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, 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, August 11, 2000.
Common Stock, no par value 18,627,573
----------------------------------- ----------------------
(Class) (Outstanding)
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets as of June 30,
2000 and March 31, 2000 3
Consolidated Statements of Operations for the
three months ended June 30, 2000 and June 30, 1999 4
Consolidated Statements of Shareholders' Equity for
the year ended March 31, 2000 and the three months
ended June 30, 2000 5
Consolidated Statements of Cash Flows for the
three months ended June 30, 2000 and June 30, 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, March 31,
2000 2000
------------- -------------
ASSETS
Cash $ 2,623,340 1,690,676
Gross loans receivable 196,303,038 173,609,123
Less:
Unearned interest and fees (44,240,200) (37,949,381)
Allowance for loan losses (11,270,735) (10,008,257)
------------- -------------
Loans receivable, net 140,792,103 125,651,485
Property and equipment, net 6,814,041 6,752,791
Other assets, net 8,712,080 8,269,399
Intangible assets, net 12,281,268 11,108,477
------------- -------------
Total assets $ 171,222,832 153,472,828
============= =============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable 88,700,000 67,900,000
Subordinated notes payable 8,000,000 10,000,000
Other note payable 482,000 482,000
Income taxes payable 657,040 2,059,441
Accounts payable and accrued expenses 3,382,602 4,839,001
------------- -------------
Total liabilities 101,221,642 85,280,442
------------- -------------
Shareholders' equity:
Common stock, no par value - -
Additional paid-in capital - 267,958
Retained earnings 70,001,190 67,924,428
------------- -------------
Total shareholders' equity 70,001,190 68,192,386
------------- -------------
$ 171,222,832 153,472,828
============= =============
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,
-------------------------
2000 1999
---- ----
<S> <C> <C>
Revenues:
Interest and fee income $22,851,229 20,552,669
Insurance and other income 4,091,403 3,774,399
----------- -----------
Total revenues 26,942,632 24,327,068
----------- -----------
Expenses:
Provision for loan losses 3,912,303 3,038,820
General and administrative expenses:
Personnel 10,868,721 10,021,087
Occupancy and equipment 1,789,458 1,621,281
Data processing 324,953 363,692
Advertising 621,573 917,290
Amortization of intangible assets 423,660 348,655
Other 2,372,687 2,028,673
----------- -----------
16,401,052 15,300,678
Interest expense 1,760,066 1,356,341
----------- -----------
Total expenses 22,073,421 19,695,839
----------- -----------
Income before income taxes 4,869,211 4,631,229
Income taxes 1,680,000 1,575,000
----------- -----------
Net income $ 3,189,211 3,056,229
=========== ===========
Net income per common share:
Basic $ .17 .16
=========== ===========
Diluted $ .17 .16
=========== ===========
Weighted average common equivalent shares outstanding:
Basic 18,775,375 19,016,573
=========== ===========
Diluted 18,905,743 19,174,710
=========== ===========
</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 - 3,189,211 3,189,211
----------- ----------- -----------
Balances at June 30, 2000 $ - 70,001,190 70,001,190
=========== =========== ===========
</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,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,189,211 3,056,229
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 3,912,303 3,038,820
Amortization of intangible assets 423,660 348,655
Amortization of loan costs and discounts 13,276 29,523
Depreciation 390,702 339,698
Change in accounts:
Other assets, net (455,957) 16,514
Accounts payable and accrued expenses (1,456,399) (1,230,033)
Income taxes payable (1,392,645) 995,044
------------ ------------
Net cash provided by operating activities 4,624,151 6,594,450
------------ ------------
Cash flows from investing activities:
Increase in loans, net (9,884,537) (8,539,327)
Net assets acquired from office acquisitions,
primarily loans (9,175,884) (1,108,770)
Purchases of premises and equipment (444,452) (368,656)
Purchases of intangible assets (1,596,451) (553,500)
------------ ------------
Net cash used by investing activities (21,101,324) (10,570,253)
------------ ------------
Cash flows from financing activities:
Proceeds from senior notes payable, net 20,800,000 3,850,000
Repayment of senior subordinated notes (2,000,000) -
Repurchase of common stock (1,433,913) -
Proceeds from exercise of stock options 43,750 -
------------ ------------
Net cash provided by financing activities 17,409,837 3,850,000
------------ ------------
Increase (decrease) in cash 932,664 (125,803)
Cash, beginning of period 1,690,676 1,236,207
------------ ------------
Cash, end of period $ 2,623,340 1,110,404
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 1,624,079 1,396,729
Cash paid for income taxes 3,092,157 579,956
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
June 30, 2000
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of the Company at June 30, 2000, and
for the three months 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,
2000, and the results of operations and cash flows for the period then ended,
have been included. The results for the period ended June 30, 2000 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 2000 to conform
with fiscal 2001 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, 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):
Three months ended June 30,
2000 1999
------------ ------------
Balance at beginning of period $ 10,008,257 8,769,367
Provision for loan losses 3,912,303 3,038,820
Loan losses (3,914,850) (3,086,443)
Recoveries 349,402 332,799
Allowance on acquired loans,
net of specific charge-offs 915,623 (15,621)
------------ ------------
Balance at end of period $ 11,270,735 9,038,922
============ ============
7
<PAGE>
NOTE 4 - LITIGATION
The Company was named as a defendant in an action, Turner v. World
Acceptance Corp., filed in the district court for the Fourteenth Judicial
District, Tulsa County, Oklahoma (No. CJ-97-1921) on May 20, 1997. That action
(the "Tulsa Case") named the Company and numerous other consumer finance
companies as defendants, and sought certification as a statewide class action.
