America's Car-Mart, Inc. (CRMT) Q1 2014 Earnings Call Transcript
Published at 2013-08-20 11:00:00
William Henderson - President and CEO Jeffrey Williams - CFO
David Scharf - JMP Securities Kyle Joseph - Stephens John Rowan - Sidoti and Company William Armstrong - C.L. King Daniel Furtado - Jefferies Jordan Hymowitz - Philadelphia Financial Dan Mazur - Harvest Capital
Good morning, everyone. Thank you for holding, and welcome to America's Car-Mart’s First Quarter 2014 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 would 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's 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 provision 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, 2013, 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.
Good morning everyone. We appreciate you joining us today. We are very pleased of course to report solid top line growth for the quarter of 11%, unit sales were up about 9% going from 9,753 last year to 10,643 this year, definitely a great start to the year in sales. As some of you may recall, we began talking a while back about how we felt it important that we improve as a retailer of cars, to better assure our continued growth. The many improvements and perks seen in inventory management have been made to provide the best possible quality, and a more consistent mix at all times, and throughout the past years, our marketing and sales training have developed significantly, providing very consistent advertising, support, and much more face-to-face sales training, and there is no question that our efforts to become a better retailer have made a difference, and we have been able to continue to grow sales even in these fiercely competitive times. While we are proud of the improvements we made in this area, we are most proud of the fact that we continue to remain focused on earning the repeat business of our customers. It is critical to our success and that's the core of our culture and very plainly worded, in our mission statement that we are very mindful of the values of our customers, in doing the right things to earn the repeat business. In our efforts to keep our good customers during these very competitive times, we have been more aggressive on down payments and terms, and this had somewhat of a negative impact on collections, and Jeff will explain that in detail in just a moment. And despite the negative impact that it does have, we feel very confident that giving a bit more in those areas to retain a good customer is absolutely the right thing to do, and is consistent with what we are all about. We do hear occasionally that some of the payment amounts and term lengths offered out there, and is certainly beyond where we are willing to go. We have been at this for a very long time, and are well aware that it's not in the best interest of the customer to put them in such a situation, and if it's not in their best interests, then it's not in ours either. On the collection side of the business, our account losses as a percentage of accounts receivable for the quarter were at 6.2% compared with 5.9% for the same time last year. While we recognize that this is impacted somewhat by some changes with financial terms, we are not happy or satisfied with the direction, and we are taking steps to assure this trend is not continued. We have long prided ourselves on being the absolute best in the business in collections through developing relationships with our customers, and working with them when they have challenges. But just because we are the best, doesn't mean we don't have room to improve. We do and we will. So I will turn it over to Jeff now to give you some more details on our results for the quarter.
Thank you, Hank. Revenues for the quarter were right at $123 million, up over 11% from last year. Same store revenues increased 5.6%. Given the challenging environment for our customer and the increased funding to the used auto industry, we are pleased with our top line growth. Average retail sales price for the quarter was up 2.6% to 9,836, but down 1.3% sequentially, due to normal seasonality. Our average sales price increased, even though our overall wholesale market prices have decreased, as we were able to put our customers in our newer car. The mileage was basically flat, but the average age was down, which hopefully will translate into fewer mechanical issues into the future. As always, we will work hard to keep increases to a minimum, for obvious affordability reasons, and at the same time this year, we are giving our customers a high quality, mechanically sound product. Down payments were 6.6%, down from 7.2% or around $39 for the quarter. Collections as a percentage of average finance receivables was 13.8% compared to 14.9%. The average initial contract term was up 27.7 months, compared to 26.7 at this time last year, but basically flat sequentially. The weighted average contract term for the entire portfolio including modifications was 29.5 months compared to 28.1 months at this time last year and compared to 29.3 months sequentially. The increases in term are related to our efforts to keep our payments affordable for competitive reasons, and to continue to work with our customers when they experience financial difficulties in these tough times. In order to remain competitive, our term lengths may continue to increase them into the future. We are aware of the downside that comes with lower down payments and increased term lengths. We remain committed to not stretching terms or reducing downs any more than we think is absolutely necessary to attract and retain our target