Back to GetFilings.com

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

For the quarterly period ended December 31, 2003

or

For the transition period from                  to                 

Commission File Number: 0-19599

WORLD ACCEPTANCE CORPORATION

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

108 Frederick Street

Greenville, South Carolina 29607

(Address of principal executive offices)

(Zip Code)

(864) 298-9800

(registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes    ¨ No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

x Yes    ¨ No

Indicate the number of shares outstanding of each of issuer’s classes of common stock, as of the latest practicable date, February 13, 2004.

1

Table of Contents

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

TABLE OF CONTENTS

2

Table of Contents

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

See accompanying notes to consolidated financial statements.

3

Table of Contents

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to consolidated financial statements.

4

Table of Contents

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

See accompanying notes to consolidated financial statements.

5

Table of Contents

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to consolidated financial statements.

6

Table of Contents

WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003

NOTE 1 – BASIS OF PRESENTATION

The consolidated financial statements of the Company at December 31, 2003, and for the three and nine month periods then ended were prepared in accordance with the instructions for Form 10-Q and are unaudited; however, in the opinion of management, all adjustments (consisting only of items of a normal recurring nature) necessary for a fair presentation of the financial position at December 31, 2003, and the results of operations and cash flows for the three and nine months periods then ended, have been included. The results for the period ended December 31, 2003 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 2003 to conform with fiscal 2004 presentation. These reclassifications had no impact on shareholders’ equity or net income.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States and should be read in conjunction with the Company’s audited financial statements and related notes for the year ended March 31, 2003, included in the Company’s 2003 Annual Report to Shareholders.

NOTE 2 – COMPREHENSIVE INCOME

The Company applies the provision of Financial Accounting Standards Board’s (FASB) Statement of Financial Accounting Standards (SFAS) No. 130 “Reporting Comprehensive Income.” The Company has no items of other comprehensive income; therefore, net income equals comprehensive income.

NOTE 3 – ALLOWANCE FOR LOAN LOSSES

The following is a summary of the changes in the allowance for loan losses for the periods indicated (unaudited):

For the three months ended December 31, 2003 and 2002, the Company recorded adjustments of approximately $703,000, and $827,000, respectively, to the allowance for loan losses in connection with its acquisitions in accordance generally accepted accounting principles. These adjustments were $886,000 and $1,878,000 for the nine months ended December 31, 2003 and 2002, respectively.

The Company records acquired loans at fair value based on current interest rates, less allowances for uncollectibility and collection costs. The Company normally records all acquired loans on its books; however, the acquired loan portfolios generally include some loans that the Company deems uncollectible but which do not have an allowance assigned to them. An allowance for loan losses is then estimated based on a review of the loan

7

Table of Contents

portfolio, considering delinquency levels, charge-offs, loan mix and other current economic factors. The Company then records the acquired loans at their gross value and records the related allowance for loan losses as an adjustment to their allowance for loan losses. This is reflected as purchase accounting acquisitions. Subsequent charge-offs related to acquired loans are reflected in the purchase accounting acquisition adjustment in the year of acquisition.

NOTE 4 – AVERAGE SHARE INFORMATION

The following is a summary of the basic and diluted average common shares outstanding:

The following options were outstanding at the period end presented but were excluded from the calculation of diluted earnings per share because of the exercise price was greater than the average market price of the common shares:

NOTE 5 – STOCK-BASED COMPENSATION

At December 31, 2003, the Company had three stock-based employee compensation option plans, which are described more fully in Note 10 to the Consolidated financial Statements in the Company’s Annual Report on Form 10-K for the year ended March 31, 2003. The Company accounts for its option plans under the recognition and measurement principles of APB Opinion 25, “Accounting for Stock Issued to Employees,” and related Interpretations (“APB Opinion 25”). No stock-based employee compensation cost is reflected in net income related to these plans, as all options granted under those plans had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock Based Compensation” (“SFAS 123”) to stock-based employee compensation option plans (dollars in thousands except share data).

The fair value of the options granted is estimated at the time of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in fiscal 2004 and 2003 respectively: dividend yield of zero; expected volatility of 35.2% and 47.5%; risk free interest rate of 3.9%; and expected lives of 10 years. The fair value of stock option granted in fiscal 2004 and 2003 were $2.76 and $4.90, respectively.

