AMERICAS CARMART INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal quarter ended: Commission file number:
JANUARY 31, 2003 0-14939

AMERICA'S CAR-MART, INC.
(Exact name of registrant as specified in its charter)

TEXAS 63-0851141
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1501 SOUTHEAST WALTON BLVD., SUITE 213, BENTONVILLE, ARKANSAS
(Address of principal executive offices)

72712
(Zip Code)

(479) 464-9944
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS AMERICA'S CAR-MART, INC.
CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial
statements.

2

CONSOLIDATED STATEMENTS OF OPERATIONS AMERICA'S CAR-MART, INC.
(UNAUDITED)

The accompanying notes are an integral part of these consolidated financial
statements.

3

CONSOLIDATED STATEMENTS OF CASH FLOWS AMERICA'S CAR-MART, INC.
(UNAUDITED)

The accompanying notes are an integral part of these consolidated financial
statements.

4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) AMERICA'S CAR-MART, INC.

A - ORGANIZATION AND BUSINESS

America's Car-Mart, Inc., a Texas corporation, ("Corporate" or the
"Company"), is a holding company that operates automotive dealerships through
its subsidiaries that focus exclusively on the "Buy Here/Pay Here" segment of
the used car market. References to the Company typically include the Company's
consolidated subsidiaries. The Company's operations are principally conducted
through its America's Car-Mart, Inc., an Arkansas corporation, ("Car-Mart of
Arkansas") and Colonial Auto Finance, Inc. ("Colonial") subsidiaries. Car-Mart
of Arkansas and Colonial are collectively referred to herein as "Car-Mart". As
of January 31, 2003 the Company operated 63 stores located primarily in small
cities throughout the South-Central United States. The Company provides
financing for substantially all of its customers, many of whom may not qualify
for conventional financing as a result of limited credit histories or past
credit problems.

During the prior fiscal year the Company made the decision to sell all of its
subsidiaries except Car-Mart, and relocate its corporate headquarters to
Bentonville, Arkansas where Car-Mart is based. As a result of this decision, in
May 2002 the Company sold its 50% interest in Precision IBC, Inc. ("Precision"),
a firm specializing in the sale and rental of intermediate bulk containers, for
$3.8 million in cash, and in July 2002 the Company sold its 80% interest in
Concorde Acceptance Corporation ("Concorde"), a prime and sub-prime mortgage
lender, for $3.0 million in cash. Upon the closing of the sale of Concorde, the
Company had disposed of all of its discontinued operations. The operating
results of (i) Concorde and (ii) Precision are included in discontinued
operations in the current period up through the date of sale. Discontinued
operations during the prior fiscal periods include the operating results of (i)
Concorde, (ii) Precision, and (iii) Smart Choice Automotive Group, Inc. ("Smart
Choice"), the Company's 70% owned subsidiary that was written-off in October
2001 (see Note K). Similarly, the assets and liabilities of Concorde and
Precision are included in "Assets of discontinued operations" and "Liabilities
of discontinued operations", respectively, in the accompanying consolidated
balance sheet at April 30, 2002.

B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended January 31, 2003 are not necessarily indicative of the
results that may be expected for the year ending April 30, 2003. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
April 30, 2002.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.

Finance Receivables and Allowance for Credit Losses

The Company originates installment sale contracts from the sale of used
vehicles at its dealerships. Finance receivables consist of contractually
scheduled payments from installment contracts net of unearned finance charges
and an allowance for credit losses. Unearned finance charges represent the
balance of interest income remaining from the capitalization of the total
interest to be earned over the term of the related installment contract.

The Company maintains an allowance for credit losses at a level it considers
sufficient to cover anticipated losses in the collection of its finance
receivables. The allowance for credit losses is based primarily upon historical
and recent credit loss experience, with consideration given to changes in loan
characteristics (i.e., average amount financed and term), delinquency levels,
collateral values, economic conditions, and underwriting and collection
practices. The allowance for credit losses is periodically reviewed by
management with any changes reflected in current operations. Although it is at
least reasonably possible that events or circumstances could occur in the future
that are not presently foreseen and actual credit losses may be materially
different from the recorded allowance for credit losses, the Company believes
that it has given appropriate consideration to all relevant factors and
reasonable assumptions in determining the allowance for credit losses.

