<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT of 1934
For the transition period from to
Commission File Number: 0-19599
WORLD ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter.)
South Carolina 57-0425114
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
108 Frederick Street
Greenville, South Carolina 29607
(Address of principal executive offices)
(Zip Code)
(864) 298-9800
(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 shorter period than the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
(Check Mark) Yes No
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date, February 13, 1997.
Common Stock, no par value 18,924,573
(Class) (Outstanding)
This Filing contains 16 pages. The
Exhibit Index is on page 14.
1
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
PAGE
<S> <C> <C>
Item 1. Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets as of December 31,
1996, and March 31, 1996 3
Consolidated Statements of Operations for the
three-month periods and nine-month periods ended
December 31, 1996, and December 31, 1995 4
Consolidated Statements of Shareholders' Equity
for the year ended March 31, 1996, and the nine-month
period ended December 31, 1996 5
Consolidated Statements of Cash Flows for the
three-month periods and nine-month periods ended
December 31, 1996, and December 31, 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the three-month
periods and nine-month periods ended December 31, 1996,
and December 31, 1995 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 4. Submission of Matters to a Vote of Securityholders 12
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 16
</TABLE>
2
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
ASSETS
<S> <C> <C>
Cash $ 2,012,177 1,693,747
Gross loans receivable 128,182,433 99,425,915
Less:
Unearned interest and fees (28,140,285) (19,802,649)
Allowance for loan losses (6,673,409) (5,006,703)
------------- --------------
Loans receivable, net 93,368,739 74,616,563
Property and equipment, net 5,816,040 5,643,120
Other assets, net 5,603,868 3,758,329
Intangible assets, net 8,879,621 4,859,807
------------ -------------
$ 115,680,445 90,571,566
============ =============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable 72,500,000 37,750,000
Other note payable 482,000 482,000
Income taxes payable 1,081,781 3,460,456
Accounts payable and accrued expenses 5,974,197 3,999,442
---------- -------------
Total liabilities 80,037,978 45,691,898
---------- -------------
Shareholders' equity:
Common stock, no par value - -
Additional paid-in capital 471,076 14,625,136
Retained earnings 35,171,391 30,254,532
------------ -------------
Total shareholders' equity 35,642,467 44,879,668
------------ ------------
$ 115,680,445 90,571,566
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
------------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Interest and fee income $ 17,031,185 15,175,756 48,469,268 43,719,455
Insurance and other income 2,137,419 2,877,093 6,000,378 7,586,227
------------ ------------- ------------ -------------
Total revenues 19,168,604 18,052,849 54,469,646 51,305,682
------------ ------------- ------------ -------------
Expenses:
Provision for loan losses 4,197,506 3,248,758 9,471,160 7,414,335
------------ ------------- ------------ -------------
General and administrative expenses:
Personnel 7,127,302 6,376,761 20,689,992 18,751,747
Occupancy and equipment 1,216,175 1,079,243 3,712,325 3,172,902
Data processing 241,368 214,685 762,329 712,165
Advertising 1,293,840 1,172,715 2,377,548 2,012,691
Amortization of intangible assets 744,431 673,075 2,135,172 2,045,516
Other 1,791,953 1,630,363 4,743,201 4,420,030
------------ ------------- ------------ -------------
12,415,069 11,146,842 34,420,567 31,115,051
------------ ------------- ------------ -------------
Interest expense 1,137,686 898,709 3,014,060 2,614,889
------------ ------------- ------------ -------------
Total expenses 17,750,261 15,294,309 46,905,787 41,144,275
------------ ------------- ------------ -------------
Income before income taxes 1,418,343 2,758,540 7,563,859 10,161,407
Income taxes 496,000 1,005,000 2,647,000 3,670,000
------------ ------------- ------------ -------------
Net income $ 922,343 1,753,540 4,916,859 6,491,407
============ ============= ============ =============
Earnings per common share:
Primary $ .05 .08 .25 .30
============ ============= ============ =============
Fully diluted $ .05 .08 .25 .30
============ ============= ============ =============
