UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT of 1934
For the transition period from ____________________ to ________________________
Commission File Number: 0-19599
WORLD ACCEPTANCE CORPORATION
-------------------------------------------------------
(Exact name of registrant as specified in its charter.)
South Carolina 57-0425114
-------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
108 Frederick Street
Greenville, South Carolina 29607
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(864) 298-9800
------------------
(registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period than the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
X Yes No
------ ------
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date, November 13, 1997.
Common Stock, no par value 18,955,573
- ------------------------------ -----------------
(Class) (Outstanding)
This Filing contains 16 pages.
The Exhibit Index is on page 14.
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Consolidated Financial Statements (unaudited):
Consolidated Balance Sheets as of September 30,
1997, and March 31, 1997 3
Consolidated Statements of Operations for the
three-month periods and six-month periods ended
September 30, 1997, and September 30, 1996 4
Consolidated Statements of Shareholders' Equity
for the year ended March 31, 1997, and the six-month
period ended September 30, 1997 5
Consolidated Statements of Cash Flows for the
three-month periods and six-month periods ended
September 30, 1997, and September 30, 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the three-month
periods and six-month periods ended September 30, 1997,
and September 30, 1996 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 4. Submission of Matters to a Vote of Securityholders 12
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
2
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, March 31,
1997 1997
------------------- --------------------
ASSETS
Cash $ 2,283,172 1,486,073
Gross loans receivable 125,929,613 113,439,027
Less:
Unearned interest and fees (27,111,223) (23,899,194)
Allowance for loan losses (7,526,452) (6,283,459)
-------------- --------------
Loans receivable, net 91,291,938 83,256,374
Property and equipment, net 6,713,464 6,102,125
Other assets, net 4,027,419 2,201,757
Intangible assets, net 9,408,176 9,117,033
------------ -------------
$ 113,724,169 102,163,362
============ =============
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Senior notes payable 67,850,000 58,200,000
Other note payable 482,000 482,000
Accounts payable and accrued expenses 3,230,493 4,517,899
---------- -------------
Total liabilities 71,562,493 63,199,899
------------ -------------
Shareholders' equity:
Common stock, no par value - -
Additional paid-in capital 704,213 625,592
Retained earnings 41,457,463 38,337,871
------------ -------------
Total shareholders' equity 42,161,676 38,963,463
------------ ------------
$ 113,724,169 102,163,362
============ =============
See accompanying notes to consolidated financial statements.
3
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
September 30, September 30,
------------------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Interest and fee income $ 18,072,484 16,139,302 35,103,194 31,438,083
Insurance and other income 2,061,042 1,855,274 4,013,963 3,862,959
------------ ------------- ------------ -------------
Total revenues 20,133,526 17,994,576 39,117,157 35,301,042
------------ ------------- ------------ -------------
Expenses:
Provision for loan losses 3,697,967 3,027,989 6,393,620 5,273,654
------------ ------------- ------------ -------------
General and administrative expenses:
Personnel 7,839,340 6,756,704 15,808,700 13,562,690
Occupancy and equipment 1,631,073 1,288,542 3,051,372 2,496,150
Data processing 303,639 259,896 599,701 520,961
Advertising 799,801 495,472 1,512,283 1,083,708
Amortization of intangible assets 300,320 697,298 785,793 1,390,741
Other 1,969,101 1,500,250 3,709,214 2,951,248
------------ ------------- ------------ -------------
12,843,274 10,998,162 25,467,063 22,005,498
------------ ------------- ------------ -------------
Interest expense 1,383,406 996,850 2,564,882 1,876,374
------------ ------------- ------------ -------------
Total expenses 17,924,647 15,023,001 34,425,565 29,155,526
------------ ------------- ------------ -------------
Income before income taxes 2,208,879 2,971,575 4,691,592 6,145,516
Income taxes 740,000 1,041,000 1,572,000 2,151,000
------------ ------------- ------------ -------------
Net income $ 1,468,879 1,930,575 3,119,592 3,994,516
============ ============= ============ =============
Earnings per common share:
Primary $ .08 .10 .16 .20
============ ============= ============ =============
Fully diluted $ .08 .10 .16 .20
============ ============= ============ =============
Weighted average common shares outstanding:
Primary 19,202,676 20,084,688 19,176,115 20,448,466
============ ============= ============ =============
Fully diluted 19,202,722 20,084,688 19,196,009 20,448,466
============ ============= ============ =============
See accompanying notes to consolidated financial statements.