Reclassifications

Certain prior year amounts in the accompanying financial statements have been
reclassified to conform to the fiscal 2003 presentation.

5

C - FINANCE RECEIVABLES

The Company originates installment sale contracts from the sale of used
vehicles at its dealerships. These installment sale contracts typically include
interest rates ranging from 6% to 19% per annum and provide for payments over
periods ranging from 12 to 30 months. The components of finance receivables as
of January 31, 2003 and April 30, 2002 are as follows:

Changes in the finance receivables allowance for credit losses for the nine
months ended January 31, 2003 and 2002 are as follows:

The Company's weighted average interest rate on its finance receivables for
the three and nine months ended January 31, 2003 and 2002 was as follows:

6

D - PROPERTY AND EQUIPMENT

A summary of property and equipment as of January 31, 2003 and April 30, 2002
is as follows:

E - ACCRUED LIABILITIES

A summary of accrued liabilities as of January 31, 2003 and April 30, 2002 is
as follows:

Changes in the Company's accrued severance liability from April 30, 2002 to
January 31, 2003 are as follows:

The severance liability pertains to the Company's decision to relocate its
corporate headquarters from Dallas, Texas to Bentonville, Arkansas where
Car-Mart is based. The initial severance liability of $2.6 million pertained to
eight Dallas based employees. Through January 31, 2003, four of such Dallas
based employees had been terminated and were paid their severance pay in full.

7

F - DEBT

A summary of debt as of January 31, 2003 and April 30, 2002 is as follows:

The Company's revolving credit facility is primarily collateralized by
finance receivables and inventory. Interest is payable monthly and the principal
balance is due at the maturity of the facility. The Company's revolving credit
facility contains various reporting and performance covenants including (i)
maintenance of certain financial ratios and tests, (ii) limitations on
borrowings from other sources, (iii) restrictions on certain operating
activities, and (iv) restrictions on the payment of dividends or distributions.
The amount available to be drawn under the Company's revolving credit facility
is a function of eligible finance receivables. Based upon eligible finance
receivables at January 31, 2003, the Company could have drawn an additional
$10.9 million under such facility.

G - WEIGHTED AVERAGE SHARES OUTSTANDING

Weighted average shares outstanding, which are used in the calculation of
basic and diluted earnings per share, are as follows for the periods ended
January 31, 2003 and 2002:

H - COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company has become a defendant in
various types of legal proceedings. Although the Company cannot determine at
this time the amount of the ultimate exposure from these ordinary course of
business lawsuits, if any, management, based on the advice of counsel, 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, results of operations or cash flows.

I - SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow disclosures for the nine months ended January 31, 2003
and 2002 are as follows:

8

J - BUSINESS SEGMENTS

Operating results and other financial data are presented for the continuing
operations of the Company by business segment for the three months ended January
31, 2003 and 2002. The segments include Car-Mart and Corporate operations. The
Company's continuing operations and other financial data by business segment for
the three months ended January 31, 2003 and 2002 are as follows (in thousands):

9

The Company's continuing operations and other financial data by business
segment for the nine months ended January 31, 2003 and 2002 are as follows (in
thousands):

10

K - DISCONTINUED OPERATIONS

In October 2001 the Company made the decision to sell all its subsidiaries
except Car-Mart, and relocate its corporate headquarters to Bentonville,
Arkansas where Car-Mart is based. This decision was based on management's desire
to separate the highly profitable and modestly leveraged operations of Car-Mart
from the operating losses or lower level of profitability and highly leveraged
operations of the Company's other subsidiaries. In addition, it was management's
belief that the Company's ownership of businesses in a variety of different
industries may have created confusion within the investment community, possibly
making it difficult for investors to analyze and properly value the Company's
common stock. In May 2002 the Company sold its remaining 50% interest in
Precision for $3.8 million in cash. In July 2002 the Company sold its 80%
interest in Concorde for $3.0 million in cash. As a result of these two sales,
the Company no longer has any discontinued operations.

