10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: October 31, 2003	Commission file number: 0-14939

AMERICA’S CAR-MART, INC.

(Exact name of registrant as specified in its charter)

Texas	63-0851141
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1501 Southeast Walton Blvd., Suite 213, Bentonville, Arkansas 72712
(Address of principal executive offices, including 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 ý No o

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

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

Title of Each Class	Outstanding at December 8, 2003
Common stock, par value $.01 per share	7,605,295

Part I

Item 1.  Financial Statements	America’s Car-Mart, Inc.
Consolidated Balance Sheets

	October 31, 2003		April 30, 2003
	(unaudited)
Assets:
Cash and cash equivalents	$	1,563,163	$	783,786
Income tax receivable	158,228		161,816
Notes and other receivables	621,570		647,872
Finance receivables, net	99,282,011		91,358,935
Inventory	4,819,994		4,056,027
Prepaid and other assets	459,095		353,014
Property and equipment, net	5,054,215		4,479,132
	$	111,958,276	$	101,840,582
Liabilities and stockholders’ equity:
Accounts payable	$	2,739,969	$	2,084,472
Accrued liabilities	4,694,523		6,664,313
Deferred tax liabilities, net	1,722,641		1,162,704
Revolving credit facility	25,744,656		25,968,220
	34,901,789		35,879,709
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $.01 per share, 1,000,000 shares authorized; none issued or outstanding
Common stock, par value $.01 per share, 50,000,000 shares authorized; 7,596,318 issued and outstanding (7,207,963 at April 30, 2003)	75,963		72,080
Additional paid-in capital	33,064,300		30,332,106
Retained earnings	43,916,224		35,556,687
Total stockholders’ equity	77,056,487		65,960,873
	$	111,958,276	$	101,840,582

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

2

Consolidated Statements of Operations	America’s Car-Mart, Inc.
(Unaudited)

	Three Months Ended October 31,				Six Months Ended October 31,
	2003		2002		2003		2002
Revenues:
Sales	$	40,196,997	$	35,925,718	$	80,517,141	$	69,746,928
Interest income	3,117,827		2,351,876		6,108,131		4,627,812
	43,314,824		38,277,594		86,625,272		74,374,740
Costs and expenses:
Cost of sales	21,195,825		19,066,304		42,131,576		36,816,030
Selling, general and administrative	7,128,642		6,631,380		14,435,598		13,186,417
Provision for credit losses	8,560,796		7,192,076		16,281,659		12,793,997
Interest expense	304,912		468,942		620,578		1,005,734
Depreciation and amortization	78,346		70,645		160,163		135,750
	37,268,521		33,429,347		73,629,574		63,937,928
Income from continuing operations before tax	6,046,303		4,848,247		12,995,698		10,436,812
Provision for income taxes	2,231,173		1,747,846		4,801,161		3,899,528
Income from continuing operations	3,815,130		3,100,401		8,194,537		6,537,284
Discontinued operations:
Income from discontinued operations, net of taxes and minority interests					165,000		375,318
Gain on sale of discontinued operation, after tax			255,842				130,868
Income from discontinued operations			255,842		165,000		506,186
Net income	$	3,815,130	$	3,356,243	$	8,359,537	$	7,043,470
Basic earnings per share:
Continuing operations	$	.51	$	.44	$	1.11	$	.94
Discontinued operations			.04		.02		.07
Total	$	.51	$	.48	$	1.13	$	1.01
Diluted earnings per share:
Continuing operations	$	.48	$	.40	$	1.03	$	.83
Discontinued operations			.03		.02		.06
Total	$	.48	$	.43	$	1.05	$	.89
Weighted average number of shares outstanding:
Basic	7,512,401		6,997,169		7,403,666		6,982,659
Diluted	7,950,608		7,808,712		7,930,054		7,872,863

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

3

Consolidated Statements of Cash Flows	America’s Car-Mart, Inc.
(Unaudited)

		Six Months Ended October 31,
		2003			2002
Operating activities:
Net income		$	8,359,537		$	7,043,470
Less:  Income from discontinued operations		165,000			506,186
Income from continuing operations		8,194,537			6,537,284
Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities:
Depreciation and amortization		160,163			135,750
Deferred income taxes		559,937			(113,469		)
Changes in finance receivables, net:
Finance receivable originations		(75,153,632		)	(63,703,121		)
Finance receivable collections		47,689,270			39,070,230
Provision for credit losses		16,281,659			12,793,997
Inventory acquired in repossession		3,259,627			2,624,080
Subtotal finance receivables		(7,923,076		)	(9,214,814		)
Changes in operating assets and liabilities:
Income tax receivable		3,588			(195,247		)
Notes and other receivables		26,302			809,329
Inventory		(763,967		)	(621,465		)
Prepaid and other		113,919			(168,937		)
Accounts payable and accrued liabilities		(1,314,293		)	(1,563,691		)
Income taxes payable		1,476,000			2,081,536
Net cash provided by (used in) operating activities		533,110			(2,313,724		)
Investing activities:
Purchase of property and equipment		(735,246		)	(1,203,470		)
Sale of discontinued subsidiaries					6,795,000
Note collections from discontinued subsidiaries					2,078,661
Other					(18,274		)
Net cash provided by (used in) investing activities		(735,246		)	7,651,917
Financing activities:
Exercise of stock options		1,617,990			590,666
Purchase of common stock		(412,913		)	(1,726,042		)
Proceeds from (repayments of) revolving credit facility, net		(223,564		)	1,084,208
Repayments of other debt					(6,000,000		)
Net cash provided by (used in) financing activities		981,513			(6,051,168		)
Cash provided by (used in) continuing operations		779,377			(712,975		)
Cash used in discontinued operations					(2,520,506		)
Increase (decrease) in cash and cash equivalents		779,377			(3,233,481		)
Cash and cash equivalents at:	Beginning of period	783,786			3,750,426
	End of period	$	1,563,163		$	516,945

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 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 October 31, 2003, the Company operated 65 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 as described in Note J.

