Americas Carmart Inc: Form 10-Q for the period ended Jan 31, 2026

The Company is authorized to repurchase shares of its common stock under its common stock repurchase program. On December 14, 2020, the Board of Directors authorized the repurchase of up to an additional one million shares along with the balance remaining under its previous authorization approved and announced on November 16, 2017. No shares were repurchased under the Company’s stock repurchase program during the third quarter of fiscal year 2026.

The Company has not historically issued any dividends and does not expect to do so in the foreseeable future. Payment of cash dividends in the future will be determined by the Company’s Board of Directors and will depend upon, among other things, the Company’s future earnings, operations, capital requirements and surplus, general financial condition, contractual restrictions that may exist, and such other factors as the Board of Directors may deem relevant.

The Company is also currently limited in its ability to pay dividends or make other distributions to its shareholders, including repurchasing shares of its common stock, without the consent of its lender under the Company’s senior secured term loan facility. Please see Note B for the Consolidated Financial Statements in Item 1 for more information regarding this limitation.

The Company is exposed to market risk on its financial instruments from changes in interest rates. In particular, the Company has historically had exposure to changes in the federal primary credit rate and changes in the prime interest rate of its lender. The Company does not use financial instruments for trading purposes but has in the past utilized an interest rate swap agreement to manage interest rate risk.

Interest rate risk. The Company’s exposure to changes in interest rates relates primarily to its debt obligations. The Company is exposed to changes in interest rates as a result of its senior secured note, and the interest rates charged to the Company under its senior secured note fluctuate based on its primary lender’s base rate of interest. The Company had an outstanding balance on its secured note of $300 million at January 31, 2026. The impact of a 1% increase in interest rates would result in increase annual interest expense of approximately $3 million and a corresponding decrease in net income before income tax.

The Company’s earnings are impacted by its net interest income, which is the difference between the income earned on interest-bearing assets and the interest paid on interest-bearing notes payable. The Company’s finance receivables carry a fixed annual interest rate based on the Company’s contract interest rate as of the origination date of the installment sale contract, while its senior secured note payable contains variable interest rates that fluctuate with market interest rates. The Company’s finance receivables carry annual interest rates ranging from 12.00% to 23.00%. The primary interest rate on the Company’s senior secured note payable is generally SOFR plus 7.5%.

a) Evaluation of Disclosure Controls and Procedures

Management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of January 31, 2026. As previously disclosed in “Item 9A. Controls and Procedures” of the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2025, management identified a material weakness in internal control over financial reporting related to the omission of required disclosures concerning loan modifications for borrowers experiencing financial difficulty under ASC 310-10-50-42 through 50-44.

Because of this material weakness, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of January 31, 2026. Notwithstanding the material weakness, management has concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, the financial position, results of operations, and cash flows of the Company for the periods presented in conformity with accounting principles generally accepted in the United States of America.

Remediation Efforts to Address Material Weakness

Management, with oversight from the Audit Committee of the Board of Directors, has initiated remediation efforts to address the material weakness related to omitted loan modification disclosures. These efforts include:

• Enhancing internal processes to ensure compliance with the disclosure requirements of ASC 310-10-50-42 through 50-44 related to loan modifications for borrowers experiencing financial difficulty, including the nature of modifications, their financial effects, and subsequent performance;
• Increasing the Company’s accounting and financial reporting resources by adding experienced personnel with technical expertise to improve oversight of the Company’s accounting and financial reporting processes, including the preparation and review of required disclosures; and
• Providing targeted training to accounting and financial reporting personnel to reinforce understanding of disclosure requirements and strengthen review procedures designed to ensure the completeness and accuracy of required financial statement disclosures.

These remediation measures are in process and, once fully implemented and tested, are expected to remediate the material weakness. Management will continue to monitor their effectiveness and make further adjustments as necessary.

b) Changes in Internal Control over Financial Reporting

Except as described above, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended January 31, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, other than the ongoing remediation efforts described above.

Inherent Limitations on Effectiveness of Controls

Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or internal control over financial reporting will prevent or detect all errors or all instances of fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect resource constraints, and the benefits of controls must be considered relative to their costs. Because of these inherent limitations, no evaluation of controls can provide absolute assurance that all control deficiencies and instances of fraud, if any, have been prevented or detected.

There have been no material changes to the Company’s risk factors as previously disclosed in Item 1A to Part I of the Company’s Form 10-K for the fiscal year ended April 30, 2025.