EXHIBIT 13
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
- --------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
Years Ended March 31,
--------------------------------------------------------------
2001 2000 1999 1998 1997
---------- --------- --------- --------- --------
Statement of Operations Data:
Interest and fee income................................. $ 103,412 $ 89,052 $ 80,677 $ 71,873 $ 64,820
Insurance commissions and other income................. 17,132 16,224 11,085 8,754 7,863
---------- --------- --------- --------- ---------
Total revenues....................................... 120,544 105,276 91,762 80,627 72,683
---------- --------- --------- --------- ---------
Provision for loan losses............................... 19,749 15,697 11,707 9,609 9,480
Legal expense/(1)/...................................... 416 183 5,845 441 645
Other general and administrative expenses............... 67,848 61,652 57,788 53,029 46,201
Interest expense........................................ 8,260 6,015 5,534 5,541 4,322
---------- --------- --------- --------- ---------
Total expenses....................................... 96,273 83,547 80,874 68,620 60,648
---------- --------- --------- --------- ---------
Income before income taxes.............................. 24,271 21,729 10,888 12,007 12,035
Income taxes............................................ 8,670 7,560 3,568 3,909 3,952
---------- --------- --------- --------- ---------
Net income/(1)/......................................... $ 15,601 $ 14,169 $ 7,320 $ 8,098 $ 8,083
========== ========= ========= ========= =========
Net income per common share (diluted)/(1)/.............. $ .83 $ .74 $ .38 $ .42 $ .41
========== ========= ========= ========= =========
Diluted weighted average common
equivalent shares.................................... $ 18,840 19,155 19,213 19,172 19,833
========== ========= ========= ========= =========
Balance Sheet Data (end of period):
Loans receivable........................................ $ 162,389 $ 135,660 $ 117,339 $ 103,385 $ 89,539
Allowance for loan losses............................... (12,032) (10,008) (8,769) (8,444) (6,283)
---------- --------- --------- --------- ---------
Loans receivable, net............................ 150,357 125,652 108,570 94,941 83,256
Total assets............................................ 183,160 153,473 133,470 118,382 104,486
Total debt.............................................. 91,632 78,382 71,632 64,182 58,682
Shareholders' equity.................................... 82,727 68,192 54,692 47,301 38,963
Other Operating Data:
As a percentage of average loans receivable:
Provision for loan losses............................ 12.6% 12.3% 10.4% 9.9% 11.1%
Net charge-offs...................................... 12.0% 12.0% 9.7% 9.4% 10.6%
Number of offices open at year-end...................... 420 410 379 360 336
/(1)/ The Company recorded a legal settlement of $5.4 million in fiscal 1999.
Excluding this settlement, net of the income tax benefit, net income and net
income per diluted common share would have been $10.8 million and $.56,
respectively.
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World Acceptance Corporation 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
General
The Company's financial performance continues to be dependent in large part
upon the growth in its outstanding loan receivables, the ongoing introduction of
new products and services for marketing to the customer base, the maintenance of
loan quality and acceptable levels of operating expenses. Since March 31, 1996,
gross loans receivable have increased at a 16.2% annual compounded rate from
$99.4 million to $210.9 million at March 31, 2001. The increase reflects both
the higher volume of loans generated through the Company's existing offices and
the contribution of loans generated from new offices opened or acquired over the
period. During this same five-year period, the Company has grown from 282
offices to 420 offices as of March 31, 2001. The Company plans to open or
acquire at least 15 new offices in each of the next two fiscal years.
The Company continues to identify new products and services for marketing
to its customer base. In addition to new insurance-related products, which have
been introduced in selected states over the last several years, the Company
sells and finances electronic items and appliances to its existing customer
base. This program, the "World Class Buying Club," began in Texas in February
1995 and has since been expanded into all 10 states where the Company operates.
Total loan volume under this program amounted to $4.2 million during fiscal
2001, a 15.8% increase from the prior fiscal year. While this represents less
than 1% of the Company's total loan volume, it remains a very profitable
program, which the Company plans to continue to emphasize in fiscal 2002 and
beyond.
The Company's ParaData Financial Systems subsidiary provides data
processing systems to separate finance companies, including the Company, and
currently supports approximately 1,035 individual branch offices in 44 states.
ParaData's revenue is highly dependent upon its ability to attract new
customers, which often requires substantial lead time, and as a result its
revenue may fluctuate greatly from year to year. During fiscal 2001, its net
revenues from system sales and support amounted to $2.8 million, a 23.0%
decrease from the $3.6 million in fiscal 2000, which was a 49.8% increase over
fiscal 1999 net revenues. As a result, ParaData's pretax income contribution to
the Company also fluctuates greatly and was $1.0 million, $1.8 million, and $0.8
million in fiscal 2001, fiscal 2000, and fiscal 1999, respectively. ParaData's
net revenue and resulting net contribution to the Company will continue to
fluctuate on a year to year basis, but should remain very profitable over the
long term. Additionally, and more importantly, ParaData continues to provide
state-of-the-art data processing support for the Company's in-house integrated
computer system.
Since fiscal 1997, the Company has expanded its product line to include
larger balance, lower risk, and lower yielding individual consumer loans. These
loans typically average $2,500 to $3,000 with terms of 18 to 24 months compared
to $300 to $500 with 8 to 12 month terms for the smaller loans. The Company
offers these loans in all states except Texas, where they are not profitable
under our lending criteria and strategy. Additionally, the Company has purchased
numerous larger loan offices and has made several bulk purchases of larger loans
receivable. As of March 31, 2001, the larger class of loans amounted to
approximately $55.1 million of gross loans receivable, a 110.1% increase over
the balance outstanding at March 31, 2000. As a result of these efforts, this
portfolio has grown to 26.1% of the total loan balances as of the end of the
fiscal year. Management believes that these loans provide lower expense and loss
ratios, thus providing positive contributions. While the Company does not intend
to change its primary lending focus from its small-loan business, it does intend
to continue expanding the larger loan product line as part of its ongoing growth
strategy.
In fiscal 1999, the Company tested in 40 offices an income tax return
preparation and refund anticipation loan program. Based on the results of this
test, the Company expanded this program into all offices where permitted by the
lease agreements (approximately 390 offices) in fiscal 2000. Due to certain
systems and service bureau problems encountered during the first two weeks of
the filing season, the program was less successful than anticipated; however, in
spite of these problems, the Company completed and filed approximately 16,000
tax returns, generating approximately $1 million in net revenue. During fiscal
2001, the Company did not experience any system problems and more than doubled
the number of returns that were prepared and filed, and generated in excess of
$2.7 million in net revenue. The Company believes that this is a beneficial
service for its existing customer base and plans to promote and expand the
program in the future.
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6 World Acceptance Corporation
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
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.
Years Ended March 31,
-----------------------------------------
2001 2000 1999
---------- ----------- -----------
(Dollars in thousands)
Average gross loans receivable/(1)/................................... $ 204,789 163,786 144,203
Average loans receivable/(2)/......................................... 156,850 127,230 112,273
Expenses as a percentage of total revenue:
Provision for loan losses......................................... 16.4% 14.9% 12.8%
General and administrative/(3)/................................... 56.6% 58.7% 63.5%
Total interest expense............................................ 6.9% 5.7% 6.0%
Operating margin/(4)/................................................. 27.0% 26.4% 23.8%
Return on average assets/(5)/......................................... 8.8% 9.7% 8.4%
Offices opened and acquired, net...................................... 10 31 19
Total offices (at period end)......................................... 420 410 379
_____________
/(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)/ Excludes $5.4 million expense for legal settlement for the year
ended March 31, 1999. Including this one-time charge, the ratio
would have been 69.3% for the fiscal 1999 period.
/(4)/ Operating margin is computed as total revenues less provision for
loan losses and general and administrative expenses (excluding
the legal settlement charge in fiscal 1999), as a percentage of
total revenues. Including the $5.4 million charge for the legal
settlement, the operating margin for the year ended March 31,
1999 would have been 17.9%.
/(5)/ Excludes $5.4 million legal settlement, net of tax benefit, for
the year ended March 31, 1999. Including this one-time charge,
the ratio would have been 5.7% for the annual period.
Comparison of Fiscal 2001 Versus Fiscal 2000
Net income amounted to $15.6 million during fiscal 2001, a 10.1% increase
over the $14.2 million earned during fiscal 2000. This increase resulted from an
increase in operating income (revenues less provision for loan losses and
general and administrative expenses) of $4.8 million, or 17.3%, offset by
increases in interest expense and income taxes.
