WORLD ACCEPTANCE CORP - 10-Q Quarterly Report

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 September 30, 2004

¨	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, November 8, 2004.


Common Stock, no par value		18,743,389
(Class)		(Outstanding)

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

TABLE OF CONTENTS


		Page
PART I - FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):

	Consolidated Balance Sheets as of September 30, 2004 and March 31, 2004	3

	Consolidated Statements of Operations for the three month periods and six month periods ended September 30, 2004 and September 30, 2003	4

	Consolidated Statements of Shareholders’ Equity for the year ended March 31, 2004 and the six months ended September 30, 2004	5

	Consolidated Statements of Cash Flows for the three month periods and six month periods ended September 30, 2004 and September 30, 2003	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	14

Item 4.	Controls and Procedures	15

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 4.	Submission of Matters to a Vote of Security Holders	16

Item 6.	Exhibits	17

Signatures		19

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2004			March 31, 2004
ASSETS
Cash	$	5,318,405		4,314,107
Gross loans receivable		349,401,986		310,130,665
Less:
Unearned interest and fees		(84,135,764	)	(73,602,603	)
Allowance for loan losses		(20,421,599	)	(17,260,750	)

Loans receivable, net		244,844,623		219,267,312
Property and equipment, net		9,634,081		9,273,602
Other assets, net		14,784,907		13,600,296
Intangible assets, net		17,484,270		15,514,003

Total assets	$	292,066,286		261,969,320

LIABILITIES & SHAREHOLDERS’ EQUITY
Liabilities:
Senior notes payable		109,300,000		91,350,000
Subordinated notes payable		—		2,000,000
Other notes payable		1,000,000		1,682,000
Accounts payable and accrued expenses		14,673,191		10,356,983

Total liabilities		124,973,191		105,388,983

Shareholders’ equity:
Common stock, no par value		—		—
Authorized 95,000,000 shares; issued and outstanding 18,230,045 and 17,663,189 shares at September 30, 2004 and March 31, 2004, respectively
Additional paid-in capital		9,164,163		12,822,906
Retained earnings		157,928,932		143,757,431

Total shareholders’ equity		167,093,095		156,580,337

	$	292,066,286		261,969,320

See accompanying notes to consolidated financial statements.

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended September 30,			Six months ended September 30,
	2004		2003	2004	2003
Revenues:
Interest and fee income	$	43,478,424	36,548,719	84,078,823	70,954,197
Insurance and other income		6,275,537	5,127,116	13,153,446	10,984,945

Total revenues		49,753,961	41,675,835	97,232,269	81,939,142

Expenses:
Provision for loan losses		11,281,929	9,328,087	19,909,337	17,257,444

General and administrative expenses:
Personnel		17,477,784	14,510,675	35,184,031	29,860,318
Occupancy and equipment		3,112,277	2,442,725	6,026,700	4,744,729
Data processing		399,201	445,904	867,182	922,556
Advertising		1,369,504	1,171,208	2,949,790	2,454,172
Amortization of intangible assets		633,202	566,456	1,264,515	1,121,798
Other		3,539,102	2,823,854	6,657,892	5,499,707

		26,531,070	21,960,822	52,950,110	44,603,280

Interest expense		1,067,112	927,946	2,056,321	1,918,947

Total expenses		38,880,111	32,216,855	74,915,768	63,779,671

Income before income taxes		10,873,850	9,458,980	22,316,501	18,159,471

Income taxes		3,968,000	3,358,000	8,145,000	6,447,000

Net income	$	6,905,850	6,100,980	14,171,501	11,712,471

Net income per common share:
Basic	$	.37	.34	.76	.65

Diluted	$	.36	.32	.73	.62

Weighted average common shares outstanding:
Basic		18,593,156	18,107,073	18,631,457	17,937,455

Diluted		19,429,018	19,163,252	19,459,166	18,961,520

See accompanying notes to consolidated financial statements.

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


	Additional Paid-in Capital			Retained Earnings	Total
Balances at March 31, 2003	$	1,048,721		114,992,309	116,041,030

Proceeds from exercise of stock options (1,238,146 shares), including tax benefit of $3,774,332		11,744,185		—	11,774,185
Net income		—		28,765,122	28,765,122

Balances at March 31, 2004	$	12,822,906		143,757,431	156,580,337

Proceeds from exercise of stock options (289,142 shares), including tax benefit of $1,404,693		3,651,736		—	3,651,736
Common stock repurchases (433,000 shares)		(7,310,479	)	—	(7,310,479	)
Net income		—		14,171,501	14,171,501

Balances at September 30, 2004	$	9,164,163		157,928,932	167,093,095

See accompanying notes to consolidated financial statements.

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three months ended September 30,					Six months ended September 30,
	2004			2003		2004		2003
Cash flows from operating activities:
Net income	$	6,905,850		6,100,980		14,171,501		11,712,471
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		11,281,929		9,328,087		19,909,337		17,257,444
Amortization of intangible assets		633,202		566,456		1,264,515		1,121,798
Amortization of loan costs and discounts		—		36,718		31,079		80,820
Depreciation		494,409		418,541		962,194		823,347
Change in accounts:
Other assets, net		(58,026	)	154,604		(1,215,690	)	664,217
Accounts payable and accrued expenses		5,020,388		(2,922,499	)	5,720,901		(3,243,667	)

Net cash provided by operating activities		24,277,752		13,682,887		40,843,837		28,416,430

Cash flows from investing activities:
Increase in loans, net		(12,564,217	)	(10,448,691	)	(30,303,223	)	(23,495,259	)
Net assets acquired from office acquisitions, primarily loans		(8,203,569	)	(673,403	)	(15,356,107	)	(2,928,841	)
Purchase of premises and equipment		(642,076	)	(278,721	)	(1,149,991	)	(724,304	)
Purchases of intangible assets		(2,097,926	)	(428,522	)	(3,234,782	)	(827,128	)

Net cash used in investing activities		(23,507,788	)	(11,829,337	)	(50,044,103	)	(27,975,532	)

Cash flows from financing activities:
Proceeds (repayment) of senior notes payable, net		50,000		(5,300,000	)	17,950,000		(4,300,000	)
Repayment of senior subordinated notes		—		—		(2,000,000	)	(2,000,000	)
Proceeds (repayment) from senior subordinated notes		(482,000	)	—		(682,000	)	1,200,000
Proceeds from exercise of stock options		2,188,534		2,216,649		2,247,043		3,769,348
Common stock repurchases		—		—		(7,310,479	)	—

Net cash provided by (used in) financing activities		1,756,534		(3,083,351	)	10,204,564		(1,330,652	)

Increase (decrease) in cash		2,526,498		(1,229,801	)	1,004,298		(889,754	)

Cash, beginning of period		2,791,907		4,362,733		4,314,107		4,022,686

Cash, end of period	$	5,318,405		3,132,932		5,318,405

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