The Tulsa Case 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 Tulsa Case also challenged the
constitutionality of the provisions of the Oklahoma Consumer Credit Code
("OCCC") under which the Company operates. The Company filed an answer in the
action denying the allegations. On March 16, 1999, the District Court granted
summary judgment in favor of the Company and the other consumer finance
companies and dismissed the Tulsa Case. The plaintiffs in the Tulsa Case
appealed that order, and their appeal remains pending before the Oklahoma Court
of Appeals.
The Tulsa Case is based on an opinion of the Oklahoma Attorney General
issued on February 20, 1997, interpreting a provision of the OCCC with respect
to the permitted amount of certain loan refinance charges in a manner contrary
to regulatory practice that had been in existence in Oklahoma since 1969. On the
basis of that opinion the Administrator of the Oklahoma Department of Consumer
Credit (the "Department") notified the Company and the other consumer finance
companies that the Department would begin enforcing the provisions of the OCCC,
as interpreted by the Attorney General's opinion on March 3, 1997. In response
to the Attorney General's opinion and the Department's threat, the Company and
numerous other consumer finance companies brought suit (the "Administrator's
Case") to enjoin enforcement by the Department of the OCCC as interpreted by the
Attorney General. Shortly thereafter, the Oklahoma Legislature enacted
amendments to the relevant provision of the OCCC, which became effective on
August 29, 1997, and which negated the effect of the Attorney General's
interpretation.
Although the Company and the other consumer finance companies were
successful at the trial court level in the Administrator's Case, in May 1999,
the Oklahoma Supreme Court upheld the Attorney General's interpretation. The
Oklahoma Supreme Court's decision expressly limited the application of the
Attorney General's interpretation of the OCCC to the period between March 3,
1997, and August 29, 1997, and it expressly refrained from reaching the issue of
whether refunds of charges assessed during that period were required.
The Attorney General subsequently directed the Department to proceed with
administratively ordering refunds. The Company and several of the other consumer
finance companies contend that for numerous reasons, the Department lacks both
the authority and the legal basis to order refunds. The Company and the other
consumer finance companies attempted to open discussions with the Department and
the Attorney General with the goal of resolving both the issues concerning an
attempted administrative order of refunds and the issues that remain pending in
the Tulsa Case.
On August 9, 2000, the Oklahoma Administrator presented to the
Commission his proposed order for effecting refunds of alleged overcharges on
renewal loans made during the period from March 3, 1997 through August 28, 1997.
After requiring certain modifications the Commission approved the
Administrator's proposal and directed him to proceed to issue an administrative
order (the "Administrative Order").
Although the Company has not made a final decision on whether to
voluntarily comply with or to oppose the Administrative Order and has not yet
determined the actual cost of voluntarily complying with the Administrative
Order, the Company preliminarily estimates that the cost of voluntary
compliance, depending on the exact language of the Administrative Order as
ultimately issued and upon other factors that go into the calculation of the
amount to be refunded and the method of accomplishing the refunds, could range
between an insignificant amount and $800,000.
Whether the Company voluntarily complies with or opposes the Administrative
Order, the pending Tulsa Case remains unresolved. The Company is continuing to
explore settlement possibilities in the Tulsa Case; however, the results of
those negotiations cannot be predicted at this time.