Interest and fee income during fiscal 2001 increased by $14.4 million, or
16.1%, over fiscal 2000. This increase resulted from an increase of $29.6
million, or 23.3%, in average loans receivable between the two fiscal years,
offset partially by a reduction in yields in the loan portfolio. The continued
decline in loan yields is primarily due to the continued expansion of the larger
loan portfolio, which grew by 110.1% during the most recent fiscal year. The
larger loans have stricter credit underwriting guidelines, more collateral, and
fewer expected losses and generally carry lower interest rates than the
traditional small loan. The large increase in average loans receivable,
especially the larger loans, is partially due to several acquisitions during the
year. The Company acquired approximately $15.6 million in net loans in 17
separate transactions during fiscal 2001.
Insurance commissions and other income increased by $907,000, or 5.6%,
over the two fiscal years. Insurance commissions increased by $245,000, or 3.0%,
as a result of the increase in loan volume in states where
- --------------------------------------------------------------------------------
World Acceptance Corporation 7
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
credit insurance may be sold. This increase was less than expected, in light of
the excellent increase in larger loans (which generally permit the sale of
credit insurance products), because of a change in state law in Tennessee during
the year that affected the small loan portfolio. Effective July 1, 2000,
Tennessee prohibited the sale of credit insurance and other ancillary products
on loans less than $1,000, but increased the interest and fees that could be
charged on these loans. Other income increased by $663,000, or 8.3%, over the
two years. Tax preparation fees increased by $1.7 million, or 181.7%, as the
Company more than doubled (to approximately 33,000) the number of tax returns
prepared and filed during fiscal 2001. This program went extremely well this
year and should provide a source of revenue growth for several years. The
increase in tax preparation fees was offset by decreases in ParaData net revenue
of $819,000 and other ancillary products of $380,000. As expected, ParaData was
unable to attract the number of new customers in fiscal 2001 that it gained in
fiscal 2000. The decline in other ancillary products resulted from the Tennessee
law change during the year, which eliminated the sale of these products on
certain loans.
Total revenues increased to $120.5 million in fiscal 2001, a $15.3
million, or 14.5%, increase over the $105.3 million in fiscal 2000. Revenues
from the 366 offices open throughout both fiscal years increased by 6.8%. At
March 31, 2001, the Company had 420 offices in operation, an increase of 10 net
offices from March 31, 2000.
The provision for loan losses during fiscal 2001 increased by $4.1
million, or 25.8%, from the previous year. This increase resulted from a
combination of increases in both the general allowance for loan losses and the
amount of loans charged off. Net charge-offs for fiscal 2001 amounted to $18.8
million, a 22.7% increase over the $15.3 million charged off during fiscal 2000,
and net charge-offs as a percentage of average loans remained stable at 12.0%
when comparing the two annual periods.
General and administrative expenses during fiscal 2001 increased by $6.4
million, or 10.4%, over the previous fiscal year. This increase was due
primarily to costs associated with the new offices opened or acquired during the
fiscal year. Excluding the expenses associated with ParaData, general and
administrative expenses, when divided by average open offices, increased by 4.4%
when comparing the two fiscal years and, overall, general and administrative
expenses as a percent of total revenues decreased from 58.7% in fiscal 2000 to
56.6% during fiscal 2001.
Interest expense increased by $2.2 million, or 37.3%, during fiscal 2001,
as compared to the previous fiscal year. This increase was due to additional
borrowings outstanding during the year, as well as increases in interest rates
during the first part of fiscal 2001.
The Company's effective income tax rate increased to 35.7% during fiscal
2001 from 34.8% during the previous fiscal year. This increase resulted
primarily from increased state income taxes.
Comparison of Fiscal 2000 Versus Fiscal 1999
Net income was $14.2 million in fiscal 2000, a $6.8 million, or 93.6%,
increase over the $7.3 million earned during fiscal 1999. The results for fiscal
1999 were greatly affected by the $5.4 million accrual for the legal settlement
recorded during that period (see "Legal Settlement"). Excluding this one-time
accrual, net of income tax benefits, net income for fiscal 2000 rose by $3.4
million, or 31.6%, over the adjusted fiscal 1999 earnings. This increase
resulted from an increase in operating income of $5.9 million, or 27.1%, offset
by increases in interest expense and income taxes.
Interest and fee income during fiscal 2000 increased by $8.4 million, or
10.4%, over fiscal 1999. This increase resulted primarily from an increase of
$15.0 million, or 13.3%, in average loans receivable between the two fiscal
years. The increase in interest and fee income resulting from the larger loan
base was partially offset by a reduction in loan yields over the two fiscal
years, primarily due to an increase in the larger loan portfolio. These loans
have lower interest rates than the traditional small loans; however, the overall
returns on these loans are enhanced by the sale of credit insurance and other
ancillary products.
- --------------------------------------------------------------------------------
8 World Acceptance Corporation
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
Insurance commissions and other income amounted to $16.2 million in fiscal
2000, a $5.1 million, or 46.4%, increase over the $11.1 million recorded in
fiscal 1999. Insurance commissions increased by $2.3 million, or 40.7%, and
other income increased by $2.8 million, or 52.6%. The improvement in insurance
commission revenue resulted primarily from the growth in the larger loan
portfolio, mainly in those states where credit insurance may be sold in
conjunction with the loan transaction. The increase in other income resulted
primarily from $1.1 million in additional net revenue generated by ParaData,
combined with approximately $1.0 million in net revenues generated by the new
tax return preparation and refund anticipation loan program. ParaData had an
excellent year in fiscal 2000, attracting several new customers. Its increased
net revenue resulted in approximately $1.8 million in pretax profit for the
subsidiary during fiscal 2000, compared with $792,000 earned in fiscal 1999. The
tax preparation program was new to the Company on a wide-scale basis in fiscal
2000. Although systems and service bureau problems were encountered during the
first several weeks of the tax filing season, the Company considered the program
a success by filing approximately 16,000 tax returns and generating
approximately $1.0 million in net revenues.
Total revenues were $105.3 million during fiscal 2000, a 14.7% increase
over the $91.8 million in the prior fiscal year. Revenues from the 346 offices
that were open throughout both fiscal years increased by 8.6%.
The provision for loan losses during fiscal 2000 increased by $4.0
million, or 34.1%, from the previous year. This increase resulted from an
increase in the general allowance for loan losses, as well as an increase in
actual loan losses. As a percentage of average loans receivable, net charge-offs
rose to 12.0% during fiscal 2000 from 9.7% during the previous fiscal year. This
increase in net charge-offs resulted from a combination of factors, including a
reduction in non-file insurance available to offset losses in two states due to
the legal settlement; the growth in the loan portfolio in Illinois and Missouri,
two newer states where credit insurance is not sold; as well as a general
increase in losses.
General and administrative expenses, excluding the accrual for the legal
settlement in fiscal 1999, increased by $3.6 million, or 6.2%, over the two
fiscal years. The Company's profitability benefited by improved expense ratios
as total general and administrative expenses as a percent of total revenues
decreased from 63.5% during fiscal 1999 to 58.7% during fiscal 2000.
Additionally, the average general and administrative expense per open office
actually declined by .1% when comparing the two fiscal years.
Interest expense increased by $481,000, or 8.7%, in fiscal 2000 when
compared with the prior fiscal year. This increase was due to an increase in
average borrowings during the year, as well as an increase in interest rates
over the two periods.
The Company's effective income tax rate increased to 34.8% in fiscal 2000
from 32.8% in fiscal 1999 primarily as a result of reduced benefits from the
Company's captive insurance subsidiary as well as increased state income taxes.
Credit Loss Experience
Delinquency is computed on the basis of the date of the last full
contractual payment on a loan (known as the recency method) and on the basis of
the amount past due in accordance with original payment terms of a loan (known
as the contractual method). Management closely monitors portfolio delinquency
using both methods to measure the quality of the Company's loan portfolio and
the probability of credit losses.
- --------------------------------------------------------------------------------
World Acceptance Corporation 9
Management's Discussion and Analysis
________________________________________________________________________________
The Company maintains an allowance for loan losses in an amount that, in
management's opinion, is adequate to cover losses inherent in the existing loan
portfolio. The Company charges against current earnings, as a provision for loan
losses, amounts added to the allowance to maintain it at levels expected to
cover probable losses of principal. The Company's policy is to charge off loans
on which a full contractual installment has not been received during the prior
180 days, or sooner if the loan is deemed uncollectible. Collection efforts on
charged-off loans continue until the obligation is satisfied or until it is
determined such obligation is not collectible or the cost of continued
collection efforts will exceed the potential recovery. Recoveries of previously
charged-off loans are credited to the allowance for loan losses.
When establishing the allowance for loan losses, the Company takes into
consideration the growth of the loan portfolio, the mix of the loan portfolio,
current levels of charge-offs, current levels of delinquencies, and current
economic factors. While management uses the best information available to make
evaluations, future adjustments to the allowance for loan losses may be
necessary if conditions differ substantially from the assumptions used in making
the calculations.
