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FORM 10-K

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

AMERICA’S CAR-MART, INC.

1501 Southeast Walton Blvd., Suite 213, Bentonville, Arkansas

72712

(479) 464-9944

   Securities registered pursuant to Section 12(b) of the Act: None

   Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 par share

   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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

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

   As of the last business day of the registrant’s most recently completed second fiscal quarter (October 31, 2002), the aggregate market value of the registrant’s common stock (based upon a closing price of $10.44) held by non-affiliates (all persons other than executive officers, directors and holder’s of 10% or more of the Registrant’s common stock) (5,068,391 shares) was $52,914,002.

   As of July 22, 2003 there were 7,390,308 shares of the Registrant’s common stock outstanding.

Documents Incorporated by Reference:

  Portions of the Registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held in 2003 are incorporated by reference into Part III of this report, with the exception of information regarding executive officers required under Item 10 of Part III, which information is included in Part I, Item 1.

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PART I

Forward-Looking Statements

   This Annual Report on Form 10-K contains numerous “forward-looking statements” within the meaning of the Private Litigation Securities Reform Act of 1995. These forward looking statements address the Company’s future objectives, plans and goals, as well as the Company’s intent, beliefs and current expectations regarding future operating performance, and can generally be identified by words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” and other similar words or phrases. Specific events addressed by these forward looking statements include, but are not limited to:

	•	opening new stores at the rate of 8% to 14% per year;
	•	financing growth primarily from profits;
	•	the continuation of Car-Mart’s consistency in earnings and history of growth;
	•	having adequate liquidity to satisfy its capital needs;
	•	the continuation of same store revenue growth; and
	•	the Company’s business and growth strategies.

   These forward-looking statements are based on the Company’s current estimates and assumptions and involve various risks and uncertainties. As a result, you are cautioned that these forward looking statements are not guarantees of future performance, and that actual results could differ materially from those projected in these forward looking statements. Factors which may cause actual results to differ materially from the Company’s projections include those risks described elsewhere in this report, as well as:

	•	the availability of a credit facility for the Company’s business;
	•	the Company’s ability to effectively underwrite and collect its loans;
	•	competition;
	•	dependence on existing management;
	•	changes in lending laws or regulations; and
	•	general economic conditions in the markets in which the Company operates, including fluctuations in employment levels.

Business and Organization

   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 two operating subsidiaries, America’s Car-Mart, Inc., an Arkansas corporation, (“Car-Mart of Arkansas”) and Colonial Auto Finance, Inc. (“Colonial”). Car-Mart of Arkansas and Colonial are collectively referred to herein as “Car-Mart”. As of April 30, 2003 the Company operated 64 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 would not qualify for conventional financing as a result of limited credit histories or past credit problems.

   In October 2001, the Company made the decision to sell all of its operating subsidiaries except Car-Mart, and relocate its corporate headquarters to Bentonville, Arkansas where Car-Mart is based. As a result of this decision, all of the Company’s other operating subsidiaries were sold and their operating results have been included in discontinued operations. The Company sold its last remaining discontinued operation in July 2002. Discontinued operations are described in Note R in the accompanying consolidated financial statements.

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Business Strategy

   In general, it is the Company’s objective to continue to expand its Buy Here/ Pay Here used car operation using the same business model that has been developed by Car-Mart over the last 22 years. This business strategy focuses on:

	•	Collecting Customer Accounts. Collecting customer accounts is perhaps the single most important aspect of operating a Buy Here/ Pay Here used car business and is a focal point for store level and general office personnel on a daily basis. Periodically, the Company measures and monitors the collection results of its stores using internally developed delinquency and repossession standards. Substantially all associate incentive compensation is tied directly or indirectly to collection results. Over the last eight years, Car-Mart’s annual credit losses as a percentage of sales have been relatively stable ranging from a low of 17.0% to a high of 20.2%. The Company believes that it can continue to be successful provided it maintains its credit losses within or below its historical credit loss range.
	•	Maintaining a Decentralized Operation. The Company’s dealerships will continue to operate on a decentralized basis. Each store is responsible for buying and selling its own vehicles, making credit decisions and collecting the loans it originates in accordance with established policies and procedures. Most customers make their payments in person at one of the Company’s dealerships. This decentralized structure is complemented by the oversight and involvement of general office management and the maintenance of centralized financial controls, including an internal compliance staff.
	•	Controlled Organic Growth. The Company will continue to expand its operations by increasing unit sales at existing dealerships and opening new dealerships. The Company expects to open new stores at the rate of 8% to 14% per annum for the foreseeable future. The Company has no plans to acquire existing dealerships of other Buy Here/ Pay Here operators.
	•	Selling Basic Transportation. The Company will continue to focus on selling basic and affordable transportation to its customers. In general, the Company does not sell luxury cars, sports cars or SUV’s. The average sales price of retail vehicles sold by the Company during fiscal 2003 was approximately $6,400. By selling vehicles in this price range the Company is able to keep the terms of its installment sales contracts short (average of 24 months), while requiring relatively low payments.
	•	Operating in Smaller Communities. The majority of the Company’s dealerships are located in cities and towns with a population of 50,000 or less (median of approximately 27,000). The Company believes by operating in smaller communities it experiences better collection results as its customers are more stable in their employment and place of residence, and are easier to locate in the event their loan becomes delinquent. Further, the Company believes that operating costs, such as salaries, rent and advertising, are lower in smaller communities than in major metropolitan areas.
	•	Promoting from Within. It has been the Company’s practice to attempt to hire honest and hardworking individuals to fill entry level positions, nurture and develop these associates, and attempt to fill the vast majority of its managerial positions from within the Company. By hiring individuals at the entry level, the Company believes it is better able to train its associates in the Car-Mart way of doing business, maintain the Company’s unique culture and develop the loyalty of its associates.
	•	Cultivating Customer Relationships. The Company believes that developing and maintaining a relationship with its customers is critical to the success of the Company. Approximately 40% of sales at mature stores are made to repeat customers, and an additional 10% to 15% of sales result from customer referrals. By developing a personal relationship with its customers the Company believes it is in a better position to assist a customer, and the customer is more likely to cooperate with the Company, should the customer experience financial difficulty during the term of his or her installment loan with the Company. The Company is in a position to cultivate these relationships as the majority of its customers make their payments in person at one of the Company’s dealerships on a weekly or bi-weekly basis.

