XML 22 R10.htm IDEA: XBRL DOCUMENT
v3.23.2

Note C - Finance Receivables, Net | 12 Months Ended
--- | ---
Apr. 30, 2023
Notes to Financial Statements |
Financing Receivables [Text Block] | C - Finance Receivables, Net 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 18.0% for all states except Arkansas (which is subject to a usuary cap of 17%) and Illinois (where dealerships originate at 19.5% to 21.5%), are collateralized by the vehicle sold and typically provide for payments over periods ranging from 18 to 69 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 our financing receivables is managed as one homogeneous pool. The components of finance receivables as of April 30, 2023, and 2022 are as follows:
(In thousands) |  | April 30, 2023 |  |  | April 30, 2022 |
Gross contract amount |  | $ | 1,752,149 |  |  | $ | 1,378,803 |
Less unearned finance charges |  |  | (378,777 | ) |  |  | (277,306 | )
Principal balance |  |  | 1,373,372 |  |  |  | 1,101,497 |
Less allowance for credit losses |  |  | (299,608 | ) |  |  | (237,823 | )
Finance receivables, net |  | $ | 1,073,764 |  |  | $ | 863,674 |
Auto finance receivables collateralizing the non-recourse notes payable related to the financing and securitization transaction completed during the fiscal year 2023 and 2022 were $721.9 million and $550.3 million, respectively. Changes in the finance receivables, net for the years ended April 30, 2023, 2022 and 2021 are as follows:
|  | Years Ended April 30, |
(In thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Balance at beginning of period |  | $ | 863,674 |  |  | $ | 632,270 |  |  | $ | 472,401 |
Finance receivable originations |  |  | 1,161,132 |  |  |  | 1,009,858 |  |  |  | 762,717 |
Finance receivable collections |  |  | (434,458 | ) |  |  | (417,796 | ) |  |  | (370,254 | )
Provision for credit losses |  |  | (352,860 | ) |  |  | (238,054 | ) |  |  | (153,835 | )
Losses on claims for accident protection plan |  |  | (25,107 | ) |  |  | (21,871 | ) |  |  | (18,954 | )
Inventory acquired in repossession and accident protection plan claims |  |  | (138,617 | ) |  |  | (100,734 | ) |  |  | (59,805 | )
Balance at end of period |  | $ | 1,073,764 |  |  | $ | 863,674 |  |  | $ | 632,270 |
Changes in the finance receivables allowance for credit losses for the years ended April 30, 2023, 2022 and 2021 are as follows:
|  | Years Ended April 30, |
(In thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Balance at beginning of period |  | $ | 237,823 |  |  | $ | 177,267 |  |  | $ | 148,781 |
Provision for credit losses |  |  | 352,860 |  |  |  | 238,054 |  |  |  | 153,835 |
Charge-offs, net of recovered collateral |  |  | (291,075 | ) |  |  | (177,498 | ) |  |  | (125,349 | )
Balance at end of period |  | $ | 299,608 |  |  | $ | 237,823 |  |  | $ | 177,267 |
Amounts recovered from previously written-off accounts were $2.5 million, $2.4 million, and $1.9 million for the years ended April 30, 2023, 2022 and 2021, respectively. As a result of improved credit losses during the fiscal year 2021, as well as the Company’s outlook for projected losses, the Company decreased the allowance for credit losses in the fourth quarter of fiscal 2021 from 25.43% to 23.55%, resulting in a $14.2 million pre-tax decrease in the provision for credit losses The allowance for credit losses remained basically flat at 23.57% at April 30, 2022. For the current year credit losses increased primarily due to the ending of federal stimulus programs, continuing inflationary pressure on customers and increasing interest rates from federal monetary policy, and in the fourth quarter of fiscal 2023, the Company increased its allowance for credit losses to 23.91%. Credit quality information for finance receivables is as follows:
(Dollars in thousands) |  | April 30, 2023 |  |  | April 30, 2022 |
|  | Principal |  |  | Percent of |  |  | Principal |  |  | Percent of |
|  | Balance |  |  | Portfolio |  |  | Balance |  |  | Portfolio |
Current |  | $ | 1,166,860 |  |  |  | 84.96 | % |  | $ | 958,808 |  |  |  | 87.05 | %
3 - 29 days past due |  |  | 156,943 |  |  |  | 11.43 | % |  |  | 109,873 |  |  |  | 9.97 | %
30 - 60 days past due |  |  | 37,214 |  |  |  | 2.71 | % |  |  | 22,477 |  |  |  | 2.04 | %
61 - 90 days past due |  |  | 8,407 |  |  |  | 0.61 | % |  |  | 7,360 |  |  |  | 0.67 | %
> 90 days past due |  |  | 3,948 |  |  |  | 0.29 | % |  |  | 2,979 |  |  |  | 0.27 | %
Total |  | $ | 1,373,372 |  |  |  | 100.00 | % |  | $ | 1,101,497 |  |  |  | 100.00 | %
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.