The following table sets forth the Company's allowance for loan losses at
the end of the fiscal years ended March 31, 2001, 2000, and 1999, and the credit
loss experience over the indicated periods:
At or for the
Years Ended March 31,
---------------------------------------
2001 2000 1999
--------- --------- ---------
(Dollars in thousands)
Allowance for loan losses........................................... $ 12,032 $ 10,008 $ 8,769
Percentage of loans receivable...................................... 7.4% 7.4% 7.5%
Provision for loan losses........................................... $ 19,749 $ 15,697 $ 11,707
Net charge-offs..................................................... $ 18,751 $ 15,284 $ 10,863
Net charge-offs as a percentage of average loans receivable /(1)/... 12.0% 12.0% 9.7%
___________________
/(1)/ Average loans receivable have been determined by averaging month-end
gross loans receivable less unearned interest and deferred fees over the
indicated period.
The following table classifies the gross loans receivable of the Company
that were delinquent on a recency and contractual basis for at least 60 days at
March 31, 2001, 2000, and 1999:
At March 31,
---------------------------------------
2001 2000 1999
--------- --------- ---------
(Dollars in thousands)
Recency basis:
60-89 days past due................................................ $ 3,213 $ 2,601 $ 2,163
90 days or more past due........................................... 1,624 1,196 1,047
------ ------ ------
Total............................................................ $ 4,837 $ 3,797 $ 3,210
====== ====== ======
Percentage of period-end gross loans receivable..................... 2.3% 2.2% 2.1%
Contractual basis:
60-89 days past due................................................ $ 4,297 $ 3,298 $ 2,766
90 days or more past due........................................... 4,080 2,818 2,609
------ ------ ------
Total............................................................ $ 8,377 $ 6,116 $ 5,375
====== ====== ======
Percentage of period-end gross loans receivable..................... 4.0% 3.5% 3.6%
====== ====== ======
________________________________________________________________________________
10 World Acceptance Corporation
Management's Discussion and Analysis
________________________________________________________________________________
Quarterly Information and Seasonality
The Company's loan volume and corresponding loans receivable follow
seasonal trends. The Company's highest loan demand typically occurs from October
through December, its third fiscal quarter. Loan demand has generally been the
lowest and loan repayment highest from January to March, its fourth fiscal
quarter. Loan volume and average balances typically remain relatively level
during the remainder of the year. This seasonal trend affects quarterly
operating performance through corresponding fluctuations in interest and fee
income and insurance commissions earned and the provision for loan losses
recorded, as well as fluctuations in the Company's cash needs. Consequently,
operating results for the Company's third fiscal quarter generally are
significantly lower than in other quarters and operating results for its fourth
fiscal quarter significantly higher than in other quarters.
The following table sets forth, on a quarterly basis, certain items
included in the Company's unaudited consolidated financial statements and shows
the number of offices open during fiscal years 2000 and 2001.
At or for the Three Months Ended
------------------------------------------------------------------------------------------------
June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31,
1999 1999 1999 2000 2000 2000 2000 2001
--------- --------- --------- --------- --------- --------- --------- ---------
(Dollars in thousands)
Total revenues....... $ 24,327 $ 25,513 $ 26,930 $ 28,506 $ 26,943 $ 28,610 $ 29,880 $ 35,111
Provision for
loan losses....... 3,039 4,573 5,540 2,545 3,912 5,155 7,039 3,643
General and
administrative
expenses.......... 15,301 14,723 15,886 15,925 16,402 16,326 17,556 17,980
Net income (loss).... 3,056 3,129 2,586 5,398 3,189 3,262 1,975 7,175
Gross loans
receivable........ $ 159,182 $ 163,228 $ 182,900 $ 173,609 $ 196,303 $ 208,651 $ 235,532 $ 210,894
Number of
offices open...... 387 399 404 410 417 424 426 420
Current Accounting Issues
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Statement is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. This
effective date reflects the deferral provided by SFAS 137, which defers the
earlier effective date specified in SFAS 133. The Company adopted SFAS 133 on
April 1, 2001, with no material impact.
In September 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 140 (SFAS No. 140), "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities - a replacement of FASB Statement 125," which revises the criteria
for accounting for securitizations and other transfers of financial assets and
collateral, and introduces new disclosures. The enhanced disclosure requirements
are effective for year-end 2000. The other provisions of SFAS No. 140 apply
prospectively to transfers of financial assets and extinguisments of liabilities
occurring after March 31, 2001. The Company adopted SFAS No. 140 on April 1,
2001 with no material impact.
________________________________________________________________________________
World Acceptance Corporation 11
Management's Discussion and Analysis
________________________________________________________________________________
Liquidity and Capital Resources
The Company has financed its operations, acquisitions and office expansion
through a combination of cash flow from operations and borrowings from its
institutional lenders. The Company has generally applied its cash flow from
operations to fund its increasing loan volume, fund acquisitions, repay long-
term indebtedness, and repurchase its common stock. As the Company's gross loans
receivable increased from $130.6 million at March 31, 1998 to $210.9 million at
March 31, 2001, net cash provided by operating activities for fiscal years 1999,
2000, and 2001 was $20.7 million, and $31.9 million, and $39.1 million,
respectively.
The Company's primary ongoing cash requirements relate to the funding of
new offices and acquisitions, the overall growth of loans outstanding, the
repayment of long-term indebtedness and the repurchase of its common stock. The
Company repurchased 1,986,000 shares of its common stock under its repurchase
program, for an aggregate purchase price of approximately $16.0 million, between
February 1996 and October 1996. Because of certain loan agreement restrictions,
the Company suspended its stock repurchases in October 1996. The stock
repurchase program was reinstated in January 2000, and 144,000 shares were
repurchased in fiscal 2000 and 275,000 were repurchased in fiscal 2001 for an
aggregate purchase price of $724,000 and $1,434,000, respectively. The Company
believes stock repurchases to be a viable component of the Company's long-term
financial strategy and an excellent use of excess cash when the opportunity
arises. In addition, the Company plans to open or acquire at least 15 new
offices in each of the next two fiscal years. Expenditures by the Company to
open and furnish new offices generally averaged approximately $19,500 per office
during fiscal 2001. New offices have also required from $100,000 to $400,000 to
fund outstanding loans receivable originated during their first 12 months of
operation.
The Company acquired 12 offices and a number of loan portfolios from
competitors in eight states in 17 separate transactions during fiscal 2001.
Gross loans receivable purchased in these transactions were approximately $23.4
million in the aggregate at the dates of purchase. The Company believes that
attractive opportunities to acquire new offices or receivables from its
competitors or to acquire offices in communities not currently served by the
Company will continue to become available as conditions in local economies and
the financial circumstances of owners change.
The Company has an $105.0 million revolving credit facility with a
syndicate of banks. The credit facility will expire on September 30, 2002. Funds
borrowed under the revolving credit facility bear interest, at the Company's
option, at either the agent bank's prime rate per annum or the LIBOR rate plus
1.75% per annum. At March 31, 2001, the interest rate on borrowings under the
revolving credit facility was 6.94%. The Company pays a commitment fee equal to
0.375% of the daily unused portion of the revolving credit facility. Amounts
outstanding under the revolving credit facility may not exceed specified
percentages of eligible loans receivable. On March 31, 2001, $83.2 million was
outstanding under this facility, and there was $21.8 million of unused borrowing
availability under the borrowing base limitations.
The Company has $8.0 million of senior subordinated secured notes with an
insurance company. These notes mature in annual installments of $2.0 million on
each June 30, from 2001 through 2004, and bear interest at 10.0%, payable
quarterly. The notes were issued at a discounted price equal to 99.6936% and may
be prepaid subject to certain prepayment penalties. Borrowings under the
revolving credit facility 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.
________________________________________________________________________________
12 World Acceptance Corporation
Management's Discussion and Analysis
________________________________________________________________________________
The Company's credit agreements contain a number of financial covenants,
including minimum net worth and fixed charge coverage requirements. The credit
agreements also contain certain other covenants, including covenants that impose
limitations on the Company with respect to (i) declaring or paying dividends or
making distributions on or acquiring common or preferred stock or warrants or
options; (ii) redeeming or purchasing or prepaying principal or interest on
subordinated debt; (iii) incurring additional indebtedness; and (iv) entering
into a merger, consolidation or sale of substantial assets or subsidiaries. The
senior subordinated notes are also subject to prepayment penalties. The Company
believes that it is in compliance with these agreements and does not believe
that these agreements will materially limit its business and expansion strategy.
