UNITED STATES
SECURITIES 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 September 30, 2000
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, November 10, 2000.
Common Stock, no par value 18,627,573
----------------------------------- ---------------------------------
(Class) (Outstanding)
This Filing contains 15 pages.
The Exhibit Index is on page 13.
1
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Item 1. Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets as of September 30,
2000, and March 31, 2000 3
Consolidated Statements of Operations for the
three-month periods and six-month periods ended
September 30, 2000, and September 30, 1999 4
Consolidated Statements of Shareholders' Equity
for the year ended March 31, 2000, and the six-month
period ended September 30, 2000 5
Consolidated Statements of Cash Flows for the
three-month periods and six-month periods ended
September 30, 2000, and September 30, 1999 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 six-month periods ended September 30, 2000,
and September 30, 1999 8
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 4. Submission of Matters to a Vote of Securityholders 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>
September 30, March 31,
2000 2000
------------- --------------
ASSETS
<S> <C> <C>
Cash $ 4,433,035 1,690,676
Gross loans receivable 208,650,792 173,609,123
Less:
Unearned interest and fees (47,707,627) (37,949,381)
Allowance for loan losses (12,589,573) (10,008,257)
-------------- --------------
Loans receivable, net 148,353,592 125,651,485
Property and equipment, net 6,884,850 6,752,791
Other assets, net 9,050,588 8,269,399
Intangible assets, net 13,925,933 11,108,477
------------ -------------
$ 182,647,998 153,472,828
============ =============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable 102,950,000 77,900,000
Other note payable 482,000 482,000
Income taxes payable 1,739,866 2,059,441
Accounts payable and accrued expenses 4,212,870 4,839,001
------------ -------------
Total liabilities 109,384,736 85,280,442
------------ -------------
Shareholders' equity:
Common stock, no par value - -
Additional paid-in capital - 267,958
Retained earnings 73,263,262 67,924,428
------------ -------------
Total shareholders' equity 73,263,262 68,192,386
------------ -------------
$ 182,647,998 153,472,828
============ =============
</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 Six months ended
September 30, September 30,
------------------------------- -------------------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Interest and fee income $ 24,926,473 21,474,500 47,777,702 42,027,169
Insurance and other income 3,683,999 4,038,264 7,775,402 7,812,663
------------ ------------- ------------ -------------
Total revenues 28,610,472 25,512,764 55,553,104 49,839,832
------------ ------------- ------------ -------------
Expenses:
Provision for loan losses 5,155,110 4,572,978 9,067,413 7,611,798
------------ ------------- ------------ -------------
General and administrative expenses:
Personnel 10,401,230 9,485,230 21,269,951 19,506,317
Occupancy and equipment 1,902,071 1,787,634 3,691,529 3,408,915
Data processing 379,056 366,335 704,009 730,027
Advertising 845,002 648,541 1,466,575 1,565,831
Amortization of intangible assets 422,232 365,948 845,892 714,603
Other 2,377,266 2,069,879 4,749,953 4,098,552
------------ ------------- ------------ -------------
16,326,857 14,723,567 32,727,909 30,024,245
------------ ------------- ------------ -------------
Interest expense 2,153,433 1,462,388 3,913,499 2,818,729
------------ ------------- ------------ -------------
Total expenses 23,635,400 20,758,933 45,708,821 40,454,772
------------ ------------- ------------ -------------
Income before income taxes 4,975,072 4,753,831 9,844,283 9,385,060
Income taxes 1,713,000 1,625,000 3,393,000 3,200,000
------------ ------------- ------------ -------------
Net income $ 3,262,072 3,128,831 6,451,283 6,185,060
============ ============= ============ =============
Net income per common share:
Basic $ .18 0.16 .34 .33
============ ============= ============ =============
Diluted $ .17 0.16 .34 .32
============ ============= ============ =============
Weighted average common shares outstanding:
Basic 18,627,573 19,016,573 18,701,474 19,016,573
============ ============= ============ =============
Diluted 18,758,398 19,218,789 18,832,071 19,196,750
============ ============= ============ =============
</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, 1999 $ 935,921 53,755,909 54,691,830
Proceeds from exercise of stock options (15,000 shares),
including tax benefit of $11,932 55,682 - 55,682