customers. We continue to believe that helping customers successfully complete their contracts, by having equity throughout the term and then owning an asset at the end of the term, is the only way to truly operate for the long term, and that's the only way for us to earn the repeat business of our customers, which is our mission. Unfortunately, the ultra low interest rate environment has helped to attract competition to the funding side that may not share this view. We are working hard to ensure that the quality of our cars is high, and our local community based service levels are excellent, which will allow us to continue to attract and target customers, and to manage the risk side of the portfolio in a profitable manner. The current competitive and macroeconomic environment continues to present some headwinds for us and will stay focused on customer success and earning repeat business, and our future is bright. The overall average retail unit sold per month, per lot for the quarter was 28.4, up from 28.3. At quarter end, 36 or 29% of our dealerships were from zero to five years of age, 26 or 21% were from five to 10 years old, and the remaining 64 were 10 years old or older. Our 10-year plus lots produced 31.7 units sold per lot per month for the quarter compared to 32.3 for the prior year, a 2% decrease. Our lots in the five to 10 year category produced 27.5, compared to 25.8, a 6% increase, and the lots less than five years of age produced 23 compared to 20.6 for the first quarter of last year, a 12% increase. The productivity at our older dealerships continues to be negatively affected by the macro and competitive factors. We will continue to focus 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 will continue to highlight the benefits of our excellent service and the local face-to-face offering to the market. Interest income was up 1.7 million, due to the $48 million increase in average finance receivables. Related average interest rate for all finance receivables at the end of July was approximately 14.9%, basically flat with this time last year. For the quarter, gross profit margin percentage was 42.5% of sales compared to 42.8% last year. 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 generally in the current range over the near term. For the quarter, SG&A as a percentage of sales decreased to 18% compared to 18.2%, a $1.8 million increase in overall SG&A dollars related primarily to higher payroll costs and other incremental costs related to new lot openings as well as higher marketing and advertising expenditures. We do expect some SG&A leveraging into the future, as we grow our revenues, and we are committed to leveraging the infrastructure investments we have made over the last several years. The exact timing of leveraging, especially on a quarter-to-quarter basis is a little harder to pinpoint, and we will continue to invest in an infrastructure to support our growth. Net charge-offs as a percentage of finance receivables was up to 6.2% from 5.9%, which was a 5% increase for the quarter. Most of the increase relates to severity of losses, due in part to wholesale price decreases, and longer terms and frequency was up just a little bit. As a reminder, for the previous three quarters, net charge-offs as a percentage of finance receivables have been flat with the prior year periods. Principal collected, as a percentage of average AR for the quarter was 13.8%, down from 14.9%. The decrease in principal collected between periods can be attributed to the increase in the average term of 1.4 months, a fact that we did modify a higher number of accounts, and we had more delinquent accounts during the quarter. Also, our managers continue to have some [addition legally] on deal structures, based on competitive factors. You should note that our expected cash-on-cash returns for the capital being allocated to finance receivables is attractive, even with the lower down payments and the term extensions, that we feel are necessary in the current competitive environment. Credit losses on the income statement is higher for the quarter, due to lower collections and higher charge-offs, each had about an equal effect, and due to the effect of lower wholesale sales levels, which had about 20 basis point effect. Overall credit losses were about 30 basis points higher due to the shift in the relative age of the portfolio versus this time last year. The average age of the lots. We have several operational initiatives in place for the collections, and we feel good about the performance of the portfolio in the future, but we do expect credit losses to continue to be elevated due to macroeconomic and competitive factors. In addition to the GPS effort that Hank will talk about in a minute, we are reporting credit for our customers, something that we had not previously done. At the end of July, our total debt was $99.5 million. We had $42 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's 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 47.3% and our debt-to-finance receivables ratio is 26.2%. We did repurchase 384,000 of common stock during the quarter, and since February of 2010, we have repurchased about 25% of the company. We do plan to allocate capital to the repurchase program in the future. But our first priority will be to continue to grow the business in a healthy manner. For the quarter, in addition with stock repurchases, finance receivables increased $16.5 million and we had $1.8 million in net capital expenditures, and we were able to keep our debt levels flat for the quarter. Now I will turn it back over to Hank.