Because of the 1997 amendments to the OCCC, the Company expects that even
if both the Tulsa Case and the Department's attempts at administratively
ordering refunds are decided adversely to the Company, those results would not
materially affect the Company's refinancing practices in Oklahoma going forward.
8
<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,
-----------------
2000 1999
---- ----
(Dollars in thousands)
Average gross loans receivable (1) $ 175,922 151,654
Average loans receivable (2) 135,561 117,492
Expenses as a % of total revenue:
Provision for loan losses 14.5% 12.5%
General and administrative 60.9% 62.9%
Total interest expense 6.5% 5.6%
Operating margin (3) 24.6% 24.6%
Return on average assets (annualized) 7.9% 8.9%
Offices opened or acquired, net 7 8
Total offices (at period end) 417 387
--------------
(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, 2000, Versus
Three Months Ended June 30, 1999
Net income rose to $3.2 million for the three months ended June 30, 2000, a
4.4% 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 $642,000, or 10.7%, and was partially
offset by increases in interest expense and income taxes.
Interest and fee income for the quarter ended June 30, 2000, increased by
$2.3 million, or 11.2%, over the same period of the prior year. This increase
resulted from an $18.1 million increase, or 15.4%, 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, greater collateral, and fewer expected losses; however,
they generally carry lower interest rates than the traditional small loan.
Insurance commissions and other income increased by $317,000 million, or
8.4%, over the two quarters primarily as a result of the increase in insurance
commissions. This increase resulted from the growth in loans in
9
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Comparison of Three Months Ended June 30, 2000, Versus
Three Months Ended June 30, 1999, continued
those states where insurance products may be sold, primarily South Carolina,
Georgia, and Tennessee. The expansion of the larger loan portfolio in these
three states has also led to increased insurance commissions as well as the
acquisitions in Kentucky, which also allows the sale of credit related insurance
products.
Total revenues rose to $26.9 million during the quarter ended June 30,
2000, a 10.8% increase over the $24.3 million for the corresponding quarter of
the previous year. Revenues from the 379 offices open throughout both quarters
increased by approximately 4.0%, primarily due to increased balances of loans
receivable in those offices. At June 30, 2000, the Company had 417 offices in
operation, an increase of 7 offices from March 31, 2000.
The provision for loan losses during the quarter ended June 30, 2000,
increased by $873,000, or 28.7%, 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 $3,565,000, a 29.5% increase over the
$2,754,000 charged off during the same quarter of fiscal 2000. As a percentage
of average loans receivable, net charge-offs increased from 9.4% on an
annualized basis from three months ended June 30, 1999, to 10.5% annualized for
the most recent quarter.
General and administrative expenses for the quarter ended June 30, 2000,
increased by $1.1 million, or 7.2%, over the same quarter of fiscal 2000. This
increase resulted from the additional general and administrative expenses
associated with the 30 net new offices opened or acquired between June 30, 1999
and 2000. Overall, general and administrative expenses, when divided by average
open offices, decreased by approximately 0.7% when comparing the two periods;
and, as a percentage of total revenue, decreased from 62.9% during the prior
year quarter to 60.9% during the most recent quarter.
Interest expense increased by $404,000, or 29.8%, 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,
combined with an increase in interest rates over the two periods.
The Company's effective income tax rate increased slightly from 34.0% when
comparing the two quarters due to reduced tax benefits from the 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 an $85.0 million revolving credit agreement, (temporarily
increased to $100.0 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
1.60%. At June 30, 2000, the average interest rate under the facility was 8.42%,
and the Company's outstanding balance was $88.7 million, leaving $11.3 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.
10
<PAGE>
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
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, to fund the principal payments due under the
subordinated notes, to repurchase its common stock on a limited basis, and to
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.
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
matters described below in "Legal Proceedings," 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; 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 precise language and application of the Administrative Order in
Oklahoma; 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.