Business Strengths

   The Company believes it possesses a number of strengths, or advantages, that distinguish it from most of its competitors. These business strengths include:

	•	Experienced and Incentivized Management. Car-Mart’s senior management team has an average tenure with the Company of 19 years. For stores opened three or more years, the average store manager tenure is 11 years. Each store manager is compensated, at least in part (some entirely), based upon the net income of his or her store. A significant portion of the compensation of Car-Mart senior management is incentive based.
	•	Proven Business Practices. The Company’s operations are highly structured. While stores are operated on a decentralized basis, the Company has established policies, procedures and business practices for virtually every aspect of a store’s operation. Detailed operating manuals are available to assist the store manager and office and collections personnel in performing their daily tasks. As a result, each store is operated in a uniform manner. Further, general office personnel monitor the stores’ operations through weekly

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		visits and a number of daily, weekly and monthly communications and reports. For the fiscal year ended April 30, 2003, each of the Company’s stores operated profitably.
	•	Low Cost Operator. The Company has structured its store and general office operations to minimize operating costs. The number of associates employed at the store level is dictated by the number of active accounts each store services. Associate compensation is standardized for each store position. Other operating costs are closely monitored and scrutinized. Technology is utilized to maximize efficiency. The Company believes its operating costs as a percentage of revenue, or per unit sold, are among the lowest in the industry.
	•	Well Capitalized / Limited External Capital Required for Growth. As of April 30, 2003, the Company’s debt to equity ratio was .4 to 1.0, which the Company believes is lower than the majority of its competitors. Further, the Company believes it can fund the majority of its planned growth from net income generated from operations. Of the external capital needed to fund its growth, the Company plans to draw on its existing revolving credit facility, or a renewal or replacement of such facility.
	•	Significant Expansion Opportunities. As of April 30, 2003, the Company operated 64 stores in seven states, with 33 of these stores located in Arkansas. The Company targets smaller communities to locate its dealerships (i.e., populations from 20,000 to 50,000), but has had success in medium-sized cities such as Tulsa, Oklahoma and Little Rock, Arkansas. The Company believes there are numerous suitable communities within the seven states in which the Company currently operates to satisfy anticipated store growth for the next several years. During fiscal 2004, the Company plans to add dealership locations principally in Texas.
	•	History of Growth and Consistency in Earnings. Over the last seven fiscal years Car-Mart has increased its revenues and profits at compound annual growth rates of 19.9% and 21.4%, respectively. All of Car-Mart’s growth has been organic, that is through the opening of new stores and increasing revenues and earnings at existing stores. Over the last eight years Car-Mart’s net income as a percentage of revenue has been fairly consistent. In seven of the last eight years, net income as a percentage of revenue has ranged between 8.6% and 9.6%. We expect Car-Mart’s consistency in earnings and history of growth to continue.

Operations

	•	Store Organization. Stores are operated on a decentralized basis. Each store is responsible for the buying and selling of vehicles, making credit decisions, and servicing and collecting the installment loans it originates. Stores also maintain their own records and make daily deposits. Store-level financial statements are prepared by the general office on a monthly basis. Depending on the number of active accounts, a store may have as little as two or as many as 20 associates employed at that location. Associate positions at a large store may include a store manager, assistant store manager, manager trainee, office manager, assistant office manager, service manager, buyer, collections personnel, salesmen and lot attendants. Stores are open Monday through Saturday from 9:00 a.m. to 6:00 p.m. The Company has both regular and satellite stores. Satellite stores are similar to regular stores, except that they tend to be smaller, sell fewer vehicles and their financial performance is not captured in a stand alone financial statement, but rather is included in the financial results of the sponsoring regular store.
	•	Store Location and Facilities. Below is a summary of stores opened during the fiscal years ended April 30, 2003, 2002 and 2001:

	Below is a summary of store locations by state as of April 30, 2003, 2002 and 2001:

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Stores are typically located in smaller communities. As of April 30, 2003, approximately 75% of the Company’s stores were located in cities with populations of less than 50,000. Stores are located on leased or owned property between one and three acres in size. When opening a new store the Company will typically use an existing structure on the property to conduct business, or purchase a facility while business at the new location develops. Once the store is well established, the Company often will construct its prototype store facility of 4,500 square feet at an average cost of $250,000.

