I am pleased to report that our Company once again achieved outstanding results by recording its fourteenth consecutive year of record revenues and profits, during fiscal 2004. Last year marked our 19th year of business and our 17th year as a public company. Several notable milestones were achieved by our Company during the past fiscal year.

Peter L. Vosotas, Chairman, CEO & President  - (left)
Ralph T. Finkenbrink, CFO & Sr. Vice President - (right)

Net income for the fiscal year ended March 31, 2004 increased 22% to $5,212,678, compared to $4,281,394 for the year ended March 31, 2003. Diluted earnings per share for the year increased 19% to $0.96, as compared to $0.81 per share a year ago. Revenue for the year increased 14% to $25,500,000, compared to $22,377,000 last year. The net worth of our Company grew 24% from $22,090,440 to $27,409,000 during the year.  In addition, the Company announced record income and revenues in each quarter during the past fiscal year.

It was with great pleasure that on August 14, 2003 the Company announced a cash dividend of $.10 cents per share on its common shares to be paid semi-annually. Dividends were paid on September 22, 2003 and on March 22, 2004 to shareholders of record as of September 8, 2003 and March 8, 2004, respectfully.

During the past year the Company added two new branch offices in Detroit, Michigan and Virginia Beach, Virginia. These offices marked a significant step forward for our company as we expanded our branch network into two new and exciting states. We intend to add one to four additional branch offices in Virginia by the end of the coming year. Our strategy has been to identify states in which we believe an opportunity exists and to implement our branch model concept. After establishing an initial branch location in a state, we try to open additional branches within the same state, in order to create a market presence and increase operational efficiencies.

In fiscal 2004 we were faced with the challenge of developing our five (5) branch offices in the state of Ohio, which were the focus of our expansion efforts during the previous year. We believe that we have solidified our foundation in this state by building a strong group of core management and staff, led by a very experienced regional director. As of March 31, 2004, we had a total of 29 branch offices in Florida, Georgia, South Carolina, North Carolina, Ohio, Michigan and Virginia. At the time of this letter, June of 2004, we have expanded our network to 32 operational branches with the addition of offices in Greensboro, North Carolina, Greenville, South Carolina and Pensacola, Florida.

During the past year the price of Nicholas stock rose from $4.98 per share to over $8.30 per share, June 1, 2003 – June 1, 2004. We were not overly surprised by this increase in share price, based on the company’s consistent performance, highlighted by fourteen (14) consecutive years of record revenues and earnings. Overall, the stock market did very well in 2003 and the Company enjoyed the rising tide.

Our consistent financial performance hasn’t happened by accident. It is the result of many people working very hard over a long period of time. The automobiles of our employees are usually the first to arrive in the parking lot each morning and invariably the last to drive away at night. We, like all companies, have a challenge to find good, hardworking, and qualified people. When we do, we try our best to keep those that work hard and produce results. We reward our employees with excellent benefits, including performance bonuses and excellent career opportunities. As a result, we have been able to reduce our employee turnover during the last few years. Our ability to mold and retain a veteran team is one of the primary reasons for our success. The majority of our senior managers, accounting staff and data processing staff have been with the Company since its inception in the late 1980’s.

On May 19, 2004 the Company announced the sale of 1,100,000 shares of common stock at a public offering price of $8.00 per share, netting approximately $7,600,000. On June 8, 2004 the Company announced that the underwriter for the offering had exercised an option to purchase 300,000 additional shares at $8.00 per share, netting the Company an additional $2,200,000 and bringing the total amount of money raised to approximately $9,800,000. The proceeds of these transactions were used to pay down the Company’s line of credit. At the same time, the Company applied and was approved for listing on the Nasdaq National Market System. As a result of the offering with its attendant visibility, and the national market listing, the Company’s shares have experienced a quadruple increase in the daily average trading volume from 7,000 shares a day to approximately 30,000 shares a day. We believe that the Company and our shareholders will benefit because of this increased trading activity.

During the past year we met with our current lenders, Bank of America, First Tennessee Bank and Hibernia National Bank, as we continued to address our long-term financing needs. Additionally, we have spoken with several investment banking firms and expect to continue this process throughout the year. By June 30th 2004, the Company expects to execute an amendment to its current line of credit, which will expand and extend the credit facility.

We look forward with optimism towards the coming year. Any company that can say, “Our potential customer base is over 100 billion dollars a year”, should be excited about its business prospects. We expect to continue our steady controlled growth by increasing our existing branch loan portfolios and building new branch offices. Overall, we are very pleased with what Nicholas Financial has accomplished in a year traumatized by the prospect of terrorism and the war in Iraq. For us, 2003-2004 was a year of cultivating our expansion of the previous year. It was a year of recruiting, hiring, training and mentoring employees, especially in our Ohio and Michigan locations. The experience of these efforts has strengthened our management team and has our company poised for even greater success.

We are very proud of our employees, whose dedication, talent and loyalty have made Nicholas an important force in automobile financing. We are grateful for their ongoing efforts and for the support of our customers, bankers, vendors and shareholders. We remain determined to increase the value of our publicly traded stock. We are convinced that our shareholders will be rewarded if we continue to build the net worth of our Company each year. To all of you who have invested in Nicholas, we wish to thank you for having continued faith in our Company. On behalf of our Board of Directors and our employees, we thank you for the confidence that you have entrusted in us.

Peter L. Vosotas
Chairman, CEO & President
June 2004