June 3, 2005
Mail Stop 0408
By U.S. Mail and Facsimile to (404) 806-3801
Vance R. Martin
President
The Money Tree Inc.
114 South Broad Street
Bainbridge, Georgia 39817
Re: The Money Tree Inc.
Form S-1 filed May 6, 2005
File No. 333-122531
Form S-1 filed May 6, 2005
Form No. 333-122533
Dear Mr. Martin:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
The purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to
enhance
the overall disclosure in your filing. We look forward to working
with you in these respects. We welcome any questions you may have
about our comments or on any other aspect of our review. Feel
free
to call us at the telephone numbers listed at the end of this
letter.
General
1. Please incorporate all corresponding changes requested below
into
the Form S-1, file no. 333-122533, as appropriate.
2. Please advise why each post-interest rate adjustment period
debenture is not a new security requiring registration.
3. Please include updated interim financial statements and MD&A in
your next amendment. Refer to Rule 3-12 of Regulation S-X and
Item
303(b) of Regulation S-K.
Sales material
4. Please reconcile the discussion of the use of sales material
with
the information in the second paragraph of Plan of Distribution,
page
67, which refers to roadway signs and newspaper ads.
5. The general and local paper advertisements appear to contain
more
information than is permitted under Rule 134. Please revise.
Cover Page
6. Please confirm that your cover page does not, or will not,
exceed
the one-page limit imposed by Item 501(a) of Regulation S-B. We
note
that currently it is on two pages.
Risk Factors, page 12
7. In the second risk factor, please include the disclosure found
on
page 38 that the company is "substantially reliant upon the net
offering proceeds...."
Management`s Discussion and Analysis
Overview, page 18
8. We note your response to our prior comment 28 that your tabular
presentation of gross receivables and contracts exclude bankrupt
accounts. To avoid confusion and for consistency with your
financial
statements, please revise your tabular presentations of loans and
contracts throughout your document to include bankrupt accounts
that
have not been charged-off. You may quantify the amounts of
bankrupt
accounts parenthetically or in a footnote to your tabular
presentations. .
Rate / Volume Analysis, page 22
9. The total net increase in interest income on finance
receivables
for the fiscal year ended September 25, 2004 disclosed in this
table
does not agree to the total net increase as reported on your
Consolidated Statements of Income. Please revise as necessary.
Loans and Contracts Liquidated and Outstanding, page 24
10. We note your revised disclosure in response to our prior
comment
38. Please revise to include a narrative explanation of what this
tabular presentation depicts. The heading "Loans and Contracts
Liquidated" may imply that the amounts disclosed represent cash
flows. Clarify whether the amounts of refinancing disclosed in
your
tabular presentation represents cash flows and describe the nature
of
the cash flows.
11. Using the information disclosed in your tabular presentation
here
and the amounts of loans originated as disclosed on pages 18 and
19,
please revise to include a tabular roll-forward for each category
of
receivables for each period presented.
12. We note your response to our prior comment 54. Please revise
to
describe the changes in asset quality and other factors that
resulted
in the significant increases in charge-offs of your direct
consumer
loans and motor vehicle installment sales contracts. Quantify the
amount of net charge-offs relative to the average balance for each
loan category and your total gross portfolio for each period
presented.
Delinquency Information, page 25
13. Please revise to describe how you evaluate the delinquency
status
of an account that is delinquent when refinanced.
14. We note your revised disclosure in response to our prior
comment
39. Please revise to quantify the amount of interest income
included
in net income attributable to loans classified as non-accrual or
restructured as of the period end. Refer to Instruction (2)(ii)
of
Item III.C.1 of Industry Guide 3.
Business
Lending and Collection Operations, page 41
15. We note your disclosure that a refinancing represents a new
loan
with an existing customer in which a portion of the new loan is
used
to repay the balance of an existing loan and the remaining portion
is
advanced to the customer. Please revise to quantify the gross
amount
of new loans that are the result of refinancing transactions, the
amount that was used to repay existing loans, and the amount
advanced
to the customer for each period presented.