4
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Additional
Paid-in Retained
Capital Earnings Total
------- ---------- -----
Balances at March 31, 1996 $ 14,625,136 30,254,532 44,879,668
Proceeds from exercise of stock options (60,000 shares),
including tax benefits of $66,469 259,294 - 259,294
Common stock repurchases (1,810,000 shares) (14,258,838) - (14,258,838)
Net income for the year - 8,083,339 8,083,339
----------- ------------ -----------
Balances at March 31, 1997 625,592 38,337,871 38,963,463
Proceeds from exercise of stock options (19,000 shares),
including tax benefit of $23,204 78,621 - 78,621
Net income for the six months - 3,119,592 3,119,592
----------- ------------ -----------
Balances at September 30, 1997 $ 704,213 41,457,463 42,161,676
=========== ========== ==========
See accompanying notes to consolidated financial statements.
5
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended Six months ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Cash flows from operating activities:
Net income $ 1,468,879 1,930,575 3,119,592 3,994,516
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for loan losses 3,697,967 3,027,989 6,393,620 5,273,654
Amortization of intangible assets 300,320 697,298 785,793 1,390,741
Amortization of loan costs and discounts 31,258 8,210 57,468 16,420
Depreciation 363,649 328,244 718,271 643,434
Change in accounts:
Other assets, net (1,953,420) 156,688 (1,883,130) (404,612)
Accounts payable and accrued expenses 683,769 (933,367) (1,264,202) (1,771,428)
----------- ------------ ------------ ------------
Net cash provided by operating activities 4,592,422 5,215,637 7,927,412 9,142,725
----------- ----------- ----------- -----------
Cash flows from investing activities:
Increase in loans, net (5,844,123) (5,135,788) (9,406,632) (9,393,170)
Net assets acquired from office acquisitions,
primarily loans (4,730,288) (409,021) (5,037,552) (847,941)
Purchases of premises and equipment (813,160) (238,746) (1,314,610) (1,036,536)
Purchases of intangible assets (939,936) (245,999) (1,076,936) (644,333)
----------- ----------- ----------- -----------
Net cash used by investing activities (12,327,507) (6,029,554) (16,835,730) (11,921,980)
----------- ----------- ------------ -----------
Cash flows from financing activities:
Proceeds (repayment) of senior notes payable, net (2,250,000) 4,100,000 (350,000) 12,850,000
Proceeds from senior subordinated notes 10,000,000 - 10,000,000 -
Proceeds from exercise of stock options 17,500 - 55,417 4,380
Repurchase of common stock - (3,158,798) - (10,210,708)
----------- ------------ ------------ -------------
Net cash provided by financing activities 7,767,500 941,202 9,705,417 2,643,672
----------- ----------- ----------- -----------
Increase (decrease) in cash 32,415 127,285 797,099 (135,583)
Cash, beginning of period 2,250,757 1,430,879 1,486,073 1,693,747
----------- ----------- ----------- -----------
Cash, end of period $ 2,283,172 1,558,164 2,283,172 1,558,164
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 899,903 544,200 2,363,686 1,708,161
Cash paid for income taxes 1,979,435 2,770,303 3,678,770 4,260,921
Supplemental schedule of noncash financing activities:
Tax benefits from exercise of stock options 7,786 - 23,204 3,451
See accompanying notes to consolidated financial statements.
6
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of the Company at September 30, 1997,
and for the periods then ended were prepared in accordance with the instructions
for Form 10-Q and are unaudited; however, in the opinion of management, all
adjustments (consisting only of items of a normal recurring nature) necessary
for a fair presentation of the financial position at September 30, 1997, and the
results of operations and cash flows for the period then ended, have been
included. The results for the periods ended September 30, 1997, are not
necessarily indicative of the results that may be expected for the full year or
any other interim period.