As a result of the Company's decision, operating results from its non
Car-Mart subsidiaries have been included in discontinued operations for all
periods presented. Below is a summary of the number of months each of these
subsidiaries' operating results are included in discontinued operations of the
Company for the three and nine months ended January 31, 2003 and 2002:

A summary of the Company's discontinued operations for the three and nine
months ended January 31, 2003 and 2002 is as follows (in thousands):

11

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the Company's
consolidated financial statements and notes thereto appearing elsewhere in this
report.

FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. Certain information included in this
Quarterly Report on Form 10-Q contains, and other materials filed or to be filed
by the Company with the Securities and Exchange Commission (as well as
information included in oral statements or other written statements made or to
be made by the Company or its management) contain or will contain,
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933,
as amended. The words "believe," "expect," "anticipate," "estimate," "project"
and similar expressions identify forward-looking statements, which speak only as
of the date the statement was made. The Company undertakes no obligation to
publicly update or revise any forward-looking statements. Such forward-looking
statements are based upon management's current plans or expectations and are
subject to a number of uncertainties and risks that could significantly affect
current plans, anticipated actions and the Company's future financial condition
and results. As a consequence, actual results may differ materially from those
expressed in any forward-looking statements made by or on behalf of the Company
as a result of various factors. Uncertainties and risks related to such
forward-looking statements include, but are not limited to, those relating to
the continued availability of lines of credit for the Company's business, the
Company's ability to effectively underwrite and collect its installment loans,
changes in interest rates, competition, dependence on existing management,
adverse economic conditions (particularly in the State of Arkansas), changes in
tax laws or the administration of such laws and changes in lending laws or
regulations. Any forward-looking statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only as of the date
made.

OVERVIEW

America's Car-Mart, Inc., a Texas corporation, ("Corporate" or the
"Company"), is a holding company that operates automotive dealerships through
its subsidiaries that focus exclusively on the "Buy Here/Pay Here" segment of
the used car market. References to the Company typically include the Company's
consolidated subsidiaries. The Company's operations are principally conducted
through its America's Car-Mart, Inc., an Arkansas corporation, ("Car-Mart of
Arkansas") and Colonial Auto Finance, Inc. ("Colonial") subsidiaries. Car-Mart
of Arkansas and Colonial are collectively referred to herein as "Car-Mart". As
of January 31, 2003 the Company operated 63 stores located primarily in small
cities throughout the South-Central United States. The Company provides
financing for substantially all of its customers, many of whom may not qualify
for conventional financing as a result of limited credit histories or past
credit problems.

During the prior fiscal year the Company made the decision to sell all of its
subsidiaries except Car-Mart, and relocate its corporate headquarters to
Bentonville, Arkansas where Car-Mart is based. In May 2002 the Company sold its
50% interest in Precision IBC, Inc. ("Precision"), a firm specializing in the
sale and rental of intermediate bulk containers, for $3.8 million in cash, and
in July 2002 the Company sold its 80% interest in Concorde Acceptance
Corporation ("Concorde"), a prime and sub-prime mortgage lender, for $3.0
million in cash. Upon the closing of the sale of Concorde, the Company had
disposed of all of its discontinued operations. The operating results of (i)
Concorde and (ii) Precision are included in discontinued operations in the
current period up through the date of sale. Discontinued operations during the
prior fiscal periods include the operating results of (i) Concorde, (ii)
Precision, and (iii) Smart Choice Automotive Group, Inc. ("Smart Choice"), the
Company's 70% owned subsidiary that was written-off in October 2001 (see Note
K).

12

RESULTS OF CONTINUING OPERATIONS

Operating results are presented for the continuing operations of the Company
by business segment for the three and nine months ended January 31, 2003 and
2002. The segments include Car-Mart and Corporate operations. A summary of the
Company's continuing operations by business segment for the three and nine
months ended January 31, 2003 and 2002 is as follows:

CONSOLIDATED
(In Thousands)

THREE MONTHS ENDED JANUARY 31, 2003 VS. THREE MONTHS ENDED JANUARY 31, 2002

Revenues increased $7.4 million, or 23.9%, for the three months ended January
31, 2003 as compared to the same period of the prior fiscal year. The increase
was principally the result of (i) revenue growth from stores that operated a
full three months in both periods ($4.8 million, or 17.1%), (ii) revenue growth
from stores opened during the three months ended January 31, 2002 or stores that
added a satellite location after October 31, 2001 ($1.0 million), and (iii)
revenues from stores opened after January 31, 2002 ($1.6 million).