Weighted average common shares outstanding:
Primary 19,295,278 21,661,091 20,064,070 21,661,138
============ ============= ============ =============
Fully diluted 19,324,947 21,782,091 20,073,959 21,743,206
============ ============= ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Paid-in Retained
Capital Earnings Total
<S> <C> <C> <C>
Balances at March 31, 1995 $ 16,059,492 19,698,474 35,757,966
Proceeds from exercise of stock options (45,000 shares),
including tax benefit of $124,140 326,168 - 326,168
Common stock repurchases (176,000 shares) (1,760,524) - (1,760,524)
Net income - 10,556,058 10,556,058
----------- ----------- -----------
Balances at March 31, 1996 $ 14,625,136 30,254,532 44,879,668
Proceeds from exercise of stock options (25,500 shares),
including tax benefit of $30,397 104,778 - 104,778
Common stock repurchases (1,810,000 shares) (14,258,838) - (14,258,838)
Net income - 4,916,859 4,916,859
----------- ----------- -----------
Balances at December 31, 1996 $ 471,076 35,171,391 35,642,467
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
-------------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 922,343 1,753,540 4,916,859 6,491,407
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 4,197,506 3,248,758 9,471,160 7,414,335
Amortization of intangible assets 744,431 673,075 2,135,172 2,045,516
Amortization of loan costs and discounts 42,610 22,587 59,030 77,843
Depreciation 332,763 268,112 976,197 772,781
Change in accounts:
Other assets, net (1,499,957) 16,083 (1,904,569) (1,626,832)
Income taxes payable (241,808) (604,953) (2,348,278) (2,433,940)
Accounts payable and accrued expenses 1,639,713 1,498,737 1,974,755 2,023,939
----------- ----------- ----------- -----------
Net cash provided by operating activities 6,137,601 6,875,939 15,280,326 14,765,049
----------- ----------- ----------- -----------
Cash flows from investing activities:
Increase in loans, net (10,250,834) (11,392,836) (19,644,004) (21,184,495)
Net assets acquired from office acquisitions,
primarily loans (7,805,663) (297,610) (8,653,604) (468,750)
Costs of organizing new subsidiary - - - (96,360)
Purchases of premises and equipment (38,309) (912,676) (1,074,845) (1,711,584)
Purchases of intangible assets (5,510,653) (102,500) (6,154,986) (197,500)
------------ ----------- ------------ -----------
Net cash used by investing activities (23,605,459) (12,705,622) (35,527,439) (23,658,689)
---------- ----------- ---------- ----------
Cash flows from financing activities:
Proceeds of senior notes payable, net 25,900,000 9,250,000 38,750,000 13,000,000
Repayment of senior term notes (4,000,000) (4,000,000) (4,000,000) (4,000,000)
Proceeds from exercise of stock options 70,001 140,618 74,381 191,808
Repurchase of common stock (4,048,130) - (14,258,838) -
----------- ----------- ----------- -------
Net cash provided by financing activities 17,921,821 5,390,618 20,565,543 9,191,808
---------- ------------ ----------- -----------
Increase (decrease) in cash 454,013 (439,065) 318,430 298,168
Cash, beginning of period 1,558,164 1,928,932 1,693,747 1,191,699
----------- ----------- ----------- -----------
Cash, end of period $ 2,012,177 1,489,867 2,012,177 1,489,867
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 1,371,235 1,218,210 3,079,396 2,812,233
Cash paid for income taxes 734,357 1,609,953 4,995,278 6,103,940
Supplemental schedule of noncash financing activities:
Tax benefits from exercise of stock options 26,946 77,710 30,397 114,344
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1996
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of the Company at December 31, 1996
and for the periods then ended were prepared in accordance with the instructions
for Form 10-Q and are unaudited; however, in the opinion of management, all
adjustments (consisting only of items of a normal recurring nature) necessary
for a fair presentation of the financial position at December 31, 1996, and the
results of operations and cash flows for the period then ended, have been
included. The results for the periods ended December 31, 1996, are not
necessarily indicative of the results that may be expected for the full year or
any other interim period.
These consolidated financial statements do not include all disclosures
required by generally accepted accounting principles and should be read in
conjunction with the Company's audited financial statements and related notes
for the year ended March 31, 1996, included in the Company's 1996 Annual Report
to Shareholders.