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 six month periods ended October 31, 2003 are not necessarily indicative of the results that may be expected for the year ended April 30, 2004.  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, 2003.

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 amount 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.

Concentration of Risk

The Company provides financing in connection with the sale of substantially all of its vehicles.  These sales are made primarily to customers residing in Arkansas, Oklahoma, Missouri, Texas and Kentucky.  Periodically, the Company maintains cash in financial institutions in excess of the amounts insured by the federal government.

Finance Receivables, Repossessions and Charge-offs 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 total interest to be earned over the term of the related installment contract.  An account is considered delinquent when a contractually scheduled payment has not been received by the scheduled payment date.  At October 31, 2003, 5.2% of finance receivable balances were 30 days or more past due.

The Company takes steps to repossess a vehicle when the customer becomes severely delinquent in his or her payments, and management determines that timely collection of delinquent and future payments is not probable.  Accounts are charged-off after the expiration of a statutory notice period for repossessed accounts, or when management determines that timely collection of future payments is not probable for accounts where the Company has been unable to repossess the vehicle.

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, underwriting and collection practices, and management’s expectations of future credit losses.  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 which could cause actual credit losses to be materially different from the recorded allowance for credit losses, the Company believes that it has given appropriate consideration to all relevant factors and has made reasonable assumptions in determining the allowance for credit losses.

5

Stock Option Plan

The Company accounts for its stock option plan in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations.  As such, compensation expense is only recorded on the date of grant if the market price on such date exceeds the exercise price.  Since the exercise price of options granted has been equal to the market price on the date of grant, no compensation expense has been recorded.  Had the Company determined compensation cost on the date of grant based upon the fair value of its stock options under Statement of Financial Accounting Standards No. 123, and using the assumptions detailed below, the Company’s pro forma net income and earnings per share would be as follows using the Black-Scholes option-pricing model.  The estimated weighted average fair value of options granted using the Black-Scholes option-pricing model was $8.68 and $6.37 per share for the six months ended October 31, 2003 and 2002, respectively.

	Three Months Ended October 31,						Six Months Ended October 31,
	2003			2002			2003			2002
Reported net income	$	3,815,130		$	3,356,243		$	8,359,537		$	7,043,470
Fair value compensation cost, net of tax	—			—			42,966			307,621
Pro forma net income	$	3,815,130		$	3,356,243		$	8,316,571		$	6,735,849
Basic earnings per share:
As reported	$	.51		$	.48		$	1.13		$	1.01
Pro forma	$	.51		$	.48		$	1.12		$	.96
Diluted earnings per share:
As reported	$	.48		$	.43		$	1.05		$	.89
Pro forma	$	.48		$	.43		$	1.04		$	.86
Assumptions:
Dividend yield	0.0		%	0.0		%	0.0		%	0.0		%
Risk-free interest rate	4.0		%	4.5		%	4.3		%	4.5		%
Expected volatility	60.0		%	50.0		%	55.0		%	50.0		%
Expected life	5 years			5 years			5 years			5 years

Related Party Transactions

During the six months ended October 31, 2003 and 2002, the Company paid Dynamic Enterprises, Inc. (“Dynamic”) approximately $18,750 per month for the lease of six dealership locations.  A director of the Company is also an officer of Dynamic.

Reclassifications

Certain prior year amounts in the accompanying financial statements have been reclassified to conform to the fiscal 2004 presentation.

6

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 36 months.  The components of finance receivables are as follows:

	October 31, 2003			April 30, 2003
Gross contract amount	$	132,492,280		$	121,013,893
Unearned finance charges	(10,449,244		)	(9,259,863		)
Allowance for credit losses	(22,761,025		)	(20,395,095		)
	$	99,282,011		$	91,358,935

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

	Six Months Ended October 31,
	2003			2002
Balance at beginning of period	$	20,395,095		$	17,042,609
Provision for credit losses	16,281,659			12,793,997
Net charge offs	(13,915,729		)	(10,702,303		)
Balance at end of period	$	22,761,025		$	19,134,303

D – Property and Equipment

A summary of property and equipment is as follows:

	October 31, 2003			April 30, 2003
Land and buildings	$	3,111,456		$	2,764,821
Furniture, fixtures and equipment	768,350			630,065
Leasehold improvements	2,061,795			1,844,191
Less accumulated depreciation and amortization	(887,386		)	(759,945		)
	$	5,054,215		$	4,479,132

7

E – Accrued Liabilities

A summary of accrued liabilities is as follows:

	October 31, 2003		April 30, 2003
Compensation	$	1,984,463	$	3,520,548
Interest	98,589		101,214
Cash overdraft	941,817		1,145,112
Deferred revenue	1,288,389		1,269,430
Other	381,265		628,009
	$	4,694,523	$	6,664,313

F – Debt

A summary of debt is as follows:

Revolving Credit Facility
Lender	Facility Amount	Interest Rate	Maturity	Balance at October 31, 2003		Balance at April 30, 2003
Bank of Oklahoma	$39.5 million	Prime	Apr 2006	$	25,744,656	$	25,968,220

The Company’s revolving credit facility is collateralized by substantially all the assets of the Company including finance receivables and inventory.  Interest is payable monthly and the principal balance is due at the maturity of the facility.  Effective November 30, 2003, interest is charged at the bank’s prime lending rate per annum.  Prior to November 30, 2003, interest was charged at the bank’s prime lending rate plus .5% (4.50% and 4.75% at October 31, 2003 and April 30, 2003, respectively).  The 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 revolving credit facility is a function of eligible finance receivables.  Based upon eligible finance receivables at October 31, 2003, the Company could have drawn an additional $13.8 million under the facility.