8

Table of Contents

NOTE 6 – ACQUISITIONS

The following table sets forth the acquisition activity of the Company for the nine months ended December 31, 2003 and 2002:

The Company evaluates each acquisition to determine if the acquired enterprise meets the definition of a business. Those that meet the definition of a business are accounted for under SFAS No. 141 and those that do not meet the definition of a business combination are accounted for as asset purchases. 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.

9

Table of Contents

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

Results of Operations

The following table sets forth certain information derived from the Company’s consolidated statements of operations and balance sheets, as well as operating data and ratios, for the periods indicated (unaudited):

Comparison of Three Months Ended December 31, 2003, Versus

Three Months Ended December 31, 2002

Interest and fee income for the quarter ended December 31, 2003, increased by $4.6 million, or 13.9%, over the same period of the prior year. This increase resulted from a $23.2 million increase, or 11.4%, in average loans receivable over the two corresponding periods. The increase in interest and fee income was greater than the increase in average net loans receivable due to a small change in mix in the loan portfolio. During the 12 months ending on December 31, 2003, small loans (those less than $1,000 in original balance) grew by 13.6% and the larger loans grew by 1.8%. Smaller loans generally carry higher interest rates (and will have higher losses) than the larger loans.

Insurance commissions and other income increased by $618,000, or 11.0%, when comparing the two quarterly periods. Insurance commissions increased by $542,000, or 18.4%, due to the increased loan volume in those states where credit insurance may be sold. Other income increased by $76,000, or a modest 2.9%. Other sources of

10

Table of Contents

WORLD ACCEPTANCE CORPORATION

MANAGEMENTS’ DISCUSSION AND ANALYSIS, CONTINUED

revenues, including returned check charges, sale of motor club memberships, and the gross profit from the sale of electronics and appliances under our World Class Buying Club were higher during the most recent quarter due to the overall increase in the customer base, however this was partially offset by a decline in the revenue from ParaData Financial Systems, the Company’s computer subsidiary, which provides data processing systems to finance companies, including the Company.

Total revenues rose to $44.3 million during the quarter ended December 31, 2003, a 13.5% increase over the $39.0 million for the corresponding quarter of the previous year. Revenues from the 435 offices open throughout both quarters increased by approximately 7.7%, primarily due to increased balances of loans receivable in those offices. At December 31, 2003, the Company had 516 offices in operation, an increase of 46 offices from March 31, 2003.

The provisions for loan losses during the quarter ended December 31, 2003, increased by $868,000, or 8.5% from the same quarter last year. This increase resulted from a combination of increases in both the general allowance for loan losses due to loan growth and the amount of loans charged off. Net charge-offs for the current quarter amounted to $8.9 million, a 14.5% increase over the $7.8 million charged off during the same quarter of fiscal 2003. As a percentage of average loans receivable, net charge-offs increased to 15.7% on an annualized basis for three months ended December 31, 2003, from 15.3% annualized for the prior year quarter. The increase in the charge-off percentages is also partially due to the change in the mix of the loan portfolio as previously mentioned. Higher yielding small loans generally have higher loss ratios. Management does not currently believe that loan losses will continue to rise significantly above the most recent quarterly levels; however, the Company can give no assurance that loan losses will not continue to increase, and such further increases would negatively affect the Company’s financial performance.

General and administrative expenses for the quarter ended December 31, 2003, increased by $2.6 million, or 11.7% over the same quarter of fiscal 2003. This increase is due primarily to 46 net new offices opened or acquired between December 31, 2002 and December 31, 2003. Overall, general and administrative expenses as a percent of total revenues decreased from 57.5% during the quarter ended December 31, 2002 to 56.6% during the most recent quarter. The ratio of general and administrative expenses to total revenue is generally highest during our third fiscal quarter due to the large increase in advertising expenditures relating to the direct mail sent during the busy and important holiday lending season. This ratio is lowest during our fourth fiscal quarter due to the stabilization of expense combined with a large increase in revenue during this period. The revenue increase results from the higher loan balances outstanding during this quarter, the high volume of repayments in the January through March period and the fees generated from our tax preparation program.

Interest expense decreased by $179,000, or 15.2%, as a result of the continued reduction in interest rates during the last two years as well as due to a 10.9% decrease in average debt outstanding when comparing the two quarterly periods.

The Company’s effective income tax rate remained unchanged at 35.5% when comparing the two quarters.

Net income rose to $4.6 million during the three months ended December 31, 2003, a 37.3% increase over the $3.4 million earned during the corresponding three-month period of the previous year. Diluted earnings per share rose by only 21.1% when comparing the two quarterly periods. This lower percentage increase in diluted earnings per share is due to the increased shares outstanding resulting from the exercise of stock options as well as an increase in the dilutive effect of the remaining outstanding options based on the higher trading price of the Company’s common stock during the current fiscal year.

Comparison of Nine Months Ended December 31, 2003,

Versus Nine Months Ended December 31, 2002

For the nine-month period ended December 31, 2003, net income amounted to $16.3 million. This represents a $3.7 million, or 29.0%, increase when comparing the two nine-month periods. Operating income (revenues less the provision for loan losses and general and administrative expenses) increased by $5.2 million, or 22.8%, over the two periods. This increase was in addition to a decrease in interest expense, offset by an increase in income taxes.

Total revenues amounted to $126.2 million during the current nine-month period, an increase of $16.2 million, or 14.8%, over the prior-year period. This increase resulted from increases in interest and fee income of 13.8%, insurance commissions of 20.9% and other income of 21.0%. The increase in interest and fee income resulted from the increase in average loans receivable of 13.0% when comparing the two nine-month periods. Revenues from the 435 offices open throughout both nine-month periods increased approximately 9.9%.

11

Table of Contents

The provision for loan losses increased by $4.2 million, or 17.2%, during the current nine-month period when compared to the same period of fiscal 2003. This increase resulted primarily from an increase in loan losses over these two periods. Net charge-offs increased to $24.4 million during the nine-months ended September 31, 2002, a $3.6 million, or 17.5%, increase over the $20.8 million charged-off during the December 31, 2002 period. As a percentage of average loans receivable, annualized net charge-offs rose to 15.0% during the current period from 14.5% during the same period of fiscal 2003.

General and administrative expenses increased by $6.8 million, or 10.9%, over the two nine-month periods. This increase resulted from the 46 net new offices added during the 12 month period ending December 31, 2003. As a percent of total revenues, general and administrative expenses decreased from 57.1% during the nine month of fiscal 2003 to 55.2% during the most recent period. Additionally, excluding the expenses associated with ParaData, overall general and administrative expenses, when divided by the average open offices, increased by 5.0% when comparing the two-nine month periods.

Interest expense decreased by $461,000 when comparing the two nine-month periods, a decrease of 13.6%. This reflects the decrease in interest rates during the past two years.

The effective income tax rate remained unchanged at 35.5% during the two nine-month periods.

Liquidity and Capital Resources

The Company’s primary ongoing cash requirements relate to the funding of new offices and acquisitions, the overall growth of loans outstanding, the repayment of long-term indebtedness and the repurchase of its common stock. The Company has financed these requirements through a combination of cash flow from operations and borrowings from its institutional lenders. The Company believes that cash flow from operations and borrowings under its revolving credit facility will be adequate to fund its currently expected cost of opening or acquiring new offices, including funding initial operating losses of new offices and funding loans receivable originated by those offices and the Company’s other offices, and the scheduled repayment of the senior subordinated notes. Management is not currently aware of any trends, demands, commitments, events or uncertainties 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 do so in the future as the need arises; however, there can be no assurance that this additional funding will be available (or available on reasonable terms) if and when needed.

As the Company’s gross loans receivable increased from $173.6 million at March 31, 2000 to $266.8 million at March 31, 2003, net cash provided by operating activities for fiscal years 2001, 2002 and 2003 was $31.9 million, $48.3 million and $55.1 million, respectively.

The Company repurchased 1,623,549 shares in fiscal 2003 for an aggregate purchase price of $12,000,000. 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.

The Company acquired 29 offices and a number of loan portfolios from competitors in 7 states in 20 separate transactions during the first nine months of fiscal 2004. Gross loans receivable purchased in these transactions were approximately $10.9 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 plans to open or acquire at least 25 new offices in each of the next two fiscal years. Expenditures by the Company to open and furnish new offices generally averaged approximately $20,000 per office during fiscal 2003. 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 has a $152.0 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, 2005. 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 2.0% per annum. At December 31, 2003, the interest rate on borrowings under the revolving credit facility was 3.16%. The Company pays a commitment fee equal to 0.375% of the daily unused portion of the revolving credit facility. Amounts outstanding under the revolving credit facility may not exceed specified percentages of eligible loans

12

Table of Contents

receivable. On December 31, 2003, $121.0 million was outstanding under this facility and there was $46.0 million of unused borrowing availability under the borrowing base limitations.

The Company has a $1.2 million installment note payable with a bank, bearing interest at LIBOR plus 2.00%, payable monthly, due in six $200,000 annual installment beginning on May 1, 2004. Certain fixed assets are pledged as collateral on this note.

The Company has $2.0 million of senior subordinated secured notes payable to an insurance company. These notes mature on June 30, 2004, and bear interest at 10.0%, payable quarterly. The notes were issued at a discounted price equal to 99.6936% and may be prepaid subject to certain prepayment penalties. Borrowings under the revolving credit facility and the senior subordinated notes are secured by a lien on substantially all the tangible and intangible assets of the Company and its subsidiaries pursuant to various security agreements.

The Company also has a $482,000 note payable to an unaffiliated insurance company, bearing interest at 10.0%, payable annually, which matures in September 2004.

The Company’s credit agreements contain a number of financial covenants, including minimum net worth and fixed charge coverage requirements. The credit agreements also contain certain other covenants, including covenants that impose limitations on the Company with respect to (i) declaring or paying dividends or making distributions on or acquiring common or preferred stock or warrants or options; (ii) redeeming or purchasing or prepaying principal or interest on subordinated debt; (iii) incurring additional indebtedness; and (iv) entering into a merger, consolidation or sale of substantial assets or subsidiaries. The senior subordinated notes are also subject to prepayment penalties. The Company was in compliance with these agreements as of December 31, 2003 and does not believe that these agreements will materially limit its business and expansion strategy.

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 nine 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 Issued Accounting Standards

In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest Entities, which was issued in January 2003. The Company will be required to apply FIN 46R to variable interests in VIEs created after December 31, 2003. For variable interest in VIEs created before January 1, 2004, the Interpretation will be applied beginning on January 1, 2005. For any VIEs that must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities and noncontrolling interests of the VIE initially would be measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying amounts is not practicable, fair value at the date FIN 46R first applies may by used to measure the assets, liabilities and noncontrolling interest of the VIE.

13

Table of Contents

WORLD ACCEPTANCE CORPORATION

MANAGEMENTS’ DISCUSSION AND ANALYSIS, CONTINUED

The Company had no impact upon adoption since it had no interests in entities, which it considers to be included within the scope of FIN 46.

Recently Issued Accounting Pronouncements

The AcSEC issued Statement of Position 3-03 (SOP) “Accounting for Certain Loans or Debt Securities Acquired in a Transfer” which addresses accounting differences between contractual cash flows and cash flows expected to be collected from an investor’s initial investment in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to credit quality. It includes such loans acquired in purchase business combinations and applies to all nongovernmental entities, including not-for-profit organizations. This SOP does not apply to loans originated by the entity. This SOP limits the yield that may be accreted (accretable yield) to the excess of the investor’s estimate of undiscounted expected principal, interest, and other cash flows (cash flows expected at acquisition to be collected) over the investor’s initial investment in the loan. This SOP requires that the excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) not be recognized as an adjustment of yield, loss accrual, or valuation allowance. This SOP prohibits investors from displaying accretable yield and nonaccretable difference in the balance sheet. Subsequent increases in cash flows expected to be collected generally should be recognized prospectively through adjustment of the loan’s yield over its remaining life. Decreases in cash flows expected to be collected should be recognized as impairment.

This SOP prohibits “carrying 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. The prohibition of the valuation allowance carryover applies to the purchase of an individual loan, a proof of loans, a group of loans, and loans acquired in a purchase business combination.