Pretax income increased $3.6 million for the three months ended January 31,
2003 as compared to the same period of the prior fiscal year. The increase was
principally the result of (i) an increase in Car-Mart's pretax income ($.8
million) stemming from an increase in revenues, and (ii) a reduction in
Corporate's pretax loss ($2.8 million). The pretax loss at Corporate decreased
as a result of (i) the prior fiscal period including a $2.3 million non-cash
charge related to stock option compensation, and (ii) a $.4 million reduction in
selling, general and administrative expenses in the current fiscal period
stemming from the Company's decision to relocate its corporate headquarters to
Bentonville, Arkansas where Car-Mart is based. The stock option based
compensation charge pertains to the Company's 1997 stock option plan that
contained a "cashless" exercise feature. Due to such cashless feature, options
granted under the plan were characterized under generally accepted accounting
principles as variable options. This resulted in compensation charges to reflect
changes in the market value of the Company's common stock. In order to avoid
future stock option based compensation charges or credits, effective May 1, 2002
the Company rescinded the cashless exercise provisions of its 1997 Plan.

NINE MONTHS ENDED JANUARY 31, 2003 VS. NINE MONTHS ENDED JANUARY 31, 2002

Revenues increased $19.4 million, or 20.9%, for the nine months ended January
31, 2003 as compared to the same period of the prior fiscal year. The increase
was principally the result of (i) revenue growth from stores that operated a
full nine months in both periods ($11.7 million, or 15.0%), (ii) revenue growth
from stores opened during the nine months ended January 31, 2002 or stores that
added a satellite location after April 30, 2001 ($4.0 million), and (iii)
revenues from stores opened after January 31, 2002 ($4.1 million).

Pretax income increased $13.1 million for the nine months ended January 31,
2003 as compared to the same period of the prior fiscal year. The increase was
principally the result of (i) an increase in Car-Mart's pretax income ($3.3
million) stemming from an increase in revenues and lower costs and expenses as a
percentage of sales, and (ii) a reduction in Corporate's pretax loss ($9.8
million). The pretax loss at Corporate decreased principally as a result of the
prior fiscal period including (i) a $2.7 million restructuring charge, (ii) a
$3.9 million write-down of investments and equipment, and (iii) a $2.3 million
non-cash charge related to stock option compensation, with no comparable charge
or write-down in the current fiscal period. Corporate's pretax loss also
decreased as a result of a $.5 million reduction in selling, general and
administrative expenses in the current fiscal period stemming from the Company's
decision to relocate its corporate headquarters to Bentonville, Arkansas where
Car-Mart is based.

The restructuring charge pertains to severance and office closing costs
related to the Company's decision to relocate its corporate headquarters to
Bentonville, Arkansas where Car-Mart is based. The write-down of investments and
equipment principally pertains to two emerging technology / Internet investments
made in a prior fiscal year that were deemed to be impaired at October 31, 2001.
The stock option based compensation charge pertains to the Company's 1997 stock
option plan that contained a "cashless" exercise feature. Due to such cashless
feature, options granted under the plan were characterized under generally
accepted accounting principles as variable options. This resulted in
compensation charges to reflect changes in the market value of the Company's
common stock. In order to avoid future stock option based compensation charges
or credits, effective May 1, 2002 the Company rescinded the cashless exercise
provisions of its 1997 Plan.

13

CAR-MART
(Operating Results, Dollars in Thousands)

THREE MONTHS ENDED JANUARY 31, 2003 VS. THREE MONTHS ENDED JANUARY 31, 2002

Revenues increased $7.5 million, or 24.3%, for the three months ended January
31, 2003 as compared to the same period of the prior fiscal year. The increase
was principally the result of (i) revenue growth from stores that operated a
full three months in both periods ($4.8 million, or 17.1%), (ii) revenue growth
from stores opened during the three months ended January 31, 2002 or stores that
added a satellite location after October 31, 2001 ($1.0 million), and (iii)
revenues from stores opened after January 31, 2002 ($1.6 million).