Thanks Jeff. I do think it's important and timely to serve one particular initiative regarding collections, as it is something that many of you have asked about in the past. As of the end of this week, we will be installing GPS devices on every vehicle we finance. We have been rolling this out for several months now, and the final installment of training is being wrapped up on the last lots just this week. We don't actually lose that many vehicles, so that's not our primary reason for making this move. As I said earlier, working with our customers is always our goal, and we know that our success rate helping our customers solve their challenges, is much higher when we are able to make contact with them when they are one payment behind, rather than two or three. So we are very excited about the positive difference this can make in helping more customers through timely resolution of payment issues, and ultimately reducing losses in the long run. And one thing I'd also like to mention before we go to your questions is our new store growth plan. We do remain committed to opening stores that has stayed similar for the past couple of years. We ended April 30 with 124 stores. We have opened two new locations this first quarter, putting us at 126 that is Grove, Oklahoma, and Rome, Georgia. Rome being now our second store in Georgia, and actually we should be opening our third in that state in Covington, within just the next week or two. We also have work already underway for locations in Meridian, Mississippi; Richmond, Kentucky; and Dauphin, Alabama, all these should be opening fairly soon. So that concludes our prepared remarks. We would now like to move on to your questions. Operator?
Thank you. At this time, the participants will now answer questions from the callers. I would 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 this Q&A. (Operator Instructions). Our first question comes from the line of David Scharf from JMP Securities. David Scharf - JMP Securities: Good morning, thanks for taking my questions. Just sort of a general question on the competitive environment, I think two, three quarters ago, when you first kind of noted the increased pressures from indirect lenders. I think you had articulated that perhaps your top 10% of customers were arguably the ones that were being targeted and increasingly in play. Just given how the competition has evolved now as we are in the end of August, is 10% still -- in that quarter, peak customer still the target, are you sensing that actually the indirect competition is dipping down even further into your target market?
Yeah, it's really hard to say exactly is it 10% or the 15%, we don't know the answer to that, and what we really know are some of the – it’s anecdotal. Things we hear back from our customers, some of them, of course people we have done business with for a while, so they tell us, Hey! Here is what the guidance Street offered. So, I would say it's rather inconsistent depending on some of the areas we are in, but there is no doubt there is some overlap there. David Scharf - JMP Securities: And maybe a different way of asking it, just directionally, has the level of competition been getting more severe over the last three-four months?
I would say, specifically, over the last three or four months, I think that really -- I think we started feeling it the most last fall, and I would say it's just still there, would be the way I’d answer that. I don't think it has really ramped up to speak. David Scharf - JMP Securities: Got it. Got it. And just wondering, obviously, there is no formal guidance but just trying to get our arms around how to think about modeling collections going forward. It's about 100 basis points in the average portfolio, lower than a year ago. On an annualized basis, is that probably a pretty rational expectation or a way to think about forecasting collections, or do we think it might be rebound partially as you get kind of the GPS product out there or are there any seasonal factors may be I have not considered?
We certainly have high hopes that the GPS efforts will increase collections. There is some seasonality involved. We are doing all we can to keep those term limits as low as possible and not lose business. We have always created -- creatively structured deals to try to get some special payments on the front end of the contracts or some special payments during tax time. So, we are pushing hard to increase collections, can't give you an exact number on that, but we do feel like there is certainly room for improvement over what we have seen in the last few quarters on the collection side. David Scharf - JMP Securities: Got it. And is there much incremental costs associated with the GPS, is it an ongoing subscription data charge that's meaningful or is it kind of rounding here at this point?
It's a meaningful number once we get a complete roll out for all of our accounts, but it's on a per-car, per-month basis. It's not a huge expense. David Scharf - JMP Securities: In aggregate, is there kind of an annualized figure we could think about?
It's going to average around -- somewhere a little around $4 per account, per month. David Scharf - JMP Securities: Got you. That's helpful. Then lastly, on the provisioning front. Obviously, the quarterly provision has been tracking upward as losses are, it doesn't sound like you are kind of moving off that 21.5% allowance, can you give a little sense for how that -- what factors might lead us to take that up?
Well, of course, we go through an extensive static pool analysis every quarter at least, and we look at the timing of charge-offs, what has happened to the pools, what's left out there, the quality of what's left, and the 21.5% still looks like a good range for us. We don't have any expectations of having to raise that at this point. But we are very aware that the charge-off numbers, while they did go up, this last quarter had been flat to the previous three quarters. So, even though our income statement is showing a higher expense, charge-offs had not been significantly higher, and again we are not pleased with where we were on charge-offs, but the reserve itself is -- appears to be adequate at the 21.5 -- some of our more recent pools, the charge-off rates so far have actually been a little bit less than at this time last year. So, we feel pretty good about that reserve percentage, and we will keep an eye on it, and the best thing we can do for the reserve percentage is to collect on our accounts and reduce those charge-offs amounts into the future, but at this point, we feel like the 21.5% is a good estimate for us, and if we perform on [audit] (ph) in the future, which we plan to, we don't feel like we are going to need to adjust that any time soon. David Scharf - JMP Securities: Got it. Got it. And just last question, just one to confirm Jeff, on the 30 basis point increase in losses year-over-year, did you say about two-thirds of that was related to the wholesale prices, basically recovery values?