8

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:

	Three Months Ended October 31,		Six Months Ended October 31,
	2003	2002	2003	2002
Weighted average shares outstanding-basic	7,512,401	6,997,169	7,403,666	6,982,659
Dilutive options and warrants	438,207	811,543	526,388	890,204
Weighted average shares outstanding-diluted	7,950,608	7,808,712	7,930,054	7,872,863
Antidilutive securities not included: Options and warrants	—	57,500	8,750	57,500

During the six months ended October 31, 2003, options and warrants covering 411,055 shares were exercised that resulted in proceeds of $1,617,990.

H – Commitments and Contingencies

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.

I – Supplemental Cash Flow Information

Supplemental cash flow disclosures are as follows:

	Six Months Ended October 31,
	2003		2002
Interest paid	$	607,078	$	1,009,580
Income taxes paid, net	2,846,617		2,335,988

9

J – 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.  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 operating 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 IBC, Inc. (“Precision”) for $3.8 million in cash.  In July 2002 the Company sold its 80% interest in Concorde Acceptance Corporation (“Concorde”) for $3.0 million in cash.  As a result of these two sales, the Company no longer operates any business other than Car-Mart.

As a result of the Company’s decision, operating results from its non Car-Mart operating subsidiaries have been reclassified to discontinued operations for all periods presented. Discontinued operations include the operations of Concorde through June 2002.  Discontinued operations for the six months ended October 31, 2003 reflect a negotiated settlement of amounts due from a former subsidiary of the Company that had been previously written-off.  A summary of the Company’s discontinued operations is as follows (in thousands):

	Three Months Ended October 31,				Six Months Ended October 31,
	2003		2002		2003		2002
Revenues	$	—	$	—	$	250	$	3,058
Operating expenses							2,306
Income before taxes and minority interests					250		752
Provision for income taxes					85		283
Minority interests							94
Income from discontinued operations	$	—	$	—	$	165	$	375

10

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 underwrite and collect its installment loans effectively, 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 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 October 31, 2003, the Company operated 65 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 J in the accompanying consolidated financial statements.

11

Consolidated Operations

(Operating Statement Dollars in Thousands)

							% Change		As a % of Sales
	Three Months Ended October 31,						2003 vs. 2002		Three Months Ended October 31,
	2003			2002					2003		2002
Revenues:
Sales	$	40,197		$	35,926		11.9	%	100.0	%	100.0	%
Interest income	3,118			2,352			32.6		7.8		6.5
Total	43,315			38,278			13.2		107.8		106.5
Costs and expenses:
Cost of sales	21,196			19,066			11.2		52.7		53.1
Selling, general and admin	7,129			6,632			7.5		17.7		18.4
Provision for credit losses	8,561			7,192			19.0		21.3		20.0
Interest expense	305			469			(35.0	)	.8		1.3
Depreciation and amortization	78			71			9.9		.2		.2
Total	37,269			33,430			11.5		92.7		93.0
Pretax income	$	6,046		$	4,848		24.7		15.1		13.5
Operating Data:
Retail units sold	6,096			5,536			10.1	%
Average stores in operation	65.7			61.7			6.5
Average units sold per store	92.8			89.7			3.4
Average retail sales price	$	6,350		$	6,279		1.1
Same store revenue growth	11.1		%	14.2		%
Period End Data:
Stores open	65			62			4.8	%
Accounts 30 days or more past due	5.2		%	3.9		%

Three Months Ended October 31, 2003 vs. Three Months Ended October 31, 2002

Revenues increased $5.0 million, or 13.2%, for the three months ended October 31, 2003 as compared to the same period in 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 ($3.9 million, or 11.1%), (ii) revenue growth from stores opened during the three months ended October 31, 2002 or stores that added a satellite location after July 31, 2002 ($.4 million), and (iii) revenues from stores opened after October 31, 2002 ($.7 million).

Cost of sales as a percentage of sales decreased to 52.7% for the three months ended October 31, 2003 from 53.1% in the same period of the prior fiscal year.  The decrease was principally the result of the Company encouraging store managers to more closely adhere to the Company’s pricing matrix and to not use their discretionary authority to discount the sales price of vehicles.

Selling, general and administrative expense as a percentage of sales decreased to 17.7% for the three months ended October 31, 2003 from 18.4% in the same period of the prior fiscal year.  The decrease was principally the result of (i) lower compensation expense at its Irving, Texas office in connection with the relocation of the Company’s principal headquarters from Irving, Texas to Bentonville, Arkansas and (ii) lower compensation expense in connection with a change in the senior management bonus program, partially offset by higher insurance costs.

Provision for credit losses as a percentage of sales increased to 21.3% for the three months ended October 31, 2003 from 20.0% in the same period of the prior fiscal year.  The increase was primarily the result of higher charge-offs as a percentage of sales.  The Company believes it incurred higher charge-offs as a percentage of sales as a result of management focusing on other parts of the Company’s business in the recent past, such as opening new lots and training initiatives, and having less of a focus on underwriting and collections.  Recently, management has renewed its focus on the underwriting and collection aspects of its business.

Interest expense as a percentage of sales decreased to .8% for the three months ended October 31, 2003 from 1.3% in the same period of the prior fiscal year.  The decrease was principally the result of (i) a decrease in the prime interest rate (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 of the Company.