The Company believes that cash flow from operations and borrowings under
its revolving credit facility will be adequate to fund the expected cost of
opening or acquiring new offices, including funding initial operating losses of
new offices and funding loans receivable originated by those offices and the
Company's other offices and the scheduled repayment of the senior subordinated
notes. From time to time, the Company has needed and obtained, and expects that
it will continue to need on a periodic basis, an increase in the borrowing
limits under its revolving credit facility. The Company has successfully
obtained such increases in the past and anticipates that it will be able to do
so in the future as the need arises; however, there can be no assurance that
this additional funding will be available (or available on reasonable terms) if
and when needed.
Quantitative and Qualitative Disclosures About Market Risk
The Company's outstanding debt under its revolving credit facility was
$83.2 million at March 31, 2001. Interest on borrowings under this facility is
based, at the Company's option, on the prime rate or LIBOR plus 1.75%. Based on
the outstanding balance at March 31, 2001, a change of 1% in the interest rate
would cause a change in interest expense of approximately $832,000 on an annual
basis.
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 ten states in which the
Company 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 in those states, which could partially offset the potential
increase in operating costs due to inflation.
Legal Settlement
From April 1995 through July 1999, the Company and several of its
subsidiaries were parties to litigation challenging the Company's non-filing
insurance practices. Non-filing insurance is an insurance product that lenders
like the Company can purchase in lieu of filing a UCC financing statement
covering the collateral of their borrowers. The litigation against the Company
was consolidated with other litigation against other finance companies, jewelry
and furniture retailers, and insurance companies in a purported nationwide class
action in the U.S. District Court in Alabama under the caption In re:
------
Consolidated "Non-filing Insurance" Fee Litigation (Multidistrict Litigation
- --------------------------------------------------
Docket No. 1130), U.S. District Court, Middle District of Alabama, Northern
Division).
________________________________________________________________________________
World Acceptance Corporation 13
Management's Discussion and Analysis
________________________________________________________________________________
On November 11, 1998, the Company and its subsidiaries named in the action
entered into a settlement agreement pursuant to which the Company agreed to
settle all claims alleged in the litigation involving it and its subsidiaries
for an aggregate cash payment of $5 million. In addition, the terms of the
settlement curtailed certain non-filing practices by the Company and its
subsidiaries and allowed the court to approve criteria defining those
circumstances in which the Company's subsidiaries could make non-filing
insurance claims going forward. As a result of the settlement, non-filing
insurance fees charged to borrowers were reduced by 25%. The settlement
agreement, which includes the settlement by several other defendants in the
litigation, including the Company's insurer, was approved by the Court.
The Company recorded an accrual for settlement costs, including the
expected expenses to comply with the terms of the settlement, of $5.4 million in
the fiscal year ended March 31, 1999. Of this total accrual, $5.0 million was
paid to an escrow account and has been distributed to class participants, and
$244 thousand in costs were incurred in completing the settlement. The remaining
$156 thousand of the accrual was reversed in fiscal 2000. The settlement limited
and reduced the coverage for the types of losses with respect to which the
Company's subsidiaries submit claims. The Company does not believe that those
limitations and reductions will have a material adverse effect on the Company's
results of operations.
Other Legal Matters
At March 31, 2001, the Company and certain of its subsidiaries have been
named as defendants in various other legal actions arising from their normal
business activities in which damages in various amounts are claimed. Although
the amount of any ultimate liability with respect to such other matters cannot
be determined, the Company believes, based upon the advice of counsel, that any
such liability will not have a material adverse effect on the Company's
consolidated financial statements taken as a whole.
________________________________________________________________________________
14 World Acceptance Corporation
Management's Discussion and Analysis
________________________________________________________________________________
Forward-Looking Statements
This annual report, 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 beliefs and assumptions, as
well as information currently available to management. 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 unpredictable nature of litigation; and
other matters discussed in this annual report and the Company's filings with the
Securities and Exchange Commission.
________________________________________________________________________________
World Acceptance Corporation 15
CONSOLIDATED BALANCE SHEETS
________________________________________________________________________________
March 31,
-------------------------------------
2001 2000
--------------- ---------------
Assets
Cash............................................................................ $ 3,292,504 1,690,676
Gross loans receivable.......................................................... 210,893,604 173,609,123
Less:
Unearned interest and deferred fees........................................ (48,504,582) (37,949,381)
Allowance for loan losses.................................................. (12,031,622) (10,008,257)
--------------- ---------------
Loans receivable, net.................................................. 150,357,400 125,651,485
Property and equipment, net..................................................... 6,538,131 6,752,791
Other assets, net............................................................... 9,834,117 8,269,399
Intangible assets, net.......................................................... 13,138,307 11,108,477
--------------- ---------------
$ 183,160,459 153,472,828
=============== ===============
Liabilities and Shareholders' Equity
Liabilities:
Senior notes payable....................................................... 83,150,000 67,900,000
Subordinated notes payable................................................. 8,000,000 10,000,000
Other note payable......................................................... 482,000 482,000
Income taxes payable....................................................... 3,038,113 2,059,441
Accounts payable and accrued expenses...................................... 5,763,812 4,839,001
--------------- ---------------
Total liabilities...................................................... 100,433,925 85,280,442
--------------- ---------------
Shareholders' equity:
Preferred stock, no par value
Authorized 5,000,000 shares............................................ - -
Common stock, no par value
Authorized 95,000,000 shares; issued and outstanding 18,688,973 and
18,887,573 shares at March 31, 2001 and 2000, respectively............. - -
Additional paid-in capital................................................. 313,655 267,958
Retained earnings.......................................................... 82,412,879 67,924,428
--------------- ---------------
Total shareholders' equity............................................. 82,726,534 68,192,386
--------------- ---------------
Commitments and contingencies
$ 183,160,459 153,472,828
=============== ===============
See accompanying notes to consolidated financial statements.
________________________________________________________________________________
16 World Acceptance Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
________________________________________________________________________________
Years Ended March 31,
--------------------------------------------------
2001 2000 1999
-------------- ------------- -------------
Revenues:
Interest and fee income.................................... $ 103,411,761 89,051,419 80,676,687
Insurance commissions and other income..................... 17,131,920 16,224,444 11,085,548
-------------- ------------- -------------
Total revenues.................................... 120,543,681 105,275,863 91,762,235
-------------- ------------- -------------
Expenses:
Provision for loan losses.................................. 19,748,604 15,697,165 11,707,392
-------------- ------------- -------------
General and administrative expenses:
Personnel.............................................. 43,878,217 39,498,066 37,055,930
Occupancy and equipment................................ 7,627,080 6,917,420 6,358,974
Data processing........................................ 1,518,501 1,501,667 1,437,421
Advertising ......................................... 3,967,213 3,932,663 4,063,755
Legal.................................................. 415,594 183,095 5,844,864
Amortization of intangible assets...................... 1,797,425 1,472,108 1,309,632
Other.................................................. 9,060,353 8,330,131 7,562,355
-------------- ------------- -------------
68,264,383 61,835,150 63,632,931
-------------- ------------- -------------
Interest expense........................................... 8,259,794 6,015,029 5,534,315
-------------- ------------- -------------
Total expenses.................................... 96,272,781 83,547,344 80,874,638
-------------- ------------- -------------
Income before income taxes...................................... 24,270,900 21,728,519 10,887,597
-------------- ------------- -------------
Income taxes.................................................... 8,670,000 7,560,000 3,568,000
-------------- ------------- -------------
Net income...................................................... $ 15,600,900 14,168,519 7,319,597
============== ============= =============
Net income per common share:
Basic...................................................... $ .84 .75 .39
============== ============= =============
Diluted.................................................... $ .83 .74 .38
============== ============= =============
Weighted average shares outstanding:
Basic...................................................... 18,670,597 19,003,380 19,010,789
============== ============= =============
Diluted.................................................... 18,839,620 19,155,042 19,212,813
============== ============= =============
See accompanying notes to consolidated financial statements.
________________________________________________________________________________
World Acceptance Corporation 17
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Additional
Paid-in Retained
Capital Earnings Total
----------- ------------ ------------
Balances at March 31, 1998........................................ $ 864,968 46,436,312 47,301,280
Proceeds from exercise of stock options (18,000 shares),
including tax benefits of $18,453.............................. 70,953 - 70,953
Net income........................................................ - 7,319,597 7,319,597
----------- ------------ ------------
Balances at March 31, 1999........................................ 935,921 53,755,909 54,691,830
Proceeds from exercise of stock options (15,000 shares),
including tax benefits 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 (76,400 shares),
including tax benefits of $41,355.............................. 367,161 - 367,161
Common stock repurchases (275,000 shares)......................... (321,464) (1,112,449) (1,433,913)
Net income........................................................ - 15,600,900 15,600,900
----------- ------------ ------------
Balances at March 31, 2001........................................ $ 313,655 82,412,879 82,726,534
=========== ============ ============
See accompanying notes to consolidated financial statements.
