Company Quick10K Filing
Quick10K
World Acceptance
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$142.24 10 $1,370
10-Q 2019-06-30 Quarter: 2019-06-30
10-K 2019-03-31 Annual: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-K 2018-03-31 Annual: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-K 2017-03-31 Annual: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-K 2016-03-31 Annual: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-K 2015-03-31 Annual: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-K 2014-03-31 Annual: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-07-25 Earnings, Regulation FD, Exhibits
8-K 2019-06-07 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-05-09 Earnings, Regulation FD
8-K 2019-04-15 Officers, Other Events, Exhibits
8-K 2019-01-31 Earnings, Regulation FD, Exhibits
8-K 2018-12-14 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-11-01 Earnings, Regulation FD, Exhibits
8-K 2018-10-15 Officers, Exhibits
8-K 2018-08-24 Shareholder Vote
8-K 2018-08-01 Enter Agreement, Exhibits
8-K 2018-07-26 Earnings, Regulation FD, Exhibits
8-K 2018-07-13 Other Events, Exhibits
8-K 2018-06-27 Officers, Exhibits
8-K 2018-06-01 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-05-04 Earnings, Regulation FD, Officers, Exhibits
8-K 2018-01-26 Earnings, Regulation FD, Exhibits
8-K 2018-01-18 Officers, Other Events, Exhibits
8-K 2018-01-04 Amend Bylaw, Other Events, Exhibits
8-K 2018-01-01 Officers, Exhibits
V Visa 349,250
MMSI Merit Medical Systems 3,160
IBA Industrias Bachoco 2,520
SVMK SVMK 2,310
HTLD Heartland Express 1,600
MNTA Momenta Pharmaceuticals 1,400
ATRC Atricure 1,150
OVBC Ohio Valley Banc 173
RMED Ra Medical Systems 52
AFH Atlas Financial Holdings 11
WRLD 2019-06-30
Part I. Financial Information
Note 1 - Basis of Presentation
Note 3 - Summary of Significant Policies
Note 4 - Fair Value
Note 5 - Finance Receivables and Allowance for Loan Losses
Note 6 - Leases
Note 7 - Average Share Information
Note 8 - Stock-Based Compensation
Note 9 - Acquisitions
Note 10 - Debt
Note 11 - Income Taxes
Note 12 - Commitments and Contingencies
Note 13 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.01 wrld06302019ex3101.htm
EX-31.02 wrld06302019ex3102.htm
EX-32.01 wrld06302019ex3201.htm
EX-32.02 wrld06302019ex3202.htm

World Acceptance Earnings 2019-06-30

WRLD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

__________________________________
 Form 10-Q
__________________________________

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934

For the transition period from ______________ to ______________         
 
Commission File Number:  000-19599

WORLD ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter.)

South Carolina
 
57-0425114
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)

108 Frederick Street
Greenville,
South Carolina
29607
(Address of principal executive offices)
(Zip Code)
(864)
298-9800
(registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, no par value
WRLD
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
 
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 ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨



 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 
Large Accelerated filer
x


 
Accelerated filer


 
 
 
 
 
 
 
 
 
Non-accelerated filer
o

 
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 

If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No x

The number of outstanding shares of the issuer’s no par value common stock as of July 31, 2019 was 9,041,850.
 




 WORLD ACCEPTANCE CORPORATION
FORM 10-Q

TABLE OF CONTENTS

Item No.
Contents
Page
 
GLOSSARY OF DEFINED TERMS
 
 
 
PART I - FINANCIAL INFORMATION
 
1.
Consolidated Financial Statements (unaudited):
 
Consolidated Balance Sheets as of June 30, 2019 and March 31, 2019
 
Consolidated Statements of Operations for the three months ended June 30, 2019 and June 30, 2018
 
Condensed Consolidated Statements of Comprehensive Income for the three months ended June 30, 2019 and June 30, 2018
 
Consolidated Statements of Shareholders' Equity for the three months ended June 30, 2019 and June 30, 2018
 
Consolidated Statements of Cash Flows for the three months ended June 30, 2019 and June 30, 2018
 
Notes to Consolidated Financial Statements
2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
3.
Quantitative and Qualitative Disclosures about Market Risk
4.
Controls and Procedures
 
 
 
 
PART II - OTHER INFORMATION
 
1.
Legal Proceedings
1A.
Risk Factors
2.
Unregistered Sales of Equity Securities and Use of Proceeds
3.
Defaults Upon Senior Securities
4.
Mine Safety Disclosures
5.
Other Information
6.
Exhibits
 
 
 
 
EXHIBIT INDEX
 
 
 
SIGNATURES

Introductory Note: As used herein, the "Company," "we," "our," "us," or similar formulations include World Acceptance Corporation and each of its subsidiaries, unless otherwise expressly noted or the context otherwise requires that it include only World Acceptance Corporation.  All references in this report to "fiscal 2020" are to the Company’s fiscal year ending March 31, 2020; all references in this report to "fiscal 2019" are to the Company's fiscal year ended March 31, 2019; and all references to "fiscal 2018" are to the Company’s fiscal year ended March 31, 2018.


3

Table of Contents

GLOSSARY OF DEFINED TERMS

The following terms may be used throughout this Report, including consolidated financial statements and related notes.