Cost of sales as a percentage of sales increased 2.6% to 53.2% for the three
months ended January 31, 2003 from 50.6% in the same period of the prior fiscal
year. The increase was principally the result of an increase in the average
retail sales price of vehicles sold. The Company utilizes a standardized pricing
model in establishing the retail sales price of its vehicles. The selling price
of a particular vehicle is a function of the cost of acquiring that vehicle.
Pursuant to the pricing model, gross margins, on a percentage basis, are set at
lower levels for vehicles with a higher cost. While the dollar amount of profit
from selling a higher priced vehicle is generally greater than the dollar amount
of profit from selling a lower priced vehicle, on a percentage basis, gross
margins decrease as the selling price increases.

Selling, general and administrative expense as a percentage of sales
increased .7% to 18.5% for the three months ended January 31, 2003 from 17.8% in
the same period of the prior fiscal year. The increase was principally the
result of (i) changing the Company's store level staffing policy such that more
associates are employed at a store for the same number of active customer
accounts, (ii) creating several new management positions at Car-Mart's general
office to assist in managing the Company's growing business, and (iii) higher
insurance costs.

Provision for credit losses as a percentage of sales decreased 2.0% to 18.5%
for the three months ended January 31, 2003 from 20.5% in the same period of the
prior fiscal year. The decrease was the result of lower charge-offs as a
percentage of sales, a reduction in the allowance for credit losses as a
percentage of the finance receivable principal balance, increased staffing at
the store and general office levels, and improvements in its underwriting and
collection practices (in particular, the credit application process). Around the
middle of the prior fiscal year the Company began creating and filling a number
of new positions at Car-Mart's general office including the position of regional
account director. Regional account directors are responsible for supervising and
managing store level collection personnel.

As a result of the improved collections mentioned above and the Company's
belief that the current results are expected to continue, the allowance for
credit losses as a percentage of the finance receivable principal balance has
been decreased from approximately 18.50% at April 30, 2002 to 18.25% at January
31, 2003.

14

Interest expense as a percentage of sales decreased .6% to 1.4% for the three
months ended January 31, 2003 from 2.0% in the same period of the prior fiscal
year. The decrease was principally the result of (i) a decrease in the prime
interest rate (i.e., interest charged on the Company's revolving credit facility
fluctuates with the prime interest rate), and (ii) a lower level of borrowings
relative to the sales volume.

NINE MONTHS ENDED JANUARY 31, 2003 VS. NINE MONTHS ENDED JANUARY 31, 2002

Revenues increased $19.8 million, or 21.4%, for the nine months ended January
31, 2003 as compared to the same period of the prior fiscal year. The increase
was principally the result of (i) revenue growth from stores that operated a
full nine months in both periods ($11.7 million, or 15.0%), (ii) revenue growth
from stores opened during the nine months ended January 31, 2002 or stores that
added a satellite location after April 30, 2001 ($4.0 million), and (iii)
revenues from stores opened after January 31, 2002 ($4.1 million).

Cost of sales as a percentage of sales was 52.9% for each of the nine months
ended January 31, 2003 and 2002.

Selling, general and administrative expense as a percentage of sales
increased 1.6% to 17.6% for the nine months ended January 31, 2003 from 16.0% in
the same period of the prior fiscal year. The increase was principally the
result of (i) changing the Company's store level staffing policy such that more
associates are employed at a store for the same number of active customer
accounts, (ii) creating several new management positions at Car-Mart's general
office to assist in managing the Company's growing business, and (iii) higher
insurance costs.

Provision for credit losses as a percentage of sales decreased 1.8% to 18.4%
for the nine months ended January 31, 2003 from 20.2% in the same period of the
prior fiscal year. The decrease was the result of lower charge-offs as a
percentage of sales, a reduction in the allowance for credit losses as a
percentage of the finance receivable principal balance, increased staffing at
the store and general office levels, and improvements in its underwriting and
collection practices (in particular, the credit application process). Around the
middle of the prior fiscal year the Company began creating and filling a number
of new positions at Car-Mart's general office including the position of regional
account director. Regional account directors are responsible for supervising and
managing store level collection personnel.

As a result of the improved collections mentioned above and the Company's
belief that the current results are expected to continue, the allowance for
credit losses as a percentage of the finance receivable principal balance has
been decreased from approximately 18.50% at April 30, 2002 to 18.25% at January
31, 2003.