These consolidated financial statements do not include all disclosures
required by generally accepted accounting principles and should be read in
conjunction with the Company's audited financial statements and related notes
for the year ended March 31, 1997, included in the Company's 1997 Annual Report
to Shareholders.
NOTE 2 - ALLOWANCE FOR LOAN LOSSES
The following is a summary of the changes in the allowance for loan losses
for the periods indicated (unaudited):
Three months Six months
ended September 30, ended September 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
Balance at beginning of period $ 6,433,534 5,230,171 6,283,459 5,006,703
Provision for loan losses 3,697,967 3,027,989 6,393,620 5,273,654
Loan losses (3,653,615) (3,024,344) (6,468,264) (5,259,719)
Recoveries 245,802 199,822 498,829 388,946
Allowance on acquired loans 802,764 23,123 818,808 47,177
----------- ---------- ---------- ----------
Balance at end of period $ 7,526,452 5,456,761 7,526,452 5,456,761
=========== ========= ========== =========
NOTE 3 - PARADATA FINANCIAL SYSTEMS (PARADATA)
The following data for ParaData was included in the Consolidated Statements
of Operations for the periods ended September 30, 1997 and 1996 (unaudited):
Three Months Ended Six Months Ended
September 30, September 30,
-------------------------- --------------------
1997 1996 1997 1996
--------- -------- --------- ------
Sales and system-support $ 463,486 431,925 870,855 938,024
Cost of sales 75,819 90,285 163,832 216,957
---------- ---------- ---------- ----------
Net margin (included in other income) 387,667 341,640 707,023 721,067
---------- ---------- ---------- ----------
General and administrative expenses
Personnel 253,425 250,465 469,285 526,053
Occupancy and equipment 69,011 68,024 135,272 133,759
Advertising 2,575 (1,029) 2,825 3,042
Amortization of intangibles 7,189 7,189 14,378 14,378
Other 38,708 41,921 78,478 91,198
--------- -------- --------- --------
370,908 366,570 700,238 768,430
Net income (loss) before income taxes $ 16,759 (24,930) 6,785 (47,363)
========= ======== ========= ========
7
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
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 (unaudited):
Three months Six months
ended September 30, ended September 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars in thousands)
Average gross loans receivable (1) $ 121,206 106,173 118,042 103,943
Average loans receivable (2) 90,086 83,175 91,811 81,682
Expenses as a % of total revenue:
Provision for loan losses 18.4% 16.8% 16.3% 14.9%
General and administrative 63.8% 61.1% 65.1% 62.3%
Total interest expense 6.9% 5.5% 6.6% 5.3%
Operating margin (3) 17.8% 22.1% 18.6% 22.7%
Return on average assets (annualized) 5.4% 8.3% 5.9% 8.7%
Offices opened or acquired, net 11 9 24 24
Total offices (at period end) 360 306 360 306
(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) Operating margin is computed as total revenues less provision for loan
losses and general and administrative expenses, as a percentage of total
revenues.
Comparison of Three Months Ended September 30, 1997, Versus
Three Months Ended September 30, 1996
Net income amounted to $1,469,000 for the three months ended September 30,
1997, a 23.9% decrease from the $1,931,000 earned during the corresponding
three-month period of the previous year. This decrease resulted from a decrease
in operating income (revenues less provision for loan losses and general and
administrative expenses) of approximately $376,000, or 9.5%, combined with an
increase in interest expense and offset by a decrease in income taxes.
Interest and fee income for the quarter ended September 30, 1997, increased
by $1,933,000, or 12.0%, over the same period of the prior year. This increase
resulted primarily from the $10.9 million increase, or 13.1%, in average loans
receivables over the two corresponding periods. The increase in interest and
fees was less than the increase in average balances outstanding due to a slight
reduction in the overall yield in the loan portfolio. This reduction is due to
lower interest rates charged on larger loans being made in select offices of the
Company. Insurance commissions and other income increased by $206,000, or 11.1%,
when comparing the two quarterly periods. Insurance commissions increased by
8.0%, tracking the growth in loans in those states that allow the sale of credit
insurance. Other income increased by $111,000, or 16.4%, primarily from
increased gross profit from both our ParaData subsidiary, as well as our World
Class Buying Club (WCBC) electronic sales.