	•	Purchasing. The Company purchases vehicles primarily through wholesalers and new car dealers. Occasionally the Company will purchase vehicles from auctions. In general, the Company has not experienced significant difficulty in locating or purchasing vehicles for its dealerships. The majority of vehicle purchasing is performed by the Company’s buyers, although certain store managers are authorized to purchase vehicles. On average, a buyer will purchase vehicles for three stores. Buyers report to the store manager, or managers, for whom they buy. Buyers also report to a purchasing director who monitors the quantity and quality of vehicles purchased, and compares the cost of similar vehicles purchased among different buyers.

Generally, the Company’s buyers purchase vehicles between four and ten years of age with 60,000 to 125,000 miles, and pay between $1,500 and $5,000 per vehicle. The Company focuses on providing basic transportation to its customers. The Company generally does not purchase sports or luxury cars, or sport utility vehicles. Some of the more popular vehicles the Company sells include the Ford Taurus and Escort, Chevrolet Lumina and Cavalier, Dodge Neon, Pontiac Grand Am and Oldsmobile Cutlass. The Company also sells a number of trucks. Buyers inspect and test-drive every vehicle they purchase. Buyers attempt to purchase vehicles that require little or no repair as the Company has limited facilities to repair or recondition vehicles.

	•	Selling, Marketing and Advertising. Stores generally maintain an inventory of 15 to 75 vehicles depending on the maturity of the dealership. Inventory turns over approximately 16 times each year. The selling price of the Company’s vehicles typically ranges between $2,500 and $8,500, with an average of approximately $6,400. Selling is done principally by the store manager, assistant manager, manager trainee or sales associate. Sales associates are paid a commission for sales that they make in addition to an hourly wage. Sales are made on an “as is” basis; however, customers are given an option to purchase a four month or 4,000 mile service contract for $345 which covers certain vehicle components and assemblies. For covered components and assemblies, the Company coordinates service with third party service centers with which the Company typically has previously negotiated labor rates and mark-up percentages on parts. The majority of the Company’s customers elect to purchase a service contract when purchasing a vehicle.

	The Company’s objective is to offer its customers basic transportation at a fair price and treat each customer in such a manner as to earn his or her repeat business. The Company attempts to build a positive reputation in each community where it operates and generate new business from such reputation as well as from customer referrals. Approximately 10% to 15% of the Company’s sales result from customer referrals. The Company recognizes repeat customers with silver, gold and platinum plaques representing the purchase of five, ten and fifteen vehicles, respectively. These plaques are prominently displayed at the dealership where the vehicles were purchased. For mature dealerships, approximately 40% of their sales are to repeat customers.
	The Company primarily advertises in local newspapers, on billboards and on the radio. In addition, periodically the Company conducts promotional sales campaigns in order to increase sales.

	•	Underwriting and Finance. The Company provides financing for substantially all of its customers who purchase a vehicle at one of its stores. The Company does not provide financing to others, nor does it purchase retail installment contracts originated by others. The Company’s installment sales contracts typically include down payments ranging from 0% to 17% (average of 7%), terms ranging from 12 months to 36 months (average of 24 months), annual interest charges ranging from 6% to 19% (average of 10%). The Company requires that payments be made on a weekly, bi-weekly, semi-monthly or monthly basis to coincide with the day the customer is paid by his or her employer. Upon the customer and the Company reaching a preliminary agreement as to financing terms, the Company obtains a credit application from the customer which includes information regarding employment, residence and credit history, personal references and a detailed budget itemizing the customer’s monthly income and expenses. Certain information is then verified by Company personnel. After the verification process, the store manager makes the decision to accept, reject, or modify (perhaps obtain a greater down payment or require an acceptable co-buyer) the proposed transaction. In general, the store manager attempts to assess the stability and character of the applicant. The store manager who makes the credit decision is ultimately responsible for collecting the loan, and his or her compensation is directly affected by the collection results of his or her store.
	•	Collections. All of the Company’s retail installment contracts are serviced by Company personnel at the store level. The majority of the Company’s customers make their payments in person at the store where they purchased their vehicle, although some customers send their payments through the mail. Each store closely monitors its customer accounts using the Company’s proprietary receivables and collections software that stratifies past due accounts by the number of days past due. The Company believes that the timely response to past due accounts is critical to its collections success.

	The Company has established standards with respect to the percentage of accounts one and two weeks past due, the percentage of accounts three or more weeks past due (delinquency standards), and the percentage of accounts where the vehicle was repossessed

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	that month (repossession standard). Store personnel (excluding the store manager) are paid a monthly bonus based upon growth in receivables at their store (similar to growth in same store revenues). This bonus is paid only if the store has met its delinquency and repossession standards for the month.
	Accounts one day late are sent a notice in the mail. Accounts three days late are contacted by phone. Notes from each phone contact are electronically maintained in the Company’s computer system. If a customer becomes severely delinquent in his or her payments, and management determines that timely collection of future payments is not probable, the Company will take steps to repossess the vehicle. While the Company works very hard to keep its delinquency percentages low, the Company also works very hard not to repossess vehicles. The Company goes to great lengths to amicably resolve payment delinquencies prior to repossessing a vehicle. For those vehicles that are repossessed, the majority are returned or surrendered by the customer on a voluntary basis. Other repossessions are performed by Company personnel or third party repossession agents. Depending on the condition of a repossessed vehicle, it is either resold on a retail basis through a Company store, or sold for cash to a wholesaler.