- --------------------------------------------------------------------------------
18 World Acceptance Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Years Ended March 31,
------------------------------------------------
2001 2000 1999
------------- ------------ ------------
Cash flows from operating activities:
Net income ....................................................... $ 15,600,900 14,168,519 7,319,597
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of intangible assets .............................. 1,797,425 1,472,108 1,309,632
Amortization of loan costs and discounts........................ 62,452 87,195 119,741
Provision for loan losses....................................... 19,748,604 15,697,165 11,707,392
Depreciation .................................................. 1,569,905 1,490,642 1,428,619
Deferred tax benefit............................................ (808,000) (485,000) (1,257,000)
Change in accounts:
Other assets, net............................................. (819,170) (819,607) (1,463,428)
Income taxes payable.......................................... 1,020,027 616,282 2,093,575
Accounts payable and accrued expenses......................... 924,811 (367,482) 1,102,972
------------ ------------ ------------
Net cash provided by operating activities................... 39,096,954 31,859,822 20,687,950
------------ ------------ ------------
Cash flows from investing activities:
Increase in loans receivable, net................................. (28,815,645) (23,207,673) (21,064,511)
Net assets acquired from office acquisitions, primarily loans..... (15,653,874) (9,622,912) (4,311,115)
Increase in intangible assets from acquisitions................... (3,827,255) (2,752,700) (1,527,123)
Purchases of property and equipment, net.......................... (1,340,245) (1,892,173) (1,264,105)
------------ ------------ ------------
Net cash used by investing activities....................... (49,637,019) (37,475,458) (28,166,854)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds of senior revolving notes
payable, net.................................................... 15,250,000 10,750,000 11,450,000
Repayment of senior term notes payable............................ - (4,000,000) (4,000,000)
Repayment of subordinated notes payable........................... (2,000,000) - -
Proceeds from exercise of stock options........................... 325,806 43,750 52,500
Repurchase of common stock........................................ (1,433,913) (723,645) -
------------ ------------- ------------
Net cash provided by financing activities................... 12,141,893 6,070,105 7,502,500
------------ ------------ ------------
Increase in cash..................................................... 1,601,828 454,469 23,596
Cash at beginning of year............................................ 1,690,676 1,236,207 1,212,611
------------ ------------ ------------
Cash at end of year.................................................. $ 3,292,504 1,690,676 1,236,207
============ ============ ============
See accompanying notes to consolidated financial statements.
- --------------------------------------------------------------------------------
World Acceptance Corporation 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
(1) Summary of Significant Accounting Policies
------------------------------------------
The Company's accounting and reporting policies are in accordance with
generally accepted accounting principles and conform to general practices
within the finance company industry. The following is a description of the
more significant of these policies used in preparing the consolidated
financial statements.
Principles of Consolidation
The consolidated financial statements include the accounts of World
Acceptance Corporation and its wholly owned subsidiaries (the "Company").
Subsidiaries consist of operating entities in various states, ParaData
Financial Systems ("ParaData"), a software company acquired during fiscal
1994, and WAC Holdings Ltd., a captive reinsurance company established in
fiscal 1994. All significant intercompany balances and transactions have
been eliminated in consolidation.
The Company operates primarily as one business segment, which is a consumer
finance company. ParaData provides data processing systems to 130 separate
finance companies, including the Company. At March 31, 2001 and 2000,
ParaData had total assets of $1,976,226, and $3,912,252, respectively. For
the years ended March 31, 2001, 2000 and 1999, ParaData had income before
income taxes of $1,024,638, $1,847,042, and $791,529, respectively. Total
net revenues (sales and systems support less cost of sales) for ParaData
for the years ended March 31, 2001, 2000 and 1999 were $2,750,536,
$3,570,297, and $2,383,578, respectively.
Loans and Interest Income
The Company is licensed to originate direct cash consumer loans in the
states of Georgia, South Carolina, Texas, Oklahoma, Louisiana, Tennessee,
Missouri, Illinois, New Mexico and Kentucky. During fiscal 2001 and 2000,
the Company originated loans generally ranging up to $3,000, with terms of
24 months or less. Experience indicates that a majority of the direct cash
consumer loans are renewed.
Fees received and direct costs incurred for the origination of loans are
deferred and amortized to interest income over the contractual lives of the
loans. Unamortized amounts are recognized in income at the time that loans
are renewed or paid in full.
Loans are carried at the gross amount outstanding reduced by unearned
interest and insurance income, net deferred origination fees and direct
costs, and an allowance for loan losses. Unearned interest is deferred at
the time the loans are made and accreted to income on a collection method,
which approximates the level yield method. Charges for late payments are
credited to income when collected.
The Company generally offers its loans at the prevailing statutory rates
for terms not to exceed 24 months. Management believes that the carrying
value approximates the fair value of its loan portfolio.
Allowance for Loan Losses
Additions to the allowance for loan losses are based on management's
evaluation of the loan portfolio under current economic conditions, the
volume of the loan portfolio, overall portfolio quality, review of specific
loans, charge-off experience, and such other factors which, in management's
judgment, deserve recognition in estimating loan losses. Loans are charged
off at the earlier of when such loans are deemed
________________________________________________________________________________
20 World Acceptance Corporation
Notes to Consolidated Financial Statements
________________________________________________________________________________
to be uncollectible or when six months have elapsed since the date of the
last full payment. The net balance of loans deemed to be uncollectible is
charged against the loan loss allowance. Recoveries of previously charged-
off loans are credited to the allowance for loan losses. While management
uses the best information available to make evaluations, future adjustments
to the allowance may be necessary if conditions differ substantially from
the assumptions used in making the calculations.
At March 31, 2001 and 2000, there were no concentrations of loans in any
local economy, type of property, or to any one borrower.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is recorded using the straight-line method over
the estimated useful life of the related asset as follows: building, 40
years; furniture and fixtures, 5 to 10 years; equipment, 3 to 7 years; and
vehicles, 3 years. Amortization of leasehold improvements is recorded using
the straight-line method over the lesser of the estimated useful life of
the asset or the term of the lease. Additions to premises and equipment and
major replacements or betterments are added at cost. Maintenance, repairs,
and minor replacements are charged to operating expense as incurred. When
assets are retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts and any gain or loss is
reflected in income.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
Other Assets
Other assets include costs incurred in connection with originating long-
term debt. Such remaining unamortized costs aggregated $192,558, and
$183,236 at March 31, 2001 and 2000, respectively, and are amortized as
interest expense over the life of the respective indebtedness.
Intangible Assets
Intangible assets include the cost of acquiring existing customers, the
value assigned to noncompete agreements, costs incurred in connection with
the acquisition of loan offices, and goodwill (the excess cost over the
fair value of the net assets acquired). These assets are being amortized on
a straight-line basis over the estimated useful lives of the respective
assets as follows: 8 to 10 years for customer lists, 5 to 10 years for
noncompete agreements and acquisition costs, and 10 years for goodwill.
Management periodically evaluates the recoverability of the unamortized
balances of these assets and adjusts them as necessary.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
about the Fair Value of Financial Instruments" (SFAS 107) requires
disclosures about the fair value of all financial instruments whether or
not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available,
fair values are based on estimates using present value
________________________________________________________________________________
World Acceptance Corporation 21
Notes to Consolidated Financial Statements
________________________________________________________________________________
or other valuation techniques. The carrying amount of financial instruments
included in the financial statements are deemed reasonable estimates of
their fair value because of their variable repricing features and/or their
short terms to maturity.
Insurance Premiums
Insurance premiums for credit life, accident and health, property and
unemployment insurance written in connection with certain loans, net of
refunds and applicable advance insurance commissions retained by the
Company, are remitted monthly to an insurance company. All commissions are
credited to unearned insurance commissions and recognized as income over
the life of the related insurance contracts using a method similar to that
used for the recognition of interest income.
Non-file Insurance
Non-file premiums are charged on certain loans at inception and renewal in
lieu of recording and perfecting the Company's security interest in the
assets pledged on certain loans and are remitted to a third-party insurance
company for non-file insurance coverage. Such insurance and the related
insurance premiums, claims, and recoveries are not reflected in the
accompanying consolidated financial statements except as a reduction in
loan losses (see note 6).
Certain losses related to such loans, which are not recoverable through
life, accident and health, property, or unemployment insurance claims are
reimbursed through non-file insurance claims subject to policy limitations.
Any remaining losses are charged to the allowance for loan losses.
Income Taxes
The Company uses the asset and liability method of accounting for income
taxes required by SFAS No. 109, "Accounting for Income Taxes." Under the
asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Supplemental Cash Flow Information
For the years ended March 31, 2001, 2000, and 1999, the Company paid
interest of $8,176,867, $5,977,647, and $5,784,930, respectively.