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Consolidated Operations

(Operating Statement Dollars in Thousands)

							% Change		As a % of Sales
	Six Months Ended October 31,						2003 vs. 2002		Six Months Ended October 31,
	2003			2002					2003		2002
Revenues:
Sales	$	80,517		$	69,747		15.4	%	100.0	%	100.0	%
Interest income	6,108			4,628			32.0		7.6		6.6
Total	86,625			74,375			16.5		107.6		106.6
Costs and expenses:
Cost of sales	42,132			36,816			14.4		52.3		52.8
Selling, general and admin	14,436			13,187			9.5		17.9		18.9
Provision for credit losses	16,282			12,794			27.3		20.2		18.3
Interest expense	620			1,005			(38.3	)	.8		1.4
Depreciation and amortization	160			136			17.6		.2		.2
Total	73,630			63,938			15.2		91.4		91.6
Pretax income	$	12,995		$	10,437		24.5		16.2		15.0
Operating Data:
Retail units sold	12,162			10,809			12.5	%
Average stores in operation	65.7			59.7			10.1
Average units sold per store	185.1			181.1			2.2
Average retail sales price	$	6,393		$	6,249		2.3
Same store revenue growth	11.5		%	14.0		%
Period End Data:
Stores open	65			62			4.8	%
Accounts 30 days or more past due	5.2		%	3.9		%

Six Months Ended October 31, 2003 vs. Six Months Ended October 31, 2002

Revenues increased $12.3 million, or 16.5%, for the six months ended October 31, 2003 as compared to the same period in the prior fiscal year.  The increase was principally the result of (i) revenue growth from stores that operated a full six months in both periods ($8.1 million, or 11.5%), (ii) revenue growth from stores opened during the six months ended October 31, 2002 or stores that added a satellite location after April 30, 2002 ($2.8 million), and (iii) revenues from stores opened after October 31, 2002 ($1.4 million).

Cost of sales as a percentage of sales decreased to 52.3% for the six months ended October 31, 2003 from 52.8% in the same period of the prior fiscal year.  The decrease was principally the result of the Company encouraging store managers to more closely adhere to the Company’s pricing matrix and to not use their discretionary authority to discount the sales price of vehicles.

Selling, general and administrative expense as a percentage of sales decreased to 17.9% for the six months ended October 31, 2003 from 18.9% in the same period of the prior fiscal year.  The decrease was principally the result of (i) lower compensation expense at its Irving, Texas office in connection with the relocation of the Company’s principal headquarters from Irving, Texas to Bentonville, Arkansas and (ii) lower compensation expense in connection with a change in the senior management bonus program, partially offset by higher insurance costs.

Provision for credit losses as a percentage of sales increased to 20.2% for the six months ended October 31, 2003 from 18.3% in the same period of the prior fiscal year.  The increase was primarily the result of higher charge-offs as a percentage of sales.  The Company believes it incurred higher charge-offs as a percentage of sales as a result of management focusing on other parts of the Company’s business in the recent past, such as opening new lots and training initiatives, and having less of a focus on underwriting and collections.  Recently, management has renewed its focus on the underwriting and collection aspects of its business.

Interest expense as a percentage of sales decreased to .8% for the six months ended October 31, 2003 from 1.4% in the same period of the prior fiscal year.  The decrease was principally the result of (i) a decrease in the prime interest rate (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 of the Company.

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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):

	Six Months Ended October 31,
	2003			2002
Operating activities:
Income from continuing operations	$	8,195		$	6,537
Finance receivables, net	(7,923		)	(9,215		)
Other	261			364
Total	533			(2,314		)
Investing activities:
Purchase of property and equipment	(735		)	(1,203		)
Sale of discontinued subsidiaries				6,795
Note collections from discontinued subsidiaries				2,079
Other				(19		)
Total	(735		)	7,652
Financing activities:
Exercise of stock options	1,618			591
Purchase of common stock	(413		)	(1,726		)
Revolving credit facility, net	(224		)	1,084
Repayment of other debt				(6,000		)
Total	981			(6,051		)
Cash provided by (used in) continuing operations	$	779		$	(713	)

At October 31, 2003, the Company had $1.6 million of cash on hand and had an additional $13.8 million of availability under its $39.5 million revolving credit facility.

On both a short-term and long-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 of approximately $2 million in the next twelve months in connection with opening new stores and refurbishing existing stores, and (iii) to the extent excess cash is available, 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 finance receivables portfolio growth from income generated from operations, with the balance of its capital needs being satisfied by its revolving credit facility.

The Company’s revolving credit facility matures in April 2006.  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 its allowance for credit losses.  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, underwriting and collection practices, and management’s expectations of future credit losses.  The allowance for credit losses is periodically

14

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 which could cause actual credit losses to be materially different from the recorded allowance for credit losses, the Company believes that it has given appropriate consideration to all relevant factors and has made reasonable assumptions in determining the allowance for credit losses.

Seasonality

The Company’s business is seasonal in nature.  The Company’s third fiscal quarter (November through January) is historically the slowest period for automobile 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 automobile sales primarily because 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 17.6% over the last seven years), while its second and third fiscal quarters tend to have higher credit losses (averaging 19.4% over the last seven 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.

The Company’s 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 (2.0% at October 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 October 31, 2003, approximately 67% 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 (assuming the prime interest rate of its lender decreases by the same percentage as the decrease in the federal primary credit rate).  The initial impact on profitability resulting from a decrease in the federal primary credit rate and the rate charged on its variable interest rate borrowings would be 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 ($122.0 million) and variable interest rate borrowings ($25.7 million), and the percentage of Arkansas originated finance receivables (67%), remain constant during the periods, and (iv) the Company’s historical collection and charge-off experience continues throughout the periods.