8
9
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Comparison of Three Months Ended September 30, 1997, Versus
Three Months Ended September 30, 1996, continued
Total revenues amounted to $20.1 million during the quarter ended September
30, 1997, representing an 11.9% increase over the $18.0 million in total
revenues for the same quarter of the prior year. Revenues from the 273 offices
open throughout both three-month periods decreased by approximately 3.9%. At
September 30, 1997, the Company had 360 offices in operation, an increase of 10
offices during the current quarter, and 24 offices since the beginning of the
fiscal year.
The provision for loan losses amounted to $3,698,000 during the quarter
ended September 30, 1997, representing a 22.1% increase over the $3,028,000
during the same quarter of fiscal 1997. This increase resulted from an increase
in the general allowance for loan losses, as well as an increase in loan losses.
Net charge-offs, during the quarter, increased by $606,000, or 21.6%, and as an
annualized percentage of average loans increased from 13.5% for the quarter
ended September 30, 1996, to 14.5% for the most recent quarter. The Company has
seen increased levels of loan losses for the last several quarters, and
management continues to focus attention to reversing this recent trend. Until
delinquencies and charge-offs return to historical levels, the results of
operations of the Company's small loan business will continue to be negatively
affected.
General and administrative expenses for the quarter ended September 30,
1997, increased by $1,845,000, or 16.8%, over the same quarter of fiscal 1996.
This increase resulted primarily from the additional expenses associated with
the 54 net new offices opened or acquired between September 30, 1996, and
September 30, 1997. The Company has also sold or merged with other existing
offices, 19 offices during the same 12 month period. These were offices that had
not grown as expected to a profitable size within a reasonable period of time.
Excluding the expenses associated with ParaData, overall general and
administrative expenses when divided by the average open offices remained level
when comparing the two periods. During the current quarter, the Company
benefited from reduced intangible amortization as a result of a large intangible
asset relating to the 1989 leveraged buyout becoming fully amortized in May
1997. However, excluding both the expenses relating to ParaData, as well as
intangible amortization overall, general and administrative expenses when
divided by average opened offices increased by only 4.3%.
Interest expense increased by $387,000, or 38.8%, when comparing the two
corresponding quarterly periods. This increase resulted primarily from the
increased level of debt, which has grown from $50.6 million at September 30,
1996, to $67.9 million at September 30, 1997. This increase in outstanding debt
resulted from the funding of $4.0 million in common stock repurchases in October
1996, and the funding of several acquisitions completed during the past year.
The effective income tax rate decreased to 33.5% during the quarter ended
September 30, 1997, from 35.0% during the prior year quarter. The current 33.5%
reflects a more accurate annualized rate than the prior year quarter. The actual
tax rate for fiscal 1997 was 32.8%.
Comparison of Six Months Ended September 30, 1997,
Versus Six Months Ended September 30, 1996
For the six-month period ended September 30, 1997, net income amounted to
$3.1 million, a decrease of $875,000, or 21.9%, from the corresponding six-month
period of the prior year. Operating income decreased by $765,000, or 9.5%, over
the two periods. This decrease combined with an increase in interest expense was
offset by a decrease in income taxes.
Total revenues amounted to $39.1 million during the current six-month
period, an increase of $3.8 million, or 10.8%, over the prior-year period. This
increase resulted from an increase in interest and fee income of 11.7% combined
with an increase in insurance and other income of 3.9%. Revenues from the 273
offices open throughout both six-month periods decreased approximately 3.9%.