For the years ended March 31, 2001, 2000 and 1999, the Company paid income
taxes of $8,457,973 $7,913,718, and $5,661,575, respectively.
________________________________________________________________________________
22 World Acceptance Corporation
Notes to Consolidated Financial Statements
________________________________________________________________________________
Supplemental non-cash financing activities for the years ended March
31, 2001, 2000, and 1999, consist of:
2001 2000 1999
---------- ----------- -----------
Tax benefits from exercise of stock options...................... $ 41,355 11,932 18,453
====== ====== ======
Earnings Per Share
Earnings per share ("EPS") are computed in accordance with SFAS No. 128,
"Earnings per Share." Basic EPS includes no dilution and is computed by
dividing income available to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution of securities that could share in the earnings of
the Company. Potential common stock included in the diluted EPS computation
consists of stock options, which are computed using the treasury stock
method.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," issued in October
1995, allows a company to either adopt the fair value method of valuation
or continue using the intrinsic valuation method presented under Accounting
Principles Board (APB) Opinion 25 to account for stock-based compensation.
The fair value method recommended in SFAS No. 123 requires a company to
recognize compensation expense based on the fair value of the option on the
grant date. The intrinsic value method measures compensation expense as the
difference between the quoted market price of the stock and the exercise
price of the option on the date of grant. The Company has elected to
continue using APB Opinion 25 and has disclosed in the footnotes pro forma
net income and earnings per share information as if the fair value method
had been applied.
Reclassification
Certain reclassification entries have been made for fiscal 2000 and 1999 to
conform with fiscal 2001 presentation. There was no impact on shareholders'
equity or net income previously reported as a result of these
reclassifications.
________________________________________________________________________________
World Acceptance Corporation 23
Notes to Consolidated Financial Statements
________________________________________________________________________________
(2) Allowance for Loan Losses
-------------------------
The following is a summary of the changes in the allowance for loan
losses for the years ended March 31, 2001, 2000, and 1999:
March 31,
-----------------------------------------------
2001 2000 1999
------------ ----------- -----------
Balance at the beginning of the year....................... $ 10,008,257 8,769,367 8,444,563
Provision for loan losses.................................. 19,748,604 15,697,165 11,707,392
Loan losses................................................ (20,433,464) (16,766,909) (12,256,626)
Recoveries................................................. 1,682,681 1,482,439 1,393,437
Allowance on acquired loans, net of specific charge-offs... 1,025,544 826,195 (519,399)
------------ ----------- ------------
Balance at the end of the year............................. $ 12,031,622 10,008,257 8,769,367
============ =========== ============
The allowance on acquired loans represents specific reserves established on
bulk loan purchases and is shown in the above roll-forward net of
subsequent charge-offs related to the same purchased loans.
(3) Property and Equipment
----------------------
Summaries of property and equipment follow:
March 31,
------------------------------
2001 2000
------------ ------------
Land................................................................. $ 250,443 250,443
Buildings and leasehold improvements................................. 3,065,873 2,696,916
Furniture and equipment.............................................. 11,501,981 11,045,811
------------ ------------
14,818,297 13,993,170
Less accumulated depreciation and amortization....................... (8,280,166) (7,240,379)
------------ ------------
Total........................................................... $ 6,538,131 6,752,791
============ ============
(4) Intangible Assets
-----------------
Intangible assets, net of accumulated amortization, consist of:
March 31,
------------------------------
2001 2000
------------- ------------
Cost of acquiring existing customers................................. $ 7,140,655 4,045,160
Value assigned to noncompete agreements.............................. 4,835,824 5,687,007
Goodwill............................................................. 939,903 1,105,768
Other................................................................ 221,925 270,542
---------- -----------
Total........................................................... $ 13,138,307 11,108,477
========== ===========
________________________________________________________________________________
24 World Acceptance Corporation
Notes to Consolidated Financial Statements
________________________________________________________________________________
(5) Notes Payable
Summaries of the Company's notes payable follow:
Senior Credit Facilities
$105,000,000 Revolving Credit Facility - This facility provides for
--------------------------------------
borrowings of up to $105.0 million, with $83.2 million outstanding at
March 31, 2001, subject to a borrowing base formula. The Company may
borrow, at its option, at the rate of prime or LIBOR plus 1.75%. At
March 31, 2001, the Company's interest rate was 6.94% and the unused
amount available under the revolver was $21.8 million. The revolving
credit facility has a commitment fee of 3/8 of 1% on the unused
portion of the commitment. Borrowings under the revolving credit
facility mature on September 30, 2002.
$8,000,000 Senior Subordinated Secured Notes - These notes mature in
--------------------------------------------
four annual installments of $2.0 million on June 30, 2001 through June
30, 2004, and bear interest at 10.0%, payable quarterly. The notes
were issued at a discounted price equal to 99.6936% and may be prepaid
subject to certain prepayment penalties.
Substantially all of the Company's assets are pledged as collateral
for borrowings under the revolving credit facility. The Company's
assets are also pledged as collateral for the senior subordinated
notes on a subordinated basis.
Other Note Payable
The Company also has a $482,000 note payable to an unaffiliated
insurance company, bearing interest at 10%, payable annually, which
matures in September 2001.
The various debt agreements contain restrictions on the amounts of
permitted indebtedness, investments, working capital, repurchases of common
stock and cash dividends. At March 31, 2001, approximately $13,460,000 was
available under these covenants for the payment of cash dividends, or the
repurchase of the Company's common stock. In addition, the agreements
restrict liens on assets and the sale or transfer of subsidiaries. The
Company was in compliance with the various debt covenants for all periods
presented.
The aggregate annual maturities of the notes payable for each of the fiscal
years subsequent to March 31, 2001, are as follows: 2002, $2,482,000; 2003,
$85,150,000; 2004, $2,000,000; and 2005, $2,000,000.
________________________________________________________________________________
World Acceptance Corporation 25
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(6) Non-file Insurance
------------------
The Company maintains non-file insurance coverage with an unaffiliated
insurance company. Premiums, claims paid, and recoveries under this
coverage are not included in the accompanying financial statements except
as a reduction of loan losses. The following is a summary of the non-file
insurance activity for the years ended March 31, 2001, 2000, and 1999:
2001 2000 1999
------------- ----------- -----------
Insurance premiums written....... $ 2,027,232 2,820,257 3,162,825
Recoveries on claims paid........ $ 359,681 368,971 367,756
Claims paid...................... $ 2,366,609 2,957,540 3,200,486
(7) Leases
------
The Company conducts most of its operations from leased facilities, except
for its owned corporate office building. It is expected that in the normal
course of business, expiring leases will be renewed at the Company's option
or replaced by other leases or acquisitions of other properties.
The future minimum lease payments under noncancelable operating leases as
of March 31, 2001, are as follows:
2002........................................... $ 3,200,806
2003........................................... 2,216,351
2004........................................... 1,196,969
2005 .......................................... 626,372
2006 .......................................... 235,199
Thereafter..................................... 7,000
-----------
Total future minimum lease payments....... $ 7,482,697
===========
Rental expense for cancelable and noncancelable operating leases for the
years ended March 31, 2001, 2000, and 1999, was $3,941,664, $3,542,209, and
$3,180,150, respectively.
