're adding to the contracts is a little more than it was at this time last year.

Okay, that's helpful. And can you remind me when, around what timing you started to help improve sales with the -- and trying to credit with changing in mods and then slightly lower down payments and extension of term?

Well, it started last year in the August/September time period. We had been feeling a little pressure before that, but really, I think the month of September was an eye opener for us in terms of the competition out there. And the fact that we needed to do some things on the structure side to retain some of those better customers, so it really started during our second quarter last year.

Okay and this -- I think this is old disclosure. I'm not sure if it still holds, but I think you used to say around 50% of your charge-offs occur around the 10- to 11-month period. Is that the -- I mean, is there anything that you're seeing in those early vintage August/September and post that you feel okay that we don't have -- when we get to that peak charge-off that we don't have a big spike?

Yes, of course we track all those pools and there's been nothing there in terms of unit loss or frequency that would be considered out of the ordinary.

Okay. And you did, I mean you have mentioned, I mean, you're aware of the risks of the down payments and extension of terms, mods, et cetera, but the loss reserve has basically been this exact same for the last five quarters. Is that something you revisit every once in awhile or you know the fear would be you get to that 10- to 11-month period, there's a slight spike so not only do charge-offs drive provisions higher but then you've got to take the provision up? Just any color on that would be helpful.

Yes, of course, the reserve is analyzed every quarter. It's an amount that -- it is an estimated loss amount. The average age of our portfolio is about 8.5 months right now and our annualized charge-offs are running right at 25% so the -- you end up with a 21.5% reserve being a pretty good estimate based on the average life of the portfolio. And the fact that we've already got eight months of experience in that number so we feel good about the 21.5%. Don't expect to have to adjust that any time in the near future.

Thank you.

(Operator Instructions)

Brandon Cohen, Abrika.

My question is about the provision for credit losses. You were just talking about it a little bit. For the year, last year, it was 23.1%. The year before, it was 21.1%, and for the last 10 years, besides 2007, it's pretty much been between 20% and 22%. Do you see the 23.1% as something temporary that these pressures are causing that provision to need to be increased and over time, it will trend back to the 20%, 22%? Or does that seem like it's a new competitive environment and upwards of 22% is more likely?

Well, we'd love to have it lower and we're doing everything we can to keep it lower but we have to be realistic, at least over the short term in the future, that we've got some competitive pressures and some things that we have to do on the structuring side. As far as giving a view long term, we feel like long-term credit losses are going to come back down to more historical ranges but as we look out into the short-term future, I think we're going to be a little higher than we've been historically.

Yes and I think we've got two different things going on. We've said, [long] said that as we have a higher percentage of younger stores, that pushes it up and that, combined with the current competitive market, we're going to be -- we are a little bit above the range we talked about for some time. But we do intend to bring that back down over time.

And with the new stores, what typically is the difference between a new store and a mature store in terms of what you would provision for credit losses as a percentage of sales on a store level?

Well, we've got two factors that drive it. One, certainly, you've got the manager there and as we've talked about quite a bit, our repeat business is an important part of our business, as we roll back in proven customers with our more mature stores that helps to push it down so the -- our newer stores are going to typically run higher.

Do you have any estimate of how much higher it typically is?

You know, we've got the newer lots are going to -- in the past we've talked about a newer lot being in the mid 20%s and an older lot being in the mid-teens so there's a pretty good swing between an old lot and a new lot.

Okay. And then one other question that I had was regarding the CapEx. What's the typical capital expenditure for us to build a new store?

We -- our average is right at $250,000 for CapEx for a new dealership.

Thank you. At this time, I'm not showing any further questions. I'd like to turn the call back to management for any further remarks.

Well, we just want to thank everyone for joining us today. And as we've talked about, you know this is a tough environment, but nevertheless, we continue to see some improvements on sales. And as we just here discussed, we do have some work to do on collections and that's where a lot of our focus lies, so. And we certainly have in the works several new store projects so we're pushing forward with our growth and we see a lot of opportunity out there for us, so. We thank you all for joining us and have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.