Common stock repurchases (144,000 shares) (723,645) - (723,645)
Net income - 14,168,519 14,168,519
----------- ------------ -----------
Balances at March 31, 2000 267,958 67,924,428 68,192,386
Proceeds from exercise of stock options (15,000 shares),
including tax benefit of $9,756 53,506 - 53,506
Common stock repurchases (275,000 shares) (321,464) (1,112,449) (1,433,913)
Net income - 6,451,283 6,451,283
----------- ------------ -----------
Balances at September 30, 2000 $ - 73,263,262 73,263,262
=========== ========== ==========
</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 Six months ended
September 30, September 30,
-------------------------- ---------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,262,072 3,128,831 6,451,283 6,185,060
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 5,155,110 4,572,978 9,067,413 7,611,798
Amortization of intangible assets 422,232 365,948 845,892 714,603
Amortization of loan costs and discounts 13,962 20,319 27,238 49,842
Depreciation 391,281 365,912 781,983 705,610
Change in accounts:
Other assets, net (352,470) (678,034) (808,427) (661,520)
Income taxes payable 1,082,826 (2,072,720) (309,819) (1,077,676)
Accounts payable and accrued expenses 830,268 315,294 (626,131) (914,739)
----------- ----------- ------------ ------------
Net cash provided by operating activities 10,805,281 6,018,528 15,429,432 12,612,978
----------- ----------- ----------- -----------
Cash flows from investing activities:
Increase in loans, net (6,509,757) (5,834,317) (16,394,294) (14,373,644)
Net assets acquired from office acquisitions,
primarily loans (6,214,342) (1,441,267) (15,390,226) (2,550,037)
Purchase of intangible assets (2,066,897) (567,300) (3,663,348) (1,120,800)
Purchases of premises and equipment (454,590) (797,785) (899,042) (1,166,441)
----------- ----------- ----------- -----------
Net cash used by investing activities (15,245,586) (8,640,669) (36,346,910) (19,210,922)
----------- ----------- ------------ ----------
Cash flows from financing activities:
Proceeds of senior notes payable, net 6,250,000 3,050,000 27,050,000 6,900,000
Repayment of senior subordinated notes - - (2,000,000) -
Proceeds from exercise of stock options - - 43,750 -
Common stock repurchase - - (1,433,913) -
----------- ----------- ----------- -----------
Net cash provided by financing activities 6,250,000 3,050,000 23,659,837 6,900,000
----------- ----------- ----------- -----------
Increase in cash 1,809,695 427,859 2,742,359 302,056
Cash, beginning of period 2,623,340 1,110,404 1,690,676 1,236,307
----------- ----------- ----------- -----------
Cash, end of period $ 4,433,035 1,538,263 4,433,035 1,538,363
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 1,880,130 1,451,902 3,504,209 2,848,631
Cash paid for income taxes 610,662 3,697,720 3,702,819 4,277,676
Supplemental schedule of noncash financing activities:
Tax benefits from exercise of stock options - - 9,756 -
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The consolidated financial statements of the Company at September 30, 2000,
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 September 30, 2000, and the
results of operations and cash flows for the periods then ended, have been
included. The results for the periods ended September 30, 2000, 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, 2000, included in the Company's 2000 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):
<TABLE>
<CAPTION>
Three months Six months
ended September 30, ended September 30,
--------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period $ 11,270,735 9,038,922 10,008,257 8,769,367
Provision for loan losses 5,155,110 4,572,978 9,067,413 7,611,798
Loan losses (5,132,195) (4,385,535) (9,047,045) (7,471,978)
Recoveries 361,181 310,630 710,583 643,429
Allowance on acquired loans, net
of specific charge-offs 934,742 65,966 1,850,365 50,345
----------- ---------- ---------- ----------
Balance at end of period $ 12,589,573 9,602,961 12,589,573 9,602,961
=========== ========= ========== ==========
</TABLE>
NOTE 4 - LITIGATION
-------------------
The Company was from early 1997 through September 2000 involved in
litigation (Turner v. World Acceptance Corp., CJ-97-1921, and Clark v. IFI,
CJ-97-1394) in Oklahoma that challenged the manner in which the Company assessed
certain loan refinance charges prior to August 1997 (the Oklahoma law was
amended in August 1997 to expressly validate the Company's procedures). On
September 7, 2000, all of the issues in all of the Oklahoma litigation were
fully and finally settled on terms favorable to the Company. The total cost to
the Company of the settlement was immaterial.