Increase (Decrease) in Interest Rates		Year 1 Increase (Decrease) in Pretax Earnings			Year 2 Increase (Decrease) in Pretax Earnings
		(in thousands)			(in thousands)
+2	%	$	310		$	1,041
+1	%	155			520
-1	%	(155		)	(520		)
-2	%	(310		)	(1,041		)

A similar calculation and table were prepared at April 30, 2003.  The calculation and table were materially consistent with the information provided above.

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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 as of the end of the period covered by this quarterly report on Form 10-Q.  Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of the Company’s disclosure controls and procedures were effective as of the end of the period covered by this quarterly report on Form 10-Q.  There were no significant changes in the Company’s internal controls over financial reporting or in other factors over the past fiscal quarter that could significantly affect these controls subsequent to the date the evaluation was completed.

PART II

Item 1.  Legal Proceedings

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.

Item 4.  Submissions of Matters to a Vote of Security Holders

The Company’s 2003 annual meeting was held on October 2, 2003.  The record date for such meeting was August 22, 2003 on which date there were a total of 7,429,063 shares of common stock outstanding and entitled to vote.  At the meeting the Company’s shareholders approved the election of directors as follows:

Election of Directors:

Director	Votes For	Votes Against	Votes Abstained
William H. Henderson	6,685,158	448,273	68,763
T.J. Falgout, III	6,731,258	402,173	68,763
Robert J. Kehl	7,133,217	214	68,763
J. David Simmons	7,132,517	914	68,763
Carl E. Baggett	7,126,917	6,514	68,763
Nan R. Smith	6,731,358	402,073	68,763

Item 6.  Exhibits and Reports on Form 8-K

(a)Exhibits:

4.2.1Amendment dated November 30, 2003 to Agented Revolving Credit Agreement dated December 18, 2001 by and between the Company as borrower, and Bank of Oklahoma and certain other banks as lenders.

31.1Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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(b)Reports on Form 8-K:

During the fiscal quarter ended October 31, 2003 the Company filed one report on Form 8-K pertaining to a press release dated September 10, 2003 announcing earnings for the fiscal quarter ended July 31, 2003.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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)
	By:	\s\ Mark D. Slusser
		Mark D. Slusser
		Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)
Dated: December 10, 2003

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Exhibit Index

4.2.1Amendment dated November 30, 2003 to Agented Revolving Credit Agreement dated December 18, 2001 by and between the Company as borrower, and Bank of Oklahoma and certain other banks as lenders.

31.1Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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EX-4.2.1

Exhibit 4.2.1

THIRD AMENDMENT TO AGENTED REVOLVING CREDIT AGREEMENT

THIS THIRD AMENDMENT TO AGENTED REVOLVING CREDIT AGREEMENT (“Amendment”) is dated effective as of November 30, 2003, by and among AMERICA’S CAR MART, INC., an Arkansas corporation (“ACM-Arkansas”), COLONIAL AUTO FINANCE, INC., an Arkansas corporation (“Colonial”) and TEXAS CAR-MART, INC. (formerly Texarkana Car Mart, Inc.), a Texas corporation (“TCM”) (separately a “Borrower”, and collectively the “Borrowers”), and BANK OF ARKANSAS, N.A., GREAT SOUTHERN BANK, BANK OF OKLAHOMA, N.A., ARVEST BANK, FIRST STATE BANK, and ARKANSAS STATE BANK, separately an “Initial Lender” and collectively the “Initial Lenders”), BANK OF ARKANSAS, N.A., as agent for the Banks (in such capacity, the “Agent”), and BANK OF OKLAHOMA, N.A., as the paying agent (“Paying Agent”).

RECITALS

A.Reference is made to the Agented Revolving Credit Agreement dated as of December 18, 2001 (as amended February 1, 2002, and November 18, 2002, the “Credit Agreement”), by and among Borrowers, Banks, Agent and Paying Agent, pursuant to which the Banks established a $39,500,000 Revolving Line of Credit in favor of Borrowers for the purpose of refinancing existing indebtedness and for working capital needs and general business purposes.

B.Effective the date hereof, the Banks intend to modify their commitments under the Credit Agreement and to extend the maturity date of the Notes to April 30, 2006.

C.The parties hereto hereby intend to further amend the Credit Agreement to reflect the foregoing changes.

AGREEMENT

For valuable consideration received, the parties agree to the following.

1.Defined Terms.  As used in this Amendment the following terms shall have the meanings given.

1.1.“Restructured and Renewed Notes” means the $2,500,000 Promissory Note payable to the order of Arkansas State Bank, the $5,000,000 Promissory Note payable to the order of Great Southern Bank, the $5,000,000 Promissory Note payable to the order of Arvest Bank, the $2,000,000 Promissory Note payable to the order of First State Bank, the $24,000,000 Promissory Note payable to the order of Bank of Oklahoma, N.A., and the $1,000,000 Promissory Note payable to the order of Bank of Arkansas, N.A., in form and content as set forth on Schedule “1.1” hereto.

1.2.“Chattel Check” means a chattel check as to each of the Borrowers from their respective states of incorporation.

2.Amendments to Credit Agreement. The Credit Agreement is amended as follows.

2.1.The following terms are hereby added or modified as follows:

2.1.1.“Advance Rate” means fifty percent (50%) of Eligible Vehicle Contracts; provided, however, that the Advance Rate shall be reduced by twice the percentage amount by which the Advance Rate Adjustment Percent exceeds 33% (rounded to the nearest one-tenth percent), in each instance such adjustments to be calculated as of the last day of each month and effective as of the first day of the following month.  For example, if the Advance Rate Adjustment Percent were 34% (1% over the standard), the Advance Rate would be reduced by 2%.

