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 December 31, 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, January 8, 2005.


Common Stock, no par value		18,992,807
(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 December 31, 2004 and March 31, 2004	3

	Consolidated Statements of Operations for the three month periods and nine month periods ended December 31, 2004 and December 31, 2003	4

	Consolidated Statements of Shareholders’ Equity for the year ended March 31, 2004 and the nine months ended December 31, 2004	5

	Consolidated Statements of Cash Flows for the three month periods and nine month periods ended December 31, 2004 and December 31, 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	15

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 6.	Exhibits	17

Signatures		19

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	December 31, 2004			March 31, 2004
ASSETS

Cash	$	5,191,982		4,314,107
Gross loans receivable		384,715,179		310,130,665
Less:
Unearned interest and fees		(95,073,249	)	(73,602,603	)
Allowance for loan losses		(23,183,507	)	(17,260,750	)

Loans receivable, net		266,458,423		219,267,312
Property and equipment, net		9,917,341		9,273,602
Other assets, net		15,587,762		13,600,296
Intangible assets, net		17,020,525		15,514,003

Total assets	$	314,176,033		261,969,320

LIABILITIES & SHAREHOLDERS’ EQUITY

Liabilities:
Senior notes payable		131,850,000		91,350,000
Subordinated notes payable		—		2,000,000
Other notes payable		1,000,000		1,682,000
Accounts payable and accrued expenses		5,675,175		10,356,983

Total liabilities		138,525,175		105,388,983

Shareholders’ equity:
Common stock, no par value		—		—
Authorized 95,000,000 shares; issued and outstanding 18,926,057 and 18,857,197 shares at December 31, 2004 and March 31, 2004, respectively
Additional paid-in capital		12,221,280		12,822,906
Retained earnings		163,429,578		143,757,431

Total shareholders’ equity		175,650,858		156,580,337

	$	314,176,033		261,969,320

See accompanying notes to consolidated financial statements.

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended December 31,			Nine months ended December 31,
	2004		2003	2004	2003
Revenues:
Interest and fee income	$	46,043,068	38,075,063	130,121,891	109,029,260
Insurance and other income		7,122,995	6,210,348	20,276,441	17,195,293

Total revenues		53,166,063	44,285,411	150,398,332	126,224,553

Expenses:
Provision for loan losses		13,730,844	11,076,780	33,640,181	28,334,224

General and administrative expenses:
Personnel		18,007,918	14,699,110	53,191,949	44,559,428
Occupancy and equipment		3,120,599	2,578,468	9,147,299	7,323,197
Data processing		542,405	470,207	1,409,587	1,392,763
Advertising		3,526,688	3,420,306	6,476,478	5,874,478
Amortization of intangible assets		650,618	570,336	1,915,133	1,692,134
Other		3,612,033	3,335,832	10,269,925	8,835,539

		29,460,261	25,074,259	82,410,371	69,677,539

Interest expense		1,314,312	997,236	3,370,633	2,916,183

Total expenses		44,505,417	37,148,275	119,421,185	100,927,946

Income before income taxes		8,660,646	7,137,136	30,977,147	25,296,607

Income taxes		3,160,000	2,533,000	11,305,000	8,980,000

Net income	$	5,500,646	4,604,136	19,672,147	16,316,607

Net income per common share:
Basic	$	.29	.25	1.05	.90

Diluted	$	.28	.23	1.01	.85

Weighted average common shares outstanding:
Basic		18,817,044	18,403,143	18,693,319	18,092,684

Diluted		19,604,191	19,691,940	19,507,508	19,204,993

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		11,774,185		—	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 (502,960 shares), including tax benefit of $2,664,781		6,708,853		—	6,708,853
Common stock repurchases (433,000 shares)		(7,310,479	)	—	(7,310,479	)
Net income		—		19,672,147	19,672,147

Balances at December 31, 2004	$	12,221,280		163,429,578	175,650,858

See accompanying notes to consolidated financial statements.

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three months ended December 31,					Nine months ended December 31,
	2004			2003		2004		2003
Cash flows from operating activities:
Net income	$	5,500,646		4,604,136		19,672,147		16,316,607
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		13,730,844		11,076,780		33,640,181		28,334,224
Amortization of intangible assets		650,618		570,336		1,915,133		1,692,134
Amortization of loan costs and discounts		35,656		38,220		66,735		119,040
Depreciation		510,210		415,231		1,472,404		1,238,578
Change in accounts:
Other assets, net		(838,511	)	(738,012	)	(2,054,201	)	(73,795	)
Accounts payable and accrued expenses		(7,737,928	)	502,467		(2,017,027	)	(2,741,200	)

Net cash provided by operating activities		11,851,535		16,469,158		52,695,372		44,885,588

Cash flows from investing activities:
Increase in loans, net		(34,971,039	)	(40,056,890	)	(65,274,262	)	(63,552,149	)
Net assets acquired from office acquisitions, primarily loans		(374,605	)	(5,073,534	)	(15,730,712	)	(8,002,375	)
Purchase of premises and equipment		(792,470	)	(956,050	)	(1,942,461	)	(1,680,354	)
Purchases of intangible assets		(186,873	)	(172,613	)	(3,421,655	)	(999,741	)

Net cash used in investing activities		(36,324,987	)	(46,259,087	)	(86,369,090	)	(74,234,619	)

Cash flows from financing activities:
Proceeds of senior notes payable, net		22,550,000		27,200,000		40,500,000		22,900,000
Repayment of senior subordinated notes		—		—		(2,000,000	)	(2,000,000	)
Proceeds (repayment) from other notes payable		—		—		(682,000	)	1,200,000
Proceeds from exercise of stock options		1,797,029		2,148,248		4,044,072		5,917,596
Common stock repurchases		—		—		(7,310,479	)	—

Net cash provided by financing activities		24,347,029		29,348,248		34,551,593		28,017,596

Increase (decrease) in cash		(126,423	)	(441,681	)	877,875		(1,331,435	)

Cash, beginning of period		5,318,405		3,132,932		4,314,107		4,022,686

Cash, end of period	$	5,191,982

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