Allowance for Credit Losses, page 44
16. We note your revised disclosure in response to our prior
comments
52 and 70. To help investors understand the extent to which the
various evaluations you perform impact your allowance, please
revise
to quantify the amount of your allowance for each period presented
attributable to the following:
* Your evaluation of net charge-offs relative to the average net
receivables;
* Your review of loans with higher balances;
* Your evaluation of inherent risks and changes in the composition
of
your loan portfolio; and
* Your consideration of delinquency trends, economic conditions,
and
industry factors.
Audited Consolidated Financial Statements
Note 2 - Summary of Significant Accounting Policies - Income
Recognition, page F-9
17. We note your supplemental responses to our prior comments 66
and
68. Your disclosure regarding commissions on credit insurance
products implies that your ability to earn and recognize
commission
revenues is dependent on the insurance coverage`s risk exposure.
We
do not note any disclosure regarding your non-credit insurance
products. Your supplemental response appears to suggest that
commissions are recognized over the term of the policy due to
refund
policies provided for in your agency agreement in the case of
early
termination of policies. Please revise your disclosure to clearly
describe the following:
* The nature of any contingencies related to the recognition of
commissions on credit and non-credit insurance product sales;
* Why you defer revenue recognition over the life of the related
contract; and
* Your basis for using the insurance coverage`s risk exposure as
your
estimate of the term that you earn and recognize the commissions
for
credit and non-credit insurance products.
18. Please revise to describe your accounting policy for
recognizing
commissions from motor club memberships.
Note 2 - Summary of Significant Accounting Policies - Credit
Losses,
page F-11
19. We note your supplemental response to our prior comment 71.
Please tell us why there are contingency fees based upon the
amount
of the settlement with the insurance underwriter for your non-file
insurance. Provide us with a hypothetical example explaining why
and
how you would determine the amount of the contingency fees
associated
with a non-file insurance claim and settlement. Related to your
example, please describe the timing of the filed claim, when you
would pay the contingency fee, and when you receive the settlement
from the insurer.
Note 2 - Summary of Significant Accounting Policies - Non-file
Insurance, page F-12
20. We note your supplemental response to our prior comment 71
that
the receivable is recorded at the time the claim is filed. Please
tell us your basis for recording the receivable when the claim is
filed. Tell us how you concluded that this does not represent a
gain
contingency. Refer to paragraph 17 of SFAS 5.
Note 8 - Debt, page F-20
21. Please revise to clarify when interest and principal payments
are
due on your variable rate subordinated debentures and demand notes
due to individuals.
Note 17 - Acquisitions, page F-28
22. We note your response to our prior comment 60 that you did not
purchase any loan portfolios outside of the business acquisitions
reflected in Note 17 of the Consolidated Financial Statements.
Please revise your disclosure to reconcile the amount of net
receivables purchased disclosed in this note to the amount of
gross
receivables purchased as disclosed on pages 18 and 19.
Exhibits
23. We note that the indentures of both issues are dated April 27,
2005. Please file the actual indentures as exhibits.
24. Please revise the exhibit list to indicate that Exhibit 10.2
is
not a form of the service agreement.
* * *
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as defense in any
proceeding
initiated by the Commission or any person under the federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
You may contact Benjamin Phippen, Staff Accountant, at (202)
551-3697 or Joyce Sweeney, Accounting Branch Chief at (202) 551-
3449
if you have questions regarding comments on the financial
statements
and related matters. Please contact Gregory Dundas at (202) 551-
3436
or me at (202) 551-3698 with any other questions.
Sincerely,
Mark Webb
Legal Branch Chief
cc: Michael K. Rafter, Esq.
Schiff Hardin LLP
1230 Peachtree Street, 18th Floor
Atlanta, Georgia 30309
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The Money Tree Inc.
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