	•	New Store Openings. The Company plans to add stores at the rate of 8% to 14% per year. Senior management, with the assistance of the general office staff, makes decisions with respect to the communities in which to locate a new store and the specific sites within those communities. New stores are typically located in the general proximity of existing stores to facilitate the general office’s oversight of the Company’s stores.

	The Company’s approach with respect to new store openings is one of gradual development. The manager in charge of a new store is normally a recently promoted associate who was an assistant manager or a manager trainee at a larger store. The facility may be of a modular nature or an existing structure. New stores operate with a low level of inventory and personnel. As a result of the modest staffing level, the new store manager performs a variety of duties (i.e., selling, collecting, and administrative tasks) during the early stages of his or her store’s operations. As the store develops and the customer base grows, additional staff is hired.
	Monthly sales levels at new stores are substantially less than sales levels at mature stores. Over time new stores gain recognition in their communities, and a combination of customer referrals and repeat business generally facilitate strong sales growth. Sales growth at new stores can exceed 20% per year for a number of years. Mature stores typically experience annual sales growth, but at a lower percentage than new stores.
	New stores are given up to $250,000 in capital from the general office during the first six to eight months of operation. These funds are used principally to fund receivables growth. After this six to eight month start-up period, new stores typically become cash flow positive. That is, receivable growth is funded out of store profits rather than additional borrowings from the general office. This limitation of capital to new, as well as existing, stores serves as an important operating discipline. Essentially, stores must be profitable in order to grow. Typically, new stores are profitable within a few months of opening.

	•	General Office Oversight and Management. The general office, based in Bentonville, Arkansas, consists of area operations managers, regional vice presidents, purchasing and compliance directors, accounting and management information systems personnel, administrative personnel and senior management. The general office monitors and oversees store operations. The Company’s stores transmit and submit operating and financial information and reports to the general office on a daily, weekly and monthly basis. This information includes cash receipts and disbursements, inventory and receivables levels, receivables agings and sales and repossession data. The general office uses this information to compile Company-wide reports, plan store visits and prepare monthly financial statements.

	Periodically, area operations managers, regional vice presidents, compliance directors and senior management visit the Company’s stores to inspect, review and comment on operations. Often, the general office assists in training new managers and other store level associates. In addition to financial results, the general office uses standards (delinquency and repossession) and a point system to evaluate a store’s performance.
	The Company’s store managers meet monthly on a district, regional or Company-wide basis. At these meetings general office personnel provide training and recognize achievements of store managers. Near the end of every fiscal year the respective area operations manager, regional vice president and senior management conduct “projection” meetings with each store manager. At these meetings the year’s results are reviewed and ranked relative to other stores, and both quantitative and qualitative goals are established for the upcoming year. The qualitative goals may focus on staff development, effective delegation, organization skills and sometimes personal matters. Quantitatively, the Company always establishes a receivables growth target (which is similar to a revenue growth target) and, depending on the circumstances, may establish delinquency, repossession, or expense goals.
	The general office is also responsible for establishing policy, maintaining the Company’s management information system, conducting compliance audits, orchestrating new store openings and setting the direction for the Company.

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Industry

	•	Used Car Sales. The market for used car sales in the United States is significant. For calendar 2000, industry analysts estimated used vehicle sales in the United States at $366 billion. Used car retail sales typically occur through franchised new car dealerships that sell used cars or independent used car dealerships. The Company operates in the Buy Here/ Pay Here segment of the independent used car sales and finance market. Buy Here/ Pay Here dealers sell and finance used cars to individuals with limited credit histories or past credit problems. Buy Here/ Pay Here dealers typically offer their customers certain advantages over more traditional financing sources, such as broader and more flexible underwriting guidelines, flexible payment terms (including scheduling payments on a weekly or biweekly basis to coincide with a customer’s pay day), and the ability to make payments in person, an important feature to individuals who may not have a checking account.
	•	Used Car Financing. The used vehicle automobile financing industry is served by traditional lending sources such as banks, savings and loans, and captive finance subsidiaries of automobile manufacturers, as well as by independent finance companies and Buy Here/ Pay Here dealers. Despite significant opportunities, many of the traditional lending sources do not consistently provide financing to individuals with limited credit histories or past credit problems. Management believes traditional lenders avoid this market because of its high credit risk and the associated collection efforts.

Competition

   The used automotive retailing industry is highly competitive and fragmented. Presently there are an estimated 22,000 franchised automobile dealers and 54,000 independent used vehicle dealers. The Company competes principally with other independent Buy Here/ Pay Here dealers, and to a lesser degree with (i) the used vehicle retail operations of franchised automobile dealerships, (ii) independent used vehicle dealers, and (iii) individual’s who sell used vehicles in private transactions. The Company competes for both the supply and resale of used vehicles.

   Management believes the principal competitive factors in the sale of its used vehicles include (i) the availability of financing to consumers with limited credit histories or past credit problems, (ii) the breadth and quality of vehicle selection, (iii) pricing, (iv) the convenience of a dealership’s location, (v) the option to purchase a service contract, and (vi) customer service. Management believes that its dealerships are competitive in each of these areas.