Interest expense as a percentage of sales decreased 1.0% to 1.4% for the nine
months ended January 31, 2003 from 2.4% in the same period of the prior fiscal
year. The decrease was principally the result of (i) a decrease in the prime
interest rate (i.e., interest charged on the Company's revolving credit facility
fluctuates with the prime interest rate), and (ii) a lower level of borrowings
relative to the sales volume.

15

CORPORATE
(Dollars in Thousands)

NM - not meaningful

THREE MONTHS ENDED JANUARY 31, 2003 VS. THREE MONTHS ENDED JANUARY 31, 2002

Pretax loss decreased $2.8 million, or 91.1%, for the three months ended
January 31, 2003 as compared to the same period of the prior fiscal year. The
decrease was principally the result of (i) a $.4 million reduction in selling,
general and administrative expense, and (ii) the prior fiscal period including a
$2.3 million non-cash charge related to stock option compensation, with no
comparable charge or write-down in the current fiscal period. The stock option
based compensation charge pertains to the Company's 1997 stock option plan that
contained a "cashless" exercise feature. Due to such cashless feature, options
granted under the plan were characterized under generally accepted accounting
principles as variable options. This resulted in compensation charges to reflect
changes in the market value of the Company's common stock. In order to avoid
future stock option based compensation charges or credits, effective May 1, 2002
the Company rescinded the cashless exercise provisions of its 1997 Plan.

Selling, general and administrative expense decreased $.4 million to $.4
million for the three months ended January 31, 2003 from $.8 million in the same
period of the prior fiscal year. The decrease was principally the result of
lower compensation and related costs resulting from the Company's decision to
relocate its corporate headquarters to Bentonville, Arkansas where Car-Mart is
based.

Interest expense decreased $.2 million as a result of Corporate paying off
its debt in November 2002.

NINE MONTHS ENDED JANUARY 31, 2003 VS. NINE MONTHS ENDED JANUARY 31, 2002

Interest income decreased $.3 million to $.4 million for the nine months
ended January 31, 2003 from $.7 million in the same period of the prior fiscal
year. The decrease was principally due to a lower level of notes receivable
outstanding during the nine months ended January 31, 2003 as compared to the
same period of the prior fiscal year.

Pretax loss decreased $9.8 million, or 86.6%, for the nine months ended
January 31, 2003 as compared to the same period of the prior fiscal year. The
decrease was principally the result of the prior fiscal period including (i) a
$2.7 million restructuring charge, (ii) a $3.9 million write-down of investments
and equipment, and (iii) a $2.3 million non-cash charge related to stock option
compensation, with no comparable charge or write-down in the current fiscal
period. The restructuring charge pertains to severance and office closing costs
related to the Company's decision to relocate its corporate headquarters to
Bentonville, Arkansas where Car-Mart is based. The write-down of investments and
equipment principally pertains to two emerging technology / Internet investments
made in a prior fiscal year that were deemed to be impaired at October 31, 2001.
The stock option based compensation charge pertains to the Company's 1997 stock
option plan that contained a "cashless" exercise feature. Due to such cashless
feature, options granted under the plan were characterized under generally
accepted accounting principles as variable options. This resulted in
compensation charges to reflect changes in the market value of the Company's
common stock. In order to avoid future stock option based compensation charges
or credits, effective May 1, 2002 the Company rescinded the cashless exercise
provisions of its 1997 Plan.

16

Selling, general and administrative expense decreased $.5 million to $1.7
million for the nine months ended January 31, 2003 from $2.2 million in the same
period of the prior fiscal year. The decrease was principally the result of
lower compensation and related costs resulting from the Company's decision to
relocate its corporate headquarters to Bentonville, Arkansas where Car-Mart is
based.

Interest expense decreased $.5 million as a result of Corporate substantially
reducing its debt.