2.1.2.“Bank” means any of the Banks.

2.1.3.“Banks” means any Initial Lender and each Person that shall become a Bank hereunder pursuant to Section 10.13.

2.1.4.“Borrowing Base” means, as of the date of determination, the amount determined by multiplying the Advance Rate by the Net Eligible Contract Payments then outstanding.

2.1.5.“Crown Sub-Debt” means the revolving line of credit provided to Borrower by ACM-Texas, in an amount not to exceed Ten Million Dollars ($10,000,000).”

2.1.6.“Funded Debt” means all outstanding Debt For Borrowed Money.

2.1.7.“Majority Banks” means, at any time of determination, the Banks holding at least sixty-six percent (66%) of the Aggregate Revolver Outstanding.

2.1.8.“Revolving Credit Commitment” or “Commitment” means, with respect to any Bank, the amount opposite such Bank’s name on its signature page hereto.

2.1.9.“Revolving Credit Loans” means an advance of funds under Section 2.01.

2.1.10.“Unused Revolving Credit Commitment” means, with respect to any Bank at any time of determination, (a) such Bank’s Revolving Credit Commitment at such time minus (b) the sum of the aggregate principal amount of all Revolving Credit Loans made by such Bank and outstanding at such time.

2.2.The term “Termination Date” is amended to evidence that the date “April 30, 2004” shall now mean “April 30, 2006.”

2.3.Section 2.01 (Revolving Credit) is hereby amended to read as follows:

“Section 2.01.  Revolving Credit. Each Bank severally agrees, on the terms and conditions hereinafter set forth, to make the Revolving Credit Loans to the Borrower from time to time during the period from the date of this Agreement up to but not including the Termination Date in an aggregate principal amount not to exceed at any time outstanding the aggregate Revolving Credit Commitment provided, that the aggregate outstanding principal amount of advances at any time outstanding shall not exceed the lesser of:  (i) the aggregate Revolving Credit Commitment; or (ii) the Borrowing Base.  Such Borrowing Base shall be computed on a monthly basis, and Borrower agrees to provide Agent, on or before the 15th of each month with regard to the immediately preceding month (or more frequently as reasonably required by Agent from time to time), all information requested in connection therewith, including without limitation the Borrowing Base Certificate.  In the event that the Borrowing Base is less than the Aggregate Revolver Outstanding, the Borrower shall immediately notify Agent of such situation and shall, within five (5) Business Days of the imbalance, either (i) reduce the amount of the outstanding balances to bring such amounts within the formulas prescribed, or (ii) provide additional Eligible Vehicle Contracts, without any additional advance being made by any Bank with respect thereto, necessary to comply with the formulas required herein.  Each Loan made in respect of the Revolving Credit Loans shall be made by each Bank in its Pro Rata Share.  Within the limits of the Commitment, the Borrower may borrow, repay and reborrow under this Section 2.01.  On such terms and conditions, the Loans may be outstanding as Prime Loans or LIBOR Loans.  Each type of Loan shall be made and maintained at such Bank’s Lending Office for such type of Loan.  The failure of any Bank to make any requested Revolving Credit Loan to be made by it on the date specified for such Loan shall not relieve any other Bank of its obligation (if any) to make such Loan on such date, but no Bank shall be responsible for the failure of any other Bank to make such Loans to be made by such other Bank.”

2.4.Section 2.05 is hereby amended to replace the existing pricing grid with the following:

Borrower’s Ratio of Funded Debt to EBITDA	Adjusted LIBOR Rate		Adjusted Prime Rate
< 2.0		LIBOR Rate plus 3.0%	Prime Rate plus 0.0%
> 2.0 < 2.25		LIBOR Rate plus 3.25%	Prime Rate plus .25%
> 2.25 < 2.50		LIBOR Rate plus 3.50%	Prime Rate plus .50%
> 2.50		LIBOR Rate plus 3.75%	Prime Rate plus .75%

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2.5.Section 2.07 (Unused Portion Fee) is hereby amended to read as follows:

Section 2.07. Unused Portion Fee. The Borrower agrees to pay to the Agent for the account of each Bank a commitment fee on the average daily unused portion of such Bank’s Commitment from the date of this Agreement until the Termination Date at the rate of one-tenth of one percent (1/10 of 1%) per annum, payable on the last day of each quarter during the term of such Bank’s Commitment, commencing November 30, 2003, and ending on the Termination Date.  Upon receipt of any commitment fees, the Agent will promptly thereafter cause to be distributed such payments to the Banks in the proportion that each Bank’s unused Commitment bears to the total of all the Banks’ unused Commitments; provided, that any Additional Bank will not receive any payment of Unused Portion Fees earned or paid prior to the date this Agreement is executed by said Additional Bank.  Further, no Unused Portion Fees will be paid for any given month during which the average monthly revolving balance exceeds $25,000,000 during each quarter the Unused Portion Fee is billed.

2.6.Section 2.16 (Termination Fee) is hereby amended to read as follow:

“Section 2.16.  Termination Fee.  The Borrower may terminate this Agreement at any time upon not less than ten (10) Business Day’s notice to Agent of such intention, provided, that all monetary obligations (e.g. payment of Notes) and any indemnification shall continue; and provided further that Borrower agrees to pay to the Agent for the account of each Bank a termination fee in an aggregate amount equal to $100,000 in the event the credit facility is terminated for any reason prior to six (6) months from the execution date hereof; provided, that no termination fee shall be payable for any prepayment if the Borrower is required to make any payments under Sections 2.13 and/or 2.14.”

2.7.Section 6.01(8)(d) (Liens) is hereby amended to evidence that the sum “One Million Dollars ($1,000,000)” shall now mean and read “One Million Five Hundred Thousand Dollars ($1,500,000).”