11
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's outstanding debt under the Revolving Credit Facility
was $88.7 million at June 30, 2000. 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, 2000,
a change of 1% in the interest rate would cause a change in interest
expense of approximately $887,000 on an annual basis.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company was named as a defendant in an action, Turner v. World
Acceptance Corp., filed in the district court for the Fourteenth
Judicial District, Tulsa County, Oklahoma (No. CJ-97-1921) on May 20,
1997. That action (the "Tulsa Case") named the Company and numerous
other consumer finance companies as defendants, and sought
certification as a statewide class action. The Tulsa Case 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 Tulsa Case
also challenged the constitutionality of the provisions of the
Oklahoma Consumer Credit Code ("OCCC") under which the Company
operates. The Company filed an answer in the action denying the
allegations. On March 16, 1999, the District Court granted summary
judgment in favor of the Company and the other consumer finance
companies and dismissed the Tulsa Case. The plaintiffs in the Tulsa
Case appealed that order, and their appeal remains pending before the
Oklahoma Court of Appeals.
The Tulsa Case is based on an opinion of the Oklahoma Attorney
General issued on February 20, 1997, interpreting a provision of the
OCCC with respect to the permitted amount of certain loan refinance
charges in a manner contrary to regulatory practice that had been in
existence in Oklahoma since 1969. On the basis of that opinion the
Administrator of the Oklahoma Department of Consumer Credit (the
"Department") notified the Company and the other consumer finance
companies that the Department would begin enforcing the provisions of
the OCCC, as interpreted by the Attorney General's opinion on March
3, 1997. In response to the Attorney General's opinion and the
Department's threat, the Company and numerous other consumer finance
companies brought suit (the "Administrator's Case") to enjoin
enforcement by the Department of the OCCC as interpreted by the
Attorney General. Shortly thereafter, the Oklahoma Legislature
enacted amendments to the relevant provision of the OCCC, which
became effective on August 29, 1997, and which negated the effect of
the Attorney General's interpretation.
Although the Company and the other consumer finance companies were
successful at the trial court level in the Administrator's Case, in
May 1999, the Oklahoma Supreme Court upheld the Attorney General's
interpretation. The Oklahoma Supreme Court's decision expressly
limited the application of the Attorney General's interpretation of
the OCCC to the period between March 3, 1997, and August 29, 1997,
and it expressly refrained from reaching the issue of whether refunds
of charges assessed during that period were required.
The Attorney General subsequently directed the Department to proceed
with administratively ordering refunds. The Company and several of
the other consumer finance companies contend that for numerous
reasons, the Department lacks both the authority and the legal basis
to order refunds. The Company and the other consumer finance
companies attempted to open discussions with the Department and the
Attorney General with the goal of resolving both the issues
concerning an attempted administrative order of refunds and the
issues that remain pending in the Tulsa Case.
On August 9, 2000, the Oklahoma Administrator presented to the
Commission his proposed order for effecting refunds of alleged
overcharges on renewal loans made during the period from March 3,
1997 through August 28, 1997. After requiring certain modifications
the Commission approved the Administrator's proposal and directed him
to proceed to issue an administrative order (the "Administrative
Order")
12
<PAGE>
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
Although the Company has not made a final decision on whether to
voluntarily comply with or to oppose the Administrative Order and has
not yet determined the actual cost of voluntarily complying with the
Administrative Order, the Company preliminarily estimates that the
cost of voluntary compliance, depending on the exact language of the
Administrative Order as ultimately issued and upon other factors that
go into the calculation of the amount to be refunded and the method
of accomplishing the refunds, could range between an insignificant
amount and $800,000.
Whether the Company voluntarily complies with or opposes the
Administrative Order, the pending Tulsa Case remains unresolved. The
Company is continuing to explore settlement possibilities in the
Tulsa Case; however, the results of those negotiations cannot be
predicted at this time.
Because of the 1997 amendments to the OCCC, the Company expects that
even if both the Tulsa Case and the Department's attempts at
administratively ordering refunds are decided adversely to the
Company, those results would not materially affect the Company's
refinancing practices in Oklahoma going forward.
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 (other than the previously
reported legal proceedings, to the extent discussed in the Company's
Annual Report on Form 10-K for the year ended March 31, 2000) that
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.
13
<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>
14
<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 June 30,
2000.
15
<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 14, 2000
------------------------------------------
C. D. Walters, Chairman, and
Chief Executive Officer
Dated: August 14, 2000
------------------------------------------
A. A. McLean III, Executive Vice President
and Chief Financial Officer
16
<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 14, 2000 /s/ C. D. Walters
-----------------------------------------
C. D. Walters, Chairman, and
Chief Executive Officer
Dated: August 14, 2000 /s/ A. A. McLean III
-----------------------------------------
A. A. McLean III, Executive Vice President
and Chief Financial Officer
16