NOTE 2 - ALLOWANCE FOR LOAN LOSSES
The following is a summary of the changes in the allowance for loan losses
for the periods indicated (unaudited):
<TABLE>
<CAPTION>
Three months Nine months
ended December 31, ended December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Balance at beginning of period $ 5,456,761 5,027,211 5,006,703 4,363,612
Provision for loan losses 4,197,506 3,248,758 9,471,160 7,414,335
Loan losses (3,905,511) (2,983,787) (9,159,691) (6,680,554)
Recoveries 184,254 299,272 573,200 489,051
Allowance on acquired loans 740,399 13,905 782,037 18,915
----------- ---------- ---------- ----------
Balance at end of period $ 6,673,409 5,605,359 6,673,409 5,605,359
=========== ========= ========== =========
</TABLE>
NOTE 3 - PARADATA FINANCIAL SYSTEMS (PARADATA)
The following data for ParaData was included in the Consolidated Statements
of Operations for the periods ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------------- -------------------
1996 1995 1996 1995
--------- -------- --------- ------
<S> <C> <C> <C> <C>
Sales and system-support $ 441,949 1,749,909 1,379,973 5,694,067
Cost of sales 36,627 574,180 253,584 2,850,632
---------- ---------- ---------- ----------
Net margin (included in other income) 405,322 1,175,729 1,126,389 2,843,435
---------- ---------- ---------- ---------
General and administrative expenses
Personnel 259,639 269,837 785,692 733,172
Occupancy and equipment 67,849 64,355 201,608 190,904
Advertising 2,921 - 5,963 2,284
Amortization of intangibles 7,189 7,189 21,567 21,565
Other 40,742 64,222 131,940 176,514
--------- -------- --------- --------
378,340 405,603 1,146,770 1,124,439
Interest expense - 1,527 - 9,005
--------- -------- --------- --------
Net income (loss) before income taxes $ (26,982) 768,599 (20,381) 1,709,991
========= ======== ========= ==========
</TABLE>
NOTE 4 - ACQUISITIONS
On December 2, 1996, the Company acquired Personal Credit Plan, Inc. for
$7.2 million in cash. The Company acquired assets totaling approximately $8.2
million and assumed liabilities totaling approximately $6.4 million. Intangible
assets and goodwill resulting from the acquisition were approximately $5.5
million.
7
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth certain information derived from the
Company's consolidated statements of operations and balance sheets, as well as
operating data and ratios, for the periods indicated (unaudited):
<TABLE>
<CAPTION>
Three months Nine months
ended December 31, ended December 31,
1996 1995 1996 1995
(Dollars in thousands)
<S> <C> <C> <C> <C>
Average gross loans receivable (1) $ 111,991 101,061 106,789 95,811
Average loans receivable (2) 87,291 80,001 83,666 75,866
Expenses as a % of total revenue:
Provision for loan losses 21.9% 18.0% 17.4% 14.5%
General and administrative 64.8% 61.7% 63.2% 60.6%
Total interest expense 5.9% 5.0% 5.5% 5.1%
Operating margin (3) 13.3% 20.3% 19.4% 24.9%
Return on average assets (annualized) 3.6% 7.6% 6.7% 9.7%
Offices opened or acquired, net 36 1 60 32
Total offices (at period end) 342 276 342 276
</TABLE>
(1) Average gross loans receivable have been determined by averaging month-end
gross loans receivable over the indicated period.
(2) Average loans receivable have been determined by averaging month-end gross
loans receivable less unearned interest and deferred fees over the
indicated period.
(3) Operating margin is computed as total revenues less provision for loan
losses and general and administrative expenses, as a percentage of total
revenues.
Comparison of Three Months Ended December 31, 1996, Versus
Three Months Ended December 31, 1995
Net income amounted to $922,000 for the three months ended December 31,
1996, a 47.4% decrease from the $1,754,000 earned during the corresponding
three-month period of the previous year. This decrease resulted from a decrease
in operating income (revenues less provision for loan losses and general and
administrative expenses) of approximately $1,101,000, or 30.1%, combined with a
slight increase in interest expense and offset by a decrease in income taxes.