2.8.Section 6.02(2) (Debt) is amended to read as follows:

“(2)  Debt described on Exhibit “J” (i.e. Crown Sub-Debt), not to exceed $10,000,000 at any given time, and no prepayment, renewals, extensions or refinancings shall occur following the occurrence and continuance of an Event of Default;”

2.9.Section 6.02(7) (Debt) is hereby amended to evidence that the sum “$1,000,000” shall now mean and read “$1,500,000.”

2.10.Section 6.10(iv) (Transactions with Affiliates) is hereby amended to evidence that the sum “$10,000 per month” shall now mean and read “$350,000 per fiscal year.”

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2.11.Section 6.11 (New Car Lots) is hereby amended to evidence that the number “six (6)” shall now mean and read “ten (10).”

2.12.Section 7.01 (Leverage Ratio) is amended to read as follows:

“Section 7.01.  Leverage Ratio.  The Borrower will at all times, calculated as of the last day of each month, maintain a ratio of Funded Debt to EBITDA for the trailing twelve (12) month period of no greater than 2.50 to 1.00.”

2.13.Section 7.02 (Fixed Charge Coverage Ratio) is amended to read as follows:

“Section 7.02.  Fixed Charge Coverage Ratio.  Borrower will not permit the ratio of (a) EBITDA to (b) Fixed Charges to be less than 1.50 to 1.00 as of the end of each month for the trailing six (6) month period.”

2.14.A new Section 7.03 is hereby added:

“Section 7.03.  Minimum Tangible Net Worth.  Borrower shall maintain at all times a Minimum Adjusted Tangible Net Worth (to be defined as book net worth less goodwill) as of the last day of each fiscal quarter each to the sum of (i) the greater of (A) eighty-five percent (85%) of the Minimum Adjusted Tangible Net Worth as of July 31, 2003 and (B) $57,000,000, plus (ii) seventy-five percent (75%) of positive quarterly Net Income (after July 31, 2003) and (iii) one hundred percent (100%) of any subsequent equity issuances (after July 31, 2003).”

2.15.The term “Notes” shall now mean the following promissory notes payable by Borrowers, together with extensions, renewals and changes in form thereof:  $5,000,000 Promissory Note payable to Arvest Bank; $5,000,000 Promissory Note payable to Great Southern Bank; $2,500,000 Promissory Note payable to Arkansas State Bank; $2,000,000 Promissory Note payable to First State Bank, $1,000,000 Promissory Note payable to Bank of Arkansas, N.A.; and $24,000,000 Promissory Note payable to Bank of Oklahoma, N.A.

2.16.Any references to “Superior Federal Bank” are hereby deleted, and Borrowers and Guarantor hereby release Superior Federal Bank from any obligations and/or commitments under the Credit Agreement; and furthermore, the obligations under the $7,500,000 Restructured Promissory Note dated November 18, 2002, payable to Superior Federal Bank are hereby released thereunder and substituted for those under the Restructured Notes.

2.17.Section 10.13 is amended to read as follows:

“Section 10.13.  Additional Banks.  Initially the aggregate Revolving Credit Commitment shall equal $39,500,000; however, it is contemplated that the aggregate Revolving Credit Commitment will increase to $45,000,000 upon the addition of one or more Banks.  In furtherance thereof, one or more Banks (“Additional Banks”) may

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be made a party hereto as determined by Agent, and any Bank made a party hereto shall execute a Signature Page attached hereto and made a part hereof, and thereafter shall be included as a Bank under the terms of this Agreement.  By execution of the Additional Bank Signature Page and upon receipt of an original executed promissory note equal to the Additional Bank’s Revolving Credit Commitment, each Additional Bank shall be bound by the terms of this Agreement and entitled to all benefits of this Agreement as though such Additional Bank had signed on the date of this Agreement; provided, however, that any Additional Banks shall not receive payments of principal, interest or fees accrued hereunder or paid by the Borrower prior to the date such Additional Bank executes its Signature Page.”

3.Conditions Precedent.  The obligations of the Banks to perform under the Credit Agreement, as amended hereby, are subject to the satisfaction of the following.

3.1.Notes.  The Restructured and Renewed Notes shall be executed and delivered to the Agent for distribution.

3.2.Corporate Action.  Certified (as of the date of this Amendment), copies of all corporate action taken by each Borrower, including resolutions of its Board of Directors authorizing the execution, delivery, and performance of this Amendment and all documents executed and delivered in connection herewith.

3.3.Incumbency and Signature Certificate.  A certificate (dated as of the date of this Amendment) of the secretary of each Borrower certifying the names and true signatures of the officers of each Borrower authorized to sign this Amendment and all related documents.

3.4.Opinion.  An opinion from each Borrower’s legal counsel, substantially in the form of Schedule “3.4” attached hereto.

3.5.Chattel Checks.  The current Chattel Checks shall be delivered to Agent, evidencing no conflicting interests to those granted to Agent.

3.6.Representations.  All representations and warranties contained in Article IV of the Credit Agreement, Section 8 of the Security Agreement, and Sections 24 through 29 of the Guaranty must be true and correct in all material respects on and as of the date hereof other than any representation or warranty that relates to a specific prior date and except to the extent that the Agent and the Banks have been notified in writing by the Borrower that any representation or warranty is not correct and the Majority Banks have explicitly waived in writing compliance with such representation or warranty.

3.7.Default.  No Default or Event of Default has occurred and is continuing, or will result from the execution and delivery of this Amendment.

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4.Representations and Warranties.  Each of the Borrowers and the Guarantor, respectively, hereby ratify and confirm all representations and warranties set forth in Article IV of the Credit Agreement, Section 8 of the Security Agreement, and Sections 24 through 29 of the Guaranty Agreement.