Regulation and Licensing

   The Company’s operations are subject to various federal, state, and local laws, ordinances and regulations pertaining to the sale and financing of vehicles. Under various state laws, the Company’s dealerships must obtain a license in order to operate or relocate. These laws also regulate advertising and sales practices. The Company’s financing activities are subject to federal truth-in-lending and equal credit opportunity regulations as well as state and local motor vehicle finance laws, installment finance laws, usury laws and other installment sales laws. Among other things, these laws require that the Company limit or prescribe terms of the contracts it originates, require specified disclosures to customers, restrict collection practices, limit the Company’s right to repossess and sell collateral, and prohibit discrimination against customers on the basis of certain characteristics including age, race, gender and marital status.

   The states in which the Company operates impose limits on interest rates the Company can charge on its loans. These limits are generally based on either (i) a specified margin above the federal primary credit rate, (ii) the age of the vehicle, or (iii) a fixed rate. Management believes the Company is in compliance in all material respects with all applicable federal, state, and local laws, ordinances and regulations. However, the adoption of additional laws, changes in the interpretation of existing laws, or the Company’s entrance into jurisdictions with more stringent regulatory requirements could have a material adverse effect on the Company’s used vehicle sales and finance business.

Discontinued Operations

   In October 2001, the Company made the decision to sell all of its operating subsidiaries except Car-Mart, and relocate its corporate headquarters to Bentonville, Arkansas where Car-Mart is based. Accordingly, the operating results of its discontinued subsidiaries are included in discontinued operations. The Company sold its last remaining discontinued operation in July 2002. See Note R of the accompanying consolidated financial statements.

Employees

   As of April 30, 2003 the Company, including its consolidated subsidiaries, employed approximately 550 persons full time. None of the Company’s employees are covered by a collective bargaining agreement and the Company believes that its relations with its employees are good.

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Executive Officers

   The executive officers of the Company are as follows:

   Nan R. Smith has served as Chairman of the Board of the Company since September 2002, Vice Chairman of the Board since May 2002 and as a director since January 2002. From 1999 until May 2002, Ms. Smith served as President of Car-Mart. From 1981 through 1998, Ms. Smith served as Chief Operating Officer of Car-Mart.

   Tilman J. Falgout, III has served as Chief Executive Officer of the Company since May 2002, General Counsel since 1995 and a director of the Company since 1992. From 1995 until May 2002, Mr. Falgout also served as Executive Vice President of the Company. From 1978 through June 1995, Mr. Falgout was a partner in the law firm of Stumpf & Falgout, Houston, Texas.

   William H. Henderson has served as President of the Company since May 2002. From 1999 until May 2002, Mr. Henderson served as Chief Operating Officer of Car-Mart. From 1987 through 1998, Mr. Henderson held a number of positions at Car-Mart including Store Manager and Regional Manager.

   Mark D. Slusser has served as Chief Financial Officer of the Company since 1989 and as Secretary since 1990. From 1981 until joining the Company, Mr. Slusser held various positions with Ernst & Young LLP including Senior Manager.

   Eddie L. Hight has served as Chief Operating Officer of the Company since May 2002. From 1984 until May 2002, Mr. Hight held a number of positions at Car-Mart including Store Manager and Regional Manager.

   As of April 30, 2003 the Company leased approximately 80% of its facilities, including dealerships and the Company’s general offices. These facilities are located principally in the states of Arkansas, Oklahoma, Kentucky, Missouri and Texas. The Company’s general administrative offices are located in approximately 6,000 square feet of leased space in Bentonville, Arkansas.

   In February, 2001 and May, 2002, the Company was added as a defendant in two similar actions which were originally filed in December 1998 against approximately twenty defendants (the “Defendants”) by Astoria Entertainment, Inc. (“Astoria”). One action was filed in the Civil District Court for the Parish of Orleans, Louisiana (the “State Claims”) and the other was filed in the United States District Court for the Eastern District of Louisiana (the “Federal Claims”). In these actions, Astoria alleges the Defendants conspired to eliminate Astoria from receiving one of the fifteen riverboat gaming licenses that were awarded by the State of Louisiana in 1993 and 1994, at a time when a former subsidiary of the Company was involved in riverboat gaming in Louisiana. Astoria seeks unspecified damages including lost profits. In August 2001, the federal court dismissed all of the Federal Claims with prejudice. A motion to dismiss the State Claims is pending before the state district court. The Company believes the remaining State Claims are without merit and intends to vigorously contest liability in this matter. Further, in the ordinary course of business, the Company has become a defendant in various types of other legal proceedings. Although the Company cannot determine at this time the amount of exposure from lawsuits, if any, management 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.

   No matters were submitted to a vote of security holders of the Company during the fourth quarter ended April 30, 2003.

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PART II

   The Company’s common stock is authorized for quotation on the NASDAQ National Market under the symbol CRMT. The following table sets forth, by fiscal quarter, the high and low closing sale prices reported by NASDAQ for the Company’s common stock for the periods indicated.

   As of July 18, 2003, there were approximately 1,225 stockholders of record. This number excludes stockholders holding stock under nominee security position listings.