Interest and fee income for the quarter ended December 31, 1996, increased
by $1,855,000, or 12.2%, over the same period of the prior year. This increase
resulted from a $7.3 million increase, or 9.1%, in average loans receivable over
the two corresponding periods. Insurance commissions and other income decreased
by $740,000, or 25.7%, during the quarter ended December 31, 1996, when compared
to the same quarter of the prior year. This decrease was due primarily to the
decrease of gross profit on sales from ParaData, the Company's computer
subsidiary, which is not expected to repeat the contribution to overall earnings
that it made during fiscal 1996. Net revenues from ParaData amounted to $405,000
for the three months ended December 31, 1996, compared to $1,176,000 for the
same period of the prior year.
8
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Comparison of Three Months Ended December 31, 1996, Versus
Three Months Ended December 31, 1995, continued
Total revenues amounted to $19.2 million during the quarter ended December
31, 1996, representing a 6.2% increase over the $18.1 million in total revenues
for the same quarter of the prior year. Revenues from the 244 offices open
throughout both three-month periods remained level when comparing the two
periods. At December 31, 1996, the Company had 346 offices in operation, an
increase of 36 offices during the current quarter, and 60 offices since the
beginning of the fiscal year.
The provision for loan losses in the quarter ended December 31, 1996,
increased by $949,000, or 29.2%, over the same period of the prior year. This
increase resulted from a combination of increases in both the general allowance
for loan losses as well as the amount of loans charged off. Net charge-offs for
the current quarter amounted to $3,721,000, an increase of $1,037,000, or 38.6%
over the amount charged off during the quarter ended December 1995. The increase
in charge-offs is partially a result of increasing loans outstanding, as well as
an increase in the overall levels of loans charged off. Management believes that
the Company's recent experience with charge-offs is consistent with a national
trend toward increased consumer defaults and bankruptcies. Management is
monitoring the Company's delinquencies and charge-offs closely and is
considering a number of attentive actions, including without limitation
tightening credit standards for small loans and increasing collection efforts.
Until the Company's delinquencies and charge-offs return to historical levels,
management expects this trend of higher charge-offs to negatively affect the
results of operations of the Company's small loan business.
General and administrative expenses for the quarter ended December 31,
1996, increased by $1,268,000, or 11.4%, over the same quarter of fiscal 1995.
This increase resulted primarily from the additional expenses associated with
the 66 new offices opened or acquired between December 31, 1995, and December
31, 1996. Excluding the expenses associated with ParaData, overall general and
administrative expenses when divided by the average open offices decreased by
2.0% when comparing the two periods.
Interest expense increased by $239,000, or 26.6%, when comparing the two
corresponding quarterly periods. This increase resulted from an increase in the
level of debt outstanding primarily due to the funds used in conjunction with
the stock repurchase program as well as the overall growth both internally and
through acquisitions during the past year. Through December 31, 1996, the
Company has repurchased 1,986,000 shares of its common stock for a total cost of
approximately $16 million.
The effective income tax rate decreased slightly to 35.0% during the
quarter ended December 31, 1996, from 36.4% during the prior year quarter as a
result of a corporate reorganization which reduced state income taxes.
Comparison of Nine Months Ended December 31, 1996,
Versus Nine Months Ended December 31, 1995
For the nine-month period ended December 31, 1996, net income amounted to
$4.9 million, a decrease of $1.6 million, or 24.3%, from the corresponding
nine-month period of the prior year. Operating income decreased by $2.2 million,
or 17.2%, over the two periods. This decrease combined with an increase in
interest expense was offset by a decrease in income taxes.
Total revenues amounted to $54.5 million during the current nine-month
period, an increase of $3.2 million, or 6.2%, over the prior-year period. This
increase resulted from an increase in interest and fee income of 10.9% offset by
a reduction in insurance and other income of 20.9%. Revenues from the 244
offices open throughout both nine-month periods increased approximately 1.3%.
Interest and fee income rose by $4.7 million, or 10.9% during the two
corresponding nine-month periods primarily as a result of increases in loan
balances outstanding. Average loans receivable were $83.7 million during the
nine months ended December 31, 1996, representing a 10.3% increase over the
average balances of the prior year. The decrease in other income resulted
primarily from a reduction in the net revenues from ParaData of $1,717,000 (see
Note 3, page 7).