(8) Income Taxes
------------
Income tax expense for the years ended March 31, 2001, 2000, and 1999,
consists of:
2001 2000 1999
---------- ----------- -----------
Current:
Federal....................................................... $ 8,764,000 7,427,000 4,538,000
State......................................................... 714,000 618,000 287,000
---------- ----------- -----------
Total..................................................... 9,478,000 8,045,000 4,825,000
---------- ----------- -----------
Deferred:
Federal....................................................... (747,000) (399,000) (1,179,000)
State......................................................... (61,000) (86,000) (78,000)
---------- ----------- -----------
Total..................................................... (808,000) (485,000) (1,257,000)
---------- ----------- -----------
$ 8,670,000 7,560,000 3,568,000
========== =========== ===========
- --------------------------------------------------------------------------------
26 World Acceptance Corporation
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The income tax expense for the years ended March 31, 2001, 2000, and 1999
differs from the amount computed by applying the U.S. federal income tax
rate of 35% as a result of the following:
2001 2000 1999
---------- ----------- -----------
Computed "expected" income tax expense............................ $ 8,495,000 7,605,000 3,811,000
Increase resulting from:
State income tax, net of Federal benefit..................... 424,000 346,000 136,000
Amortization of goodwill..................................... 58,000 58,000 58,000
Insurance income exclusion................................... (247,000) (165,000) (162,000)
Other, net................................................... (60,000) (284,000) (275,000)
---------- ----------- -----------
Total income tax expense.......................................... $ 8,670,000 7,560,000 3,568,000
========== =========== ===========
Temporary differences between the financial statement carrying amounts and
tax basis of assets and liabilities that give rise to significant portions
of the deferred tax asset (liability) at March 31, 2001 and 2000, relate to
the following:
2001 2000
----------- -----------
Deferred tax assets:
Allowance for doubtful accounts.............................. $ 4,372,000 3,680,000
Unearned insurance commissions............................... 1,739,000 1,453,000
Accounts payable and accrued expenses primarily
related to employee benefits............................. 508,000 350,000
Intangible assets............................................ - 27,000
Tax over book accrued interest receivable.................... 840,000 743,000
Other........................................................ 289,000 266,000
----------- ------------
Gross deferred tax assets......................................... 7,748,000 6,519,000
Less valuation allowance.......................................... (281,000) (266,000)
----------- ------------
Net deferred tax assets........................................... 7,467,000 6,253,000
----------- ------------
Deferred tax liabilities:
Intangible Assets............................................ (455,000) -
Discount on purchased loans.................................. (87,000) (121,000)
Deferred net loan origination fees........................... (483,000) (442,000)
Other........................................................ (424,000) (480,000)
----------- ------------
Gross deferred tax liabilities.................................... (1,449,000) (1,043,000)
----------- ------------
Net deferred tax assets........................................... $ 6,018,000 5,210,000
=========== ============
A valuation allowance is established for any portion of the gross deferred
tax asset that management cannot determine is more likely than not to be
realized. The realization of net deferred tax assets is based on
utilization of loss carrybacks to prior taxable periods, anticipation of
future taxable income and the utilization of tax planning strategies. The
valuation allowance against the potential total deferred tax asset as of
March 31, 2001 and 2000 relates to state net operating losses. Management
has determined that it is more likely than not that the net deferred tax
asset can be realized based upon these criteria.
The Internal Revenue Service has examined the Company's federal income tax
returns for the fiscal years 1994 through 1996. Tax returns for fiscal 1997
and subsequent years are subject to examination by the taxing authorities.
- --------------------------------------------------------------------------------
World Acceptance Corporation 27
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(9) Earnings Per Share
------------------
The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS calculations.
For the year ended March 31, 2001
-----------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Income available to common shareholders.................. $ 15,600,900 18,670,597 $ .84
======
Effect of Dilutive Securities
Options.................................................. $ - 169,023
------------ -----------
Diluted EPS
Income available to common shareholders
plus assumed conversions............................... $ 15,600,900 18,839,620 $ .83
============ =========== ======
For the year ended March 31, 2000
-----------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Income available to common shareholders.................. $ 14,168,519 19,003,380 $ .75
======
Effect of Dilutive Securities
Options.................................................. $ - 151,662
------------ -----------
Diluted EPS
Income available to common shareholders
plus assumed conversions............................... $ 14,168,519 19,155,042 $ .74
============ =========== ======
For the year ended March 31, 1999
-----------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
Income available to common shareholders.................. $ 7,319,597 19,010,789 $ .39
======
Effect of Dilutive Securities
Options.................................................. $ - 202,024
------------ -----------
Diluted EPS
Income available to common shareholders
plus assumed conversions............................... $ 7,319,597 19,212,813 $ .38
============ =========== ======
Options to purchase 1,822,078, 2,986,140, and 1,979,878, shares of common
stock at various prices were outstanding during the years ended March 31,
2001, 2000 and 1999, respectively, but were not included in the computation
of diluted EPS because the option exercise price was greater than the
average market price of the common shares. The options, which expire on
various dates, were still outstanding as of March 31, 2001.
- --------------------------------------------------------------------------------
28 World Acceptance Corporation
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(10) Benefit Plans
-------------
Retirement Plan
The Company provides a defined contribution employee benefit plan (401(k)
plan) covering full-time employees, whereby employees can invest up to 15%
of their gross pay. The Company makes a matching contribution equal to 50%
of the employees' contributions for the first 6% of gross pay. The
Company's expense under this plan was $371,073, $364,667, and $306,697, for
the years ended March 31, 2001, 2000, and 1999, respectively.
Supplemental Executive Retirement Plan
The Company has instituted a Supplemental Executive Retirement Plan
("SERP"), which is a non-qualified executive benefit plan in which the
Company agrees to pay the executive additional benefits in the future,
usually at retirement, in return for continued satisfactory performance by
the executive. The Company selects the key executives who participate in
the SERP. The SERP is an unfunded plan, which means there are no specific
assets set aside by the Company in connection with the establishment of the
plan. The executive has no rights under the agreement beyond those of a
general creditor of the Company. For the year ended March 31, 2001,
contributions of $384,222 were charged to operations related to the SERP.
Stock Option Plans
The Company has a 1992 Stock Option Plan and a 1994 Stock Option Plan for
the benefit of certain directors, officers, and key employees. Under these
plans, 3,750,000 shares of authorized common stock have been reserved for
issuance pursuant to grants approved by the Stock Option Committee. The
options have a maximum duration of 10 years, may be subject to certain
vesting requirements, and are priced at the market value of the Company's
common stock on the date of grant of the option.
The Company applies APB Opinion 25 in accounting for the stock option
plans, described in the preceding paragraph. Accordingly, no compensation
expense has been recognized for the stock-based option plans. Had
compensation cost been recognized for the stock option plans applying the
fair-value-based method as prescribed by SFAS 123, the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:
(Dollars in thousands except per share amounts) 2001 2000 1999
----------- ----------- -----------
Net income
As reported................................................. $ 15,601 14,169 7,320
Pro forma................................................... $ 14,733 13,423 6,666
Basic earnings per share
As reported................................................. $ .84 .75 .39
======= ====== ======
Pro forma................................................... $ .79 .71 .35
======= ====== ======
Diluted earnings per share
As reported................................................. $ .83 .74 .38
======= ====== ======
Pro forma................................................... $ .78 .70 .35
======= ====== ======
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
used for grants in 2001, 2000, and 1999, respectively: dividend yield of
zero; expected volatility of 29%, 40%, and 51%; risk-free interest rate of
5.49%, 6.76%, and 5.00%; and expected lives of 10 years for all plans in
all three years. The fair values of options granted in 2001, 2000, and 1999
were $2.93, $3.36, and $3.92, respectively.
- --------------------------------------------------------------------------------
World Acceptance Corporation 29
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
At March 31, 2001, the Company had the following options outstanding:
Shares Shares Shares Price
Grant Date Granted Exercisable Exercised Per Share Expiration Date
---------- ------- ----------- --------- --------- ---------------
April 22, 1992 150,000 150,000 - $ 2.98 April 22, 2002
April 30, 1992 24,000 24,000 6,000 $ 3.04 April 30, 2002
October 20, 1992 358,500 358,500 267,500 $ 2.92 October 20, 2002
January 20, 1993 30,000 30,000 - $ 5.04 January 20, 2003
April 7, 1993 90,000 90,000 4,000 $ 6.33 April 7, 2003
April 30, 1993 18,000 18,000 - $ 5.54 April 30, 2003
October 19, 1993 313,500 313,500 13,500 $ 6.88 October 19, 2003
April 30, 1994 24,000 24,000 - $ 5.75 April 30, 2004
October 13, 1994 454,500 454,500 6,000 $ 7.48 October 13, 2004
April 1, 1995 211,692 211,692 - $ 8.63 April 1, 2005
April 30, 1995 24,000 24,000 - $ 9.50 April 30,2005
June 26, 1995 75,000 75,000 - $11.33 June 26, 2005
October 31, 1995 98,500 96,500 - $13.00 October 31, 2005
January 23, 1996 15,000 15,000 - $10.25 January 23, 2006
April 1, 1996 137,123 137,123 - $10.75 April 1, 2006
April 1, 1996 60,054 60,054 - $10.75 June 26, 2001
April 1, 1996 33,000 33,000 - $10.75 April 1, 2006
April 30, 1996 24,000 24,000 - $10.06 April 30, 2006
July 18, 1996 6,800 6,800 - $ 6.75 July 18, 2006
July 18, 1996 7,800 7,800 - $ 6.75 June 26, 2001
October 25, 1996 162,000 129,600 - $ 6.69 October 25, 2006
January 27, 1997 30,000 24,000 - $ 5.94 January 27, 2007
January 27, 1997 6,000 6,000 - $ 5.94 June 26, 2001
March 31, 1997 26,800 26,800 - $ 5.41 March 31, 2007
April 1, 1997 54,080 54,080 - $ 5.41 April 1, 2007
April 1, 1997 24,502 24,502 - $ 5.41 June 26, 2001
April 29, 1997 17,500 16,700 - $ 5.18 April 29, 2007
April 29, 1997 6,500 6,500 6,500 $ 5.18 June 26, 2001
April 30, 1997 24,000 24,000 - $ 5.16 April 30, 2007
October 28, 1997 180,500 108,300 - $ 5.19 October 28, 2007
April 1, 1998 50,022 50,022 - $ 6.69 April 1, 2008
April 1, 1998 23,287 23,287 - $ 6.69 June 26, 2001
April 1, 1998 36,300 24,200 - $ 6.69 April 1, 2008
April 30, 1998 24,000 24,000 - $ 6.50 April 30, 2008
November 23, 1998 211,000 84,400 - $ 5.25 November 23, 2008
April 1, 1999 42,100 - - $ 5.38 April 1, 2009
April 1, 1999 100,000 66,666 - $ 5.38 April 1, 2009
April 1, 1999 50,000 50,000 35,900 $ 5.38 June 26, 2001
April 30, 1999 24,000 24,000 - $ 5.47 April 30, 2009
May 11, 1999 15,000 3,000 - $ 5.47 May 11, 2009
August 16, 1999 50,000 10,000 - $ 5.78 August 16, 2009
October 20, 1999 140,000 24,500 - $ 5.44 October 20, 2009
April 1, 2000 50,000 - - $ 4.91 April 1, 2010
April 30, 2000 24,000 24,000 - $ 5.13 April 30, 2010
October 26, 2000 203,500 - - $ 5.03 October 26, 2010
--------- --------- ---------
Total 3,712,140 2,981,106 339,400
========= ========= =========
- --------------------------------------------------------------------------------
30 World Acceptance Corporation
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
On April 30, 2001, the Company granted options for 24,000 shares to non-
management directors. After giving affect to the above grants, there remain
13,860 shares of common stock available for future grants. No expense has
been recorded relative to stock options granted to date.
