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Note L - Commitments and Contingencies
 12 Months Ended
Apr. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure [Text Block]
L - Commitments and Contingencies

Facility Leases

The Company leases certain dealership and office facilities under various non-cancelable operating leases.  Dealership leases are generally for periods from three to five years and contain multiple renewal options.  As of April 30, 2013 the aggregate rentals due under such leases, including renewal options that are reasonably assured, were as follows:

 
Years Ending
April 30,
 
Amount
(In thousands)
   
           
 
2014
  $ 4,623    
 
2015
    4,639    
 
2016
    4,549    
 
2017
    4,387    
 
2018
    4,175    
 
Thereafter
    16,315    
             
      $ 38,688    

The $38.7 million of lease commitments includes $7.4 million of non-cancelable lease commitments under the primary lease terms, and $31.3 million of lease commitments for renewal periods at the Company’s option that are reasonably assured.  For the years ended April 30, 2013, 2012 and 2011, rent expense for all operating leases amounted to approximately $4.7 million, $4.2 million, and $3.7 million, respectively.

Litigation

In the ordinary course of business, the Company has become a defendant in various types of legal proceedings.  The Company does not expect the final outcome of any of these actions, individually or in the aggregate, to have a material adverse effect on the Company’s financial position, annual results of operations or cash flows.  However, the results of legal proceedings cannot be predicted with certainty, and an unfavorable resolution of one or more of these legal proceedings could have a material adverse effect on the Company’s financial position, annual results of operations or cash flows.

Related Finance Company

Car-Mart of Arkansas and Colonial do not meet the affiliation standard for filing consolidated income tax returns, 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 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.

In fiscal 2010, the IRS completed the examinations of the Company’s income tax returns for fiscal years 2008 and 2009.  As a result of the examinations, the IRS questioned whether deferred PPP revenue associated with the sale of certain receivables are subject to the acceleration of advance payments provision of the Internal Revenue Code and whether the Company may deduct losses on the sale of the PPP receivables in excess of the income recognized on the underlying contracts.  The issue was timing in nature and did not affect the overall tax provision, but affected the timing of required tax payments.

In January 2013, the Company received approval for a negotiated settlement with the IRS related to the examinations for income tax returns for fiscal years 2008 and 2009.  The negotiated settlement resulted in additional taxable income and a resulting tax payment for the exam period.  The question related to the timing of income recognition and therefore the additional income recognized in 2008 and 2009 will result in a corresponding tax deduction and resulting refund in the following fiscal year.  Under the settlement the Company paid an immaterial amount of interest to the IRS related to the additional tax payment.

The IRS is currently auditing the Company’s federal income tax returns for fiscal years 2010 and 2011.