9
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Comparison of Nine Months Ended December 31, 1996,
Versus Nine Months Ended December 31, 1995, continued
The provision for loan losses increased by $2,057,000, or 27.7% during the
current nine-month period when compared to the same period of fiscal 1996. This
increase resulted in an increase in the general reserve for loan losses which is
a function of gross loans outstanding, as well as an increase in loan losses.
Net charge-offs increased by $2,395,000, or 38.7%, when comparing the two
nine-month periods. As a percentage of average loans, this represented an
increase to 13.7% during the current nine-month period compared to 11.8% for the
same period of the prior fiscal year. The increase in delinquencies and loan
losses during the six-month periods resulted in large part from the trend
discussed above.
General and administrative expenses increased by $3,306,000, or 10.6%,
during the most recent nine-month period. As a percentage of total revenues,
these expenses increased from 60.6% during the prior year nine-month period to
63.2% during the current period. This increase resulted from the additional
offices opened or acquired during the past year. Excluding the expenses
associated with ParaData, overall general and administrative expenses, when
divided by the average open offices, decreased by 1.4% when comparing the two
nine-month periods.
Interest expense increased by approximately $399,000 during the current
nine-month period as a result of the increase in the level of debt outstanding
primarily due to the funds used to repurchase the Company's common stock.
The effective income tax rate decreased slightly to 35.0% during the nine
months ended December 31, 1996, from 36.1% for the same period ended December
31, 1995, as a result of a reduction of certain state income taxes resulting
from a corporate reorganization.
Liquidity and Capital Resources
The Company's primary sources of funds are cash flow from operations and
borrowings under its revolving credit agreement. The Company's primary ongoing
cash requirements are funding the opening and operation of new offices, the
overall growth of loans outstanding, and the repayment of existing debt.
The Company has a $75.0 million revolving credit agreement and $12.0
million of senior term notes outstanding with institutional lenders. The term
notes provide for interest payments to be made semi-annually at a fixed rate of
8.5% with annual principal payments of $4.0 million to be made each year (the
next payment being due on December 1, 1997). The revolving credit facility is
made up of a $50 million permanent line which expires on November 30, 1998, and
a $25 million temporary line which expires on April 15, 1997. These lines bear
interest, at the Company's option, at the agent's prime rate or LIBOR plus
1.60%. At December 31, 1996, the interest rate under the revolving credit
facility was 7.27%, and the Company's outstanding balance under this facility
was $60.5 million, leaving $3.9 million in borrowing availability under existing
borrowing base limitations, which are based on eligible loans receivable. The
Company is currently in negotiations with its lenders to extend the temporary
line or restructure its lending arrangement to insure the adequate availability
of funds to fulfill all of its funding requirements. The Company anticipates
that the restructuring will be completed by the end of the current fiscal year.
Borrowings under the revolving credit agreement and the term notes are secured
by a lien on substantially all the tangible and intangible assets of the Company
and its subsidiaries pursuant to various security agreements.
The Company believes that cash flow from operations and borrowings under
its revolving credit facility will be adequate to fund principal payments due
under the term notes as well as fund the expected costs of opening and operating
new offices, including funding initial operating losses of new offices, and
funding loans receivable originated by those offices and the Company's other
offices.
10
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Inflation
The Company does not believe that inflation has a material adverse effect
on its financial condition or results of operations. The primary impact of
inflation on the operations of the Company is reflected in increased operating
costs. While increases in operating costs would adversely affect the Company's
operations, the consumer lending laws of three of the six states in which the
Company currently operates allow indexing of maximum loan amounts to the
Consumer Price Index. These provisions will allow the Company to make larger
loans at existing interest rates, which could offset the effect of inflationary
increases in operating costs.
Quarterly Information and Seasonality
The Company's loan volume and corresponding loans receivable follow
seasonal trends. The Company's highest loan demand occurs each year from October
through December, its third fiscal quarter. Loan demand is generally the lowest
and loan repayment is highest from January to March, its fourth fiscal quarter.
Loan volume and average balances remain relatively level during the remainder of
the year. This seasonal trend causes fluctuations in the Company's cash needs
and quarterly operating performance through corresponding fluctuations in
interest and fee income and insurance commissions earned, since unearned
interest and insurance income are accreted to income on a collection method.