RESULTS OF DISCONTINUED OPERATIONS

Operating results are presented below for the discontinued operations of the
Company for the three and nine months ended January 31, 2003 and 2002. These
discontinued operations include the following subsidiaries for the periods
indicated:

NINE MONTHS ENDED JANUARY 31, 2003 VS. NINE MONTHS ENDED JANUARY 31, 2002

Revenues decreased $97.0 million, or 96.9%, for the nine months ended January
31, 2003 as compared to the same period in the prior fiscal year. The decrease
was principally the result of the removal of Smart Choice from the Company's
discontinued operations. Effective October 31, 2001, the Company wrote-off its
investment in Smart Choice and thereafter the Company ceased to include Smart
Choice's operating results in its discontinued operations. In March 2002, the
Company sold its investment in Smart Choice for a nominal sum.

Pretax income for the Company's discontinued operations was $.8 million for
the nine months ended January 31, 2003 as compared to a $(24.2) million pretax
loss for the same period in the prior fiscal year. The $24.9 million improvement
was principally the result of not including Smart Choice in the Company's
discontinued operations during the nine months ended January 31, 2003.

17

LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth certain summarized historical information with
respect to the Company's statements of cash flows (in thousands):

At January 31, 2003 the Company had (i) $.6 million of cash on hand and had
an additional $10.9 million of availability on its $39.5 million revolving
credit facility, and (ii) $.6 million of other receivables.

On a short-term basis, the Company's principal sources of liquidity include
(i) income from continuing operations, (ii) borrowings from its revolving credit
facility, and (iii) other receivables. On a longer-term basis, the Company
expects its principal sources of liquidity to include (i) income from continuing
operations, and (ii) borrowings from a revolving credit facility. Further, while
the Company has no present plans to issue debt or equity securities, the Company
believes, if necessary, it could raise additional capital through the issuance
of such securities.

The Company expects to use cash to (i) grow its finance receivables portfolio
in direct proportion to the expected growth in its sales levels, (ii) purchase
property and equipment in connection with opening new stores and refurbishing
existing stores, and, to the extent excess cash is available, (iii) reduce debt.
In addition, from time to time the Company may use cash to repurchase its common
stock.

The Company expects to fund the majority of its growth from income generated
from operations. Further, the Company expects its financial leverage ratio to
decline for the foreseeable future, as net income builds equity at a faster rate
than any increase in debt.

The Company's revolving credit facility matures in April 2004. The Company
expects that it will be able to renew or refinance its revolving credit facility
on or before the scheduled maturity date. The Company believes it will have
adequate liquidity to satisfy its capital needs for the foreseeable future.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires the Company to
make estimates and assumptions in determining the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from the Company's
estimates. The Company believes the most significant estimate made in the
preparation of the accompanying consolidated financial statements relates to the
determination of its allowance for credit losses. Below is a discussion of the
Company's accounting policy concerning such allowance. Other accounting policies
are disclosed in Note B in this report and in Note B of the Company's
consolidated financial statements which are included in its annual report on
Form 10-K for the year ended April 30, 2002.

18

The Company maintains an allowance for credit losses at a level it considers
sufficient to cover anticipated losses in the collection of its finance
receivables. The allowance for credit losses is based primarily upon historical
and recent credit loss experience, with consideration given to changes in loan
characteristics (i.e., average amount financed and term), delinquency levels,
collateral values, economic conditions, and underwriting and collection
practices. The allowance for credit losses is periodically reviewed by
management with any changes reflected in current operations. Although it is at
least reasonably possible that events or circumstances could occur in the future
that are not presently foreseen and actual credit losses may be materially
different from the recorded allowance for credit losses, the Company believes
that it has given appropriate consideration to all relevant factors and
reasonable assumptions in determining the allowance for credit losses.

SEASONALITY

The Company's automobile sales and finance business is seasonal in nature.
The Company's third fiscal quarter (November through January) is historically
the slowest period for car and truck sales. Many of the Company's operating
expenses such as administrative personnel, rent and insurance are fixed and
cannot be reduced during periods of decreased sales. Conversely, the Company's
fourth fiscal quarter (February through April) is historically the busiest time
for car and truck sales as many of the Company's customers use income tax
refunds as a down payment on the purchase of a vehicle. Further, the Company
experiences seasonal fluctuations in its finance receivable credit losses. As a
percentage of sales, the Company's first and fourth fiscal quarters tend to have
lower credit losses (averaging around 17.4% over the last six years), while its
second and third fiscal quarters tend to have higher credit losses (averaging
about 19.3% over the last six years).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk on its financial instruments from
changes in interest rates. In particular, the Company has exposure to changes in
the federal primary credit rate and the prime interest rate of its lender. The
Company does not use financial instruments for trading purposes or to manage
interest rate risk. 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. As described
below, a decrease in market interest rates would generally have an adverse
effect on the Company's profitability.

