UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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.
__X__ Yes _____ No
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date, August 11, 1999.
Common Stock, no par value 19,016,573
-------------------------- ------------
(Class) (Outstanding)
1
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
<S> <C>
PAGE
----
Item 1. Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets as of June 30,
1999 and March 31, 1999 3
Consolidated Statements of Operations for the
three months ended June 30, 1999 and June 30, 1998 4
Consolidated Statements of Shareholders' Equity for the year ended
March 31, 1999 and the three months ended June 30, 1999 5
Consolidated Statements of Cash Flows for the
three months ended June 30, 1999 and June 30, 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 15
</TABLE>
2
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
-------- ----------
ASSETS
<S> <C> <C>
Cash $ 1,110,404 1,236,207
Gross loans receivable 159,182,169 149,570,861
Less:
Unearned interest and fees (34,976,800) (32,231,831)
Allowance for loan losses (9,038,922) (8,769,367)
------------ -------------
Loans receivable, net 115,166,447 108,569,663
Property and equipment, net 6,341,113 6,299,662
Other assets, net 7,490,950 7,536,987
Intangible assets, net 10,032,730 9,827,885
------------ -------------
Total assets $ 140,141,644 133,470,404
============ =============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable 75,000,000 71,150,000
Other note payable 482,000 482,000
Income taxes payable 2,935,135 1,940,091
Accounts payable and accrued expenses 3,976,450 5,206,483
------------ -------------
Total liabilities 82,393,585 78,778,574
------------ -------------
Shareholders' equity:
Common stock, no par value - -
Additional paid-in capital 935,921 935,921
Retained earnings 56,812,138 53,755,909
------------ -------------
Total shareholders' equity 57,748,059 54,691,830
------------ -------------
$ 140,141,644 133,470,404
============ =============
</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
June 30,
-----------------------------
1999 1998
---- ----
<S> <C> <C>
Revenues:
Interest and fee income $ 20,552,669 18,445,292
Insurance and other income 3,774,399 2,288,317
------------ ------------
Total revenues 24,327,068 20,733,609
------------ ------------
Expenses:
Provision for loan losses 3,038,820 2,359,669
General and administrative expenses:
Personnel 10,021,087 9,018,177
Occupancy and equipment 1,621,281 1,494,788
Data processing 363,692 352,051
Advertising 917,290 891,024
Amortization of intangible assets 348,655 310,686
Other 2,028,673 1,858,082
------------ ------------
15,300,678 13,924,808
Interest expense 1,356,341 1,215,683
------------ ------------
Total expenses 19,695,839 17,500,160
------------ ------------
Income before income taxes 4,631,229 3,233,449
Income taxes 1,575,000 1,100,000
------------ ------------
Net income $ 3,056,229 2,133,449
============ ============
Net income per common share:
Basic $ .16 .11
============ ============
Diluted $ .16 .11
============ ============
Weighted average common equivalent shares outstanding:
Basic 19,016,573 19,003,122
============ ============
Diluted 19,174,710 19,250,197
============ ============
</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, 1998 $ 864,968 46,436,312 47,301,280
Proceeds from exercise of stock options (18,000 shares),
including tax benefit of $18,453 70,953 - 70,953
Net income - 7,319,597 7,319,597
----------- ----------- -----------
Balances at March 31, 1999 935,921 53,755,909 54,691,830
Net income - 3,056,229 3,056,229
----------- ----------- -----------
Balances at June 30, 1999 $ 935,921 56,812,138 57,748,059
=========== ========== ==========
</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
June 30,
-------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,056,229 2,133,449
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 3,038,820 2,359,669
Amortization of intangible assets 348,655 310,686
Amortization of loan costs and discounts 29,523 27,521
Depreciation 339,698 333,839
Change in accounts:
Other assets, net 16,514 (256,178)
Accounts payable and accrued expenses (1,230,033) (1,043,766)
Income taxes payable 995,044 81,575
----------- -----------
Net cash provided by operating activities 6,594,450 3,946,795
----------- -----------
Cash flows from investing activities:
Increase in loans, net (8,539,327) (5,450,310)
Net assets acquired from office acquisitions,
primarily loans (1,108,770) (230,550)
Purchases of premises and equipment (368,656) (303,652)
Purchases of intangible assets (553,500) (22,350)
----------- -----------
Net cash used by investing activities (10,570,253) (6,006,862)
----------- -----------
Cash flows from financing activities:
Proceeds from senior notes payable, net 3,850,000 1,600,000
Proceeds from exercise of stock options - 17,500
----------- -----------
Net cash provided by financing activities 3,850,000 1,617,500
----------- -----------
Decrease in cash (125,803) (442,567)
Cash, beginning of period 1,236,207 1,212,611
----------- -----------
Cash, end of period $ 1,110,404 770,044
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 1,396,729 1,487,490
Cash paid for income taxes 579,956 1,018,425
Supplemental schedule of noncash financing activities:
Tax benefits from exercise of stock options - 8,363
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The consolidated financial statements of the Company at June 30, 1999, and
for the period 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 June 30, 1999, and the
results of operations and cash flows for the period then ended, have been
included. The results for the period ended June 30, 1999 are not necessarily
indicative of the results that may be expected for the full year or any other
interim period.