9
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
Comparison of Six Months Ended September 30, 1997,
Versus Six Months Ended September 30, 1996, continued
Interest and fee income rose by $3.7 million, or 11.7%, during the two
corresponding six-month periods primarily as a result of increases in loan
balances outstanding. Average loans receivable were $91.8 million during the six
months ended September 30, 1997, representing a 12.4% increase over the average
balances of the prior year. Other income increased by 3.9% due to increased
insurance commissions, as well as increased gross profit from WCBC sales.
The provision for loan losses increased by $1,120,000, or 21.2%, during the
current six-month period when compared to the same period of fiscal 1997. This
increase resulted in an increase in the general reserve for loan losses which is
a function of gross loans outstanding, as well as an increase in loan losses.
Net charge-offs increased by $1,099,000, or 22.6%, when comparing the two
six-month periods. As an annualized percentage of average loans, this
represented an increase to 13.0% during the current six-month period compared to
11.9% for the same period of the prior fiscal year.
General and administrative expenses increased by $3,462,000, or 15.7%,
during the most recent six-month period. As a percentage of total revenues,
these expenses increased from 62.3% during the prior year six-month period to
65.1% during the current period. This increase resulted from the 54 net new
offices opened or acquired during the past year. Excluding the expenses
associated with ParaData, overall general and administrative expenses, when
divided by the average open offices, decreased by 1.0% when comparing the two
six-month periods.
Interest expense increased by approximately $689,000 during the current
six-month period as a result of the increase in the level of debt outstanding
primarily due to the funds used to repurchase the Company's common stock and
complete several key acquisitions during the previous 12 months.
The effective income tax rate decreased to 33.5% during the six months
ended September 30, 1997, from 35.0% for the same period ended September 30,
1996, which reflects a more accurate annualized income tax rate.
Liquidity and Capital Resources
The Company's primary sources of funds are cash flow from operations and
borrowings under its revolving credit agreement. The Company's primary ongoing
cash requirements are funding the opening and operation of new offices, the
overall growth of loans outstanding and the repayment of existing debt.
The Company has a $65.0 million revolving credit agreement, $12.0 million
of senior term notes, and $10.0 million of subordinated notes.
The revolving credit facility expires on September 30, 1999, and bears
interest, at the Company's option, at the agent's prime rate or LIBOR plus
1.60%. At September 30, 1997, the interest rate under the facility was 7.33%,
and the Company's outstanding balance was $45.9 million, leaving $19.1 million
in borrowing availability under existing borrowing base limitations (based on
eligible loans receivable).
The senior term notes provide for interest payments to be made
semi-annually at a fixed rate of 8.5% with annual principal payments of $4.0
million to be made each year (the next payment being due on December 1, 1997).
The subordinated notes provide for interest payments to be made quarterly
at a fixed rate of 10.0%. Annual principal payments of $2.0 million will be due
beginning June 1, 19999, with a final maturity date of June 1, 2004.
Borrowings under the revolving credit agreement, the senior term notes, and
the 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.
The Company believes that cash flow from operations and borrowings under
its revolving credit facility will be adequate to fund the principal payment due
under the term notes as well as fund the expected costs of opening and operating
new offices, including funding initial operating losses of new offices, and
funding loans receivable originated by those offices and the Company's other
offices.
10
WORLD ACCEPTANCE CORPORATION
MANAGEMENTS' DISCUSSION AND ANALYSIS, CONTINUED
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 six states in which the
Company currently 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, which could offset the effect of inflationary
increases in operating costs.
Quarterly Information and Seasonality
The Company's loan volume and corresponding loans receivable follow
seasonal trends. The Company's highest loan demand occurs each year from October
through December, its third fiscal quarter. Loan demand is generally the lowest
and loan repayment is highest from January to March, its fourth fiscal quarter.
Loan volume and average balances remain relatively level during the remainder of
the year. This seasonal trend causes fluctuations in the Company's cash needs
and quarterly operating performance through corresponding fluctuations in
interest and fee income and insurance commissions earned, since unearned
interest and insurance income are accreted to income on a collection method.
Consequently, operating results for the Company's third fiscal quarter are
significantly lower than in other quarters and operating results for its fourth
fiscal quarter are generally higher than in other quarters.