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 is not presently a party to any such other pending
legal proceedings that it believes would have a material adverse effect on its
financial condition.
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 Six months
ended September 30, ended September 30,
------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Average gross loans receivable (1) $ 203,551 161,431 192,545 157,367
Average loans receivable (2) 156,111 124,853 148,052 121,865
Expenses as a % of total revenue:
Provision for loan losses 18.0% 17.9% 16.3% 15.3%
General and administrative 57.1% 57.7% 58.9% 60.2%
Total interest expense 7.5% 5.7% 7.0% 5.7%
Operating margin (3) 24.9% 24.4% 24.8% 24.5%
Return on average assets (annualized) 7.4% 8.8% 7.6% 8.9%
Offices opened or acquired, net 6 12 13 20
Total offices (at period end) 423 399 423 399
</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 September 30, 2000, Versus
-----------------------------------------------------------
Three Months Ended September 30, 1999
-------------------------------------
Net income rose to $3.3 million during the three months ended September 30,
2000, a 4.3% increase over the $3.1 million earned during the corresponding
three-month period of the previous year. This increase resulted from an increase
in operating income (revenues less provision for loan losses and general and
administrative expenses) of approximately $912,000, or 14.7%, and was partially
offset by increases in interest expense and income taxes. Excluding the results
from ParaData, the Company's computer subsidiary, from both quarterly periods,
the Company's core lending operations improved by 19.4% over the two
corresponding periods, which is more representative of the growth in loans
during these periods.
Interest and fee income for the quarter ended September 30, 2000, increased
by $3.5 million, or 16.1%, over the same period of the prior year. This increase
resulted from a $31.3 million increase, or 25.0%, in average loans receivable
over the two corresponding periods, offset partially by a reduction in yields on
the loan portfolio. This yield reduction was due to the expansion of the larger
loans program in several states. The larger loans have stricter credit
underwriting guidelines, more collateral, and fewer expected losses; however,
they generally carry lower interest rates than the traditional small loan. The
large increase in average loans receivable over the two corresponding quarters
was due primarily to several acquisitions during the first six months of the
fiscal year. The Company has acquired approximately 12,000 accounts, or
approximately $23.0 million in gross loans, in several separate transactions
during the current fiscal year.
Insurance commissions and other income decreased by $354,000 million, or
8.8%, over the two quarters primarily as a result of a decrease in revenue at
the Company's ParaData computer subsidiary. Insurance commissions increased by
$156,000, or 7.9%, when comparing the two quarterly periods. This increase,
which was less than would generally be expected with the large increase in loan
volume, was largely attributable to a change in the Tennessee statute governing
loans less than $1,000. The change in the statute, which the Company believes
will
8
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
-----------------------------------------------
Comparison of Three Months Ended September 30, 2000, Versus
-----------------------------------------------------------
Three Months Ended September 30, 1999, continued
------------------------------------------------
ultimately be revenue neutral, increased the interest and fees that can be
charged on these loans, but eliminated the sale of all insurance products in
conjunction with these loans. Other income decreased by $510,000, or 24.7%, over
the two quarterly periods as a result of the decrease in net revenue from
ParaData. This subsidiary attracted several new customers during the prior
fiscal year, which resulted in an excellent prior year second quarter that was
not expected to be duplicated during the current second quarter. Additionally,
the Company expects to experience a similar revenue shortfall from this
subsidiary during the upcoming third fiscal quarter.
Total revenues rose to $28.6 million during the quarter ended September 30,
2000, a 12.1% increase over the $25.5 million for the corresponding quarter of
the previous year. Revenues from the 373 offices open throughout both quarters
increased by approximately 8.1%, primarily due to increased balances of loans
receivable in those offices. At September 30, 2000, the Company had 423 offices
in operation, an increase of 13 offices from March 31, 2000.