Yeah, about 20 basis points was related to it. David Scharf - JMP Securities: 20 of the 30 was -- got it. Thank you very much.
Thank you. And our next question comes from the line of Kyle Joseph from Stephens. Kyle Joseph - Stephens: Good morning guys, thanks for taking my questions.
Good morning Kyle. Kyle Joseph - Stephens: I want to talk a little bit about -- so the car prices dropped sequentially. I think you touched on that being related to seasonality. Is that kind of a strategic goal for you guys to keep -- to lower car prices or what do you think we can expect going forward there?
Well, I think there are a couple of things going on with car prices right now. Yes, with seasonality, we came out of the tax time, where there is more of a demand for the price range of car we deal in, those typically go up and we have passed that time. We obviously know that there is a lot of sales taking place above us putting a lot of the trade-ins in the market, which has brought some of those prices down, and so our goal is -- as I think we said on our last call, our goal is to be focused on affordability, and hold these close to flat. So, our intention would be to -- certainly for the remainder of the year to continue to hold prices close to flat as we can. Kyle Joseph - Stephens: Okay, got it. Thank you. And for -- you guys gave some good statistics on store performance by vintage. Would you say you are seeing more competition in older stores or competition having a greater effect there?
Right, and it's not entirely just related to the age. It so happens that a few of our older stores happen to be also in some of what -- or for us, our larger markets, and obviously in larger markets, you tend to have little more competition. So, I think I tend to feel the pressure. Obviously too, we also have with our older stores, expectations of higher average sales and just simply, when you try to sell more and keep your volumes higher, you can build a little more there. Kyle Joseph - Stephens: Okay. Thanks. That makes sense. Then in terms of new stores that you guys are rolling out, has there been any effect on the time it takes for these stores to break even, as a result of competitive dynamics?
Yes, with the terms going out a little bit, certainly the timing of cash profits has been pushed out a little bit. But the GAAP profits have not been hugely affected as far as the timing. They are pretty accretive right out of the gate, but the cash profits have been pushed out a little bit, because of the lower down payments and the term extensions. Kyle Joseph - Stephens: Okay, great. Thanks for answering my question guys.
Thank you. And our next question comes from the line of John Rowan from Sidoti and Company. John Rowan - Sidoti and Company: Good morning guys.
Good morning. John Rowan - Sidoti and Company: In your prepared remarks, you guys said that the cars that you are retailing are a little bit newer, and obviously a lot of your commentary suggests that you are managing their customer payments around the same level. Just out of curiosity, why not leave the car age the same, if you are getting some alleviation of your wholesale costs, and start pulling back on duration?
Just the quality, if you have the chance to put your customers in a better car, that's a little more mechanically sound possibly, because it's newer than we found over time. So that's a good thing for us to do, as long as we don't get carried away with the sales price increases, which we are very cautious to that side of it too. But really, it's about an opportunity to put our customers in a little better car. John Rowan - Sidoti and Company: Okay, fair enough. That's all I had. Thank you.
Thank you. And our next question comes from the line of Bill Armstrong from C.L. King. William Armstrong - C.L. King: Good morning Hank and Jeff. First question, actually is a follow-up to that last one. So we are seeing your average selling price up about 3% year-over-year. Is that more a function of mix, where maybe you are getting some newer or lower mileage cars, rather than a broader price trend?
For us, we have talked about it -- it's always for where we can be on that cost versus quality curve, and when we do have an opportunity to step up and can pick up a few more lower mileage cars and such, we are going to do that, and just in the current market where we are, we have had some of that opportunity. William Armstrong - C.L. King: Okay. You also mentioned that, your competitors -- there are competitors out there that are not focused on earning repeat business. I was wondering if you can just kind of elaborate on that a little bit, you know, what's the basis of that observation and give us a little more detail on that?