Term
Definition
ASU
Accounting Standards Update
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CFPB
U.S. Consumer Financial Protection Bureau
Compensation Committee
Compensation and Stock Option Committee
DOJ
U.S. Department of Justice
Exchange Act
Securities Exchange Act of 1934, as amended
FASB
Financial Accounting Standards Board
FCPA
U.S. Foreign Corrupt Practices Act of 1977, as amended
G&A
General and administrative
GAAP
U.S. generally accepted accounting principles
IRC
Internal Revenue Code of 1986, as amended
IRS
U.S. Internal Revenue Service
LIBOR
London Interbank Offered Rate
Option Measurement Period
The 6.5 year performance period beginning on September 30, 2018 and ending on March 31, 2025 over which the Performance Options are eligible to vest, following certification by the Compensation Committee of achievement
Purchasers
Jointly, Astro Wealth S.A. de C.V. and Astro Assets S.A. de C.V.
Performance Share Measurement Period
The 6.5 year performance period beginning on September 30, 2018 and ending on March 31, 2025 over which the Performance Shares are eligible to vest, following certification by the Compensation Committee of achievement
Performance Options
Performance-based stock options
Performance Shares
Service- and performance-based restricted stock awards
Restricted Stock
Service-based restricted stock awards
SEC
U.S. Securities and Exchange Commission
Service Options
Service-based stock options
SWAC
Servicios World Acceptance Corporation de México, S. de R.L. de C.V, a former subsidiary of World Acceptance Corporation
TCJA
Tax Cuts and Jobs Act
Transition Tax
Tax amount associated with a one-time repatriation tax on deferred foreign income
WAC de Mexico
WAC de México, S.A. de C.V., SOFOM, E.N.R., a former subsidiary of World Acceptance Corporation


4

Table of Contents

PART I.  FINANCIAL INFORMATION

WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30, 2019
 
March 31, 2019
ASSETS
 
 
 
Cash and cash equivalents
$
9,759,095

 
$
9,335,433

Gross loans receivable
1,222,696,245

 
1,127,957,383

Less:
 

 
 

Unearned interest, insurance and fees
(320,728,557
)
 
(290,813,752
)
Allowance for loan losses
(87,353,087
)
 
(81,519,624
)
Loans receivable, net
814,614,601

 
755,624,007

Right-of-use asset (Note 6)
117,266,685

 

Property and equipment, net
25,766,599

 
25,424,183

Deferred income taxes, net
25,903,849

 
23,830,899

Other assets, net
16,493,178

 
18,398,935

Goodwill
7,239,122

 
7,034,463

Intangible assets, net
23,649,536

 
15,340,153

Total assets
$
1,040,692,665

 
$
854,988,073

 
 
 
 
LIABILITIES & SHAREHOLDERS' EQUITY
 

 
 

 
 
 
 
Liabilities:
 

 
 

Senior notes payable
$
326,390,000

 
$
251,940,000

Income taxes payable
12,717,210

 
11,550,197

Lease liability (Note 6)
117,871,908

 

Accounts payable and accrued expenses
34,053,486

 
39,381,251

Total liabilities
491,032,604

 
302,871,448

 
 
 
 
Commitments and contingencies (Note 12)

 

 


 
 
Shareholders' equity:
 

 
 

Preferred stock, no par value Authorized 5,000,000, no shares issued or outstanding

 

Common stock, no par value Authorized 95,000,000 shares; issued and outstanding 9,181,305 and 9,284,118 shares at June 30, 2019 and March 31, 2019, respectively

 

Additional paid-in capital
208,876,263

 
198,125,649

Retained earnings
340,783,798

 
353,990,976

Total shareholders' equity
549,660,061

 
552,116,625

 
 
 
 
Total liabilities and shareholders' equity
$
1,040,692,665

 
$
854,988,073


See accompanying notes to consolidated financial statements.


5

Table of Contents

WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
Three months ended June 30,
 
2019
 
2018
Continuing operations
 
 
 
Revenues:
 
 
 
Interest and fee income
$
122,910,149

 
$
108,444,378

Insurance income, net and other income
15,531,834

 
14,345,607

Total revenues
138,441,983

 
122,789,985

 
 
 
 
Expenses:
 

 
 

Provision for loan losses
41,291,071

 
30,590,619

General and administrative expenses:
 

 
 

Personnel
52,459,445

 
40,793,850

Occupancy and equipment
11,949,749

 
10,592,751

Advertising
6,109,827

 
4,839,298

Amortization of intangible assets
954,641

 
263,452

Other
10,302,701

 
11,288,004

Total general and administrative expenses
81,776,363

 
67,777,355

 
 
 
 
Interest expense
4,403,328

 
4,225,001

Total expenses
127,470,762

 
102,592,975

 
 
 
 
Income from continuing operations before income taxes
10,971,221

 
20,197,010

 
 
 
 
Income taxes
2,362,822

 
4,559,345

 
 
 
 
Income from continuing operations
8,608,399

 
15,637,665

 
 
 
 
Discontinued operations (Note 2)
 
 
 
Income from discontinued operations before disposal of discontinued operations and income taxes

 
2,341,825

Loss on disposal of discontinued operations

 
(39,006,544
)
Income taxes

 
476,240

Loss from discontinued operations

 
(37,140,959
)
 
 
 
 
Net income (loss)
$
8,608,399

 
$
(21,503,294
)
 
 
 
 
Net income per common share from continuing operations:
 
 
 
Basic
$
1.01

 
$
1.73

Diluted
$
0.97

 
$
1.69

Net loss per common share from discontinued operations:
 
 
 
Basic
$

 
$
(4.10
)
Diluted
$

 
$
(4.01
)

6

Table of Contents

Net income (loss) per common share:
 

 
 

Basic
$
1.01

 
$
(2.37
)
Diluted
$
0.97

 
$
(2.32
)
Weighted average common shares outstanding:
 

 
 

Basic
8,507,121

 
9,054,793

Diluted
8,866,250

 
9,253,226


See accompanying notes to consolidated financial statements.


7

Table of Contents

WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
Three months ended June 30,
 
2019
 
2018
 
 
 
 
Net income (loss)
$
8,608,399

 
$
(21,503,294
)
Foreign currency translation adjustments

 
(5,235,838
)
Comprehensive income (loss)
$
8,608,399

 
$
(26,739,132
)

See accompanying notes to consolidated financial statements.


8

Table of Contents

 
WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2019
 
Common Stock
 
 
 
 
 
 
 
 
 
Shares
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss, net
 
Total Shareholders' Equity
Balances at March 31, 2019
9,284,118

 
$
198,125,649

 
353,990,976

 

 
$
552,116,625

Proceeds from exercise of stock options
39,766

 
2,676,573

 

 

 
2,676,573

Common stock repurchases
(141,077
)
 

 
(21,815,577
)
 

 
(21,815,577
)
Restricted common stock expense under stock option plan, net of cancellations ($238,168)
(1,502
)
 
6,452,703

 

 

 
6,452,703

Stock option expense

 
1,621,338

 

 

 
1,621,338

Net income

 

 
8,608,399

 

 
8,608,399

Balances at June 30, 2019
9,181,305

 
$
208,876,263

 
340,783,798

 

 
$
549,660,061


 
Three months ended June 30, 2018
 
Common Stock
 
 
 
 
 
 
 
 
 
Shares
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss, net
 
Total Shareholders' Equity
Balances at March 31, 2018
9,119,443

 
$
175,887,227

 
391,275,705

 
(26,055,080
)
 
$
541,107,852

Proceeds from exercise of stock options
20,830

 
1,428,938

 

 

 
1,428,938

Restricted common stock expense under stock option plan

 
950,790

 

 

 
950,790

Stock option expense

 
524,227

 

 

 
524,227

Other comprehensive loss

 

 

 
(5,235,838
)
 
(5,235,838
)
Net loss

 

 
(21,503,294
)
 

 
(21,503,294
)
Balances at June 30, 2018
9,140,273

 
$
178,791,182

 
369,772,411

 
(31,290,918
)
 
$
517,272,675


See accompanying notes to consolidated financial statements.


9

Table of Contents

WORLD ACCEPTANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

10

Table of Contents

 
Three months ended June 30,
 
2019
 
2018
Cash flow from operating activities:
 
 
 
Net income (loss)
$
8,608,399

 
$
(21,503,294
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 

 
 

Loss on sale of discontinued operations

 
39,006,544

Amortization of intangible assets
954,641

 
263,452

Amortization of debt issuance costs
133,338

 
208,921

Provision for loan losses
41,291,071

 
32,399,678

Depreciation
1,799,075

 
1,833,309

Loss (gain) on sale of property and equipment
(69,369
)
 
89,673

Deferred income tax expense (benefit)
(2,072,950
)
 
413,750

Compensation related to stock option and restricted stock plans, net of taxes and adjustments
8,312,209

 
1,475,017

Change in accounts:
 

 
 

Other assets, net
3,369,042

 
739,376

Income taxes payable
1,167,013

 
3,560,469

Accounts payable and accrued expenses
(5,327,765
)
 
(3,033,131
)
Net cash provided by operating activities
58,164,704

 
55,453,764

Cash flows from investing activities:
 

 
 

Increase in loans receivable, net
(69,555,473
)
 
(64,053,964
)
Net assets acquired from branch acquisitions, primarily loans
(30,795,192
)
 

Increase in intangible assets from acquisitions
(9,468,683
)
 

Purchases of property and equipment
(2,084,717
)
 
(2,267,431
)
Proceeds from sale of property and equipment
81,595

 
93,700

Net cash used in investing activities
(111,822,470
)
 
(66,227,695
)
Cash flow from financing activities:
 

 
 

Borrowings from senior notes payable
132,641,400

 
55,390,000

Payments on senior notes payable
(58,191,400
)
 
(60,450,000
)
Debt issuance costs associated with senior notes payable
(991,400
)
 
(240,000
)
Proceeds from exercise of stock options
2,676,573

 
1,428,938

Payments for taxes related to net share settlement of equity awards
(238,168
)
 

Repurchase of common stock
(21,815,577
)
 

Net cash provided by (used in) financing activities
54,081,428

 
(3,871,062
)
Effects of foreign currency fluctuations on cash and cash equivalents

 
(765,404
)
Net change in cash and cash equivalents
423,662

 
(15,410,397
)
Cash and cash equivalents at beginning of period from continuing operations
9,335,433

 
12,473,833

Cash and cash equivalents at beginning of period from discontinued operations

 
19,612,471

Cash and cash equivalents at end of period
$
9,759,095

 
$
16,675,907

Cash and cash equivalents at end of period from continuing operations
$
9,759,095

 
$
10,262,901

Cash and cash equivalents at end of period from discontinued operations
$

 
$
6,413,006

 
 
 
 
Supplemental Disclosures:
 
 
 
Interest paid during the period
$
3,953,803

 
$
3,896,463

Income taxes paid during the period
$
6,216,505

 
$
1,291,884


See accompanying notes to consolidated financial statements.

11

Table of Contents

WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


NOTE 1 – BASIS OF PRESENTATION

The consolidated financial statements of the Company at June 30, 2019, and for the three 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 June 30, 2019, and the results of operations and cash flows for the periods ended June 30, 2019 and 2018, have been included. The results for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

The preparation of consolidated financial statements in conformity with GAAP 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 consolidated financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The consolidated financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the fiscal year ended March 31, 2019, included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019, as filed with the SEC.

NOTE 2 – DISCONTINUED OPERATIONS

As previously disclosed, the Company sold all of the issued and outstanding capital stock and equity interest of WAC de Mexico and SWAC to the Purchasers, effective as of July 1, 2018, for a purchase price of approximately $44.36 million. The Company has provided, and may continue to provide, limited ParaData systems and software training to the Purchasers, as requested. The Company has not and will not have any other involvement with the Mexico operating segment subsequent to the sale's effective date.

There were no assets or liabilities of discontinued operations at June 30, 2019 and March 31, 2019.

The following table reconciles the major classes of line items constituting loss from discontinued operations to the amounts presented in the Consolidated Statements of Operations:
 
Three months ended June 30,
 
 
2018
 
 
 
Revenues
 
$
9,693,367

Provision for loan losses
 
1,809,059

General and administrative expenses
 
5,542,483

Income from discontinued operations before disposal of discontinued operations and income taxes
 
2,341,825

Loss on disposal of discontinued operations
 
(39,006,544
)
Income taxes
 
476,240

Loss from discontinued operations
 
$
(37,140,959
)


12

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The following table presents operating, investing and financing cash flows for the Company’s discontinued operations:
 
 
Three months ended June 30,
 
 
2019
 
2018
 
 
 
 
 
Cash provided by operating activities:
 
$

 
$
353,854

Cash provided by investing activities:
 

 
1,138,084

Cash provided by (used in) financing activities:
 
$

 
$
(17,126,000
)


NOTE 3 – SUMMARY OF SIGNIFICANT POLICIES

Nature of Operations

The Company is a small-loan consumer finance company headquartered in Greenville, South Carolina that offers short-term small loans, medium-term larger loans, related credit insurance products and ancillary products and services to individuals who have limited access to other sources of consumer credit. The Company offers income tax return preparation services to its loan customers and other individuals.

Seasonality

The Company's loan volume and corresponding loans receivable follow seasonal trends. The Company's highest loan demand generally occurs from October through December, its third fiscal quarter. Loan demand is generally lowest and loan repayment highest from January to March, its fourth fiscal quarter. Loan volume and average balances remain relatively level during the remainder of the year. Consequently, the Company experiences significant seasonal fluctuations in its operating results and cash needs. Operating results for the Company's third fiscal quarter are generally lower than in other quarters and operating results for its fourth fiscal quarter are generally higher than in other quarters.

Reclassification

Certain prior period amounts have been reclassified to conform to the current presentation. Such reclassifications had no impact on previously reported net income or shareholders' equity.

Recently Adopted Accounting Standards

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU, as amended by ASU 2018-01, ASU 2018-10, and 2018-11, requires lessees to recognize assets and liabilities from leases with terms greater than 12 months and to disclose information related to the amount, timing and uncertainty of cash flows arising from leases, including various qualitative and quantitative requirements. The amendments of this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018.

Upon adoption of this guidance on April 1, 2019 the Company removed its deferred rent expense balance of $0.4 million, recorded a right-of-use asset of $92.3 million, and recorded a lease liability of $92.7 million. Amounts recorded upon adoption of Topic 842 were adjusted from what was reported in the Company's Annual Report on From 10-K for the fiscal year ended March 31, 2019 due to the Company finalizing its implementation since that filing. In conjunction with adoption the Company made the following elections as outlined in ASU 2016-02 and its amendments:

The Company elects to apply the new guidance retrospectively at the beginning of the period of adoption, and, as a result, the adoption date shall be the beginning of the reporting period in which the Company first applies the guidance in Topic 842. The Company will not adjust comparative years in the consolidated financial statements or make the new required disclosures for periods before the adoption date. The new required disclosures will only be presented in the period of adoption and subsequently thereafter.


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Table of Contents

The Company elects, by class of underlying asset, to expense short-term leases on a straight-line basis over the life of the lease rather than applying the recognition requirements in Topic 842 according to the following table:
Class of Underlying Asset
Election? Yes/No
Buildings (Office Space)
No
Office Equipment
Yes

The Company elects, by class of underlying asset, not to separate nonlease components from lease components and instead account for each separate lease component and the nonlease components associated with those lease components as a single lease component according to the following table:
Class of Underlying Asset
Election? Yes/No
Buildings (Office Space)
Yes
Office Equipment
Yes

The Company elects the following practical expedients, which must be elected as a package, when applying Topic 842 to leases that commenced before the adoption date:
1.
Not to reassess whether any expired or existing contracts are or contain leases;
2.
Not to reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with Topic 840 will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with Topic 840 will be classified as finance leases); and,
3.
Not to reassess initial direct costs for any existing leases.

The Company elects to use hindsight in determining the lease term (that is, when considering lessee options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of the its right-of-use assets when applying Topic 842 to leases that commenced before the adoption date.

Adoption of the standard did not impact the Company's Consolidated Statements of Operations nor did adoption require the Company to alter its revolving credit facility to remain in compliance with its debt covenants.

Recently Issued Accounting Standards Not Yet Adopted

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates Step 2 from the goodwill impairment test. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. The amendments in this update are effective for public entities who are SEC filers for fiscal years beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact the adoption of this guidance will have on our consolidated financial statements.

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The amendment seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For public business entities the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact the adoption of this guidance will have on our consolidated financial statements. The adoption of this ASU could have a material impact on the provision for loan losses in the consolidated statements of operations and allowance for loan losses in the consolidated balance sheets.

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Table of Contents


We reviewed all other newly issued accounting pronouncements and concluded that they are either not applicable to our business or are not expected to have a material effect on the consolidated financial statements as a result of future adoption.

NOTE 4 – FAIR VALUE

Fair Value Disclosures

The Company may carry certain financial instruments and derivative assets and liabilities measured at fair value on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Company determines the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Fair value measurements are grouped in three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices that are observable for assets and liabilities, either directly or indirectly. These inputs include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in market that are less active.
Level 3 – Unobservable inputs for assets or liabilities reflecting the reporting entity’s own assumptions.

The Company’s financial instruments consist of the following: cash and cash equivalents, loans receivable, and senior notes payable. 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 eight months. Given the short-term nature of these loans, they are continually repriced at current market rates. The Company’s revolving credit facility has a variable rate based on a margin over LIBOR and reprices with any changes in LIBOR. The Company also considers its creditworthiness in its determination of fair value.

The carrying amounts and estimated fair values of the Company's financial instruments are summarized below.
 
 
 
June 30, 2019
 
March 31, 2019
 
Input Level
 
Carrying Value
 
Estimated Fair Value
 
Carrying Value
 
Estimated Fair Value
ASSETS
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
1
 
$
9,759,095

 
9,759,095

 
$
9,335,433

 
9,335,433

Loans receivable, net
3
 
814,614,601

 
814,614,601

 
755,624,007

 
755,624,007

 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
Senior notes payable
3
 
326,390,000

 
326,390,000

 
251,940,000

 
251,940,000



There were no significant assets or liabilities measured at fair value on a non-recurring basis as of June 30, 2019 or March 31, 2019.

NOTE 5 – FINANCE RECEIVABLES AND ALLOWANCE FOR LOAN LOSSES

The following is a summary of gross loans receivable as of:
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
 
 
 
 
 
 
Small loans
$
805,380,448

 
$
736,643,663

 
$
716,209,163

Large loans
412,902,115

 
383,686,372

 
345,206,234

Tax advance loans
4,413,682

 
7,627,348

 
1,257,780

Total gross loans
$
1,222,696,245

 
$
1,127,957,383

 
$
1,062,673,177



15

Table of Contents


The following is a summary of the changes in the allowance for loan losses for the periods indicated:
 
Three months ended June 30,
 
2019
 
2018
 
 
 
 
Balance at beginning of period
$
81,519,624

 
$
66,088,139

Provision for loan losses
41,291,071

 
30,590,619

Loan losses
(39,523,987
)
 
(32,441,141
)
Recoveries
4,066,379

 
3,792,005

Balance at end of period
$
87,353,087

 
$
68,029,622



The following is a summary of loans individually and collectively evaluated for impairment for the period indicated:
June 30, 2019
Loans individually
evaluated for
impairment
(impaired loans)
 
Loans collectively
evaluated for
impairment
 
Total
 
 
 
 
 
 
Gross loans in bankruptcy, excluding contractually delinquent
$
4,898,870

 

 
4,898,870

Gross loans contractually delinquent
60,531,119

 

 
60,531,119

Loans not contractually delinquent and not in bankruptcy

 
1,157,266,256

 
1,157,266,256

Gross loan balance
65,429,989

 
1,157,266,256

 
1,222,696,245

Unearned interest and fees
(13,190,042
)
 
(307,538,515
)
 
(320,728,557
)
Net loans
52,239,947

 
849,727,741

 
901,967,688

Allowance for loan losses
(47,549,279
)
 
(39,803,808
)
 
(87,353,087
)
Loans, net of allowance for loan losses
$
4,690,668

 
809,923,933

 
814,614,601


March 31, 2019
Loans individually
evaluated for
impairment
(impaired loans)
 
Loans collectively
evaluated for
impairment
 
Total
 
 
 
 
 
 
Gross loans in bankruptcy, excluding contractually delinquent
$
4,644,203

 

 
4,644,203

Gross loans contractually delinquent
59,633,541

 

 
59,633,541

Loans not contractually delinquent and not in bankruptcy

 
1,063,679,639

 
1,063,679,639

Gross loan balance
64,277,744

 
1,063,679,639

 
1,127,957,383

Unearned interest and fees
(14,319,795
)
 
(276,493,957
)
 
(290,813,752
)
Net loans
49,957,949

 
787,185,682

 
837,143,631

Allowance for loan losses
(45,511,124
)
 
(36,008,500
)
 
(81,519,624
)
Loans, net of allowance for loan losses
$
4,446,825

 
751,177,182

 
755,624,007



16

Table of Contents

June 30, 2018
Loans individually
evaluated for
impairment
(impaired loans)
 
Loans collectively
evaluated for
impairment
 
Total
 
 
 
 
 
 
Gross loans in bankruptcy, excluding contractually delinquent
$
4,472,996

 

 
4,472,996

Gross loans contractually delinquent
48,449,681

 

 
48,449,681

Loans not contractually delinquent and not in bankruptcy

 
1,009,750,500

 
1,009,750,500

Gross loan balance
52,922,677

 
1,009,750,500

 
1,062,673,177

Unearned interest and fees
(10,714,788
)
 
(270,171,767
)
 
(280,886,555
)
Net loans
42,207,889

 
739,578,733

 
781,786,622

Allowance for loan losses
(37,924,995
)
 
(30,104,627
)
 
(68,029,622
)
Loans, net of allowance for loan losses
$
4,282,894

 
709,474,106

 
713,757,000



The average net balance of impaired loans was $51.1 million and $42.7 million, respectively, for the three month periods ended June 30, 2019, and 2018. It is not practical to compute the amount of interest earned on impaired loans.
 
The following is an assessment of the credit quality for the period indicated:
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
Credit risk
 
 
 
 
 
Consumer loans- non-bankrupt accounts
$
1,216,089,192

 
$
1,121,895,834

 
$
1,057,020,248

Consumer loans- bankrupt accounts
6,607,053

 
6,061,549

 
5,652,929

Total gross loans
$
1,222,696,245

 
$
1,127,957,383

 
$
1,062,673,177

 
 
 
 
 
 
Consumer credit exposure
 

 
 

 
 
Credit risk profile based on payment activity, performing
$
1,133,978,402

 
$
1,039,774,448

 
$
992,218,267

Contractual non-performing, 61 or more days delinquent (1)
88,717,843

 
88,182,935

 
70,454,910

Total gross loans
$
1,222,696,245

 
$
1,127,957,383

 
$
1,062,673,177

 
 
 
 
 
 
Credit risk profile based on customer type
 

 
 

 
 
New borrower
$
147,365,635

 
$
138,140,479

 
$
103,601,323

Former borrower
133,566,583

 
116,242,182

 
121,695,512

Refinance
920,783,881

 
854,880,194

 
819,375,003

Delinquent refinance
20,980,146

 
18,694,528

 
18,001,339

Total gross loans
$
1,222,696,245

 
$
1,127,957,383

 
$
1,062,673,177


_______________________________________________________
(1) Loans in non-accrual status.


17

Table of Contents

The following is a summary of the past due receivables as of:
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
Contractual basis:
 

 
 

 
 

30-60 days past due
$
46,738,172

 
40,300,574

 
37,050,516

61-90 days past due
28,186,725

 
28,549,394

 
22,005,229

91 days or more past due
60,531,118

 
59,633,541

 
48,449,681

Total
$
135,456,015

 
128,483,509

 
107,505,426

 
 
 
 
 
 
Percentage of period-end gross loans receivable
11.1
%
 
11.4
%
 
10.1
%
 
 
 
 
 
 
Recency basis:
 
 
 
 
 
30-60 days past due
$
45,096,798

 
35,992,122

 
34,926,566

61-90 days past due
25,365,096

 
22,393,106

 
19,630,463

91 days or more past due
44,176,264

 
42,771,862

 
34,006,294

Total
$
114,638,158

 
101,157,090

 
88,563,323

 
 
 
 
 
 
Percentage of period-end gross loans receivable
9.4
%
 
9.0
%
 
8.3
%


NOTE 6 – LEASES

ASU No. 2016-02 Adoption

The Company
adopted the new lease accounting standard on April 1, 2019. See Note 3, “Summary of Significant Accounting Policies,” for an overview of the transition to this standard.

Accounting Policies and Matters Requiring Management's Judgment

When determining the economic life of a lease the Company adopts a convention of applying an economic life equal to the useful life as specified in its accounting policy. Refer to Note 1, “Property and Equipment,” to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2019 for a description of the Company's accounting policy regarding useful lives.