Legal Proceedings
The Company is a party to certain legal proceedings. See Part II, Item 1.
11
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its Georgia subsidiary are named as
co-defendants with a number of other finance companies, jewelry and
furniture retailers, and insurance companies in a consolidated
action, currently pending in 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). The consolidated
action involves the defendants' non-file insurance practices. The
complaint alleges, among other things, that the defendants' non-file
insurance coverages do not constitute true insurance, and that the
defendants' practices with respect to non-file insurance constitute
alleged federal truth-in-lending, RICO and antitrust violations. The
complaint seeks certification of a nationwide class and seeks to
recover money damages and injunctive relief. The complaint was filed
on April 18, 1995, the Company has filed an answer and the parties
are in the discovery process. The Company has been advised that
certain of the defendants in the case have agreed to settle the
claims made against them by paying money damages to the plaintiffs.
The Company has also been advised that certain of the settling
defendants have agreed to change their non-file insurance practices.
If the Company's non-file insurance practices are found to be
improper, the Company could be required to refund non-file insurance
fees, pay other significant damages to the plaintiffs, and change its
non-file insurance practices going forward and, as a result, the
Company could experience a reduction in future income.
The Company has been named as a defendant in an action, Turner v.
World Acceptance Corp. pending in District Court for the Fourteenth
Judicial District, Tulsa County, Oklahoma (No. CJ-97-1921). The
action was commenced against the company on May 20, 1997, names
numerous other consumer finance companies as defendants, and seeks
certification as a statewide class action. The action alleges that
World and other consumer finance defendants collected excess finance
charges in connection with refinancing certain consumer loans in
Oklahoma and seeks money damages and an injunction against further
collection of such charges. The Company has filed an answer in the
action denying liability, and discovery has not commenced. The
plaintiff's claim is based on a recent opinion of the Oklahoma
Attorney General interpreting a provision of the Oklahoma Consumer
Credit Code with respect to the permitted amount of certain loan
refinance charges in a manner contrary to prior regulatory practice
in Oklahoma. Enforcement of the Oklahoma Attorney General's opinion
has been enjoined, and such action is currently pending before the
Oklahoma Supreme Court. In addition, the State of Oklahoma has
recently enacted legislation to clarify the interpretation of the
disputed provision of the Oklahoma Consumer Credit Code consistent
with prior regulatory practice. World intends to vigorously defend
this action.
From time to time the Company is involved in other routine litigation
relating to claims arising out of its operations in the normal course
of business. The Company believes that it is not presently a party to
any such other pending legal proceedings that would have a material
adverse effect on its financial condition.
Any statement of management's expectation with respect to litigation
may be deemed a forward-looking statement, within the meaning of
Section 21E of the Securities Exchange Act of 1934 (the "Exchange
Act"), and no assurance can be given that management's expectation
will prove correct, as such expectation is subject to certain risks,
uncertaintities and assumptions based on the preliminary nature of
the actions and the vagaries of litigation generally. Should one or
more of these risks materialize or should underlying assumptions
prove incorrect, the actual outcome of this litigation could differ
materially from management's expectation.
Item 2. Changes in Securities
None. The Company's credit agreements contain certain restrictions on
the payment of cash dividends on its capital stock.
12
Item 4. Submission of Matters to a Vote of Securityholders
(a) The 1997 Annual Meeting of Shareholders was held on August 6,
1997.
(b) Pursuant to Instruction 3 to Item 4, this paragraph need not be
answered.