Certain reclassification entries have been made for fiscal 1999 to conform
with fiscal 2000 presentation. These reclassifications had no impact on
shareholders' equity or net income.
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent 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 those estimates.
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, 1999, included in the Company's 1999 Annual Report
to Shareholders.
NOTE 2 - COMPREHENSIVE INCOME
- -----------------------------
The Company applies the provision of Financial Accounting Standards Board's
(FASB) Statement of Financial Accounting Standards (SFAS) No. 130 "Reporting
Comprehensive Income." The Company has no items of other comprehensive income;
therefore, net income equals comprehensive income.
NOTE 3 - ALLOWANCE FOR LOAN LOSSES
- ----------------------------------
The following is a summary of the changes in the allowance for loan losses
for the periods indicated (unaudited):
Three months ended June 30,
---------------------------
1999 1998
---- ----
Balance at beginning of period $ 8,769,367 8,444,563
Provision for loan losses 3,038,820 2,359,669
Loan losses (3,033,879) (2,347,395)
Recoveries 332,799 330,823
Allowance on acquired loans,
net of specific charge-offs (68,185) 11,359
----------- -----------
Balance at end of period $ 9,038,922 8,799,019
=========== ===========
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):
Three months
ended June 30,
--------------
1999 1998
---- ----
(Dollars in thousands)
Average gross loans receivable (1) $ 151,654 133,009
Average loans receivable (2) 117,492 103,974
Expenses as a % of total revenue:
Provision for loan losses 12.5% 11.4%
General and administrative 62.9% 67.2%
Total interest expense 5.6% 5.9%
Operating margin (3) 24.6% 21.5%
Return on average assets (annualized) 8.9% 7.1%
Offices opened or acquired, net 8 6
Total offices (at period end) 387 366
(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
revenue.
Comparison of Three Months Ended June 30, 1999, Versus
- ------------------------------------------------------
Three Months Ended June 30, 1998
- --------------------------------
Net income rose to $3,056,000 for the three months ended June 30, 1999, a
43.3% increase over the $2,133,000 earned during the corresponding three-month
period of the previous year. This increase resulted primarily from an increase
in operating income (revenues less provision for loan losses and general and
administrative expenses) of approximately $1,538,000, or 34.6%, and was
partially offset by increases in interest expense and income taxes.
Interest and fee income for the quarter ended June 30, 1999, increased by
$2.1 million, or 11.4%, over the same period of the prior year. This increase
resulted from a $13.5 million increase, or 13.0%, in average loans receivable
over the two corresponding periods.
Insurance commissions and other income increased by $1.5 million, or 64.9%,
over the two quarters. Insurance commissions increased to $1.9 million during
the three months ended June 30, 1999, representing $682,000, or 55.6%, increase
from the prior year quarter. This increase resulted from the growth in loans in
those states where
8
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
-----------------------------------------------
Comparison of Three Months Ended June 30, 1999, Versus
- ------------------------------------------------------
Three Months Ended June 30, 1998, continued
- -------------------------------------------
insurance products may be sold, primarily South Carolina and Georgia. The
expansion of the larger loan portfolio in these two states has also led to
increased insurance commissions. Other income increased by $804,000, or 75.7%,
when comparing the two quarterly periods. The increase in net revenues from the
Company's ParaData subsidiary contributed $483,000 of this overall increase and
the sale of other ancillary products such as motor club memberships, Accidental
Death or Disability Policies, and mortgage referral fees contributed the
remaining increase.