The Company uses its effective annual interest rate as the discount rate when evaluating leases under Topic 842. Management applies its effective annual interest rate to leases entered for the entirety of the subsequent year. For example, FY2019’s annual effective interest rate of 6.7% will be used in the determination of lease type as well as the discount rate when calculating the present value of lease payments for all leases entered into in FY2020 or until a new annual effective interest rate is available for application.

Based on its historical practice, the Company believes it is reasonably certain to exercise a given option associated with a given office space lease. Therefore, the Company classifies all lease options for office space as “reasonably certain” unless it has specific knowledge to the contrary for a given lease. The Company does not believe it is reasonably certain to exercise any options associated with its office equipment leases.

Periodic Disclosures

The Company's leases consist of real estate leases for office space as well as office equipment leases, all of which were classified as Operating at June 30, 2019. Both the real estate and office equipment leases range from three years to five years, and generally contain options to extend which mirror the original terms of the lease.

The following table reports information about the Company's lease cost for the three months ended June 30, 2019:

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Table of Contents

 
Three months ended June 30,
 
2019
Lease Cost
 
Operating lease cost
$
6,230,579

Variable lease cost
804,607

Total lease cost
$
7,035,186



The following table reports other information about the Company's leases for the three months ended June 30, 2019:
 
 
Three months ended June 30,
 
 
2019
Other Lease Information
 
 
Cash paid for amounts included in the measurement of lease liabilities
 
$
6,032,398

Right-of-use assets obtained in exchange for new operating lease liabilities(1)
 
$
30,046,246

Weighted average remaining lease term — operating leases
 
5.2 years

Weighted-average discount rate — operating leases
 
6.7
%
_______________________________________________________
(1) In May 2019 the Company executed a new 10 year lease agreement for its corporate headquarters in Greenville, SC. The lease payments are projected to commences in December 2019; however, execution of the lease agreement triggered recognition of the ROU asset in May 2019 for approximately $26.9 million.

The following table reports information about the maturity of the Company's operating leases as of June 30, 2019:
Operating lease liability maturity analysis
 
 
FY2020
 
$
18,077,542

FY2021
 
22,501,563

FY2022
 
19,122,696

FY2023
 
15,184,316

FY2024
 
10,978,524

FY2025
 
7,076,802

Thereafter
 
28,659,065

Total undiscounted lease liability
 
$
121,600,508

Imputed interest
 
3,728,600

Total discounted lease liability
 
$
117,871,908



The Company had no leases with related parties at June 30, 2019.

NOTE 7 – AVERAGE SHARE INFORMATION

The following is a summary of the basic and diluted average common shares outstanding:
 
Three months ended June 30,
 
2019
 
2018
Basic:
 
 
 
Weighted average common shares outstanding (denominator)
8,507,121

 
9,054,793

 
 
 
 
Diluted:
 

 
 

Weighted average common shares outstanding
8,507,121

 
9,054,793

Dilutive potential common shares securities
359,129

 
198,433

Weighted average diluted shares outstanding (denominator)
8,866,250

 
9,253,226



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Options to purchase 683,442 and 486,561 shares of common stock at various prices were outstanding during the three months ended June 30, 2019 and 2018 respectively, but were not included in the computation of diluted EPS because the option exercise price was anti-dilutive. 

NOTE 8 – STOCK-BASED COMPENSATION

Stock Incentive Plans

The Company has a 2005 Stock Option Plan, a 2008 Stock Option Plan, a 2011 Stock Option Plan and a 2017 Stock Incentive Plan for the benefit of certain non-employee directors, officers, and key employees. Under these plans, a total of 4,350,000 shares of common stock have been authorized and reserved for issuance pursuant to grants approved by the Compensation 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 three to five years for officers, non-employee directors, and key employees, and are priced at the market value of the Company's common stock on the option's grant date. At June 30, 2019, there were a total of 205,484 shares of common stock available for grant under the plans.

Stock-based compensation is recognized as provided under FASB ASC Topic 718-10 and FASB ASC Topic 505-50. FASB ASC Topic 718-10 requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the requisite service period (generally the vesting period) in the consolidated financial statements based on their grant date fair values. The Company has applied the Black-Scholes valuation model in determining the grant date fair value of the stock option awards. Compensation expense is recognized only for those options expected to vest.

Long-term Incentive Program and Non-Employee Director Awards

On October 15, 2018, the Compensation Committee and Board approved and adopted a new long-term incentive program that seeks to motivate and reward certain employees and to align management’s interest with shareholders' by focusing executives on the achievement of long-term results. The program is comprised of four components: Service Options, Performance Options, Restricted Stock, and Performance Shares.

Pursuant to this program, the Compensation Committee approved certain grants of Service Options, Performance Options, Restricted Stock and Performance Shares under the World Acceptance Corporation 2011 Stock Option Plan and the World Acceptance Corporation 2017 Stock Incentive Plan to certain employee directors, vice presidents of operations, vice presidents, senior vice presidents, and executive officers. Separately, the Compensation Committee approved certain grants of Service Options and Restricted Stock to certain of the Company's non-employee directors.

Under the long-term incentive program, up to 100% of the shares of restricted stock subject to the Performance Shares shall vest, if at all, based on the achievement of two trailing earnings per share performance targets established by the Compensation Committee that are based on earnings per share (measured at the end of each calendar quarter, commencing with the calendar quarter ending September 30, 2019) for the previous four calendar quarters. The Performance Shares are eligible to vest over the Performance Share Measurement Period and subject to each respective employee’s continued employment at the Company through the last day of the applicable Performance Share Measurement Period (or as otherwise provided under the terms of the applicable award agreement or applicable employment agreement).

The Performance Share performance targets are set forth below.
Trailing 4-Quarter EPS Targets for
September 30, 2018 through March 31, 2025
Restricted Stock Eligible for Vesting
(Percentage of Award)
$16.35
40%
$20.45
60%


The Restricted Stock awards vest in six equal annual installments, beginning on the first anniversary of the grant date, subject to each respective employee’s continued employment at the Company through each applicable vesting date or otherwise provided under the terms of the applicable award agreement or applicable employment agreement.

The Service Options vest in six equal annual installments, beginning on the first anniversary of the grant date, subject to each respective employee’s continued employment at the Company through each applicable vesting date or otherwise provided under

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the terms of the applicable award agreement or applicable employment agreement. The option price is equal to the fair market value of the common stock on the grant date and the Service Options shall have a 10-year term.

The Performance Options shall fully vest if the Company attains the trailing earnings per share target over four consecutive calendar quarters occurring between September 30, 2018 and March 31, 2025 described below. Such performance target was established by the Compensation Committee and will be measured at the end of each calendar quarter commencing on September 30, 2019. The Performance Options are eligible to vest over the Option Measurement Period, subject to each respective employee’s continued employment at the Company through the last day of the Option Measurement Period or as otherwise provided under the terms of the applicable award agreement or applicable employment agreement. The option price is equal to the fair market value of the common stock on the grant date and the Performance Options shall have a 10-year term. The Performance Option performance target is set forth below.
Trailing 4-Quarter EPS Targets for
September 30, 2018 through March 31, 2025
Options Eligible for Vesting
(Percentage of Award)
$25.30
100%


Stock Options

The weighted-average fair value at the grant date for options issued during the three months ended June 30, 2019 and 2018 was $68.63 and $49.67, respectively. Fair value was estimated at grant date using the weighted-average assumptions listed below:
 
Three months ended June 30,
 
2019
 
2018
 
 
 
 
Dividend Yield
%
 
%
Expected Volatility
49.74%
 
53.02%
Average risk-free rate
2.22%
 
2.84%
Expected Life
6.6 years
 
5.0 years


The expected stock price volatility is based on the historical volatility of the Company's common stock for a period approximating the expected life. The expected life represents the period of time that options are expected to be outstanding after the grant date. The risk-free rate reflects the interest rate at grant date on zero coupon U.S. governmental bonds having a remaining life similar to the expected option term.

Option activity for the three months ended June 30, 2019 was as follows:
 
Shares
 
Weighted Average Exercise
Price
 
Weighted Average
Remaining
Contractual Term
 
Aggregate Intrinsic Value
 
 
 
 
 
 
 
 
Options outstanding, beginning of period
704,240

 
$
85.33

 
 
 
 
Granted during period
1,500

 
133.14

 
 
 
 
Exercised during period
(39,766
)
 
67.31

 
 
 
 
Forfeited during period
(443
)
 
63.31

 
 
 
 
Expired during period

 

 
 
 
 
Options outstanding, end of period
665,531

 
$
86.53

 
7.0 years
 
$
51,629,291

Options exercisable, end of period
261,633

 
$
71.24

 
4.1 years
 
$
24,297,778


 
The aggregate intrinsic value reflected in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price on June 30, 2019 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  June 30, 2019. This amount will change as the market price of the common stock changes. The total intrinsic value of options exercised during the periods ended June 30, 2019 and 2018 was as follows:

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June 30,
2019
 
June 30,
2018
 
 
 
 
Three months ended
$
2,835,328

 
$
941,140


 
As of June 30, 2019, total unrecognized stock-based compensation expense related to non-vested stock options amounted to approximately $14.1 million, which is expected to be recognized over a weighted-average period of approximately 5.0 years.

Restricted Stock

The Company did not grant any shares of restricted stock during the first quarter of fiscal 2020.

During fiscal 2019, the Company granted 760,420 shares of restricted stock (which are equity classified), to certain vice presidents, senior vice presidents, executive officers, and non-employee directors with a grant date weighted average fair value of $101.61.

During fiscal 2018, the Company granted 24,456 shares of restricted stock (which are equity classified) to certain executive officers, with a grant date weighted average fair value of $107.52 per share. One-third of these awards vest on each anniversary of the grant date over the three years following the grant date.

Compensation expense related to restricted stock 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 compensation expense of $6.7 million and $1.0 million for the three months ended June 30, 2019 and 2018, respectively, which is included as a component of general and administrative expenses in the Company’s Consolidated Statements of Operations.  

As of June 30, 2019, there was approximately $59.2 million of unrecognized compensation cost related to unvested restricted stock awards, which is expected to be recognized over the next 4.2 years based on current estimates.

A summary of the status of the Company’s restricted stock as of June 30, 2019, and changes during the three months ended June 30, 2019, are presented below:
 
Shares
 
Weighted Average Fair Value at Grant Date
 
 
 
 
Outstanding at March 31, 2019
783,450

 
$
100.66

Granted during the period

 

Vested during the period
(3,459
)
 
101.14

Forfeited during the period

 

Outstanding at June 30, 2019
779,991

 
$
100.65

 
Total Stock-Based Compensation

Total stock-based compensation included as a component of net income during the three-month periods ended June 30, 2019 and 2018 was as follows:
 
Three months ended June 30,
 
2019
 
2018
Stock-based compensation related to equity classified awards:
 
 
 
Stock-based compensation related to stock options
$
1,621,338

 
$
524,227

Stock-based compensation related to restricted stock, net of adjustments and exclusive of cancellations
6,690,870

 
950,790

Total stock-based compensation related to equity classified awards
$
8,312,208

 
$
1,475,017





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NOTE 9 – ACQUISITIONS

The Company evaluates each set of assets and activities it acquires to determine if the set meets the definition of a business according to FASB ASC Topic 805-10-55. Acquisitions meeting the definition of a business are accounted for as a business combination while all other acquisitions are accounted for as asset purchases.

The following table sets forth the Company's acquisition activity for the three months ended June 30, 2019. There were no acquisitions during the three months ended June 30, 2018.
 
 
Three months ended June 30,
 
 
2019
Acquisitions:
 
 
Number of branches acquired through business combinations
 
21

Number of loan portfolios acquired through asset purchases
 
94

Total acquisitions
 
115

 
 
 
Purchase price
 
$
40,263,875

 
 
 
Tangible assets:
 
 

Loans receivable, net
 
30,726,192

Property and equipment
 
69,000

Total tangible assets
 
30,795,192

 
 
 
Excess of purchase prices over carrying value of net tangible assets
 
$
9,468,683

 
 
 
Customer lists
 
$
8,689,024

Non-compete agreements
 
$
575,000

Goodwill
 
$
204,659



Acquisitions that are accounted for as business combinations typically result in one or more new branches. In such cases, the Company typically retains the existing employees and the branch location from the acquisition. The purchase price is allocated to the tangible assets and intangible assets acquired based upon their estimated fair market values at the acquisition date. The remainder is allocated to goodwill.

