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 December 31, 2003
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 incorporation or organization) |
(I.R.S. Employer Identification 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
x Yes ¨ No
Indicate the number of shares outstanding of each of issuer’s classes of common stock, as of the latest practicable date, February 13, 2004.
| Common Stock, no par value |
18,840,537 | |
| (Class) | (Outstanding) |
1
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
| Page | ||||
| PART I - FINANCIAL INFORMATION |
||||
| Item 1. |
Consolidated Financial Statements (unaudited): | |||
| Consolidated Balance Sheets as of December 31, 2003 and March 31, 2003 | 3 | |||
| Consolidated Statements of Operations for the three month periods and nine month periods ended December 31, 2003 and December 31, 2002 | 4 | |||
| Consolidated Statements of Shareholders’ Equity for the year ended March 31, 2003 and the nine months ended December 31, 2003 | 5 | |||
| Consolidated Statements of Cash Flows for the three month periods and nine month periods ended December 31, 2003 and December 31, 2002 | 6 | |||
| Notes to Consolidated Financial Statements | 7 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 15 | ||
| Item 4. |
Controls and Procedures | 15 | ||
| PART II - OTHER INFORMATION |
||||
| Item 1. |
Legal Proceedings | 16 | ||
| Item 2. |
Changes in Securities | 16 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 17 | ||
| 19 | ||||
2
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| December 31, 2003 |
March 31, 2003 |
||||||
| ASSETS | |||||||
| Cash |
$ | 2,691,251 | 4,022,686 | ||||
| Gross loans receivable |
334,484,836 | 266,752,662 | |||||
| Less: |
|||||||
| Unearned interest and fees |
(83,634,515 | ) | (63,578,130 | ) | |||
| Allowance for loan losses |
(19,901,729 | ) | (15,097,780 | ) | |||
| Loans receivable, net |
230,948,592 | 188,076,752 | |||||
| Property and equipment, net |
9,088,095 | 8,297,859 | |||||
| Other assets, net |
13,275,930 | 13,321,175 | |||||
| Intangible assets, net |
13,906,415 | 14,598,808 | |||||
| Total assets |
$ | 269,910,283 | 228,317,280 | ||||
| LIABILITIES & SHAREHOLDERS’ EQUITY | |||||||
| Liabilities: |
|||||||
| Senior notes payable |
120,950,000 | 98,050,000 | |||||
| Subordinated notes payable |
2,000,000 | 4,000,000 | |||||
| Other notes payable |
1,682,000 | 482,000 | |||||
| Accounts payable and accrued expenses |
4,619,866 | 9,744,250 | |||||
| Total liabilities |
129,251,866 | 112,276,250 | |||||
| Shareholders’ equity: |
|||||||
| Common stock, no par value |
— | — | |||||
| Authorized 95,000,000 shares; issued and outstanding 18,505,461 and 17,663,189 shares at December 31, 2003 and March 31, 2003, respectively |
|||||||
| Additional paid-in capital |
9,349,501 | 1,048,721 | |||||
| Retained earnings |
131,308,916 | 114,992,309 | |||||
| Total shareholders’ equity |
140,658,417 | 116,041,030 | |||||
| $ | 269,910,283 | 228,317,280 | |||||
See accompanying notes to consolidated financial statements.
3
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended December 31, |
Nine months ended December 31, | ||||||||
| 2003 |
2002 |
2003 |
2002 | ||||||
| Revenues: |
|||||||||
| Interest and fee income |
$ | 38,075,063 | 33,442,181 | 109,029,260 | 95,779,269 | ||||
| Insurance and other income |
6,210,348 | 5,592,430 | 17,195,293 | 14,220,005 | |||||
| Total revenues |
44,285,411 | 39,034,611 | 126,224,553 | 109,999,274 | |||||
| Expenses: |
|||||||||
| Provision for loan losses |
11,076,780 | 10,208,829 | 28,334,224 | 24,176,710 | |||||
| General and administrative expenses: |
|||||||||
| Personnel |
14,699,110 | 13,363,907 | 44,559,428 | 40,074,632 | |||||
| Occupancy and equipment |
2,578,468 | 2,215,309 | 7,323,197 | 6,567,163 | |||||
| Data processing |
470,207 | 447,284 | 1,392,763 | 1,315,765 | |||||
| Advertising |
3,420,306 | 2,850,176 | 5,874,478 | 4,864,873 | |||||
| Amortization of intangible assets |
570,336 | 530,440 | 1,692,134 | 1,616,921 | |||||
| Other |
3,335,832 | 3,044,517 | 8,835,539 | 8,403,380 | |||||
| 25,074,259 | 22,451,633 | 69,677,539 | 62,842,734 | ||||||
| Interest expense |
997,236 | 1,175,831 | 2,916,183 | 3,376,744 | |||||
| Total expenses |
37,148,275 | 33,836,293 | 100,927,946 | 90,396,188 | |||||
| Income before income taxes |
7,137,136 | 5,198,318 | 25,296,607 | 19,603,086 | |||||
| Income taxes |
2,533,000 | 1,846,000 | 8,980,000 | 6,959,000 | |||||
| Net income |
$ | 4,604,136 | 3,352,318 | 16,316,607 | 12,644,086 | ||||
| Net income per common share: |
|||||||||
| Basic |
$ | .25 | .19 | .90 | .71 | ||||
| Diluted |
$ | .23 | .19 | .85 | .69 | ||||
| Weighted average common shares outstanding: |
|||||||||
| Basic |
18,403,143 | 17,550,523 | 18,092,684 | 17,860,101 | |||||
| Diluted |
19,691,940 | 17,936,993 | 19,204,993 | 18,304,976 | |||||
See accompanying notes to consolidated financial statements.