|  | Twelve Months Ended April 30, |
|  | 2023 |  |  | 2022 |
Average total collected per active customer per month |  | $ | 534 |  |  | $ | 513 |
Principal collected as a percent of average finance receivables |  |  | 34.7 | % |  |  | 43.5 | %
Average down-payment percentage |  |  | 5.4 | % |  |  | 6.4 | %
Average originating contract term (in months) |  |  | 42.9 |  |  |  | 40.2 |
|  | April 30, 2023 |  |  | April 30, 2022 |
Portfolio weighted average contract term, including modifications (in months) |  |  | 46.3 |  |  |  | 42.9 |
Although total dollars collected per active customer increased 4.1% year over year, principal collections as a percentage of average finance receivables were lower in fiscal 2023 compared to fiscal 2022 primarily due to the average term increases. Overall collections have also been negatively impacted by the current inflationary environment and lower overall income tax refunds for consumers in fiscal 2023. The portfolio weighted average contract term increased primarily due to the increased average selling price, up $1,708 or 10.4%, from fiscal year 2022. When customers apply for financing, the Company’s proprietary scoring models rely 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 6 rated customers. 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 April 30, 2023 segregated by customer score and year of origination.
|  |  | Customer Score by Fiscal Year of Origination |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  |  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | Prior to 2019 |  |  | Total |  |  | % |
1-2 |  |  | $ | 38,743 |  |  | $ | 12,983 |  |  | $ | 2,736 |  |  | $ | 329 |  |  | $ | 32 |  |  | $ | 6 |  |  | $ | 54,829 |  |  |  | 4.0 | %
3-4 |  |  |  | 294,972 |  |  |  | 105,101 |  |  |  | 24,982 |  |  |  | 1,698 |  |  |  | 243 |  |  |  | 137 |  |  |  | 427,133 |  |  |  | 31.1 | %
5-6 |  |  |  | 563,581 |  |  |  | 254,945 |  |  |  | 66,436 |  |  |  | 5,390 |  |  |  | 687 |  |  |  | 371 |  |  |  | 891,410 |  |  |  | 64.9 | %
Total |  |  | $ | 897,296 |  |  | $ | 373,029 |  |  | $ | 94,154 |  |  | $ | 7,417 |  |  | $ | 962 |  |  | $ | 514 |  |  | $ | 1,373,372 |  |  |  | 100.0 | %
The following table presents a summary of finance receivables by credit quality indicator, as of April 30, 2022 segregated by customer score and year of origination.
|  |  | Customer Score by Fiscal Year of Origination |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | 2018 |  |  | Prior to 2018 |  |  | Total |  |  | % |
1-2 |  |  | $ | 37,916 |  |  | $ | 11,493 |  |  | $ | 2,221 |  |  | $ | 77 |  |  | $ | - |  |  | $ | 2 |  |  | $ | 51,709 |  |  |  | 4.7 | %
3-4 |  |  |  | 260,298 |  |  |  | 84,118 |  |  |  | 13,537 |  |  |  | 587 |  |  |  | 14 |  |  |  | 15 |  |  |  | 358,569 |  |  |  | 32.5 | %
5-6 |  |  |  | 488,257 |  |  |  | 172,843 |  |  |  | 28,193 |  |  |  | 1,803 |  |  |  | 115 |  |  |  | 8 |  |  |  | 691,219 |  |  |  | 62.8 | %
Total |  |  | $ | 786,471 |  |  | $ | 268,454 |  |  | $ | 43,951 |  |  | $ | 2,467 |  |  | $ | 129 |  |  | $ | 25 |  |  | $ | 1,101,497 |  |  |  | 100.0 | %

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for financing receivable. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 42 -Subparagraph (a)(2) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481962/310-10-50-42 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 12A -Publisher FASB -URI https://asc.fasb.org//1943274/2147481933/310-10-55-12A Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 44 -Subparagraph (a)(1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481962/310-10-50-44 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//310-10/tableOfContent Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 310 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//310-20/tableOfContent + Details
Name: | us-gaap_FinancingReceivablesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration