UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
quarterly period ended September 30, 2006
or
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of
1934
For
the
transition period from
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. Yes
x
No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
One):
Large
Accelerated Filer o
|
Accelerated
Filer x
|
Non-accelerated
filer o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o
No
x
The
number of outstanding shares of the issuer’s no par value common stock as of
November 7, 2006 was 17,530,541.
WORLD
ACCEPTANCE CORPORATION
AND
SUBSIDIARIES
TABLE
OF
CONTENTS
|
|
Page
|
PART
I - FINANCIAL INFORMATION
|
|
|
|
|
Item
1.
|
Consolidated
Financial Statements (unaudited):
|
|
|
|
|
|
Consolidated
Balance Sheets as of September 30,
|
|
|
2006
and March 31, 2006
|
3
|
|
|
|
|
Consolidated
Statements of Operations for the three and
|
|
|
six
months ended September 30, 2006 and September 30, 2005
|
4
|
|
|
|
|
Consolidated
Statements of Shareholders' Equity and
|
|
|
Comprehensive
Income for the year ended March 31, 2006
|
|
|
and
the six months ended September 30, 2006
|
5
|
|
|
|
|
Consolidated
Statements of Cash Flows for the
|
|
|
six
months ended September 30, 2006 and September 30, 2006
|
6
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
7
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial
|
14
|
|
Condition
and Results of Operations
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
19
|
|
|
|
Item
4.
|
Controls
and Procedures
|
20
|
|
|
|
PART
II - OTHER INFORMATION
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
20
|
|
|
|
Item
1A.
|
Risk
Factors
|
20
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity, Securities and Use of Proceeds
|
20
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
21
|
|
|
|
Item
6.
|
Exhibits
|
22
|
|
|
|
Signatures
|
|
24
|
WORLD
ACCEPTANCE CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
|
|
September
30,
|
|
March
31,
|
|
|
|
2006
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
6,601,102
|
|
|
4,033,888
|
|
Gross
loans receivable
|
|
|
470,274,665
|
|
|
416,301,892
|
|
Less:
|
|
|
|
|
|
|
|
Unearned
interest and fees
|
|
|
(120,314,243
|
)
|
|
(103,556,110
|
)
|
Allowance
for loan losses
|
|
|
(26,548,792
|
)
|
|
(22,717,192
|
)
|
Loans
receivable, net
|
|
|
323,411,630
|
|
|
290,028,590
|
|
Property
and equipment, net
|
|
|
13,072,849
|
|
|
11,039,619
|
|
Deferred
tax benefit
|
|
|
3,970,908
|
|
|
3,898,000
|
|
Other
assets, net
|
|
|
8,643,710
|
|
|
6,922,292
|
|
Goodwill
|
|
|
4,936,243
|
|
|
4,715,110
|
|
Intangible
assets, net
|
|
|
10,927,995
|
|
|
12,146,008
|
|
Total
assets
|
|
$
|
371,564,437
|
|
|
332,783,507
|
|
|
|
|
|
|
|
|
|
LIABILITIES
& SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Senior
notes payable
|
|
|
122,600,000
|
|
|
99,800,000
|
|
Other
notes payable
|
|
|
600,000
|
|
|
800,000
|
|
Income
taxes payable
|
|
|
1,054,978
|
|
|
6,778,276
|
|
Accounts
payable and accrued expenses
|
|
|
13,289,795
|
|
|
14,975,112
|
|
Total
liabilities
|
|
|
137,544,773
|
|
|
122,353,388
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
Common
stock, no par value
|
|
|
|
|
|
|
|
Authorized
95,000,000 shares; issued and outstanding
|
|
|
|
|
|
|
|
18,531,691
and 18,336,604 shares at September 30, 2006
|
|
|
|
|
|
|
|
and
March 31, 2006, respectively
|
|
|
-
|
|
|
-
|
|
Additional
paid-in capital
|
|
|
5,710,047
|
|
|
1,209,358
|
|
Retained
earnings
|
|
|
228,404,900
|
|
|
209,270,853
|
|
Accumulated
other comprehensive loss
|
|
|
(95,283
|
)
|
|
(50,092
|
)
|
Total
shareholders' equity
|
|
|
234,019,664
|
|
|
210,430,119
|
|
Commitments
and contingencies
|
|
$
|
371,564,437
|
|
|
332,783,507
|
|
See
accompanying notes to consolidated financial statements.
WORLD
ACCEPTANCE CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three
months ended
|
|
Six
months ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Interest
and fee income
|
|
$
|
58,749,903
|
|
|
48,743,672
|
|
|
113,286,046
|
|
|
93,342,567
|
|
Insurance
and other income
|
|
|
8,457,602
|
|
|
8,000,559
|
|
|
17,759,037
|
|
|
15,169,323
|
|
Total
revenues
|
|
|
67,207,505
|
|
|
56,744,231
|
|
|
131,045,083
|
|
|
108,511,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
13,812,779
|
|
|
13,131,219
|
|
|
24,980,247
|
|
|
22,671,322
|
|
General
and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
|
23,673,664
|
|
|
19,633,345
|
|
|
47,266,339
|
|
|
39,215,193
|
|
Occupancy
and equipment
|
|
|
4,414,689
|
|
|
3,579,978
|
|
|
8,329,960
|
|
|
6,764,435
|
|
Data
processing
|
|
|
555,005
|
|
|
511,997
|
|
|
1,049,743
|
|
|
1,012,613
|
|
Advertising
|
|
|
1,793,544
|
|
|
1,640,855
|
|
|
3,683,451
|
|
|
3,298,377
|
|
Amortization
of intangible assets
|
|
|
742,188
|
|
|
729,947
|
|
|
1,535,917
|
|
|
1,415,912
|
|
Other
|
|
|
4,110,407
|
|
|
4,034,313
|
|
|
8,270,692
|
|
|
7,664,380
|
|
|
|
|
35,289,497
|
|
|
30,130,435
|
|
|
70,136,102
|
|
|
59,370,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
2,269,540
|
|
|
1,621,539
|
|
|
4,170,779
|
|
|
2,928,131
|
|
Total
expenses
|
|
|
51,371,816
|
|
|
44,883,193
|
|
|
99,287,128
|
|
|
84,970,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
15,835,689
|
|
|
11,861,038
|
|
|
31,757,955
|
|
|
23,541,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
5,975,004
|
|
|
4,432,000
|
|
|
11,910,450
|
|
|
8,800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
9,860,685
|
|
|
7,429,038
|
|
|
19,847,505
|
|
|
14,741,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
.53
|
|
|
.40
|
|
|
1.07
|
|
|
.79
|
|
Diluted
|
|
$
|
.52
|
|
|
.39
|
|
|
1.05
|
|
|
.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
18,514,433
|
|
|
18,527,955
|
|
|
18,468,387
|
|
|
18,670,019
|
|
Diluted
|
|
|
18,884,094
|
|
|
19,147,348
|
|
|
18,839,978
|
|
|
19,312,224
|
|
See
accompanying notes to consolidated financial statements.
WORLD
ACCEPTANCE CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE
INCOME
(Unaudited)
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Other
|
|
Total
|
|
Total
|
|
|
|
Paid-in
|
|
Retained
|
|
Comprehensive
|
|
Shareholders’
|
|
Comprehensive
|
|
|
|
Capital
|
|
Earnings
|
|
Loss,
Net
|
|
Equity
|
|
Income
|
|
Balances
at March 31, 2005
|
|
|
11,964,056
|
|
|
177,747,137
|
|
|
-
|
|
|
189,711,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of stock options (190,397 shares), including tax benefits
of
$1,205,288
|
|
|
3,045,527
|
|
|
-
|
|
|
-
|
|
|
3,045,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock repurchases (800,400 shares)
|
|
|
(13,800,225
|
)
|
|
(6,991,249
|
)
|
|
-
|
|
|
(20,791,474
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive loss
|
|
|
-
|
|
|
-
|
|
|
(50,092
|
)
|
|
(50,092
|
)
|
|
(50,092
|
)
|
Net
income
|
|
|
-
|
|
|
38,514,965
|
|
|
-
|
|
|
38,514,965
|
|
|
38,514,965
|
|
Total
comprehensive income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
38,464,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at March 31, 2006
|
|
$
|
1,209,358
|
|
|
209,270,853
|
|
|
(50,092
|
)
|
|
210,430,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of stock Options (253,087 shares), including tax benefits
of
$1,874,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock repurchases (66,000 shares)
|
|
|
(1,209,358
|
)
|
|
(713,458
|
)
|
|
|
|
|
(1,922,816
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of restricted common stock under stock option plan (8,000
shares)
|
|
|
164,107
|
|
|
-
|
|
|
-
|
|
|
164,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
option expense
|
|
|
1,262,106
|
|
|
-
|
|
|
-
|
|
|
1,262,106
|
|
|
|
|
Other
comprehensive loss
|
|
|
|
|
|
|
|
|
(45,191
|
)
|
|
(45,191
|
)
|
|
(45,191
|
)
|
Net
income
|
|
|
-
|
|
|
19,847,505
|
|
|
-
|
|
|
19,847,505
|
|
|
19,847,505
|
|
Total
comprehensive income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
19,802,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at September 30, 2006
|
|
$
|
5,710,047
|
|
|
228,404,900
|
|
|
(95,283
|
)
|
|
234,019,664
|
|
|
|
|
See
accompanying notes to consolidated financial statements.
WORLD
ACCEPTANCE CORPORATION
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six
months ended
September 30,
|
|
|
|
2006
|
|
2005
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
Net
income
|
|
$
|
19,847,505
|
|
|
14,741,527
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
24,980,247
|
|
|
22,671,322
|
|
Amortization
of intangible assets
|
|
|
1,535,917
|
|
|
1,415,912
|
|
Amortization
of loan costs and discounts
|
|
|
-
|
|
|
25,000
|
|
Depreciation
|
|
|
1,362,359
|
|
|
1,095,334
|
|
Compensation
related to stock option and restricted stock plans
|
|
|
1,426,213
|
|
|
-
|
|
Tax
benefit from exercise of stock options
|
|
|
-
|
|
|
789,482
|
|
Change
in accounts:
|
|
|
|
|
|
|
|
Deferred
tax assets
|
|
|
(72,908
|
)
|
|
-
|
|
Other
assets, net
|
|
|
(1,766,609
|
)
|
|
237,655
|
|
Accounts
payable and accrued expenses
|
|
|
(1,803,671
|
)
|
|
(8,457,695
|
)
|
Income
taxes payable
|
|
|
(5,723,298
|
)
|
|
3,855,171
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
39,785,755
|
|
|
36,373,708
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Increase
in loans, net
|
|
|
(56,032,684
|
)
|
|
(48,220,410
|
)
|
Net
assets acquired from office acquisitions, primarily loans
|
|
|
(2,344,103
|
)
|
|
(2,325,778
|
)
|
Purchases
of premises and equipment
|
|
|
(3,382,089
|
)
|
|
(1,987,586
|
)
|
Purchases
of intangible assets
|
|
|
(539,037
|
)
|
|
(1,174,216
|
)
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(62,297,913
|
)
|
|
(53,707,990
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Net
change in bank overdraft
|
|
|
118,354
|
|
|
(224,884
|
)
|
Proceeds
from senior notes payable, net
|
|
|
22,800,000
|
|
|
38,700,000
|
|
Repayment
of other notes payable
|
|
|
(200,000
|
)
|
|
(200,000
|
)
|
Repurchase
of common stock
|
|
|
(1,922,816
|
)
|
|
(20,791,474
|
)
|
Proceeds
from exercise of stock options
|
|
|
2,409,078
|
|
|
1,046,687
|
|
Tax
benefit from exercise of stock options
|
|
|
1,874,756
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
25,079,372
|
|
|
18,530,329
|
|
|
|
|
|
|
|
|
|
Increase
in cash and cash equivalents
|
|
|
2,567,214
|
|
|
1,196,047
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents beginning of period
|
|
|
4,033,888
|
|
|
3,046,677
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents end of period
|
|
$
|
6,601,102
|
|
|
4,242,724
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
4,174,355
|
|
|
2,810,797
|
|
Cash
paid for income taxes
|
|
|
15,826,119
|
|
|
4,155,347
|
|
See
accompanying notes to consolidated financial statements.
WORLD
ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2006 and 2005
(Unaudited)
NOTE
1
- BASIS OF PRESENTATION
The
consolidated financial statements of the Company at September 30, 2006, and
for
the three and six months 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, 2006, and the results of operations and cash flows for the period then
ended, have been included. The results for the period ended September 30, 2006
are not necessarily indicative of the results that may be expected for the
full
year or any other interim period.
Certain
reclassification entries have been made for fiscal 2006 to conform with fiscal
2007 presentation. These reclassifications had no impact on shareholders’ equity
and comprehensive income or net income.
The
preparation of financial statements in conformity with U.S. 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.
These
consolidated financial statements do not include all disclosures required by
U.S. generally accepted accounting principles and should be read in conjunction
with the Company's audited consolidated financial statements and related notes
for the year ended March 31, 2006, included in the Company's 2006 Annual Report
to Shareholders.
NOTE
2
- COMPREHENSIVE INCOME
The
Company applies the provisions of Financial Accounting Standards Board’s (FASB)
Statement of Financial Accounting Standards (SFAS) No. 130 “Reporting
Comprehensive Income.”
The
following summarizes accumulated other comprehensive loss as of September 30,
2006:
|
|
Three
months
ended September 30,
|
|
Six
months
ended September 30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Balance
at beginning of period
|
|
|
(116,353
|
)
|
|
-
|
|
|
(50,092
|
)
|
|
-
|
|
Unrealized
income (loss) from foreign exchange translation adjustment
|
|
$
|
21,070
|
|
|
(5,285
|
)
|
|
(45,191
|
)
|
|
(5,285
|
)
|
Balance
at end of period
|
|
$
|
(95,283
|
)
|
|
(5,285
|
)
|
|
(95,283
|
)
|
|
(5,285
|
)
|
NOTE
3
- ALLOWANCE FOR LOAN LOSSES
The
following is a summary of the changes in the allowance for loan losses for
the
periods indicated:
|
|
Three
months
ended September 30,
|
|
Six
months
ended September 30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Balance
at beginning of period
|
|
$
|
24,604,838
|
|
|
20,531,043
|
|
|
22,717,192
|
|
|
20,672,740
|
|
Provision
for loan losses
|
|
|
13,812,779
|
|
|
13,131,219
|
|
|
24,980,247
|
|
|
22,671,322
|
|
Loan
losses
|
|
|
(13,255,540
|
)
|
|
(12,550,416
|
)
|
|
(23,944,336
|
)
|
|
(23,306,962
|
)
|
Recoveries
|
|
|
1,302,812
|
|
|
1,025,488
|
|
|
2,676,242
|
|
|
2,089,671
|
|
Allowance
on acquired loans, net of specific charge-offs
|
|
|
83,903
|
|
|
86,087
|
|
|
119,447
|
|
|
96,650
|
|
Balance
at end of period
|
|
$
|
26,548,792
|
|
|
22,223,421
|
|
|
26,548,792
|
|
|
22,223,421
|
|
Effective
April
1, 2005,
the Company adopted Statement of Position No. 03-3 ("SOP 03-3"), "Accounting
for Certain Loans or Debt Securities Acquired in a Transfer,"
which
prohibits carry over or creation of valuation allowances in the initial
accounting of all loans acquired in a transfer that are within the scope of
this
SOP. Management believes that a loan has shown deterioration if it is over
60
days delinquent. The Company believes that loans acquired since the adoption
of
SOP 03-3 have not shown evidence of deterioration of credit quality since
origination, and therefore, are not within the scope of SOP 03-3 because the
Company did not pay consideration for, or record, acquired loans over 60 days
delinquent. Loans acquired that are more than 60 days past due are included
in
the scope of SOP 03-3 and therefore, subsequent refinances or restructures
of
these loans would not be accounted for as a new loan.
For
the
quarters ended September 30, 2006 and 2005, the Company recorded adjustments
of
approximately $84,000 and $86,000, respectively, to the allowance for loan
losses in connection with acquisitions in accordance generally accepted
accounting principles. These adjustments were $119,000 and $97,000 for the
six-months ended September 30, 2006 and 2005, respectively. These adjustments
represent the allowance for loan losses on acquired loans which do not meet
the
scope of SOP 03-3.
NOTE
4 -
AVERAGE SHARE INFORMATION
The
following is a summary of the basic and diluted average common shares
outstanding:
|
|
Three
months ended September 30,
|
|
Six
months ended September 30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding (denominator)
|
|
|
18,514,433
|
|
|
18,527,955
|
|
|
18,468,387
|
|
|
18,670,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
18,514,433
|
|
|
18,527,955
|
|
|
18,468,387
|
|
|
18,670,019
|
|
Dilutive
potential common shares
|
|
|
371,318
|
|
|
619,393
|
|
|
368,558
|
|
|
642,205
|
|
Weighted
average diluted shares outstanding (denominator)
|
|
|
18,885,751
|
|
|
19,147,348
|
|
|
18,836,945
|
|
|
19,312,224
|
|
As
of
September 30, 2005 and 2006, there were no anti-dilutive shares.
NOTE
5
- STOCK-BASED COMPENSATION
Stock
Option Plans
The
Company has a 1992 Stock Option Plan, a 1994 Stock Option Plan, a 2002 Stock
Option Plan and a 2005 Stock Option Plan for the benefit of certain directors,
officers, and key employees. Under these plans, 4,350,000 shares of authorized
common stock have been reserved for issuance pursuant to grants approved by
the
Compensation and Stock Option Committee of the Board of Directors. Stock options
granted under these plans have a maximum duration of 10 years, may be subject
to
certain vesting requirements, which are generally one year for directors and
five years for officers and key employees, and are priced at the market value
of
the Company's common stock on the date of grant of the option. At September
30,
2006, there were 768,800 shares available for grant under the plans.
Effective
April 1, 2006, the Company adopted Statement of Financial Accounting Standards
(“SFAS”) No. 123 (Revised 2004), “Share-Based Payment” (“SFAS” 123-R), using the
modified prospective transition method, and did not retroactively adjust results
from prior periods. Under this transition method, stock option compensation
will
be recognized as an expense over the remaining unvested portion of all stock
option awards granted prior to April 1, 2006, based on the fair values estimated
at grant date in accordance with the original provisions of SFAS 123. The
Company has applied the Black-Sholes valuation model in determining the fair
value of the stock option awards. Compensation expense is recognized only for
those options expected to vest, with forfeitures estimated based on historical
experience and future expectations. Prior to fiscal year 2007, stock option
compensation was included as a pro forma disclosure, as permitted by SFAS
123.
As
a
result of adopting SFAS 123-R, the impact to the Consolidated Statements of
Operations for the quarter ended September 30, 2006 was to decrease income
before income taxes and net income by $727,000 and $454,000, respectively,
and
basic and diluted earnings per share by $0.02. The impact to the Consolidated
Statement of Operations for the six-month period ended September 30, 2006 was
to
decrease income before income taxes and net income by approximately $1,426,000
and $891,000, respectively, and basic and diluted earnings per share by $0.05.
In addition, prior to the adoption of SFAS 123-R, the Company presented the
tax
benefit from the exercise of stock options as a cash flow provided by operating
activities in the Consolidated Statements of Cash Flows. Upon adoption of SFAS
123-R, this tax benefit is classified as a cash flow provided by financing
activities.
Option
activity for the six months ended September 30, 2006, was as
follows:
|
|
Weighted
Average Exercise
|
|
Weighted
Average Remaining
Contractual
|
|
Aggregated
Intrinsic
|
|
|
|
Shares
|
|
Price
|
|
Term
|
|
Value
|
|
Options
outstanding, beginning of year
|
|
|
1,274,068
|
|
$
|
15.56
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
Exercised
|
|
|
(253,087
|
)
|
$
|
15.01
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(4,799
|
)
|
$
|
11.90
|
|
|
|
|
|
|
|
Options
outstanding, end of period
|
|
|
1,016,182
|
|
$
|
17.08
|
|
|
6.73
|
|
$
|
27,337,319
|
|
Options
exercisable, end of period
|
|
|
400,132
|
|
$
|
6.17
|
|
|
4.38
|
|
$
|
3,854,191
|
|
The
aggregate intrinsic value reflected in the table above represents the total
pre-tax intrinsic value (the difference between the closing stock price on
September 30, 2006 and the exercise price, multiplied by the number of
in-the-money options) that would have been received by option holders had all
option holders exercised their options as of September 30, 2006. This amount
will change as the stock’s market price changes. The total intrinsic value of
options exercised during the period ended September 30, 2006 and 2005 were
as
follows:
|
|
2006
|
|
2005
|
|
Three
month ended
|
|
$
|
871,350
|
|
|
313,513
|
|
Six
months ended
|
|
$
|
5,482,864
|
|
|
2,224,903
|
|
As
of
September 30, 2006, total unrecognized stock-based compensation expense related
to non-vested stock options amounts to approximately $3.7 million, which is
expected to be recognized over a weighted-average period of approximately 1.4
years.
Prior
to
the adoption of SFAS No. 123-R on April 1, 2006, the Company accounted for
its
stock plans under the recognition and measurement principles of APB Opinion
25,
“Accounting
of Stock Issued to Employees.”
The
pro forma table below reflects net income and basic and diluted earnings per
share for the three and six months ended September 30, 2005 had the Company
applied the fair value recognition provisions of SFAS 123:
|
|
Three
months ended September 30,
|
|
Six
months ended
September
30,
|
|
|
|
2005
|
|
2005
|
|
|
|
(Dollars
in thousands, except per share amounts)
|
|
Net
income
|
|
|
|
|
|
Net
income, as reported
|
|
$
|
7,429
|
|
|
14,742
|
|
Deduct:
|
|
|
|
|
|
|
|
Total
stock-based employee compensation expense determined under fair value
based method for all option awards, net of related income tax
effect
|
|
|
241
|
|
|
619
|
|
Pro
forma net income
|
|
|
7,188
|
|
|
14,123
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
|
|
|
|
|
|
As
reported
|
|
$
|
0.40
|
|
|
0.79
|
|
Pro
forma
|
|
$
|
0.39
|
|
|
0.76
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
|
|
|
|
|
|
As
reported
|
|
$
|
0.39
|
|
|
0.76
|
|
Pro
forma
|
|
$
|
0.38
|
|
|
0.73
|
|
The
weighted-average fair value at the grant date for options issued during the
six
months ended September 30, 2005 was $13.45 per share. This fair value was
estimated at grant date using the following weighted-average assumptions:
dividend yield of $0, expected volatility of 44.31%, average risk-free interest
rate of 3.88%, expected life of 7.5 years and vesting period ranging from one
to
five years. There were no option grants during the six months ended September
30, 2006.
The
expected stock price volatility is based on the historical volatility of the
Company’s stock over the 7.5 years prior to the grant date. The expected term
represents the period of time that options are expected to be outstanding after
their grant date. The risk-free interest rate reflects the interest rate at
grant date on zero-coupon U.S. governmental bonds that have a remaining life
similar to the expected option term.
Restricted
Stock
On
May 2,
2006, the Company granted 8,000 shares of restricted stock (which are equity
classified), with a grant date fair value of $28.96 per share, to its
independent directors. One-half of the restricted stock vested immediately
and
the other half will vest on the first anniversary of grant.
Compensation
expense related to these shares is based on the number of shares expected to
vest and the fair market value of the common stock on the grant date. The
Company recognized $28,959 and $164,107 of compensation expense for the quarter
and six months ended September 30, 2006 related to this restricted stock, which
is included as a component of general and administrative expenses in the
Consolidated Statements of Operations. All shares are expected to
vest.
As
of
September 30, 2006, there was approximately $67,573 of unrecognized compensation
cost related to unvested restricted stock awards granted, which is expected
to
be recognized over the next seven months.
Total
share-based compensation included as a component of net income as of September
30, 2006 was as follows:
|
|
Three
months ended
|
|
Six
months ended
|
|
Share-based
compensation related to equity classified units:
|
|
|
|
|
|
|
|
Share-based
compensation related to stock options
|
|
$
|
697,908
|
|
$
|
1,262,106
|
|
Share-based
compensation related to restricted stock units
|
|
|
28,959
|
|
|
164,107
|
|
|
|
|
|
|
|
|
|
Total
share-based compensation related to equity classified
awards
|
|
$
|
726,867
|
|
$
|
1,426,213
|
|
NOTE
6
- ACQUISITIONS
The
following table sets forth the acquisition activity of the Company for the
six
months ended September 30, 2006 and 2005:
|
|
2006
|
|
2005
|
|
Number
of offices purchased
|
|
|
9
|
|
|
14
|
|
Merged
into existing offices
|
|
|
4
|
|
|
13
|
|
Purchase
Price
|
|
$
|
2,883,140
|
|
$
|
3,499,994
|
|
Tangible
assets:
|
|
|
|
|
|
|
|
Net
loans
|
|
|
2,330,603
|
|
|
2,285,778
|
|
Furniture,
fixtures & equipment
|
|
|
13,500
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
Excess
of purchase prices over carrying value of
|
|
|
|
|
|
|
|
net
intangible assets
|
|
$
|
2,344,103
|
|
$
|
2,325,778
|
|
|
|
|
|
|
|
|
|
Customer
lists
|
|
|
254,904
|
|
|
1,063,316
|
|
Non-compete
agreements
|
|
|
41,000
|
|
|
60,000
|
|
Goodwill
|
|
|
243,133
|
|
|
50,900
|
|
|
|
|
|
|
|
|
|
Total
intangible assets
|
|
$
|
539,037
|
|
$
|
1,174,216
|
|
All
acquisitions have been made from independent third parties.
The
Company evaluates each acquisition to determine if the acquired enterprise
meets
the definition of a business. Those acquired enterprises that meet the
definition of a business are accounted for as a business combination under
SFAS
No. 141 and all other acquisitions are accounted for as asset purchases.
When
the
acquisition results in a new office, the Company records the transaction as
a
business combination, since the office acquired will continue to generate loans.
The Company typically retains the existing employees and the office location.
Non-compete agreements are valued at the stated amount paid to the other party
for these agreements, which the Company believes approximates the fair value.
In
a business combination, the remaining excess of the purchase price over the
fair
value of the tangible assets and non-compete agreements is allocated two-thirds
to goodwill and one-third to customer list. Generally, the acquired offices
are
small, privately owned offices, which do not have sufficient historical data
to
determine attrition. Management believes that the customers acquired have the
same characteristics and perform similarly to customers of the Company.
Therefore, management utilized the attrition patterns of the Company’s customers
when developing the methodology. This methodology was determined in fiscal
2002
and was re-evaluated during fiscal 2006. During the six months ended September
30, 2006, 5 acquisitions were recorded as business combinations.
When
the
acquisition is of a portfolio of loans only, the Company records the transaction
as an asset purchase. In an asset purchase, no goodwill is recorded. The
purchase price is allocated to the estimated fair value of the tangible and
intangible assets acquired. During the six months ended September 30, 2006,
4
acquisitions were recorded as asset acquisitions.
Our
acquisitions include tangible assets (generally loans and furniture and
equipment) and intangible assets (generally non-compete agreements, customer
lists, and goodwill), both of which are recorded at their fair values, which
are
estimated pursuant to the processes described below.
Acquired
loans are valued at the net loan balance. Given the short-term nature of these
loans, generally four months, and that these loans are subject to continual
repricing at current rates, management believes the net loan balances
approximate their fair value.
Furniture
and equipment are valued at the specific purchase price as agreed to by both
parties at the time of acquisition, which management believes approximates
their
fair values.
Customer
lists are allocated at an office level and are evaluated for impairment at
an
office level, in accordance with SFAS 144 “Accounting for the Impairment or
Disposed of a Long Lived Assets.” If an impairment occurs, the impairment loss
to the customer list is generally the remaining unamortized customer list
balance.
The
results of all acquisitions have been included in the Company’s consolidated
financial statements since the respective acquisition dates. 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.
NOTE
7
- DERIVATIVE FINANCIAL INSTRUMENTS
On
October 5, 2005, the Company entered into an interest rate swap with a notional
amount of $30 million to economically hedge a portion of the cash flows from
its
floating rate revolving credit facility. Under the terms of the interest rate
swap, the Company will pay a fixed rate of 4.755% on the $30 million notional
amount and receive payments from a counterparty based on the 1 month LIBOR
rate
for a term ending October 5, 2010. Interest rate differentials paid or received
under the swap agreement are recognized as adjustments to interest
expense.
On
April
28, 2006, the Company entered into a $1 million foreign exchange currency option
to economically hedge its foreign exchange risk relative to the Mexican peso.
Under the terms of the option contract, the Company can exchange $1 million
U.S.
dollars at a rate of 11.36 Mexican pesos on April 30, 2007.
At
September 30, 2006, the Company recorded an asset related to the interest rate
swap of $215,000, which represented the fair value of the interest rate swap
at
that date. The corresponding unrealized losses of $640,000 and $278,000 were
recorded as other income for the quarter and six month period ended September
30, 2006, respectively. During the quarter and six month period ended September
30, 2006, interest expense was decreased by approximately $33,000 and $63,000,
respectively, as a result of net disbursements under the terms of the interest
rate swap. The fair value of the option at September 30, 2006 was a loss of
approximately $15,000.
The
Company does not enter into derivative financial instruments for trading or
speculative purposes. The purpose of these instruments is to reduce the exposure
to variability in future cash flows attributable to a portion of its LIBOR-based
borrowings and to reduce variability in foreign cash flows. The fair value
of
the interest rate swap and option is recorded on the consolidated balance sheets
as an other asset or other liability. The Company is currently not accounting
for these derivative instruments using the cash flow hedge accounting provisions
of SFAS 133; therefore, the changes in fair value of the swap and option are
included in earnings as other income or expenses.
By
using
derivative instruments, the Company is exposed to credit and market risk. Credit
risk, which is the risk that a counterparty to a derivative instrument will
fail
to perform, exists to the extent of the fair value gain in a derivative. Credit
risk is created when the fair value of a derivative contract is positive, since
this generally indicates that the counterparty owes the Company. When the fair
value of a derivative is negative, no credit risk exists since the Company
would
owe the counterparty. Market risk is the adverse effect on the financial
instruments from a change in interest rates or implied volatility of exchange
rates. The Company manages the market risk associated with interest rate
contracts and currency options by establishing and monitoring limits as to
the
types and degree of risk that may be undertaken. The market risk associated
with
derivatives used for interest rate and foreign currency risk management
activities is fully incorporated in the Company’s market risk sensitivity
analysis. See Part I, Item 3, “Quantitative and Qualitative Disclosures About
Market Risk.”
NOTE
8
- SUBSEQUENT EVENTS
Second
Amendment to Amended and Restated Credit Agreement
The
Company entered into a Second Amendment to the Amended and Restated Credit
Agreement dated as of October 2, 2006 (the “Amendment”), which amends the
Company’s Amended and Restated Revolving Credit Agreement, dated as of
July 20, 2005, as amended (the “Credit Agreement”) among the Company, the
banks party thereto (the “Banks”), JPMorgan Chase Bank as Co-Agent and Harris
N.A. as Agent for the Banks.
The
Amendment permits the Company to incur up to $110,000,000 in aggregate principal
amount of indebtedness under the Convertible Notes (as defined in the
Convertible Senior Notes section below) on the terms, including subordination
terms, set forth in the offering memorandum for the Convertible Notes dated
as
of October 3, 2006, and confirms that the Notes constitute subordinated
indebtedness as defined in the Credit Agreement. In addition, the Amendment
modifies the consolidated net worth and fixed charge coverage ratio financial
covenants in the Credit Agreement and adjusts an indebtedness negative covenant
in the Credit Agreement that, as amended, prohibits the incurrence of
(i) senior debt as defined in the Credit Agreement, on a consolidated basis
that exceeds 375% of the sum of consolidated adjusted net worth and the
aggregate unpaid principal amount of subordinated debt, and
(ii) subordinated debt that exceeds 150% of consolidated adjusted net
worth.
The
Amendment eliminates the current restricted payments negative covenant in the
Credit Agreement and replaces it with a covenant (i) requiring all
obligations under the Credit Agreement to constitute senior debt under any
agreement covering subordinated debt (and all such obligations to constitute
designated senior debt under the indenture for the Convertible Notes),
(ii) restricting amendments to subordinated debt (other than amendments
with respect to interest rates, deferral of repayments or other matters not
adverse to the senior lenders), and (iii) restricting voluntary prepayments
and redemptions and cash payments upon conversion of any subordinated debt
except for any such payments that on a pro forma basis do not create a default
or event of default as defined in the Credit Agreement.
The
Amendment also permits the convertible note hedge and warrant transactions,
described in the Convertible Senior Notes section below, and provides that
a
default by the Company under such convertible note hedge and warrant
transactions will also constitute an event of default under the Credit
Agreement.
Convertible
Senior Notes
On
October 10, 2006, the Company issued $110 million aggregate principal amount
of
its 3.0% convertible senior subordinated notes due October 1, 2011 (the
“Convertible Notes”) to qualified institutional brokers in accordance with Rule
144A of the Securities Act of 1933. Interest on the Convertible Notes is payable
semi-annually in arrears on April 1 and October 1 of each year, commencing
April
1, 2007. The Convertible Notes are the Company’s direct, senior subordinated,
unsecured obligations and rank equally in rate of payment with all existing
and
future unsecured senior subordinated debt of the Company, senior in right of
payment to all of the Company’s existing and future subordinated debt and junior
to all of the Company’s existing and future senior debt. The Convertible
Notes are structurally junior to the liabilities of the Company’s subsidiaries.
The Convertible Notes are convertible prior to maturity, subject to certain
conditions described below, at an initial conversion rate of 16.0229 shares
per
$1,000 principal amount of notes, which represents an initial conversion price
of approximately $62.41 per share, subject to adjustment. Upon conversion,
the
Company will pay cash up to the principal amount of notes converted and deliver
shares of its common stock to the extent the daily conversion value exceeds
the
proportionate principal amount based on a 30 trading-day observation period.
The
Company does not expect to be required to include the underlying shares in
the
calculation of the Company’s diluted weighted average shares outstanding for
earnings per share until the Company’s common stock price exceeds $62.41 per
share.
Holders
may convert the Convertible Notes prior to July 1, 2011 only if one or more
of
the following conditions are satisfied:
|
·
|
|
During
any fiscal quarter commencing after December 31, 2006, if the last
reported sale price of the common stock for at least 20 trading days
during a period of 30 consecutive trading days ending on the last
trading
day of the preceding fiscal quarter is greater than or equal to 120%
of
the applicable conversion price on such last trading day;
|
|
|
|
|
|
·
|
|
During
the five business day period after any ten consecutive trading day
period
in which the trading price per note for each day of such ten consecutive
trading day period was less than 98% of the product of the last reported
sale price of the Company’s common stock and the applicable conversion
rate on each such day; or
|
|
·
|
|
The
occurrence of specified corporate
transactions.
|
If
the
Convertible Notes are converted in connection with certain fundamental changes
that occur prior to October 1, 2011, the Company may be obligated to pay an
additional make-whole premium with respect to the Convertible Notes converted.
If the Company undergoes certain fundamental changes, holders of Convertible
Notes may require the Company to purchase the Convertible Notes at a price
equal
to 100% of the principal amount of the Convertible Notes purchased plus accrued
interest to, but excluding, the purchase date.
Holders
may also surrender their Convertible Notes for conversion anytime on or after
July 1, 2011 until the close of business on the third business day immediately
preceding the maturity date, regardless of whether any of the foregoing
conditions have been satisfied.
The
Company does not expect that the contingent conversion feature will be required
to be bifurcated and accounted for separately under the provisions of FAS 133
“Accounting for Derivative Instruments and Hedging Activities.”
The
aggregate underwriting commissions and other debt issuance costs incurred with
respect to the issuance of the Convertible Notes were approximately $3.6
million.
Convertible
Notes Hedge Strategy
Concurrent
and in connection with the sale of the Convertible Notes, the Company purchased
call options to purchase from the counterparties shares of the Company’s common
stock equal to the conversion rate as of the date the options are exercised
for
the Convertible Notes, at a price of $62.4105 per share. The cost of the call
options totaled $22.1 million. The Company also sold warrants to the same
counterparties to purchase from the Company an aggregate of 1,762,519 shares
of
the
Company’s common stock at a price of $73.97 per share and received net proceeds
from the sale of increasing these warrants of $14.5 million. Taken
together, the call option and warrant agreements have the effect to the Company
of the effective conversion price of the Convertible Notes to $73.97 per
share. The call options and warrants must be settled in net shares. On the
date of settlement, if the market price per share of the Company’s common stock
is above $73.97 per share, the Company will be required to deliver shares of
its
common stock representing the value of the call options and warrants in excess
of $73.97 per share.
The
warrants have a strike price of $73.97 and are generally exercisable at
anytime. The Company issued and sold the warrants in a transaction exempt
from the registration requirements of the Securities Act of 1933, as amended,
by
virtue of section 4(2) thereof. There were no underwriting commissions or
discounts in connection with the sale of the warrants.
The
Company expects to account for the call options and warrants as a net reduction
in additional paid in capital, and currently does not expect to recognize
subsequent changes in fair value of the call options and warrants in its
consolidated financial statements.
Share
Repurchase
On
October 3, 2006 the Company announced that the board of directors authorized
the
repurchase of up to an aggregate of $55 million of its common stock. This
repurchase program replaces all previously announced common stock repurchase
programs. The Company promptly repurchased approximately $48 million of common
stock (1,030,900 shares) in negotiated transactions with institutional
investors. The stock repurchase program may be suspended or discontinued at
any
time.
Titan
Acquisition
On
October 6, 2006 the Company announced that it has agreed to purchase
assets, consisting primarily of loans receivable, from Titan Financial Group,
II, LLC and certain of its affiliated companies for approximately
$13.5 million in cash. The assets include the loan receivable portfolios
and operating assets of Titan office locations across Georgia and South
Carolina. The Company expects to keep open 39 of the 69 Titan offices and
consolidate the remaining Titan offices into existing operations. On
October 6, 2006, the Bankruptcy Court Judge exercising jurisdiction over
the Chapter 11 bankruptcy cases filed by Titan and its affiliates entered
an order approving the agreed purchase terms.
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:
|
|
Three
months
ended September 30,
|
|
Six
months
ended September 30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Average
gross loans receivable (1)
|
|
$
|
462,233
|
|
|
381,910
|
|
|
447,060
|
|
|
370,965
|
|
Average
net loans receivable (2)
|
|
|
343,980
|
|
|
287,133
|
|
|
333,551
|
|
|
279,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
as a % of total revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
20.6
|
%
|
|
23.1
|
%
|
|
19.1
|
%
|
|
20.9
|
%
|
General
and administrative
|
|
|
52.5
|
%
|
|
53.1
|
%
|
|
53.5
|
%
|
|
54.7
|
%
|
Total
interest expense
|
|
|
3.4
|
%
|
|
2.9
|
%
|
|
3.2
|
%
|
|
2.7
|
%
|
Operating
margin (3)
|
|
|
26.9
|
%
|
|
23.8
|
%
|
|
27.4
|
%
|
|
24.4
|
%
|
Return
on average assets (annualized)
|
|
|
10.9
|
%
|
|
9.5
|
%
|
|
11.3
|
%
|
|
9.6
|
%
|
Offices
opened or acquired, net
|
|
|
37
|
|
|
28
|
|
|
58
|
|
|
32
|
|
Total
offices (at period end)
|
|
|
678
|
|
|
611
|
|
|
678
|
|
|
611
|
|
(1)
|
Average
gross loans receivable have been determined by averaging month-end
gross
loans receivable over the indicated
period.
|
(2)
|
Average
net 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
revenue.
|
Comparison
of Three Months Ended September 30, 2006, Versus
Three
Months Ended September 30, 2005
Net
income increased to $9.9 million for the three months ended September 30, 2006,
or 32.7%, from the three month period ended September 30, 2005. Operating income
(revenues less provision for loan losses and general and administrative
expenses) increased approximately $4.6 million, or 34.3%, and was offset
partially by an increase in interest expense and an increase in income
taxes.
Interest
and fee income for the quarter ended September 30, 2006, increased by $10.0
million, or 20.5%, over the same period of the prior year. This increase
resulted from an $80.0 million increase, or 21.0%, in average gross loans
receivable over the two corresponding periods.
Insurance
commissions and other income increased by $457,000, or 5.7%, between the two
quarterly periods. Insurance commissions increased by $932,000, or 19.3%, during
the most recent quarter when compared to the prior year quarter due to the
increase in loans in those states where credit insurance is sold in conjunction
with the loan. Other income decreased by approximately $475,000, or 15%, over
the two corresponding quarters. The decrease is attributed to an unrealized
loss
of $640,000 recorded for the change in the fair value of the interest rate
swap.
This decrease was offset by an increase in revenue from motor club products
of
approximately $249,000 when comparing the two quarters.
Total
revenues rose to $67.2 million during the quarter ended September 30, 2006,
an
18.4% increase over the $56.7 million for the corresponding quarter of the
previous year. This increase was attributable to new offices and an increase
in
revenues
from offices open throughout both quarterly periods. Revenues from the 571
offices open throughout both quarterly periods increased by approximately 11.8%.
At September 30, 2006, the Company had 678 offices in operation, an increase
of
58 offices from March 31, 2006.
The
provision for loan losses during the quarter ended September 30, 2006 increased
by $682,000, or 5.2%, from the same quarter last year. This increase resulted
from an increase in the general allowance for loan losses due to loan growth.
Net charge-offs for the current quarter amounted to $12.0 million, a slight
increase from $11.5 million charged off during the same quarter of fiscal year
2006. As a percentage of average loans receivable, net charge-offs decreased
to
14.0% on an annualized basis for the current quarter from 16.1% for the quarter
ended September 30, 2005. Although the Company does not anticipate experiencing
any near term material change in its ongoing expected loss ratios, it cannot
give assurance that such changes will not occur or would not materially and
adversely affect the Company’s results of operations and financial
condition.
General
and administrative expenses for the quarter ended September 30, 2006 increased
by $5.2 million, or 17.1% over the same quarter of fiscal year 2006. Overall,
general and administrative expenses, when divided by average open offices,
increased by approximately 5.5% when comparing the two periods; and, as a
percentage of total revenue, decreased from 53.1% over the same quarter of
fiscal year 2006 to 52.5% during the most recent period. This decrease resulted
from a higher growth in revenue than in expenses.
Interest
expense increased by $648,000 when comparing the two corresponding quarterly
periods as a result of the recent rise in interest rates and an increase in
the
average outstanding balance.
The
Company’s effective income tax rate increased slightly to 37.7% for the three
months ended September 30, 2006 from 37.4% for the prior year
quarter.
Overall,
per share earnings growth benefited from growth in revenue, as well as declines
in general and administrative expenses as a percentage of revenues and lower
charge-offs as a percent of average loans. Although we are not expecting future
earnings to increase at the same rate as the current quarter, we do expect
good
results for the remainder of the fiscal year as we focus on internal growth,
new
office openings, our continued close management of expenses and our recent
successes with lower delinquencies and charge-offs.
Comparison
of Six Months Ended September 30, 2006, Versus
Six
Months Ended September 30, 2005
Net
income increased to $19.8 million for the six months ended September 30, 2006,
or 34.6% from the six month period ended June 30, 2005. Operating income
(revenues less provision for loan losses and general and administrative
expenses) increased approximately $9.5 million, or 35.7%, and was offset
partially by an increase in interest expense and an increase in income
taxes.
Interest
and fee income for the six months ended September 30, 2006, increased by $19.9
million, or 21.4%, over the same period of the prior year. This increase
resulted from a $76.1 million increase, or 20.5%, in average gross loans
receivable over the two corresponding periods.
Insurance
commissions and other income increased by $2.6 million, or 17.1%, between the
two periods. Insurance commissions increased by $2.2 million, or 23.0%, during
the most recent six months when compared to the prior year first six months
due
to the increase in loans in those states where credit insurance is sold in
conjunction with the loan. Other income increased by approximately $409,000,
or
7.2%, over the two corresponding periods primarily due to an increase in revenue
from motor club products of approximately $424,000 when comparing the two six
month periods. This increase was partially offset by an unrealized loss of
$278,000 recorded for the change in the fair value of the interest rate
swap.
Total
revenues rose to $131.0 million during the six months ended September 30, 2006,
a 20.8% increase over the $108.5 million for the corresponding period of the
previous year. This increase was attributed to new offices and an increase
in
revenues from offices open throughout both periods. Revenues from the 571
offices open throughout both periods increased by approximately 15.6%.
The
provision for loan losses during the six months ended September 30, 2006
increased by $2.3 million, or 10.2%, from the same period last year. This
increase resulted from an increase in the general allowance for loan losses
due
to loan growth. Net charge-offs for the current six month period amounted to
$21.4 million, a slight increase from $21.0 million charged off during the
same
period of fiscal 2006. As a percentage of average loans receivable, net
charge-offs decreased to 12.8% on
an
annualized basis for the current six month period from 15.0% for the six month
period ended September 30, 2005. Although the Company does not anticipate
experiencing any near term material change in its ongoing expected loss ratios,
it cannot give assurance that such changes will not occur or would not
materially and adversely affect the Company’s results of operations and
financial condition.
General
and administrative expenses for the six month period ended September 30, 2006
increased by $10.8 million, or 18.1% over the same six month period of fiscal
2006. Overall, general and administrative expenses, when divided by average
open
offices, increased by approximately 7.8% when comparing the two periods; and,
as
a percentage of total revenue, decreased from 54.7% during the prior year six
month period to 53.5% during the most recent six month period. This decrease
resulted from a higher growth in revenue than in expenses.
Interest
expense increased by $1.2 when comparing the two corresponding six month periods
as a result of the recent rise in interest rates and an increase in the average
outstanding balance.
The
Company’s effective income tax rate increased slightly to 37.5% for the six
month period ended September 30, 2006 from 37.4% for the prior year
period.
Overall,
per share earnings growth benefited from growth in revenue, as well as declines
in general and administrative expenses as a percentage of revenues and lower
charge-offs as a percent of average loans. Although we are not expecting future
earnings to increase at the same rate as the current six month period, we do
expect good results for the remainder of the fiscal year as we focus on internal
growth, new office openings, our continued close management of expenses and
our
recent successes with lower delinquencies and charge-offs.
Critical
Accounting Policies
The
Company’s accounting and reporting policies are in accordance with U. S.
generally accepted accounting principles and conform to general practices within
the finance company industry. Certain critical accounting policies involve
significant judgment by the Company’s management, including the use of estimates
and assumptions which affect the reported amounts of assets, liabilities,
revenues, and expenses. As a result, changes in these estimates and assumptions
could significantly affect the Company’s financial position and results of
operations. The Company considers its policies regarding the allowance for
loan
losses to be its most critical accounting policy due to the significant degree
of management judgment. The Company has developed policies and procedures for
assessing the adequacy of the allowance for loan losses which takes into
consideration various assumptions and estimates with respect to the loan
portfolio. The Company’s assumptions and estimates may be affected in the future
by changes in economic conditions, among other factors.
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's primary ongoing cash requirements relate to the funding
of new offices and acquisitions, the overall growth of loans outstanding, the
repayment of indebtedness and the repurchase of its common stock. As the
Company's gross loans receivable increased from $266.8 million at March 31,
2003
to $416.3 million at March 31, 2006, net cash provided by operating activities
for fiscal years 2004, 2005 and 2006 was $69.9 million, $87.7 million and $98.0
million, respectively.
During
the first six months of fiscal 2007, the Company repurchased 66,000 shares
of
its common stock for an aggregate purchase price of $1,922,816. 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 50 new
offices in each of the next two fiscal years. Expenditures by the Company to
open and furnish new offices generally averaged approximately $25,000 per office
during fiscal 2006. 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 9 office and a number of loan portfolios from competitors
in 7
states in 8 separate transactions during the first six months of fiscal 2007.
Gross loans receivable purchased in these transactions were approximately $2.8
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 a $167.0 million base credit facility with a syndicate of banks.
In
addition to the base revolving credit commitment, there is a $15 million
seasonal revolving credit commitment available November 15 of each year through
March 31 of the immediately succeeding year to cover the increase in loan demand
during this period. The credit facility will expire on September 30, 2008.
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
1.85% per annum. At September 30, 2006, the interest rate on borrowings under
the revolving credit facility was 8.25%. The Company pays a commitment fee
equal
to 0.375% per annum 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 September 30, 2006,
$122.6 million was outstanding under this facility, and there was $44.4 million
of unused borrowing availability under the borrowing base
limitations.
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
Company believes that it was in compliance with these agreements as of September
30, 2006, 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 or other sources 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 other notes
payable (for the next 12 months and for the foreseeable future beyond that).
Management is not currently aware of any trends, demands, commitments, events
or
uncertainties related to the Company’s operations that it believes will result
in, or are reasonably likely to result in, the Company’s liquidity increasing or
decreasing in any material way. 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 obtain such increases or secure other sources of
financing 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.