4
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
| Additional Paid-in Capital |
Retained Earnings |
Total |
||||||||
| Balances at March 31, 2002 |
$ | 681,354 | 101,752,026 | 102,433,380 | ||||||
| Proceeds from exercise of stock options (416,734 shares), including tax benefit of $392,945 |
2,745,120 | — | 2,745,120 | |||||||
| Common stock repurchases (1,623,549 shares) |
(2,377,753 | ) | (9,623,240 | ) | (12,000,993 | ) | ||||
| Net income |
— | 22,863,523 | 22,863,523 | |||||||
| Balances at March 31, 2003 |
$ | 1,048,721 | 114,992,309 | 116,041,030 | ||||||
| Proceeds from exercise of stock options (842,272 shares), including tax benefit of $2,383,184 |
8,300,780 | — | 8,300,780 | |||||||
| Net income |
— | 16,316,607 | 16,316,607 | |||||||
| Balances at December 31, 2003 |
$ | 9,349,501 | 131,308,916 | 140,658,417 | ||||||
See accompanying notes to consolidated financial statements.
5
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three months ended December 31, |
Nine months ended December 31, |
||||||||||||
| 2003 |
2002 |
2003 |
2002 |
||||||||||
| Cash flows from operating activities: |
|||||||||||||
| Net income |
$ | 4,604,136 | 3,352,318 | 16,316,607 | 12,644,086 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||||||||
| Provision for loan losses |
11,076,780 | 10,208,829 | 28,334,224 | 24,176,710 | |||||||||
| Amortization of intangible assets |
570,336 | 530,440 | 1,692,134 | 1,616,921 | |||||||||
| Amortization of loan costs and discounts |
38,220 | 36,065 | 119,040 | 86,368 | |||||||||
| Depreciation |
415,231 | 418,078 | 1,238,578 | 1,240,601 | |||||||||
| Change in accounts: |
|||||||||||||
| Other assets, net |
(738,012 | ) | (311,285 | ) | (73,795 | ) | (1,269,721 | ) | |||||
| Accounts payable and accrued expenses |
502,467 | 1,908,654 | (2,741,200 | ) | (2,260,928 | ) | |||||||
| Net cash provided by operating activities |
16,469,158 | 16,143,099 | 44,885,588 | 36,234,037 | |||||||||
| Cash flows from investing activities: |
|||||||||||||
| Increase in loans, net |
(40,056,890 | ) | (34,170,681 | ) | (63,552,149 | ) | (56,765,837 | ) | |||||
| Net assets acquired from office acquisitions, primarily loans |
(5,073,534 | ) | (6,990,407 | ) | (8,002,375 | ) | (16,709,663 | ) | |||||
| Purchase of premises and equipment |
(956,050 | ) | (305,067 | ) | (1,680,354 | ) | (1,699,935 | ) | |||||
| Purchases of intangible assets |
(172,613 | ) | (285,123 | ) | (999,741 | ) | (2,746,943 | ) | |||||
| Net cash used in investing activities |
(46,259,087 | ) | (41,751,278 | ) | (74,234,619 | ) | (77,922,378 | ) | |||||
| Cash flows from financing activities: |
|||||||||||||
| Proceeds of senior notes payable, net |
27,200,000 | 26,550,000 | 22,900,000 | 54,750,000 | |||||||||
| Repayment of senior subordinated notes |
— | — | (2,000,000 | ) | (2,000,000 | ) | |||||||
| Proceeds from other note payable |
— | — | 1,200,000 | — | |||||||||
| Proceeds from exercise of stock options |
2,148,248 | 607,879 | 5,917,596 | 1,420,485 | |||||||||
| Common stock repurchases |
— | (2,001,000 | ) | — | (12,000,993 | ) | |||||||
| Net cash provided by financing activities |
29,348,248 | 25,156,879 | 28,017,596 | 42,169,492 | |||||||||
| Increase (decrease) in cash |
(441,681 | ) | (451,300 | ) | (1,331,435 | ) | 481,151 | ||||||
| Cash, beginning of period |
3,132,932 | 4,154,717 | 4,022,686 | 3,222,266 | |||||||||
| Cash, end of period |
$ | 2,691,251 | 3,703,417 | < | |||||||||