The provision for loan losses during the quarter ended September 30, 2000,
increased by $582,000, or 12.7%, 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 $4,771,000, a 17.1% increase over the
$4,075,000 charged off during the same quarter of fiscal 2000. As a percentage
of average loans receivable, net charge-offs decreased from 13.1% on an
annualized basis from three months ended September 30, 1999, to 12.2% annualized
for the most recent quarter.
General and administrative expenses for the quarter ended September 30,
2000, increased by $1.6 million, or 10.9% over the same quarter of fiscal 2000.
This increase resulted from the additional general and administrative expenses
associated with the 24 net new offices opened or acquired between September 30,
1999 and 2000. Overall, general and administrative expenses, when divided by
average open offices, increased by approximately 4.0% when comparing the two
periods; and, as a percentage of total revenue, decreased from 57.7% during the
prior year quarter to 57.1% during the most recent quarter.
Interest expense increased by $691,000, or 47.3%, primarily as a result of
the additional debt incurred to fund the increase in loans receivable during the
prior year, to fund recent acquisitions, and to repurchase common stock in prior
quarters, combined with an increase in interest rates over the two periods.
The Company's effective income tax rate increased slightly from 34.2% to
34.4% when comparing the two quarters due to reduced tax benefits from the
captive insurance subsidiary.
Comparison of Six Months Ended September 30, 2000,
--------------------------------------------------
Versus Six Months Ended September 30, 1999
------------------------------------------
For the six-month period ended September 30, 2000, net income amounted to
$6.5 million. This represents a $266,000, or 4.3%, increase when comparing the
two six-month periods. Operating income increased by $1.6 million, or 12.7%,
over the two periods. This increase was partially offset by an increase in both
interest expense and income taxes.
Total revenues amounted to $55.6 million during the current six-month
period, an increase of $5.7 million, or 11.5%, over the prior-year period. This
increase resulted from an increase in interest and fee income of 13.7% offset
slightly by a decrease in insurance and other income of .5%. Insurance income
rose by $459,000 or 11.8%, when comparing the two six-month periods due to the
growth in the loan portfolio. This increase was more than offset by a $496,000
decrease in other income due to reduced gross profit from ParaData. Revenues
from the 373 offices open throughout both six-month periods increased
approximately 7.5%.
The provision for loan losses increased by $1.5 million, or 19.1%, during
the current six-month period when compared to the same period of fiscal 2000.
This increase resulted primarily from an increase in loan losses over these two
periods. Net charge-offs increased to $8.3 million during the six-months ended
September 30, 2000, a $1.5 million, or 22.1%, increase over the $6.8 million
charged-off during the September 30, 1999 period. As a percentage of average
9
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
-----------------------------------------------
Comparison of Six Months Ended September 30, 2000,
--------------------------------------------------
Versus Six Months Ended September 30, 1999, continued
-----------------------------------------------------
loans receivable, annualized net charge-offs rose to 11.3% during the current
period from 11.2 % during the same period of fiscal 2000. The Company is pleased
that the charge-off ratios began to level off during the current quarter;
however, there can be no assurances that this trend will continue.
General and administrative expenses increased by $2.7 million, or 9.0%,
over the two six-month periods. This increase resulted from the 24 net new
offices added during the 12 month period ending September 30, 2000. The Company
benefited from a reduction in the general and administrative expense ratios, as
these expenses as a percentage of total revenues declined to 58.9% during the
most recent six months from 60.2% during the prior year period. Additionally,
excluding the expenses associated with ParaData, overall general and
administrative expenses, when divided by the average open offices, increased by
1.7% when comparing the two six-month periods.
Interest expense increased by $1.1 million when comparing the two six-month
periods, an increase of 38.8%. This reflects the increase in overall debt from
September 1999 to the end of the current quarter, combined with an increase in
interest rates.
The effective income tax rate increased slightly to 34.5% during the six
months ended September 30, 2000, from 34.1% during the same period ended
September 30, 1999 due to the reduced benefits from the Company's captive
insurance subsidiary.
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), the repayment of
existing debt and the repurchase of its common stock.
The Company has a $105.0 million revolving credit agreement, (temporarily
increased to $120.0 million), and $8.0 million of subordinated notes.