Financial instruments consist of fixed rate finance receivables and variable
rate notes payable. The Company's finance receivables generally bear interest at
fixed rates ranging from 6% to 19%. These finance receivables generally have
remaining maturities from one to 30 months. The Company's borrowings contain
variable interest rates that fluctuate with market interest rates (i.e., the
rate charged on the Company's revolving credit facility fluctuates with the
prime interest rate of its lender). However, interest rates charged on finance
receivables originated in the State of Arkansas are limited to the federal
primary credit rate (2.25% at January 31, 2003) plus 5.0%. Typically, the
Company charges interest on its Arkansas loans at or near the maximum rate
allowed by law. Thus, while the interest rates charged on the Company's loans do
not fluctuate once established, new loans originated in Arkansas are set at a
spread above the federal primary credit rate which does fluctuate. At January
31, 2003 approximately 68% of the Company's finance receivables were originated
in Arkansas. Assuming that this percentage is held constant for future loan
originations, the long-term effect of decreases in the federal primary credit
rate would generally have a negative effect on the profitability of the Company.
This is the case because the amount of interest income lost on Arkansas
originated loans would likely exceed the amount of interest expense saved on the
Company's variable rate borrowings. The initial impact on profitability
resulting from a decrease in the federal primary credit rate is positive, as the
immediate interest expense savings would outweigh the loss of interest income on
new loan originations. However, as the amount of new loans originated at the
lower interest rate increases to an amount in excess of the amount of variable
interest rate borrowings, the effect on profitability would become negative.

The table below illustrates the estimated impact that hypothetical changes in
the federal primary credit rate would have on the Company's continuing pretax
earnings. The calculations assume (i) the increase or decrease in the federal
primary credit rate remains in effect for two years, (ii) the increase or
decrease in the federal primary credit rate results in a like increase or
decrease in the rate charged on the Company's variable rate borrowings, (iii)
the principal amount of finance receivables ($106.9 million) and variable
interest rate borrowings ($28.6 million), and the percentage of Arkansas
originated finance receivables (68%), remain constant during the periods, and
(iv) the Company's historical collection and charge-off experience continues
throughout the periods.

A similar calculation and table was prepared as of April 30, 2002. That
calculation and table was materially consistent with the information provided
above.

19

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer, the
Company has evaluated the effectiveness of the design and operation of its
disclosure controls and procedures within 90 days of the filing date of this
quarterly report, and, based on their evaluation, the Chief Executive Officer
and Chief Financial Officer have concluded that these disclosure controls and
procedures are effective. There were no significant changes in the Company's
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of their evaluation.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

99.1 Form of Certification Pursuant to Section 906 of
Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K:

During the fiscal quarter ended January 31, 2003 the Company
did not file any reports on Form 8-K.

20

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

AMERICA'S CAR-MART, INC.

By: /s/ Tilman J. Falgout, III
--------------------------------
Tilman J. Falgout, III
Chief Executive Officer
(Principal Executive Officer)

Dated: March 6, 2003 By: /s/ Mark D. Slusser
--------------------------------
Mark D. Slusser
Chief Financial Officer, Vice
President Finance and Secretary
(Principal Financial and
Accounting Officer)

21

CERTIFICATION

I, Tilman J. Falgout III, Chief Executive Officer of America's
Car-Mart, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of America's
Car-Mart, Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: March 6, 2003 /s/ Tilman J. Falgout, III
--------------------------------
Tilman J. Falgout, III
Chief Executive Officer

22

CERTIFICATION

I, Mark D. Slusser, Chief Financial Officer, Vice President Finance and
Secretary of America's Car-Mart, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of America's
Car-Mart, Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: March 6, 2003 /s/ Mark D. Slusser
--------------------------------
Mark D. Slusser
Chief Financial Officer, Vice
President Finance and Secretary

23

AMERICA'S CAR-MART, INC.

EXHIBIT INDEX