(c) At the 1997 Annual Meeting of Shareholders, the following two
matters were voted upon and passed. The tabulation of votes was:
(1) The election of seven Directors to serve until the 1997
Annual Meeting of Shareholders:
VOTES IN FAVOR WITHHOLD AUTHORITY*
-------------- -------------------
IN PERSON AS PROXY IN PERSON AS PROXY
--------- -------- --------- --------
Ken R. Bramlett, Jr. 15,452,371 292,375
-------------- ------------ ------------- -----------
James R. Gilreath 15,452,371 292,375
-------------- ------------ ------------- -----------
William S. Hummers III 15,418,771 325,975
-------------- ------------- ------------- -----------
A. Alexander McLean III 15,452,371 292,375
-------------- ------------ ------------- -----------
R. Harold Owens 15,452,271 292,475
-------------- ------------ ------------- -----------
Charles D. Walters 15,450,371 294,375
-------------- ------------ ------------- -----------
Charles D. Way 15,452,371 292,375
-------------- ------------ ------------- -----------
(2) The ratification of the selection of KPMG Peat Marwick as
Independent Auditors:
VOTES IN FAVOR VOTES AGAINST ABSTENTIONS*
-------------- ------------- ------------
IN PERSON AS PROXY IN PERSON AS PROXY IN PERSON AS PROXY
--------- -------- --------- -------- --------- --------
15,717,110 22,700 4,936
------------- ------------- -------------- ------------- ------------- -----------
*There were no broker non votes on these routine items.
13
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
PART II. OTHER INFORMATION, CONTINUED
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Filed
Herewith (*) or
Previous Company
Exhibit Exhibit Registration
Number Description Number No. or Report
- ------ ----------- ------ -------------
3.1 Second Amended and Restated Articles of Incorporation of the 3.1 1992 10-K
Company
3.2 First Amendment to Second Amended and Restated Articles 3.2 1995 10-K
of Incorporation
3.3 Amended Bylaws of the Company 3.4 33-42879
4.1 Specimen Share Certificate 4.1 33-42879
4.2 Articles 3, 4 and 5 of the Form of Company's Second 3.1, 3.2 1995 10-K
Amended and Restated Articles of Incorporation
4.3 Article II, Section 9 of the Company's Second Amended 3.2 1995 10-K
and Restated Bylaws
4.4 Amended and Restated Revolving Credit Agreement, dated as *
of June 30, 1997, between Harris Trust and Savings Bank,
the Banks signatory thereto from time to time and the Company
4.5 Amended and Restated Note Agreement, dated as of June 30, 1997, *
between Jefferson-Pilot Life Insurance Company and the Company
4.6# Amended and Restated Note Agreement, dated as of June 30, 1997,
between Principal Mutual Life Insurance Company and the Company
4.7 Note Agreement, dated as of June 30, 1997, between Principal *
Mutual Life Insurance Company and the Company re: 10%
Senior Subordinated Secured Notes
4.8 Amended and Restated Security Agreement, Pledge and Indenture *
of Trust, dated as of June 30, 1997, between the Company and
Harris Trust and Savings Bank, as Security Trustee
10.1+ Employment Agreement of Charles D. Walters, effective April 1, 10.1 1994 10-K
1994
10.2+ Employment Agreement of A. Alexander McLean, III, effective 10.2 1994 10-K
April 1, 1994
10.3+ Employment Agreement of R. Harold Owens, effective June 26, 10.3 1995 10-K
1995
14
10.4 Securityholders' Agreement, dated as of September 19, 1991, 10.5 33-42879
between the Company and certain of its securityholders
10.5+ 1992 Stock Option Plan of the Company 4 33-52166
10.6+ 1994 Stock Option Plan of the Company, as amended 10.6 1995 10-K
10.7+ The Company's Executive Incentive Plan 10.6 1994 10-K
10.8+ The Company's Executive Strategic Incentive Plan 10.8 1995 10-K
10.9+ Amendment No. 1, dated as of April 1, 1996, to the Executive 10.9 1996 10-K
Strategic Incentive Plan
# Omitted from filing -- substantially identical to immediately preceding
exhibits, except for the parties thereto and the principal amount involved.
+ Management contract or other compensatory plan required to be filed under
Item 14(c) of this report and Item 601 of Regulation S-K.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended September
30, 1997.
15
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLD ACCEPTANCE CORPORATION
Dated: November 13, 1997 /s/ C. D. Walters
---------------------
C. D. Walters, Chief Executive Officer
Dated: November 13, 1997 /s/ A. A. McLean III
------------------------
A. A. McLean III, Executive Vice President
and Chief Financial Officer
16