5.Ratification.  Borrowers hereby ratify and confirm the Credit Agreement, and all instruments, documents, and agreements executed by and in connection therewith.

6.Ratification of Guaranty and Subordination Agreement.  ACM-Texas hereby ratifies and confirms the Guaranty and the Crown Sub-Debt Subordination Agreement, and agrees that they remain in full force and effect, and that the “Obligations” defined in the Guaranty and the “Superior Obligations” defined in the Crown Sub-Debt Subordination Agreement shall additionally include the Restructured and Renewed Notes.  Furthermore, ACM-Texas and Agent agree the “$7,500,000 Unsecured Note (“Subordinated Note”) dated January 15, 1999, payable by Borrower to Subordinating Party, maturing January 15, 2004” shall now mean and read “$10,000,000 Unsecured Note (“Subordinated Note”) dated as of November 1, 2003, payable by Borrower to Subordinating Party, maturing November 1, 2006.

7.Agency Fee.  Borrower agrees to pay Agent an annual agency fee equal to $30,000, payable in twelve (12) monthly installments of $2,500 on the first day of each month.

8.Governing Law.  This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of Arkansas.

9.Multiple Counterparts.  This Amendment may be executed in any number of counterparts, and by different parties to this Agreement in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

10.Costs, Expenses and Fees.  Borrower agrees to pay all costs, expenses and fees incurred by Banks in connection herewith, including without limitation the reasonable attorney fees of Riggs, Abney, Neal, Turpen, Orbison and Lewis.

“BORROWERS”
AMERICA’S CAR MART, INC., an Arkansas corporation
By
	Mark D. Slusser, Vice President

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TEXAS CAR-MART, INC., formerly Texarkana Car Mart, Inc., a Texas corporation
By
	Mark D. Slusser, Vice President
COLONIAL AUTO FINANCE, INC., an Arkansas corporation
By
	Tilman J. Falgout, III, President
“GUARANTOR” and “SUBORDINATING PARTY”
AMERICA’S CAR-MART, INC., a Texas corporation, formerly known as Crown Group, Inc.
By
	Mark D. Slusser, Vice President

[Signature Page to Third Amendment to Agented Revolving

Credit Agreement dated November 30, 2003]

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“BANKS”
Revolving Credit Commitment:	BANK OF OKLAHOMA, N.A.
$24,000,000
Principal Office and Lending Office
P.O. Box 2300
Tulsa, OK 74192	By
Attn:  John Anderson		Jeffrey R. Dunn, Vice President
janderson@bokf.com

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Revolving Credit Commitment:	BANK OF ARKANSAS, N.A.
$1,000,000
Principal Office and Lending Office:
P.O. Box 1407
Fayetteville, AR 72702-1404	By
Attention: Jeffrey R. Dunn		Jeffrey R. Dunn, President & CEO
jdunn@bokf.com

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Revolving Credit Commitment:	ARVEST BANK
$5,000,000
Principal Office and Lending Office:
801 Technology Drive
Little Rock, AR  72223	By
Attention: Tom Wetzel		Tom Wetzel, Senior Vice President
rwetzel@arvest.com

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Revolving Credit Commitment:	GREAT SOUTHERN BANK
$5,000,000
Principal Office and Lending Office:
1451 E. Battlefield
Springfield, MO  65804	By
Attn:  Gary Lewis		Gary Lewis, Vice President
glewis@greatsouthernbank.com

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Revolving Credit Commitment:	ARKANSAS STATE BANK
$2,500,000
Principal Office and Lending Office:
315 E. Main
Siloam Springs, AR  72761	By
Attn:  Curtis Hutchines		Art Morris, President and CEO
amorris@arkstatebank.com

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Revolving Credit Commitment:	FIRST STATE BANK
$2,000,000
Principal Office and Lending Office:
620 Chestnut Street
Conway, AR 72703	By
Attention: Michael Bynum		Michael Bynum, Senior Vice President
mbynum@fsbmail.com

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“AGENT”
BANK OF ARKANSAS, N.A.
By
		Jeffrey R. Dunn, President
“PAYING AGENT”
BANK OF OKLAHOMA, N.A.
By
	Jeffrey R. Dunn, Vice President

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Schedule “1.1”

(Restructured Promissory Note)

Schedule “3.4”

(Opinion of Borrower’s Counsel)

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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. for the period ended October 31, 2003;

2.Based on my knowledge, this 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 report;

3.Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a).designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report was being prepared;

(b).designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c).evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d).disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

(a).all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b).any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

December 10, 2003	\s\ Tilman J. Falgout, III
	Tilman J. Falgout, III
	Chief Executive Officer

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EX-31.2

Exhibit 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Mark D. Slusser, Chief Financial Officer 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. for the period ended October 31, 2003;

2.Based on my knowledge, this 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 report;

3.Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a).designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report was being prepared;

(b).designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c).evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d).disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

(a).all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b).any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

December 10, 2003	\s\ Mark D. Slusser
	Mark D. Slusser
	Chief Financial Officer and Secretary

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EX-32.1

Exhibit 32.1

Certification Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of America’s Car-Mart, Inc. (the “Company”) on Form 10-Q for the quarterly period ended October 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Tilman J. Falgout, III, Chief Executive Officer of the Company, and Mark D. Slusser, Chief Financial Officer of the Company do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	\s\ Tilman J. Falgout, III
	Tilman J. Falgout, III
	Chief Executive Officer
	December 10, 2003
By:	\s\ Mark D. Slusser
	Mark D. Slusser
	Chief Financial Officer and Secretary
	December 10, 2003

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