(11) Acquisitions
------------
During fiscal 2001, the Company purchased the net assets of 17 consumer
loan offices for a total consideration of $19,405,071. Total net loans
receivable acquired amounted to $15,638,874, and the Company paid
$3,843,156 for non-compete agreements with predecessor owners and for other
intangible assets. Eight of the 17 offices acquired were merged into
existing offices.
During fiscal 2000, the Company purchased the net assets of 24 consumer
loan offices for a total consideration of $12,376,112. Total net loans
receivable acquired amounted to $9,571,314, and the Company paid $2,753,200
for non-compete agreements with predecessor owners and for other intangible
assets. Twelve of the 24 offices acquired were merged into existing
offices.
During fiscal 1999, the Company purchased the net assets of 21 consumer
loan offices for a total consideration of $5,909,134. Total net loans
receivable acquired amounted to $4,271,696, and the Company paid $1,527,123
for non-compete agreements with predecessor owners and for other intangible
assets. Eighteen of the 21 offices acquired were merged into existing
offices.
The pro forma impact of these purchases as though they had been acquired at
the beginning of the periods presented would not have a material effect on
the results of operations as reported.
(12) Quarterly Information (Unaudited)
---------------------------------
The following sets forth selected quarterly operating data:
2001 2000
--------------------------------- ---------------------------------
First Second Third Fourth First Second Third Fourth
----- ------ ----- ------ ----- ------ ----- ------
(Dollars in thousands, except earnings per share data)
Total revenues............................. $ 26,943 28,610 29,880 35,111 24,327 25,513 26,930 28,506
Provision for loan losses.................. 3,912 5,155 7,039 3,643 3,039 4,573 5,540 2,545
General and administrative expenses........ 16,402 16,326 17,556 17,980 15,301 14,723 15,886 15,925
Interest expense........................... 1,760 2,154 2,303 2,043 1,356 1,463 1,582 1,614
Income tax expense ........................ 1,680 1,713 1,007 4,270 1,575 1,625 1,336 3,024
------- ------ ------- ------ ------- ------- ------- ------
Net income............................ $ 3,189 3,262 1,975 7,175 3,056 3,129 2,586 5,398
======= ====== ======= ====== ======= ======= ======= ======
Earnings per share:
Basic................................. $ .17 .18 .11 .38 .16 .16 .14 .29
======= ====== ======= ====== ======= ======= ======= ======
Diluted............................... $ .17 .17 .11 .38 .16 .16 .14 .28
======= ====== ======= ====== ======= ======= ======= ======
- --------------------------------------------------------------------------------
World Acceptance Corporation 31
Notes to Consolidated Financial Statements
________________________________________________________________________________
(13) Litigation
----------
From April 1995 through July 1999, the Company and several of its
subsidiaries were parties to litigation challenging the Company's non-
filing insurance practices. Non-filing insurance is an insurance
product that lenders like the Company can purchase in lieu of filing a
UCC financing statement covering the collateral of their borrowers.
The litigation against the Company was consolidated with other
litigation against other finance companies, jewelry and furniture
retailers, and insurance companies in a purported nationwide class
action in the U.S. District Court in Alabama under the caption In re:
Consolidated "Non-filing Insurance" Fee Litigation (Multidistrict
------------------------------------
Litigation Docket No. 1130), U.S. District Court, Middle District of
Alabama, Northern Division).
On November 11, 1998, the Company and its subsidiaries named in the
action entered into a settlement agreement pursuant to which the
Company agreed to settle all claims alleged in the litigation
involving it and its subsidiaries for an aggregate cash payment of $5
million. In addition, the terms of the settlement curtailed certain
non-filing practices by the Company and its subsidiaries and allowed
the court to approve criteria defining those circumstances in which
the Company's subsidiaries could make non-filing insurance claims
going forward. As a result of the settlement, non-filing insurance
fees charged to borrowers were reduced by 25%. The settlement
agreement, which includes the settlement by several other defendants
in the litigation, including the Company's insurer, was approved by
the Court.
The Company recorded an accrual for settlement costs, including the
expected expenses to comply with the terms of the settlement, of $5.4
million in the fiscal year ended March 31, 1999. Of this total
accrual, $5.0 million was paid to an escrow account and has been
distributed to class participants and $244 thousand in costs were
incurred in completing the settlement. The remaining $156 thousand of
the accrual was reversed in fiscal 2000. The settlement limited and
reduced the coverage for the types of losses with respect to which the
Company's subsidiaries submit claims. The Company does not believe
that those limitations and reductions will have a material adverse
effect on the Company's results of operations.
________________________________________________________________________________
32 World Acceptance Corporation
Notes to Consolidated Financial Statements
________________________________________________________________________________
At March 31, 2001, the Company and certain of its subsidiaries have
been named as defendants in various other legal actions arising from
their normal business activities in which damages in various amounts
are claimed. Although the amount of any ultimate liability with
respect to such other matters cannot be determined, the Company
believes, based upon the advice of counsel, that any such liability
will not have a material adverse effect on the Company's consolidated
financial statements taken as a whole.
(14) Commitments
-----------
The Company has entered into employment agreements with certain key
executive employees. The employment agreements have terms of two or
three years and call for aggregate minimum annual base salaries of
$655,000, adjusted annually as determined by the Company's
Compensation Committee. The agreements also provide for annual
incentive bonuses, which are based on the achievement of certain
predetermined operational goals.
________________________________________________________________________________
World Acceptance Corporation 33
INDEPENDENT AUDITORS' REPORT
________________________________________________________________________________
The Board of Directors
World Acceptance Corporation
Greenville, South Carolina
We have audited the accompanying consolidated balance sheets of World
Acceptance Corporation and subsidiaries as of March 31, 2001 and 2000, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended March 31, 2001. The
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of World
Acceptance Corporation and subsidiaries as of March 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the years in the
three-year period ended March 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.
/s/ KPMG LLP
Greenville, South Carolina
April 24, 2001
________________________________________________________________________________
34 World Acceptance Corporation
CORPORATE INFORMATION
________________________________________________________________________________
Common Stock
World Acceptance Corporation's common stock trades on The Nasdaq Stock
Market under the symbol: WRLD. As of June 18, 2001, there were approximately 141
shareholders of record and approximately 2,000 persons or entities who hold
their stock in nominee or "street" names through various brokerage firms. On
this date there were 18,815,542 shares of common stock outstanding.
The table below reflects the stock prices published by Nasdaq by quarter
for the last two fiscal years. The last reported sale price on June 18, 2001,
was $7.96.
Market Price of Common Stock
Fiscal 2000
------------------------------------
Quarter High Low
First $ 5.75 $ 5.00
Second 6.63 5.00
Third 5.81 4.13
Fourth 6.13 4.38
Fiscal 2001
-------------------------------------
Quarter High Low
First $ 5.50 $ 4.78
Second 5.38 4.94
Third 5.50 5.00
Fourth 6.69 5.25
The Company has never paid a dividend on its Common Stock. The Company presently
intends to retain its earnings to finance the growth and development of its
business and does not expect to pay cash dividends in the foreseeable future.
The Company's debt agreements also contain certain limitations on the Company's
ability to pay dividends. See note 5 to the Company's Consolidated Financial
Statements.