I mean, obviously, about some of the offerings that customers tell us, that they have been offered, and we see the deals, that sort of thing, and we know, the year, make, model price, price of the [way] that they are looking at, and obviously for us, we know that what are realistic term lengths for those sort of thing, and since you got another party that's out there, offering some term lengths well beyond what we know work -- that doesn't work for us, we know that's not a good situation of the customer. You may enjoy it on the front end with the lower payments, but it's really not putting in a situation that they are likely to succeed. William Armstrong - C.L. King: Do you see any possible shakeout in this -- in the subprime financing side, coming any time soon Hank? I mean, I know you have been in this business for a long time, and you have probably seen cycles like this before. At what point do lenders maybe start pulling back on this easy availability of credit for subprime borrowers?
It's difficult to say exactly what that timing is for them, because I know they structure the deal somewhat differently. But at some point, when the losses start rolling in beyond our expectations or the value -- the residual value of the vehicle is not what they expected it to be. That's when the pullback continued. I feel, car sales, financing cars has been around forever, and I felt like that if these sort of things were viable, they would have already existed, and what we are seeing right now, are some offerings that weren't there before, and as Jeff mentioned, it has been a large part of this ultra low interest rate, that enables them to do that. So we are moving forward with or without the competition. As is our attitude certainly, we are continuing to put new stores out there, and with the thought that if there is pullback from some of this competition, well there's just that much more opportunity, and certainly the step-up for us, and even if it doesn't go away, and it's a little more sustainable, then certainly we know that particularly, in the smaller markets where we are, we have our niche and our need for those folks that want -- need the face to face service, which certainly represents the vast majority of the market for folks at this level. So anything, it's strictly to start our own speculation as to how sustainable or how long it will be out there. William Armstrong - C.L. King: Got it. Okay. Thanks very much.
Thank you. And our next question comes from the line of Vincent Matthews from (inaudible).
Good morning. All my questions have really been answered. I just have one on this GPS implementation. Is this something that has been tested elsewhere and other implement and just any customer feedback? I mean, I would think that, if all things were being equal, if I were buying a car, I would choose the guy who wasn't going to put a GPS monitor on my car. So --
That's a good question, and actually, we are kind of about the last ones to enter this market. Virtually, everyone who sells vehicles at our level, they have already offered it. And when these things first came out, we stayed out of it. We are very relationship driven. Much due in part to the comments you just made, the perception, but I can tell you that we have been rolling this out for several months. We have actually already sold a lot of vehicles with it on there, and we have had -- we've really had virtually no negative comments from our customers, it's a very commonplace. William Armstrong - C.L. King: Okay. I appreciate it very much. Thank you.
Thank you and our next question comes from the line of Daniel Furtado from Jefferies Company. Daniel Furtado - Jefferies: Good morning guys. Thank you for the opportunity.
Hello Daniel. Daniel Furtado - Jefferies: Good morning. Just a quick question, when you are looking at this -- I know it's a very rough number. But this 10% to 15% of customers that are, you know, kind of at risk of being poached or swayed by the competition? I mean, is your gut that this is the case of these customers "graduating" up to the next credit spectrum, or is it more that the competition is coming down into this spectrum?
A little of both. The customer graduating has always been a piece of the business, that means that they are improving themselves, develop their credit score, whenever they can move us somewhat. That's always been with us. I think that right now, its' a little different and not just into the qualifier piece of it, but they hear some of the offerings, and I think that the extremely long term links that some of the folks have been offered in the payment levels, are more attractive too, and obviously with all this said, obviously there's -- it's going deeper than it was a year ago, and certainly quite a bit more than two years on how deep they are willing to go. So obviously more customers do qualify. Daniel Furtado - Jefferies: Understood. And I mean, we have seen this a couple of times in the past. I remember, pre-crisis, there was a big (inaudible) extension that was going on through this space, maybe a spectrum or two higher than where you guys were at the time? And I believe, you held your line relatively well then, and I am just wondering, if you look at your pool data, are you seeing any differences in the vintage performance from, say like the past 12 or 18 months or so, compared to other post crisis vintages, or is there really any kind of -- anything you can glean off of that, as they do from vintages there?
Yeah, we don't really have good data from the past 10 years ago. But I can tell you that the default rates for our pool that have been placed in the last 10 months or so, are actually defaulting at a little lower rate than at this time last year. So we are quite pleased that out of the gate, those newer pools are actually performing quite nicely. Daniel Furtado - Jefferies: Great. Thanks for the color everybody.