Total revenues rose to $24.3 million during the quarter ended June 30,
1999, a 17.3% increase over the $20.7 million for the corresponding quarter of
the previous year. Revenues from the 248 offices open throughout both quarters
increased by approximately 11.3%, primarily due to increased balances of loans
receivable in those offices. At June 30, 1999, the Company had 387 offices in
operation, an increase of 8 offices from March 31, 1999.
The provision for loan losses during the quarter ended June 30, 1999
increased by $679,000, or 28.8%, from the same quarter last year. This increase
resulted from a combination of increases in both the general allowance for loan
losses due to loan growth and the amount of loans charged off. Net charge-offs
for the current quarter amounted to $2,701,000, a 33.9% increase over the
$2,017,000 charged off during the same quarter of fiscal 1999. As a percentage
of average loans receivable, net charge-offs increased from 7.8% on an
annualized basis from three months ended June 30, 1998, to 9.2% annualized for
the most recent quarter.
General and administrative expenses for the quarter ended June 30, 1999,
increased by $1,376,000, or 9.9%, over the same quarter of fiscal 1999. This
increase resulted from the additional general and administrative expenses
associated with the 21 net new offices opened or acquired between June 30, 1998
and 1999. Overall, general and administrative expenses, when divided by average
open offices, increased by approximately 3.8% when comparing the two periods;
and, as a percentage of total revenue, decreased from 67.2% during the prior
year quarter to 62.9% during the most recent quarter.
Interest expense increased by $141,000, or 11.6%, primarily as a result of
the additional debt incurred to fund the increase in loans receivable during the
prior year.
The Company's effective income tax rate remained constant at 34.0% during
the two quarterly periods.
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, funding
overall growth of loans outstanding (including acquisitions) and the repayment
of existing debt.
The Company has a $65.0 million revolving credit agreement, $4.0
million of senior term notes, and $10.0 million of subordinated notes.
The revolving credit facility expires on September 30, 2000, and bears
interest, at the Company's option, at the agent's prime rate or LIBOR plus
1.60%. At June 30, 1999, the interest rate under the facility was 6.70%, and the
Company's outstanding balance was $61.0 million, leaving $4.0 million in
borrowing availability under existing borrowing base limitations (based on
eligible loans receivable). The Company has received a temporary increase in
availability under the revolving credit facility of $10.0 million for the period
beginning August 1, 1999 through September 29, 1999. The Company has also
received a commitment from an additional bank for $15.0 million, which it
expects to add to its existing credit line. Before September 29, 1999, the
Company expects to restructure the revolving credit facility to provide for
greater availability on a more permanent basis.
The senior term notes provide for interest payments to be made
semi-annually at a fixed rate of 8.5%, with the final annual principal payment
of $4.0 million to be made on December 1, 1999.
The subordinated notes provide for interest payments to be made quarterly
at a fixed rate of 10.0%. Annual principal payments of $2.0 million will be due
beginning June 2000, with a final maturity date of June 1, 2004.
9
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
-----------------------------------------------
Borrowings under the revolving credit agreement, the senior term notes, and
the subordinated 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 when restructured will be adequate to fund the
continuing growth of the Company's loan portfolio, the principal payments due
under the term notes and fund the expected cost of opening and operating new
offices, including funding initial operating losses of new offices and loans
receivable originated by those offices and the Company's other offices.
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 nine 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 partially 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.
Year 2000
- ---------
The Company recognizes that there is a business risk in computerized
systems and products as the calendar rolls over into the next century. Failure
of these systems and products to correctly process the date could cause
miscalculations, unpredictable or inconsistent results, or complete system
failures. This problem is commonly called the "year 2000 problem." In
particular, in the Company's line of business, the year 2000 problem could cause
results such as miscalculations of interest on loans or other significant
problems.
The Company has determined that its primary software package, the "Loan
Manager System" developed and maintained by its wholly owned subsidiary,
ParaData Financial Systems, is year 2000 compliant.
The Company is also dependent upon several outside vendors for processing
information such as payroll, general ledger, benefits administration, etc.
Inquiries have been made of and assurances received from each of these providers
that these systems are also prepared for the year 2000. The Company believes
that its total costs of addressing the year 2000 problem has been, and will
continue to be, immaterial.