Consequently, operating results for the Company's third fiscal quarter are
significantly lower than in other quarters and operating results for its fourth
fiscal quarter are generally higher than in other quarters.
Legal Proceedings
The Company is a party to certain legal proceedings. See Part II, Item 1.
11
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its Georgia subsidiary are named as co-defendants
with a number of other finance companies, jewelry and furniture
retailers, and insurance companies in a consolidated action,
currently pending in U.S. District Court in Alabama under the caption
In re American Insurance Company, "Non-filing Insurance" Fee
Litigation (Multidistrict Litigation Docket No. 1130, U.S. District
Court, District of Alabama, Northern Division). The consolidated
action involves the defendants' non-file insurance practices. The
complaint alleges, among other things, that the defendants' non-file
insurance coverages do not constitute true insurance, which result in
alleged federal truth-in-lending, RICO and antitrust violations and
state fraud, breach of contract and conversion violations, and seeks
certification of a nationwide class of plaintiffs to recover money
damages and injunctive relief. The complaint in this action was filed
on April 18, 1995, the Company has filed an answer and the parties
are in the discovery process. The Company has been advised that
certain of the defendants in the case have agreed to settle the
claims made against them by paying money damages to the plaintiffs.
The Company has also been advised that at least one of the settling
defendants has agreed to change its non-file insurance practices. If
the Company's non-file insurance practices are found to be invalid,
the Company could be required to refund non-file insurance fees, pay
other significant damages to the plaintiffs or change its non-file
insurance practices going forward, and the Company could experience a
reduction in future income unless legislative reforms are enacted.
The Company disputes the allegations made in the complaint, and
intends to continue to defend itself vigorously. Although the Company
is unable to predict with certainty the outcome of this litigation,
management expects that it will not have a material adverse effect on
the Company's financial position or results of operations.
Management's statement of expectation about the outcome of this
litigation should be deemed a forward-looking statement, within the
meaning of Section 27A of the Security Exchange Act of 1934, and no
assurance can be given that management's expectation will prove
correct, as such expectation is subject to certain risks,
uncertainties and assumptions based on the preliminary nature of the
case and the vagaries of litigation generally. Should one or more of
these risks materialize or should underlying assumptions prove
incorrect, the actual outcome of this litigation could differ
materially from management's expectation.
The Company from time to time and currently is involved as plaintiff
or defendant in various other legal actions incident to its business.
The current legal activities are not believed to be material to the
financial condition of the Company.
Item 2. Changes in Securities
None. The Company's credit agreements contain certain restrictions on
the payment of cash dividends on its capital stock.
12
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART II. OTHER INFORMATION, CONTINUED
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Previous Company
Exhibit Exhibit Registration
Number Description Number No. or Report
<S> <C> <C> <C> <C>
3.1 Second Amended and Restated Articles of Incorporation of the 3.1 1992 10-K
Company
3.2 First Amendment to Second Amended and Restated Articles 3.2 1995 10-K
of Incorporation
3.3 Amended Bylaws of the Company 3.4 33-42879
4.1 Specimen Share Certificate 4.1 33-42879
4.2 Articles 3, 4 and 5 of the Form of Company's Second 3.1, 3.2 1995 10-K
Amended and Restated Articles of Incorporation
4.3 Article II, Section 9 of the Company's Second Amended 3.2 1995 10-K
and Restated Bylaws
4.4 Revolving Credit Agreement, dated as of December 1, 1992, 4.6 33-61524
between Harris Trust and Savings Bank, the Banks signatory
thereto from time to time and the Company