This SOP is effective for loans acquired in fiscal years beginning after December 15, 2004. For loans acquired in fiscal years beginning on or before December 15, 2004, and within the scope of Practice Bulletin 6, paragraphs 7 and 8 of this SOP, as they apply to decreases in cash flows expected to be collected, should be applied prospectively for fiscal years beginning after December 15, 2004.

Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity

Effective July 1, 2003, the Company adopted SFAS No. 150, (“SFAS 150”), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS 150 requires an issuer to classify certain financial instruments that include certain obligations, such as mandatory redemption, repurchase of the issuer’s equity, or settlement by issuing equity, as liabilities or assets in some circumstances. Forward contracts to repurchase an issuer’s equity shares that require physical settlement in exchange for cash are initially measured at the fair value of the shares at inception, adjusted for any consideration or unstated rights or privileges, which is the same as the amount that would be paid under the conditions specified in the contract if settlement occurred immediately. Those contracts and mandatorily redeemable financial instruments are subsequently measured at the present value of the amount to be paid at settlement, if both the amount of cash and the settlement date are fixed, or, otherwise, at the amount that would be paid under the conditions specified in the contract if settlement occurred at the reporting date. Other financial instruments are initially and subsequently measured at fair value, unless required by SFAS 150 or other generally accepted accounting principles to be measured differently. The Company had no impact upon adoption since it had no financial instruments, which it considers to be included within the scope of SFAS 150.

14

Table of Contents

WORLD ACCEPTANCE CORPORATION

MANAGEMENTS’ DISCUSSION AND ANALYSIS, CONTINUED

Forward-Looking Information

This report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may contain various “forward-looking statements,” within the meaning of Section 21E of the Securities Exchange Act of 1934, that are based on management’s belief and assumptions, as well as information currently available to management. When used in this document, the words “anticipate,” “estimate,” “expect,” “believe,” “plan,” “may,” “will,” “should” and similar expressions may identify forward-looking statements. Although the Company believes that the expectations reflected in any such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Any such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company’s actual financial results, performance or financial condition may vary materially from those anticipated, estimated or expected. Among the key factors that could cause the Company’s actual financial results, performance or condition to differ from the expectations expressed or implied in such forward-looking statements are the following: changes in interest rates, risks inherent in making loans, including repayment risks and value of collateral; recently-enacted or proposed legislation; the timing and amount of revenues that may be recognized by the Company; changes in current revenue and expense trends (including trends affecting charge-offs); changes in the Company’s markets and general changes in the economy (particularly in the markets served by the Company); and other matters discussed in this Report and the Company’s other filings with the Securities and Exchange Commission.

The Company’s financial instruments consist of the following: cash, loans receivable, senior notes payable and subordinated notes payable. Fair market 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 revolving credit facility and the other $1.2 million note payable have variable rates based on a margin over LIBOR and reprice with any changes in LIBOR. The interest rate of the subordinated notes is 10%, which is considered to be a market rate for this type of instrument. The Company’s outstanding debt under its floating rate notes was $122.2 million at December 31, 2003. Interest on borrowings under the revolving credit facility is based at the Company’s option, on the prime rate or LIBOR plus 2.00% and on the other note payable, LIBOR plus 2.00%. Based on the outstanding balance at December 31, 2003, a change of 1% in the interest rate would cause a change in interest expense of approximately $1.2 million on an annual basis.

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 December 31, 2003. 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. During the third quarter of fiscal 2004 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.

15

Table of Contents

PART II. OTHER INFORMATION

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 currently a party to any such pending legal proceedings that would have a material adverse effect on its financial condition.

The Company’s credit agreements contain certain restrictions on the payment of cash dividends on its capital stock. See Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources,” the contents of which are incorporated by reference in response to this item.

16

Table of Contents

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

PART II. OTHER INFORMATION, CONTINUED

(a) Exhibits:

17

Table of Contents

(b) Reports on Form 8-K.

The Company furnished one report on Form 8-K during the quarter ended December 31, 2003. The report, furnished October, 2003, attached the terms of the Company’s earnings press release the quarter ended September 30, 2003.

18

Table of Contents

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

19