Subsequent
to September 30, 2006, the Company amended its senior credit facility in
connection with the issuance of $110 million in aggregate principal amount
of
its 3.0% Convertible Senior Subordinated Notes due October 1, 2011. See Note
8
to the unaudited Consolidated Financial Statements included in this report
for
more information regarding these transacations.
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 eleven 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 partially 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.
Recently
Adopted Accounting Pronouncements
Accounting
for Stock Based Compensation
In
December 2004, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 123 (Revised) (SFAS 123-R), “Share-Based Payment.” This standard
requires expensing of stock options and other share-based payments and
supersedes SFAS No. 123 which had allowed companies to choose between expensing
stock options or showing pro forma disclosure only. On April 14, 2005, the
SEC
announced the adoption of a rule that delays the effective date of SFAS 123-R.
This standard is effective as of the beginning of the Company’s 2007 fiscal year
and applies to previously issued and unvested awards, as well as all awards
granted, modified, cancelled or repurchased after the effective date. The
Company adopted SFAS 123-R on April 1, 2006. See Note 5 to our Consolidated
Financial Statements.
New
Accounting Pronouncements
Accounting
for Uncertainty in Income Taxes
In
July
2006, FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes - an interpretation of FASB Statement No. 109” (“FASB Interpretation
No. 48”), was issued. It clarifies the accounting for uncertainty in income
taxes recognized in an entity’s financial statements in accordance with
Statement of Financial Accounting Standards No. 109, “Accounting for Income
Taxes,” by prescribing the minimum recognition threshold and measurement
attribute a tax position taken or expected to be taken on a tax return is
required to meet before being recognized in the financial statements. FASB
Interpretation No. 48 also provides guidance on derecognition, measurement,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. Management is currently evaluating the impact of
FASB
Interpretation No. 48, which must be implemented effective March 31, 2007.
Fair
Value Measurements
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157 (SFAS 157), "Fair Value Measurements.” SFAS 157 provides a common definition
of fair value and a framework for measuring assets and liabilities at fair
values when a particular standard prescribes it. In addition, the Statement
prescribes a more enhanced disclosure of fair value measures, and requires
a
more expanded disclosure when non-market data is used to assess fair values.
As
required by SFAS 157, we will adopt this new accounting standard effective
April
1, 2008. We are currently reviewing the impact of SFAS 157 on our financial
statements.
Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements
In
September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 108 (“SAB 108”), “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements,” which provides interpretive guidance on the consideration of the
effects of prior year misstatements is quantifying current year misstatements
for the purpose of a materially assessment. SAB 108 requires registrants to
quantify misstatements using both the balance sheet and income statement
approaches and to evaluate whether either approach results in quantifying an
error that is material based on relevant quantitative and qualitative factors.
The guidance is effective for the first fiscal period ending after November
15,
2006 and the Company is required to adopt it in the fourth quarter of fiscal
2007. Management is currently evaluating the impact of adopting SAB 108 on
our
Consolidated Financial Statements.
Forward-Looking
Information
This
report on Form 10-Q, including “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” contains various
“forward-looking statements,” within the meaning of Section 21E of the
Securities Exchange Act of 1934, that are based on management’s belief and
assumptions, as well as information currently available to management.
Statements other than those of historical fact, as well as those identified
by
the words “anticipate,” “estimate,” “plan,” “expect,” “believe,” “may,” “will,”
and “should” any variation of the foregoing and similar expressions are
forward-looking statements. Specifically, the statements in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” of the
Company’s expectations regarding favorable results on the continuation of
favorable trends for the remainder of this fiscal year are 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 delinquencies and 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
Report in Part I, Item 1A, “Risk Factors” in the Company’s most recent annual
report on Form 10-K filed with the Securities and Exchange Commission (“SEC”)
and the Company’s other reports filed with, or furnished to, the SEC from time
to time. The Company does not undertake any obligation to update any
forward-looking statements it makes.
Item
3. Quantitative
and Qualitative Disclosures About Market Risk
Interest
Rate Risk
The
Company’s financial instruments consist of the following: cash, loans
receivable, senior notes payable, and an other note payable and an interest
rate
swap. Fair value approximates carrying value for all of these instruments.
Loans
receivable are originated at prevailing market rates and have an average life
of
approximately four months. Given the short-term nature of these loans, they
are
continually repriced at current market rates. The Company’s outstanding debt
under its revolving credit facility was $122.6 million at September 30, 2006.
Interest on borrowings under this facility is based, at the Company’s option, on
the prime rate or LIBOR plus 1.85%.
Based
on
the outstanding balance at September 30, 2006, a change of 1% in the interest
rates would cause a change in interest expense of approximately $932,000 on
an
annual basis.
In
October 2005, the Company entered into an interest rate swap to economically
hedge the variable cash flows associated with $30 million of its LIBOR-based
borrowings. This swap converted the $30 million from a variable rate of
one-month LIBOR to a fixed rate of 4.755% for a period of five
years.
In
accordance with SFAS 133, the Company records derivatives at fair value, as
other assets or liabilities, on the consolidated balance sheets. Since the
Company is not utilizing hedge accounting under SFAS 133, changes in the fair
value of the derivative instrument are included in other income. As of September
30, 2006 the fair value of the interest rate swap was $215,000 and is included
in other assets. The change in fair value from the beginning of the year,
recorded as an unrealized loss in other income, was $278,000.
The
Company has another note payable which has a balance of $600,000 at September
30, 2006, and carries an interest rate equal to LIBOR + 2.00%.
Foreign
Currency Exchange Rate Risk
In
September 2005 the Company began opening offices in Mexico, where its local
businesses utilize the Mexican peso as their functional currency. The
consolidated financial statements of the Company are denominated in U.S. dollars
and are therefore subject to fluctuation as the U.S. dollar and Mexican peso
foreign exchange rates change. International revenues were less than 1% of
the
Company’s total revenues for the quarter ended September 30, 2006 and net loans
denominated in Mexican pesos were approximately $2.2 million (USD) at September
30, 2006.
The
Company’s foreign currency exchange rate exposures may change over time as
business practices evolve and could have a material effect on the Company’s
financial results. There have been, and there may continue to be,
period-to-period fluctuations in the relative portions of Mexican revenues.
On
April
28, 2006, the Company economically hedged its foreign exchange risk by
purchasing a $1 million foreign exchange currency option with a strike rate
of
11.36 Mexican peso per US dollar. This option expires on April 30, 2007. Changes
in the fair value of this option is recorded as a component of earnings since
the Company does not apply hedge accounting under SFAS 133. The fair value
of
the option at September 30, 2006, and the change in the fair value of the option
in fiscal 2007 is less than $50,000.
Because
its earnings are affected by fluctuations in the value of the U.S. dollar
against foreign currencies, the Company has performed an analysis assuming
a
hypothetical 10% increase or decrease in the value of the U.S. dollar relative
to the Mexican peso in which our transactions in Mexico are denominated. At
September 30, 2006, the analysis indicated that such market movements would
not
have had a material effect on the Company’s consolidated financial statements.
The actual effects on the consolidated financial statements in the future may
differ materially from results of the analysis for the quarter ended September
30, 2006. The Company will continue to monitor and assess the effect of currency
fluctuations and may institute further hedging alternatives.
Item
4. Controls
and Procedures
An
evaluation was carried out under the supervision and with the participation
of
the Company’s management, including its Chief Executive Officer (“CEO”) and
Chief Financial Officer ("CFO"), of the effectiveness of the Company's
disclosure controls and procedures as of September 30, 2006. Based on that
evaluation, the Company's management, including the CEO and CFO, has concluded
that the Company's disclosure controls and procedures are effective as of
September 30, 2006. During the second quarter of fiscal 2007, there was no
change in the Company's internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART
II. OTHER INFORMATION
Item
1. Legal
Proceedings
From
time
to time the Company is involved in 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
pending legal proceedings that would have a material adverse effect on its
financial condition.
Item
1A. Risk
Factors
The
information presented below updates, and should be read in conjunction with,
the
“Risk Factors” section of our Annual Report on Form 10-K for the year ended
March 31, 2006, found in Part I, Item 1A (page 9) of that Form
10-K.
We
are subject to interest rate risk resulting from general economic conditions
and
policies of various governmental and regulatory
agencies.