10
<PAGE>
The Company believes the most reasonably likely worst case year 2000
scenario would be the failure of key suppliers (e.g. utility providers, phone
and data communication vendors, banks, etc.) to achieve year 2000 compliance,
resulting in lost revenues due to forced office closings or loss of
communications for extended periods of time. Currently, based on responses
obtained from third parties to date, the Company is not aware of any material
third parties that do not expect to be year 2000 compliant. However, due to the
uncertainty surrounding the readiness of third parties, the Company is unable to
determine whether the consequences of year 2000 failures will materially affect
the Company's financial condition or results of operations. The Company
maintains a contingency plan that allows individual offices to operate in a
manual environment for short periods of time; however, these alternatives would
not be sufficient should year 2000 failures cause blackouts for extended
periods.
The year 2000 disclosure set forth above should be read in connection with
"Forward-Looking Information," which follows.
Forward-Looking Information
- ---------------------------
This report on Form 10-Q, including "Management's Discussion and Analysis
of Financial Condition and Results of Operations," may contain various
"forward-looking statements," within the meaning of Section 21E of the
Securities Exchange Act of 1934, that are based on management's belief and
assumptions, as well as information currently available to management.
Specifically, management's statements of expectations with respect to the
Settlement and the other litigation described below in "Legal Proceedings," and
the matters discussed above in "Year 2000," may be deemed forward-looking
statements. When used in this document, the words "anticipate," "estimate,"
"expect," and similar expressions may identify forward-looking statements.
Although the Company believes that the expectations reflected in any such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Any such statements are subject to
certain risks, uncertainties and assumptions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
the Company's actual financial results, performance or financial condition may
vary materially from those anticipated, estimated or expected. Among the key
factors that could cause the Company's actual financial results, performance or
condition to differ from the expectations expressed or implied in such
forward-looking statements are the following; changes in interest rates, risks
inherent in making loans, including repayment risks and value of collateral;
recently-enacted or proposed legislation; whether, and the terms upon; the
occurrence of non-filing claims at historical levels in circumstances validated
by the Settlement; the timing and amount of revenues that may be recognized by
the Company; changes in current revenue and expense trends (including trends
affecting charge-offs); changes in the Company's markets and general changes in
the economy (particularly in the markets served by the Company); the ability of
the Company and third parties with whom the Company deals to achieve year 2000
compliance; the unpredictable nature of litigation; and other matters discussed
in this Report and the Company's other filings with the Securities and Exchange
Commission.
Legal Proceedings
- -----------------
The Company is a party to certain legal proceedings. See Part II, Item I.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Company's outstanding debt under the Revolving Credit Facility
was $61.0 million at June 30, 1999. Interest on borrowings under this
facility is based, at the Company's option, on the prime rate or
LIBOR plus 1.60%. Based on the outstanding balance at June 30, 1999,
a change of 1% in the interest rate would cause a change in interest
expense of approximately $610,000 on an annual basis.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Since April 1995, the Company and several of its subsidiaries have
been parties to litigation challenging the Company's non-filing
insurance practices. Non-filing insurance is an insurance product
that lenders like the Company can purchase in lieu of filing a UCC
financing statement covering the collateral of their borrowers. The
litigation against the Company has been consolidated with other
litigation against other finance companies, jewelry and furniture
retailers, and insurance companies in a purported nationwide class
action in the U.S. District Court in Alabama under the caption In re:
Consolidated "Non-filing Insurance" Fee Litigation (Multidistrict
Litigation Docket No. 1130), U.S. District Court, Middle District of
Alabama, Northern Division).
11
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
On November 11, 1998, the Company and its subsidiaries named in the
action entered into a settlement agreement (the "Settelement").
Pursuant to the Settlement. The Company has agreed to settle all
claims alleged in the litigation involving it and its subsidiaries
for an aggregate cash payment of $5 million, which has been funded.
In addition, the terms of the Settlement will curtail certain
non-filing practices by the Company and its subsidiaries and allows
the court to approve criteria defining those circumstances in which
the Company's subsidiaries can make non-filing insurance claims going
forward. As a result of the Settlement, non-filing insurance fees
charged to borrowers will be reduced by 25%. The Settlement, which
includes the settlement by several other defendants in the
litigation, including the Company's insurer, was approved by the
court as fair and reasonable to the plaintiff class.
The Company has been named as a defendant in an action, Turner v.
World Acceptance Corp. pending in district court for the Fourteenth
Judicial District, Tulsa County, Oklahoma (No. CJ-97-1921). The
action commenced against the Company on May 20, 1997, names numerous
other consumer finance companies as defendants, and seeks
certification as a statewide class action. The action alleges that
the Company and other consumer finance defendants collected excess
finance charges in connection with refinancing certain consumer
finance loans in Oklahoma and seeks money damages and an injunction
against further collection of such charges. The Company has filed an
answer in the action denying liability, and discovery is proceeding.