   Since its inception the Company has paid no dividends on its common stock. The Company currently intends to follow a policy of retaining earnings to finance future growth. Payment of 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’s revolving credit facility prohibits distributions from Car-Mart to Corporate beyond the repayment of a loan from Corporate to Car-Mart ($6.6 million at April 30, 2003). Thus, the Company is limited in the amount of dividends or other distributions it can make to its shareholders without the consent of its lender.

   In January 2002, the Company issued a warrant to purchase 40,000 shares of its common stock at an exercise price of $5.00 per share to a firm that provides investor relations services. During fiscal 2003, the Company issued 12,331 shares of its common stock pursuant to a partial exercise of the warrant by the investor relations firm. In January 2003, the Company issued a warrant to purchase 5,000 shares of its common stock at an exercise price of $13.04 per share to the same investor relations firm.

   The financial data set forth below was derived from the audited consolidated financial statements of the Company and should be read in conjunction with the consolidated financial statements and related notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained elsewhere herein. (In thousands, except per share amounts.)

a –	Fiscal 2002 includes after tax charges of $10.7 million pertaining to (i) non-cash stock option compensation ($6.3 million), (ii) the write-down of certain emerging technology/ Internet investments and equipment ($2.6 million), and (iii) severance and office closing costs in connection with the decision to relocate the Company’s corporate headquarters to Bentonville, Arkansas ($1.8 million).

b –	Fiscal 2000 includes an after tax gain on the sale of securities of $7.0 million.

c –	Fiscal 1999 includes an after tax gain on the sale of securities of $16.9 million.

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   The following discussion should be read in conjunction with the Company’s consolidated financial statements appearing elsewhere in this annual report.

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 two operating subsidiaries, America’s Car-Mart, Inc., an Arkansas corporation, (“Car-Mart of Arkansas”) and Colonial Auto Finance, Inc. (“Colonial”). Car-Mart of Arkansas and Colonial are collectively referred to herein as “Car-Mart”. As of April 30, 2003 the Company operated 64 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 would not qualify for conventional financing as a result of limited credit histories or past credit problems.

   In October 2001, the Company made the decision to sell all of its operating subsidiaries except Car-Mart, and relocate its corporate headquarters to Bentonville, Arkansas where Car-Mart is based. As a result of this decision, all of the Company’s other operating subsidiaries were sold and their operating results have been included in discontinued operations. The Company sold its last remaining discontinued operation in July 2002. Discontinued operations are described in Note R in the accompanying consolidated financial statements.

Results of Continuing Operations

   Operating results are presented for the continuing operations of the Company by business segment for the years ended April 30, 2003, 2002 and 2001. The segments include Car-Mart and Corporate operations. A summary of the Company’s continuing operations by business segment for the years ended April 30, 2003, 2002 and 2001 is as follows:

Consolidated

2003 vs. 2002

   Revenues increased $27.0 million, or 21.1%, in fiscal 2003 versus fiscal 2002 principally as a result of (i) revenue growth from stores that operated a full 12 months in both periods ($15.8 million, or 15.5%), (ii) revenue growth from stores opened during fiscal 2002 or stores that added a satellite location during fiscal 2003 or fiscal 2002 ($6.8 million), and (iii) revenues from stores opened during fiscal 2003 ($4.8 million). Pretax income increased by $19.3 million principally as a result of (i) higher pretax earnings at Car-Mart ($3.7 million), (ii) lower overhead costs at Corporate ($1.2 million), and (iii) fiscal 2002 including $14.0 million of Corporate related charges (consisting of a $7.3 million non-cash stock option based compensation charge, a $2.7 million restructuring charge, and a $3.9 million write-down of investments and equipment), with no comparable charge or write-down in fiscal 2003.

   During fiscal 2002 the Company recorded a $7.3 million non-cash charge related to stock option based compensation. The charge pertains to the Company’s 1997 stock option plan which contained a “cashless” exercise feature. Due to such cashless feature, options granted under the plan were characterized as variable options under generally accepted accounting principles. 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 provision of its 1997 Plan. Also during fiscal 2002, the Company recorded a $2.7 million restructuring charge (severance and office closing costs) in connection with the decision to relocate its corporate headquarters to Bentonville, Arkansas and wrote-down the carrying value of two emerging technology/ Internet investments and certain equipment by $3.9 million that were deemed to be impaired.

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2002 vs. 2001

   Revenues increased $21.2 million, or 19.8%, in fiscal 2002 versus fiscal 2001 principally as a result of (i) revenue growth from stores that operated a full 12 months in both periods ($12.5 million, or 14.1%), (ii) revenue growth from stores opened during fiscal 2001 or stores that added a satellite location during fiscal 2002 or fiscal 2001 ($5.0 million), and (iii) revenues from stores opened during fiscal 2002 ($4.1 million). Pretax income decreased by $10.7 million, or 82.9%, principally as a result of (i) fiscal 2002 including $14.0 million of Corporate related charges and write-downs with no comparable charges or write-downs in fiscal 2001, partially offset by (ii) higher pretax earnings at Car-Mart ($3.0 million).