4.5 First Amendment re: Note Agreements, Revolving Credit 4.5 1994 10-K
Agreement and Security Agreement, Pledge and Indenture of Trust,
dated as of April 2, 1993, between the Company and the Banks
signatory thereto
4.6 Second Amendment to Revolving Credit Agreement, dated as 4.6 1994 10-K
of September 1, 1993, between the Company and the Banks
signatory thereto
4.7 Third Amendment to Credit Agreement/Second Amendment to 4.7 1995 10-K
Revolving Credit Notes, dated as of November 1, 1994, between
the Company and the Banks signatory thereto
4.8 Third (sic) Amendment to Credit Agreement, dated as of March 4.8 1995 10-K
13, 1995, between the Company and the Banks signatory thereto
4.9 Fifth Amendment to Credit Agreement, dated as of June 30, 1995 4.9 1996 10-K
4.10 Sixth Amendment to Credit Agreement, dated as of September 4.10 1996 10-K
1, 1995
4.11 Seventh Amendment to Credit Agreement, dated as of November 4.11 1996 10-K
1, 1995
4.12 Eighth Amendment to Credit Agreement, dated as of June 4.12 1996 10-K
1, 1996
13
<PAGE>
4.13 Term Note Agreement, dated as of December 1, 1992, between 4.7 33-61524
Jefferson-Pilot Life Insurance Company and the Company
4.14# Term Note Agreement, dated as of December 1, 1992, between NA NA
Principal Mutual Life Insurance Company and the Company
4.15 First Amendment to Note Agreements, dated November 1, 1994, 4.11 1995 10-K
between Principal Mutual Life Insurance Company, Jefferson-
Pilot Life Insurance Company and the Company
4.16 Security Agreement, Pledge and Indenture of Trust, dated as 4.9 33-61524
of December 1, 1992, between the Company and Harris Trust
and Savings Bank, as Security Trust
4.17 Second Amendment to Security Agreement, Pledge and Indenture 4.10 1994 10-K
of Trust, dated as of September 1, 1993, between the Company
and Harris Trust and Savings Bank, as Security Trustee
4.18 Third Amendment to Security Agreement, Pledge and Indenture 4.18 1996 10-K
of Trust, dated as of June 30, 1995
4.19 Fourth Amendment to Security Agreement, Pledge and Indenture 4.19 1996 10-K
of Trust, dated as of November 1, 1995
4.20 Fifth Amendment to Security Agreement, Pledge and Indenture 4.20 1996 10-K
of Trust, dated as of June 1, 1996
10.1+ Employment Agreement of Charles D. Walters, effective April 1, 10.1 1994 10-K
1994
10.2+ Employment Agreement of A. Alexander McLean, III, effective 10.2 1994 10-K
April 1, 1994
10.3+ Employment Agreement of R. Harold Owens, effective June 26, 10.3 1995 10-K
1995
10.4 Securityholders' Agreement, dated as of September 19, 1991, 10.5 33-42879
between the Company and certain of its securityholders
10.5+ 1992 Stock Option Plan of the Company 4 33-52166
10.6+ 1994 Stock Option Plan of the Company, as amended 10.6 1995 10-K
10.7+ The Company's Executive Incentive Plan 10.6 1994 10-K
10.8+ The Company's Executive Strategic Incentive Plan 10.8 1995 10-K
10.9+ Amendment No. 1, dated as of April 1, 1996, to the Executive 10.9 1996 10-K
Strategic Incentive Plan
</TABLE>
# Omitted from filing -- substantially identical to immediately preceding
exhibits, except for the parties thereto and the principal amount involved.
+ Management contract or other compensatory plan required to be filed under
Item 14(c) of this report and Item 601 of Regulation S-K.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended December
31, 1996.
14
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLD ACCEPTANCE CORPORATION
Dated: February 13, 1997 /s/ C. D. Walters
---------------------
C. D. Walters, Chief Executive Officer
Dated: February 13, 1997 /s/ A. A. McLean III
------------------------
A. A. McLean III, Executive Vice President
and Chief Financial Officer
15
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,012
<SECURITIES> 0
<RECEIVABLES> 100,042
<ALLOWANCES> 6,673
<INVENTORY> 0
<CURRENT-ASSETS> 95,381
<PP&E> 5,816
<DEPRECIATION> 0
<TOTAL-ASSETS> 115,680
<CURRENT-LIABILITIES> 7,056
<BONDS> 72,982
0
0
<COMMON> 35,642
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 115,680
<SALES> 0
<TOTAL-REVENUES> 54,470
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 34,421
<LOSS-PROVISION> 9,471
<INTEREST-EXPENSE> 3,014
<INCOME-PRETAX> 7,564
<INCOME-TAX> 2,647
<INCOME-CONTINUING> 4,917
<DISCONTINUED> 0
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<EPS-PRIMARY> .25
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