Interest
rates are highly sensitive to many factors that are beyond our control,
including general economic conditions and policies of various governmental
and
regulatory agencies and, in particular, the Federal Reserve Board. Changes
in monetary policy, including changes in interest rates, could influence the
amount of interest we pay on our revolving credit facility and other note
payable
or any
other floating-interest-rate debt obligations we may incur,
but
such changes could also affect our ability to originate loans. If
the
interest we pay on our revolving credit facility increases, earnings could
be
adversely affected because we
generally charge
the
maximum fees allowed by the respective state’s regulatory agency. Additional
information regarding interest rate risk is included in the sections
captioned “Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Quantitative
and Qualitative Disclosures about Market Risk”
in
our
Annual Report on Form 10-K for the fiscal year ended March 31, 2006 and
subsequent
quarterly reports on Form 10-Q.
Absence
of dividends could reduce our attractiveness to
investors.
Since
1989, we have not declared or paid cash dividends on our common stock and may
not pay cash dividends in the foreseeable future. As a result, our common stock
may be less attractive to certain investors than the stock of dividend-paying
companies.
Various
provisions and laws could delay or prevent a change of control that stockholders
may favor.
Provisions
of our articles of incorporation and South Carolina law could delay or prevent
a
change of control that the holders of our common stock may favor or may impede
the ability of our stockholders to change our management. In particular, our
articles of incorporation and South Carolina law, among other things,
will
require
the affirmative vote of holders of two-thirds of our outstanding shares of
voting stock to approve our merger or consolidation with another corporation
and
authorize our board of directors to issue preferred stock in one or more series,
without shareholder approval.
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds
On
October 10, 2006, pursuant to a purchase agreement dated as of October 3, 2006,
between the Company and J.P. Morgan Securities Inc. as representative for itself
and Jeffries & Company, Inc. and BMO Capital Markets Corp., as initial
purchasers, the Company issued $110,000,000 aggregate principal amount of its
3.00% Convertible Senior Subordinated Notes due 2011. The notes were sold by
the
initial purchasers to qualified institutional buyers, pursuant to Rule 144A
under the
Securities Act of 1933. Other information regarding the sale of the notes was
set forth in Forms 8-K filed by the Company on October 4, 2006 and October
12,
2006 and is included in Note 8 to the accompanying unaudited Consolidated
Financial Statements included in this report.
Item
4. Submission
of Matters of a Vote of Security Holders
(a) |
The
2006 Annual Meeting of Shareholders was held on August 2,
2006.
|
(b) |
Pursuant
to Instruction 3 to Item 4, this paragraph need not be
answered.
|
(c) |
At
the 2006 Annual Meeting of Shareholders, the following two matters
were
voted upon and passed. The tabulation of votes
was:
|
(1) |
The
election of six Directors to serve until the 2007 Annual Meeting
of
Shareholders:
|
|
|
VOTES
IN FAVOR
|
|
VOTES
WITHHELD
|
|
Ken
R. Bramlett, Jr.
|
|
|
16,848,993
|
|
|
355,221
|
|
James
R. Gilreath
|
|
|
16,848,712
|
|
|
355,502
|
|
William
S. Hummers III
|
|
|
16,848,693
|
|
|
355,521
|
|
A.
Alexander McLean III
|
|
|
16,849,726
|
|
|
354,488
|
|
Charles
D. Walters
|
|
|
16,282,598
|
|
|
921,616
|
|
Charles
D. Way
|
|
|
16,849,012
|
|
|
355,202
|
|
(2) |
The
ratification of the selection of KPMG LLP as Independent
Auditors:
|
|
VOTES
IN FAVOR
|
|
VOTES
AGAINST
|
|
ABSTENTIONS*
|
|
|
|
|
|
|
|
|
|
17,088,604
|
|
112,022
|
|
3,588
|
|
*There
were no broker non-votes on this routine item.
WORLD
ACCEPTANCE CORPORATION
AND
SUBSIDIARIES
PART
II. OTHER INFORMATION, CONTINUED
|
|
|
|
Previous |
|
Company |
Exhibit
|
|
|
|
|
|
Registration
|
Number
|
|
Description
|
|
Number
|
|
No.
or Report
|
3.1
|
|
Second
Amended and Restated Articles of Incorporation of the
|
|
|
|
|
|
|
Company,
as amended
|
|
3.1
|
|
333-107426
|
|
|
|
|
|
|
|
3.2
|
|
Third
Amended and Restated Bylaws of the Company
|
|
99.3
|
|
3-29-06
8-K
|
|
|
|
|
|
|
|
4.1
|
|
Specimen
Share Certificate
|
|
4.1
|
|
33-42879
|
|
|
|
|
|
|
|
4.2
|
|
Articles
3, 4 and 5 of the Form of Company's Second
|
|
|
|
|
|
|
Amended
and Restated Articles of Incorporation (as amended)
|
|
3.1
|
|
333-107426
|
|
|
|
|
|
|
|
4.3
|
|
Article
II, Section 9 of the Company's Second Amended
|
|
|
|
|
|
|
and
Restated Bylaws
|
|
3.2
|
|
33-42879
|
|
|
|
|
|
|
|
4.4
|
|
Amended
and Restated Credit Agreement dated July 20, 2005
|
|
4.4
|
|
6-30-05
10-Q
|
|
|
|
|
|
|
|
4.5
|
|
Second
Amendment to Amended and Restated Revolving Credit
|
|
|
|
|
|
|
Agreement
dated as of October 2, 2006
|
|
10.1
|
|
10-04-06
8-K
|
|
|
|
|
|
|
|
4.6
|
|
First
Amendment Amended and Restated Revolving Credit
|
|
|
|
|
|
|
Agreement,
dated as of August 4, 2006
|
|
4.4
|
|
6-30-06
10-Q
|
|
|
|
|
|
|
|
4.7
|
|
Subsidiary
Security Agreement dated as of June 30, 1997, as
|
|
|
|
|
|
|
amended
through July 20, 2005
|
|
4.5
|
|
9-30-05
10-Q
|
|
|
|
|
|
|
|
4.8
|
|
Company
Security Agreement dated as of June 20, 1997, as
|
|
|
|
|
|
|
amended
through July 20, 2005
|
|
4.6
|
|
9-30-05
10-Q
|
|
|
|
|
|
|
|
4.9
|
|
Fourth
Amendment to Subsidiary Amended and Restated
|
|
|
|
|
|
|
Security
Agreement, Pledge and Indenture of Trust
|
|
|
|
|
|
|
(i.e.
Subsidiary Security Agreement)
|
|
4.7
|
|
6-30-05
10-Q
|
|
|
|
|
|
|
|
4.10
|
|
Fourth
Amendment to 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
|
|
4.8
|
|
9-30-07
10-Q
|
|
|
|
|
|
|
|
4.11
|
|
Fifth
Amendment to Amended and Restated Security Agreement,
|
|
|
|
|
|
|
Pledge
and Indenture of Trust (i.e. Company Security Agreement)
|
|
4.9
|
|
6-30-05
10-Q
|
|
|
|
|
|
|
|
4.12
|
|
Form
of 3.00% Convertible Senior Subordinated Note due 2011
|
|
4.1
|
|
10-12-06
8-K
|
|
|
|
|
|
|
|
4.13
|
|
Indenture,
dated October 10, 2006 between the Company
|
|
|
|
|
|
|
and
U.S. Bank National Association, as Trustee
|
|
4.2
|
|
10-12-06
8-K
|
|
|
|
|
|
|
Company
|
Exhibit
|
|
|
|
|
|
Registration
|
Number
|
|
Description
|
|
Number
|
|
No.
or Report
|
31.1
|
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive
Officer
|
|
*
|
|
|
|
|
|
|
|
|
|
31.2
|
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
|
|
*
|
|
|
|
|
|
|
|
|
|
32.1
|
|
Section
1350 Certification of Chief Executive Officer
|
|
*
|
|
|
|
|
|
|
|
|
|
32.2
|
|
Section
1350 Certification of Chief Financial Officer
|
|
*
|
|
|
|
|
|
|
|
|
|
*
|
|
Filed
or furnished herewith.
|
|
|
|
|
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 |
|
|
|
|
By: |
/s/
A.
Alexander McLean, III |
|
A.
Alexander McLean, III, Chief |
|
Executive
Officer
|
|
Date: November 9,
2006 |
|
|
|
|
|
|
|
By: |
/s/
Kelly Malson Snape |
|
Kelly
Malson Snape, Vice President and |
|
Chief
Financial Officer
Date:
November 9, 2006
|