Car-Mart

2003 vs. 2002

   Revenues increased $27.4 million, or 21.5%, in fiscal 2003 versus fiscal 2002 principally as a result of (i) revenue growth from stores that operated a full 12 months in both periods ($15.8 million, or 15.5%), (ii) revenue growth from stores opened during fiscal 2002 or stores that added a satellite location during fiscal 2003 or fiscal 2002 ($6.8 million), and (iii) revenues from stores opened during fiscal 2003 ($4.8 million). Interest income as a percentage of sales decreased .6% to 6.8% in fiscal 2003 from 7.4% in fiscal 2002. The decrease was principally the result of a decrease in the maximum interest rate that can be charged on Arkansas originated loans. Interest charged on Arkansas originated loans is limited to the federal primary credit rate plus 5.0%. As of April 30, 2003, approximately 69% of the Company’s finance receivables were originated in Arkansas.

   Cost of sales as a percentage of sales was 53.1% in fiscal 2003 and in fiscal 2002.

   Selling, general and administrative expense as a percentage of sales increased 1.4% to 17.7% in fiscal 2003 from 16.3% in fiscal 2002. The increase was principally the result of (i) changing the staffing policy at the store level in the middle of fiscal 2002 such that more personnel are employed at the same number of active customer accounts (store staffing levels are based upon the number of active customer accounts), (ii) creating several new positions at the general office in the middle of fiscal 2002 to assist in managing the Company’s growing business, (iii) Car-Mart assuming all of Corporate’s overhead costs beginning in February 2003, and (iv) higher insurance costs.

   Provision for credit losses as a percentage of sales decreased .9%, to 18.5% in fiscal 2003 from 19.4% in fiscal 2002. The decrease was principally the result of (i) increased staffing at the store and general office levels, and (ii) improvements in the Company’s underwriting and collection practices.

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   Interest expense as a percentage of sales decreased .8%, to 1.4% in fiscal 2003 from 2.2% in fiscal 2002. The decrease was principally the result of (i) a decrease in the prime interest rate, which reduced the rate charged on the Company’s revolving credit facility, and (ii) a lower level of borrowings relative to the sales volume of the Company.

2002 vs. 2001

   Revenues increased $21.7 million, or 20.5%, in fiscal 2002 versus fiscal 2001 principally as a result of (i) revenue growth from stores that operated a full 12 months in both periods ($12.5 million, or 14.1%), (ii) revenue growth from stores opened during fiscal 2001 or stores that added a satellite location during fiscal 2002 or fiscal 2001 ($5.0 million), and (iii) revenues from stores opened during fiscal 2002 ($4.1 million). Interest income as a percentage of sales decreased .6% to 7.4% in fiscal 2002 from 8.0% in fiscal 2001. The decrease was principally the result of a decrease in the maximum interest rate that can be charged on Arkansas originated loans. Interest charged on Arkansas originated loans was limited to the federal discount rate plus 5.0%. As of April 30, 2002, approximately 72% of the Company’s finance receivables were originated in Arkansas.

   Cost of sales as a percentage of sales decreased 1.5% to 53.1% in fiscal 2002 from 54.6% in fiscal 2001. The decrease was principally the result of the Company’s decision to raise vehicle prices, thereby improving gross margins. The Company made the decision to raise prices after making significant improvements in the price it pays when purchasing vehicles. During fiscal 2002 the Company created and filled two Regional Purchasing Director positions. These individuals used the Company’s purchasing database to standardize the price paid for similar vehicles, and have been actively involved with each buyer to improve their vehicle purchases.

   Selling, general and administrative expense as a percentage of sales increased 1.0% to 16.3% in fiscal 2002 from 15.3% in fiscal 2001. The increase was principally the result of (i) changing the staffing policy at the store level in the middle of fiscal 2002 such that more personnel are employed at the same number of active customer accounts, and (ii) creating several new positions at the general office in the middle of fiscal 2002 to assist in managing the Company’s growing business.

   Provision for credit loss as a percentage of sales increased 1.8%, to 19.4% in fiscal 2002 from 17.6% in fiscal 2001. The Company believes the increase was principally the result of (i) a general slowdown in the economy during fiscal 2002 as compared to fiscal 2001, and (ii) a failure to timely add sufficient staff to enable the general office to adequately address the more difficult collection environment during the first nine months of fiscal 2002. In response to the need for additional general office staff, in mid-fiscal 2002 a number of new positions were created and filled at the general office to assist in managing the Company’s growing business.

   Interest expense as a percentage of sales decreased 1.5%, to 2.2% in fiscal 2002 from 3.7% in fiscal 2001. The decrease was principally the result of (i) a decrease in the prime interest rate, which reduced the rate charged on the Company’s revolving credit facility, and (ii) a lower level of borrowings relative to the sales volume of the Company.

Corporate

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2003 vs. 2002

   Interest income decreased $.3 million to $.5 million in fiscal 2003 from $.8 million in fiscal 2002. The decrease was principally due to a lower level of notes receivable outstanding during fiscal 2003 as compared to fiscal 2002. Selling, general and administrative expense decreased $1.2 million to $1.8 million in fiscal 2003 from $3.0 million in fiscal 2002, a decrease of 39.3%. The decrease was principally the result of lower compensation expense resulting from reductions in corporate office staff in connection with the relocation of the Company’s corporate headquarters from Irving, Texas to Bentonville, Arkansas where Car-Mart is based. Further, in February 2003, all remaining Corporate overhead costs were assumed by Car-Mart. Interest expense decreased $.6 million to $.2 million in fiscal 2003 from $.8 million in fiscal 2002. The decrease was the result of the repayment of all Corporate related debt in fiscal 2003.