The following table describes the Company's business combination activity for the three months ended June 30, 2019.
No.
Acquiree Name
Acquiree State(s)
Date
1
Western Shamrock Corporation (11 branches)
GA
4/29/2019
2
Western Shamrock Corporation (7 branches)
SC
5/9/2019
3
Western Shamrock Corporation (3 branches)
AL
5/14/2019

Acquisitions that are accounted for as asset purchases are typically limited to acquisitions of loan portfolios. The purchase price is allocated to the tangible assets and intangible assets acquired based upon their estimated fair market values at the acquisition date. In an asset purchase, no goodwill is recorded.

The Company’s 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 eight months, and that these loans are priced at current rates, management believes the net loan balances approximate their fair value.


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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.

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.

Customer lists are valued with a valuation model that utilizes the Company’s historical data to estimate the value of any acquired customer lists. Customer lists are allocated at a branch level and are evaluated for impairment at a branch level when a triggering event occurs in accordance with FASB ASC Topic 360-10-05. If a triggering event occurs, the impairment loss to the customer list is generally the remaining unamortized customer list balance. In most acquisitions, the original fair value of the customer list allocated to a branch is less than $100,000, and management believes that in the event a triggering event were to occur, the impairment loss to an unamortized customer list would be immaterial.

The results of all acquisitions have been included in the Company’s Consolidated Financial Statements since the respective acquisition date. The pro forma impact of these branches 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 10 – DEBT

Revolving Credit Facility

In June 2019, the Company entered into an amended and restated revolving credit agreement, which amends and restates the prior revolving credit agreement to, among other things: (i) increase the aggregate commitments of the lenders to $685.0 million (from $480.0 million); (ii) permit the Company to purchase its equity securities or make other distributions in respect of its equity securities in the amount of $200 million from June 7, 2019 through June 1, 2020 plus up to 50% of consolidated adjusted net income for the period commencing on January 1, 2019, subject to certain restrictions; (iii) provide for a process to transition to a new benchmark interest rate from LIBOR, if necessary; (iv) extend the maturity date of the amended and restated revolving credit agreement to June 7, 2022; and (v) for clarity and convenience, restate the prior credit agreement, as amended since 2010. Under the amended and restated revolving credit agreement, the administrative agent has the right to set aside reasonable reserves against the available borrowing base in such amounts as it may deem appropriate, including, without limitation, reserves with respect to certain regulatory events or any increased operational, legal, or regulatory risk of the Company and its subsidiaries.

At June 30, 2019 $326.4 million was outstanding under the Company's revolving credit facility, not including a $0.3 million outstanding standby letter of credit related to workers compensation. To the extent that the letter of credit is drawn upon, the disbursement will be funded by the credit facility. There are no amounts due related to the letter of credit as of June 30, 2019. Subject to a borrowing base formula, the Company may borrow at the rate of LIBOR plus an applicable margin between 3.0% and 4.0% based on certain EBITDA related metrics set forth in the revolving credit agreement, which will be determined and adjusted on a monthly basis with a minimum rate of 4.0%. The revolving credit facility has a commitment fee of 0.50% per annum on the unused portion of the commitment. Commitment fees on the unused portion of the borrowing totaled $0.3 million and $0.3 million for the three months ended June 30, 2019 and 2018, respectively.

For the three months ended June 30, 2019 and fiscal year ended March 31, 2019, the Company’s effective interest rate, including the commitment fee and amortization of debt issuance costs, was 6.1% annualized and 6.7%, respectively, and the unused amount available under the revolver at June 30, 2019 was $351.5 million. Borrowings under the revolving credit facility mature on June 7, 2022.

Substantially all of the Company’s assets are pledged as collateral for borrowings under the revolving credit agreement.

Debt Covenants

The amended and restated revolving credit agreement contains affirmative and negative covenants, including covenants that generally restrict the ability of the Company and its subsidiaries to, among other things, incur or guarantee indebtedness, incur liens, pay dividends and repurchase or redeem capital stock, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, redeem or prepay subordinated debt, amend subordinated debt documents, make changes in the nature of its business, and engage in transactions with affiliates. The agreement also contains financial covenants, including: (i) a minimum consolidated net worth of $375.0 million; (ii) a minimum fixed charge coverage ratio of 2.5 to 1.0; (iii) a maximum provision for loan losses for any four quarters then ending that meets or exceeds the net loan charge off for the corresponding period; and (iv) a maximum specified level for the collateral performance indicator of 24.0%, which is the sum of (a) a three-month rolling average rate of receivables at least sixty days past due and (b) an eight-month rolling average net charge-off rate.

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The agreement allows the Company to incur subordinated debt that matures after the termination date for the revolving credit facility and that contains specified subordination terms, subject to limitations on amount imposed by the financial covenants under the agreement.

The Company was in compliance with these covenants at June 30, 2019 and March 31, 2019 and does not believe that these covenants will materially limit its business and expansion strategy.

The agreement contains events of default including, without limitation, nonpayment of principal, interest or other obligations, violation of covenants, misrepresentation, cross-default to other debt, prohibited payments on or amendment to subordinated debt, bankruptcy and other insolvency events, judgments, certain ERISA events, defaults under certain other agreements, actual or asserted invalidity of loan documentation, invalidity of subordination provisions of subordinated debt, certain changes of control of the Company, other defaults under the agreement that are not remedied within thirty (30) days, invalidity of loan documents related to the agreement, appointment of a custodian, trustee, or receiver, and the occurrence of certain regulatory events (including the entry of any stay, order, judgment, cease and desist order, or other sanction (other than the imposition of a monetary fine), order, or ruling against the Company or any of its subsidiaries related in any way to the originating, holding, pledging, col