The plaintiff's claim is based on a recent opinion of the Oklahoma
Attorney General interpreting a provision of the Oklahoma Consumer
Credit Code with respect to the permitted amount of certain loan
refinance charges in a manner contrary to prior regulatory practice
in existence in Oklahoma since 1969. The Company and numerous other
consumer finance companies have brought suit to enjoin enforcement by
the Oklahoma Attorney General of its recent interpretation of this
provision of the Oklahoma Consumer Credit Code. In May 1999, the
Oklahoma Supreme Court upheld the Attorney General's interpretation
on a prospective basis. The Company and the other consumer finance
companies party to the proceeding against the Attorney General have
petitioned the Oklahoma Supreme Court for a rehearing on this matter.
In addition, the State of Oklahoma has recently enacted legislation
to clarify the interpretation of the disputed provision of the
Oklahoma Consumer Credit Code consistent with the prior regulatory
practice followed by the Company. Because of this recent legislation,
the Company expects that the purported class-action lawsuit, even if
decided adversely to the Company, would not materially affect the
Company's refinancing practices in Oklahoma going forward, although
such an adverse decision could possibly involve a material monetary
award. The Company intends to defend this action vigorously.
From time to time the Company is involved in other routine litigation
relating to claims arising out of its operations in the normal course
of business. The Company believes that it is not presently a party to
any such other pending legal proceedings that would have a material
adverse effect on its financial condition.
Management's statement of expectation with respect to litigation may
be deemed forward-looking statements, within the meaning of Section
21E of the Securities Exchange Act of 1934 (the "Exchange Act"), 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 these litigation matters could
differ materially from management's expectation.
Item 2. Changes in Securities
---------------------
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
--------------------------------
<TABLE>
<CAPTION>
(a) Exhibits:
Previous Company
Exhibit Exhibit Registration
Number Description Number No. or Report
- ----------------------------------------------------------------------------------------------------------------
<S> <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 (as amended)
4.3 Article II, Section 9 of the Company's Second Amended 3.2 1995 10-K
and Restated Bylaws
4.4 Amended and restated Revolving Credit Agreements, dated as 4.4 9-30-97 10-Q
of June 30, 1997, between Harris Trust and Savings Bank, the
Banks signatory thereto from time to time and the Company
4.5 Amended and Restated Note Agreements, dated as of June 30, 4.5 9-30-97 10-Q
1997, between Jefferson-Pilot Life Insurance Company and
the Company
4.6# Amended and Restated Note Agreement, dated as of June 30, 4.6 9-30-97 10-Q
1997, between Principal Mutual Life Insurance Company and
the Company
4.7 Note Agreement, dated as of June 30, 1997, between Principal 4.7 9-30-97 10-Q
Mutual Life Insurance Company and the Company re: 10%
Senior Subordinated Secured Notes
4.8 Amended and Restated Security Agreement, Pledge and Indenture 4.8 9-30-97 10-Q
of Trust, dated as of June 30, 1997, between the Company and
Harris Trust and Savings Bank, as Security Trustee
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 Settlement Agreement dated as of April 1, 1999, between the 10.3 1999 10-K
Company and R. Harold Owens
10.4 Securityholders' Agreement, dated as of September 19, 1991, 10.5 33-42879
between the Company and certain of its securityholders
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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
27 Financial Data Schedules (for SEC purposes only)
# Omitted from filing - substantially identical to immediately preceding
exhibits, except for the parties thereto and the principal amount involved.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended June 30, 1999.
</TABLE>
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: August 11, 1999 /s/ C. D. Walters
---------------------------------------------
C. D. Walters, Chairman, and
Chief Executive Officer
Dated: August 11, 1999 /s/ A. A. McLean III
---------------------------------------------
A. A. McLean III, Executive Vice President
and Chief Financial Officer
15
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,110
<SECURITIES> 0
<RECEIVABLES> 124,205
<ALLOWANCES> 9,039
<INVENTORY> 0
<CURRENT-ASSETS> 116,276
<PP&E> 6,341
<DEPRECIATION> 0
<TOTAL-ASSETS> 140,142
<CURRENT-LIABILITIES> 6,912
<BONDS> 75,482
0
0
<COMMON> 57,748
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 140,142
<SALES> 0
<TOTAL-REVENUES> 24,327
<CGS> 0
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