2002 vs. 2001

   Interest income decreased $.7 million to $.8 million in fiscal 2002 from $1.5 million in fiscal 2001. The decrease was principally due to a lower level of notes receivable outstanding during fiscal 2002 as compared to fiscal 2001. Selling, general and administrative expense decreased $.8 million to $3.0 million in fiscal 2002 from $3.8 million in fiscal 2001, a decrease of 21.5%. The decrease was principally the result of lower compensation expense resulting from reductions in corporate office bonuses and the size of the corporate office staff. The staff was reduced in anticipation of the planned relocation of the Company’s corporate headquarters from Irving, Texas to Bentonville, Arkansas where Car-Mart is based. The Company’s corporate headquarters relocation was completed in July 2002.

   During fiscal 2002 the Company recorded a $7.3 million non-cash charge related to stock option based compensation. The charge pertains to the Company’s 1997 stock option plan which contained a “cashless” exercise feature. Due to such cashless feature, options granted under the plan were characterized as variable options under generally accepted accounting principles. 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 provision of its 1997 Plan. Also during fiscal 2002, the Company recorded a $2.7 million restructuring charge (severance and office closing costs) in connection with the decision to relocate its corporate headquarters to Bentonville, Arkansas and wrote-down the carrying value of two emerging technology/ Internet investments and certain equipment by $3.9 million that were deemed to be impaired.

Results of Discontinued Operations

   Operating results are presented below for the discontinued operations of the Company for the fiscal years ended April 30, 2003, 2002 and 2001. Discontinued operations include the following subsidiaries for the periods indicated.

2003 vs. 2002

   Revenues decreased $101.0 million, or 97.1%, in fiscal 2003 compared with fiscal 2002 principally as a result of only including two months of Concorde’s operating results in fiscal 2003 compared to twelve months of Concorde’s and Precision’s operating results and six months of Smart Choice’s operating results in fiscal 2002. Concorde was sold in July 2002.

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2002 vs. 2001

   Revenues decreased $132.8 million, or 56.1%, in fiscal 2002 compared with fiscal 2001 principally as a result of only including six months of Smart Choice’s operating results in fiscal 2002 compared to twelve months in fiscal 2001. Effective October 31, 2001 the Company’s investment in Smart Choice was reduced to zero and thereafter the Company ceased to include Smart Choice’s operating results in its discontinued operations.

   Pretax loss for the Company’s discontinued operations was $23.4 million for fiscal 2002 compared with a $2.0 million pretax loss for fiscal 2001. The $21.4 million increase in loss was principally the result of a $19.9 million net write-down of Smart Choice assets. The $19.9 million net write-down pertains to certain Smart Choice assets (finance receivables, property and equipment, deferred tax assets and goodwill) that were deemed to be impaired in connection with the foreclosure by Finova (Smart Choice’s senior lender) of certain of its assets and the winding-down of its operations.

Liquidity and Capital Resources

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

   During fiscal 2003, proceeds from (i) an income tax refund of $8.4 million (stemming largely from a loss on the sale of a discontinued operation in fiscal 2002) and (ii) the sale of discontinued operations of $6.8 million, were used primarily to reduce debt.

   At April 30, 2003 the Company had (i) $.8 million of cash on hand and had an additional $13.5 million of availability under its $39.5 million revolving credit facility, and (ii) $.8 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) the collection of other receivables. On a longer-term basis, the Company expects its principal sources of liquidity to consist of income from continuing operations, and 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 by approximately the same percentage that its sales grow, (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 its finance receivables portfolio growth from income generated from operations, with the balance of its capital needs being provided by its revolving credit facility.

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   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.

Contractual Payment Obligations

   The following is a summary of the Company’s contractual obligations as of April 30, 2003 (in thousands):

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 the accompanying consolidated financial statements.

   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 17.5% over the last seven years), while its second and third fiscal quarters tend to have higher credit losses (averaging 19.3% over the last seven years).

   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 36 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 April 30, 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

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   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 ($111.8 million) and variable interest rate borrowings ($26.0 million), and the percentage of Arkansas originated finance receivables (69%), 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 at April 30, 2002. The calculation and table was materially consistent with the information provided above.

   The following financial statements and accountant’s report are included in Item 8 of this report:

	Report of Independent Certified Public Accountants

Consolidated Balance Sheets as of April 30, 2003 and 2002

Consolidated Statements of Operations for the fiscal years ended April 30, 2003, 2002 and 2001

Consolidated Statements of Cash Flows for the fiscal years ended April 30, 2003, 2002 and 2001

Consolidated Statements of Stockholders’ Equity for the fiscal years ended April 30, 2003, 2002 and 2001

Notes to Consolidated Financial Statements

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Report of Independent Certified Public Accountants

Stockholders and Board of Directors

   We have audited the accompanying consolidated balance sheets of America’s Car-Mart, Inc., as of April 30, 2003 and 2002, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended April 30, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

   We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of America’s Car-Mart, Inc. as of April 30, 2003 and 2002, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended April 30, 2003 in conformity with accounting principles generally accepted in the United States of America.

Grant Thornton LLP

Dallas, Texas

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