The revolving credit facility expires on September 30, 2002, and bears
interest, at the Company's option, at the agent's prime rate or LIBOR plus
1.75%. At September 30, 2000, the weighted average interest rate under the
facility was 8.42%, and the Company's outstanding balance was $95.0 million,
leaving $25.0 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 $15.0
million for the period beginning June 28, 2000, through March 31, 2001.
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 are due each
June 1, with a final maturity date of June 1, 2004.
Borrowings under the revolving credit agreement and the senior 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 will be adequate to fund the continuing growth of
the Company's loan portfolio, the principal payments due under the subordinated
notes, the repurchase of the Company's common stock on a limited basis and 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
10
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
-----------------------------------------------
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
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.
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. 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; 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); 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 1.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Company's outstanding debt under the revolving credit facility was
$94.95 million at September 30, 2000. Interest on borrowings under this
facility is based, at the Company's option, on the prime rate or LIBOR
plus 1.75%. Based on the outstanding balance at September 30, 2000, a
change of 1% in the interest rate would cause a change in interest
expense of approximately $.95 million on an annual basis.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
As previously reported in the Company's 10-Q for the quarter ended
June 30, 2000, and in prior reports, the Company was from early 1997
through September 2000 involved in litigation (Turner v. World
Acceptance Corp., CJ-97-1921, and Clark v. IFI, CJ-97-1394) in
Oklahoma that challenged the manner in which the Company assessed
certain loan refinance charges prior to August 1997 (the Oklahoma law
was amended in August 1997 to expressly validate the Company's
procedures). On September 7, 2000, all of the issues in all of the
Oklahoma litigation were fully and finally settled on terms favorable
to the Company. The total cost to the Company of the settlement was
immaterial.
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 it believes would have
a material adverse effect on its financial condition.
Item 2. Changes in Securities
---------------------
The Company's credit agreements contain certain restrictions on the
payment of cash dividends on its capital stock.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The 2000 Annual Meeting of Shareholders was held on August 2,
2000.
(b) Pursuant to Instruction 3 to Item 4, this paragraph need not be
answered.
(c) At the 2000 Annual Meeting of Shareholders, the following two
matters were voted upon and passed. The tabulation of votes was:
(1) The election of seven Directors to serve until the 2001
Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
VOTES IN FAVOR VOTES WITHHELD*
----------------------------- -----------------------------
<S> <C> <C>
Ken R. Bramlett, Jr. 16,969,421 79,394
--------------- ---------------
James R. Gilreath 16,969,721 79,094
--------------- ---------------
William S. Hummers III 16,969,721 79,094
--------------- ---------------
A. Alexander McLean III 16,969,421 79,394
--------------- ---------------
Charles D. Walters 16,969,721 79,094
--------------- ---------------
Charles D. Way 16,948,721 100,094
--------------- ---------------
</TABLE>
(2) The ratification of the selection of KPMG LLP as Independent
Auditors:
<TABLE>
<CAPTION>
VOTES IN FAVOR VOTES AGAINST ABSTENTIONS*
---------------------------- ----------------------------- -----------------------------
<S> <C> <C>
17,005,479 42,036 1,300
----------------- --------------- ---------------
</TABLE>
*There were no broker non-votes on these routine items.
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>
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 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
4.6 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 Employment Agreement of Douglas R. Jones, effective 10.3 12-31-99 10-Q
August 16, 1999
10.4 Settlement Agreement dated as of April 1, 1999, between the 10.3 1999 10-K
Company and R. Harold Owens
10.5 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>
10.6 World Acceptance Corporation Supplemental 10.7 2000 10-K
Income Plan
10.7 Board of Directors Deferred Compensation Plan 10.6 2000 10-K
10.8 1992 Stock Option Plan of the Company 4 33-52166
10.9 1994 Stock Option Plan of the Company, as amended 10.6 1995 10-K
10.10 The Company's Executive Incentive Plan 10.6 1994 10-K
10.11 World Acceptance Corporation Retirement Savings Plan 4.1 333-14399
27 Financial Data Schedules (for SEC purposes only)
</TABLE>
# 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 September
30, 2000.
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: November 6, 2000 /s/ C. D. Walters
------------------------------------------
C. D. Walters, Chief Executive Officer
Dated: November 6, 2000 /s/ A. A. McLean III
------------------------------------------
A. A. McLean III, Executive Vice President
and Chief Financial Officer
15