Thank you. (Operator Instructions). Our next question comes from the line of Jordan Hymowitz from Philadelphia. Jordan Hymowitz - Philadelphia Financial: Thanks guys. First of all, what was the actual net charge-off dollar amount in the quarter?
It was $23,067,000. Jordan Hymowitz - Philadelphia Financial: 23.067, and what was the actual APR in the quarter?
The APR was 15%. [49]. Jordan Hymowitz - Philadelphia Financial: And what was the recovery rate in the quarter, on repossessed vehicles at --?
It's a little less than 30. Jordan Hymowitz - Philadelphia Financial: And that historically was like 35 right, so it's about 30 basis points of a difference?
Well not quite 35, it was in the low 30s. We are down a few points there. Jordan Hymowitz - Philadelphia Financial: And my second question is, you guys don't securitize, but have you noticed any change in the auto securitization market? In other words, because more and more people are securitizing subprime paper so successfully, the OC requirement to the cost of funds keeps coming down. In the past month or two, there has been a little bit of destruction in the debt capital markets. Has that affected the auto EVS market at all, which will indirectly benefit you, see what I am getting at?
Yeah, we haven't seen any of that yet, we'd like to think if rates do click up, that there would be some benefit down the road for us, but I don't think we have seen that yet. Jordan Hymowitz - Philadelphia Financial: But would it be a fair statement to say, is that if the auto EVS market, which is where most people of your competitive funding, has this, you as a portfolio [likely would] benefit?
Can you say that again, Jordan? Jordan Hymowitz - Philadelphia Financial: Almost everybody or a lot of people who compete against you, are securitizing the funding in the capital market versus on balance sheet, correct?
We think there is a fair amount of that, yes. Jordan Hymowitz - Philadelphia Financial: So, to the extent that the auto EVS market has issues, and they have to pull back a little bit, that would benefit you as a portfolio lender, correct? That's not happening, you are saying, but that would clearly be a positive?
That would be a positive, yes. Jordan Hymowitz - Philadelphia Financial: Okay. and final question, I am sorry about that, I think it was the JMP guy, who asked about the allowance at 21.5, which has been flat now, despite the provisions going up. How many quarters of provisions of the 24% level until you take that allowance off to match the provision levels? Because they have usually been guided (inaudible) close to in tandem?
Well the charge-off amount during any quarter is the total charge. There could be accounts charged off that are 42 months old. So the static pool of losses are running around at 25% net charge-off amount. So if you are eight or nine months in to a contract term and still have 21.5% reserved on a static basis, [lining up] around 25. Then that's one way to look at the fact that the 21.5% just makes sense, and then we got all the detailed calculations to support that also. Jordan Hymowitz - Philadelphia Financial: And the other way to think, if the number is 25 now, how high would this static pool losses have to be, to increase the reserve level?
I don't have an exact number there, I hope that's not part of our conversation in the next few quarters. We are working hard to keep the charge-offs down and we look at every quarter. Can't give you an exact amount there. Jordan Hymowitz - Philadelphia Financial: Thank you.
Thank you. (Operator Instructions). And we do have another question now from the line of Dan Mazur from Harvest Capital. Dan Mazur - Harvest Capital: Hi. Thanks for taking my question. Do you plan to install GPS devices in all the existing portfolio, or just on newly financed sales?
It will be rolled out on newly financed sales, we won't go back and install on any existing account. Dan Mazur - Harvest Capital: Okay. So the topic -- the comment on just using GPS, without question that's obviously just for kind of future -- is it just on the current vintages that are rolling out with it -- with that on it?
Exactly. Dan Mazur - Harvest Capital: Okay. Great. That's all I had.
Thank you. And we now have a follow-up from the line of Bill Armstrong from C.L. King. William Armstrong - C.L. King: Hi. Just one quick follow-up on the GPS. When the loan gets paid off, do you remove the device from the car?
And that's part of how we keep the costs down.
And we are hoping we can keep that costs down even lower than the amounts I mentioned earlier by reusing and really maximizing the minutes that we have. William Armstrong - C.L. King: Got it. Okay. Thanks.
Thank you. And I see no additional questions at this time.
All right, well thank you everyone for joining us this morning, and we look forward to talking with you again in the future. Thank you.
Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a good day.