World Acceptance Corp. engages in the small-loan consumer finance business. It offers short-term small instalment, medium-term larger loans, related credit insurance, ancillary products and services to individuals. The company also offers income tax return preparation services to customers. It also markets computer software and related services to financial services companies through its subsidiary ParaData Financial Systems. World Acceptance was founded in 1962 and is headquartered in Greenville, SC.
Federal legislative or regulatory proposals, initiatives, actions, or changes that are adverse to our operations or result in adverse regulatory proceedings, or our failure to comply with existing or future federal laws and regulations, could force us to modify, suspend, or cease part or all of our nationwide operations.
We have experienced significant turnover in our senior management, and our business may be adversely affected by the transitions in our senior management team.
The departure, transition, or replacement of key personnel could significantly impact the results of our operations. If we cannot continue to hire and retain high-quality employees, our business and financial results may be negatively affected.
We may be exposed to liabilities under the FCPA, and any determination that the Company or any of its subsidiaries has violated the FCPA could have a material adverse effect on our business and liquidity.
Our investigation of our previous operations in Mexico may expose the Company to other potential liabilities in addition to any potential liabilities under the FCPA and cause the Company to incur substantial expenses.
We may suffer significant liability in connection with indemnification provisions of the stock purchase agreement pursuant to which we sold our Mexico subsidiaries.
Litigation and regulatory actions, including challenges to the arbitration clauses in our customer agreements, could subject us to significant class actions, fines, penalties, judgments and requirements resulting in increased expenses and potential material adverse effects on our business, results of operations and financial condition.
Unfavorable state legislative or regulatory actions or changes, adverse outcomes in litigation or regulatory proceedings or failure to comply with existing laws and regulations could force us to cease, suspend or modify our operations in a state, potentially resulting in a material adverse effect on our business, results of operations and financial condition.
Changes in local laws and regulations or interpretations of local laws and regulations could negatively impact our business, results of operations, and financial condition.
Media and public characterization of consumer installment loans as being predatory or abusive could have a materially adverse effect on our business, prospects, results of operations and financial condition.
Damage to our reputation could negatively impact our business.
Employee misconduct or misconduct by third parties acting on our behalf could harm us by subjecting us to monetary loss, significant legal liability, regulatory scrutiny, and reputational harm.
Interest rate fluctuations may adversely affect our borrowing costs, profitability and liquidity.
We depend to a substantial extent on borrowings under our revolving credit agreement to fund our liquidity needs.
Uncertainty about the future of LIBOR may adversely affect our business.
Our risk management efforts may not be effective.
Our current debt and any additional debt we may incur in the future could negatively impact our business, prevent us from satisfying our debt obligations and adversely affect our financial condition.
We may not be able to generate sufficient cash flows to service our outstanding debt and fund operations and may be forced to take other actions to satisfy our obligations under such debt.
The terms of our debt limit how we conduct our business.
Changes in federal, state and local tax law, interpretations of existing tax law, or adverse determinations by tax authorities, could increase our tax burden or otherwise adversely affect our financial condition or results of operations.
The conditions of the U.S. and international capital markets may adversely affect lenders with which we have relationships, causing us to incur additional costs and reducing our sources of liquidity, which may adversely affect our financial position, liquidity and results of operations.
We are exposed to credit risk in our lending activities.
Our insurance operations are subject to a number of risks and uncertainties, including claims, catastrophic events, underwriting risks and dependence on a primary distribution channel.
A prolonged shutdown of the federal government may result in higher delinquency and could negatively affect our financial condition and results of operations.
If our estimates of loan losses are not adequate to absorb actual losses, our provision for loan losses would increase, which would adversely affect our results of operations.
The concentration of our revenues in certain states could adversely affect us.
We have goodwill, which is subject to periodic review and testing for impairment.
If we fail to maintain appropriate controls and procedures, we may not be able to accurately report our financial results, which could have a material adverse effect on our operations, financial condition, and the trading price of our common stock.
Regular turnover among our managers and other employees at our branches makes it more difficult for us to operate our branches and increases our costs of operations, which could have an adverse effect on our business, results of operations and financial condition.
We may be unable to execute our business strategy due to current economic conditions.
Our ability to execute our growth strategy may be adversely affected.
We currently lack product and business diversification; as a result, our revenues and earnings may be disproportionately negatively impacted by external factors and may be more susceptible to fluctuations than more diversified companies.
A reduction in demand for our products and a failure by us to adapt to such reduction could adversely affect our business and results of operations.
We operate in a highly competitive market, and we cannot ensure that the competitive pressures we face will not have a material adverse effect on our results of operations, financial condition and liquidity.
We depend on secure information technology, and a breach of those systems or those of third-party vendors could result in significant losses, unauthorized disclosure of confidential customer information, and reputational damage, which could materially adversely affect our business, financial condition and/or results of operations, and could lead to significant financial and legal exposure.
Any interruption of our information systems could adversely affect us.
We may not be able to make technological improvements as quickly as some of our competitors, which could harm our ability to compete with our competitors and adversely affect our results of operations, financial condition, and liquidity.
We are subject to data privacy laws, which may significantly increase our compliance and technology costs resulting in a material adverse effect on our results of operations and financial condition.
We are also subject to the theft or misuse of physical customer and employee records at our facilities.
Our centralized headquarters functions are susceptible to disruption by catastrophic events, which could have a material adverse effect on our business, results of operations, and financial condition.
Absence of dividends could reduce our attractiveness to investors.
Various provisions of our charter documents and applicable laws could delay or prevent a change of control that shareholders may favor.
Overall stock market volatility may materially and adversely affect the market price of our common stock.
Changes to accounting rules, regulations or interpretations could significantly affect our financial results.
If assumptions or estimates we use in preparing our financial statements are incorrect or are required to change, our reported results of operations and financial condition may be adversely affected.
A small number of our shareholders have the ability to significantly influence matters requiring shareholder approval and such shareholders have interests which may conflict with the interests of our other security holders.
The future issuance of additional shares of our common stock in connection with potential acquisitions or otherwise will dilute all other shareholders.
Our use of third-party vendors is subject to regulatory review.
Initiating and processing potential acquisitions may be unsuccessful or difficult, leading to losses and increased delinquencies, which could have a material adverse effect on our results of operations.
As disclosed above, we sold our Mexico operations effective July 1, 2018. As a result of the sale, we have classified the Mexico business as discontinued operations on the statements of operations and balance sheets for the applicable periods. Net income from continuing operations for fiscal 2019 was $73.9 million, a 50.5% increase from the $49.1 million earned during fiscal 2018. The increase in net income from continuing operations was primarily due to a $15.4 million decrease in income tax expense related to the implementation of the Tax Cuts and Jobs Act (TCJA) in the prior year as well as an increase in average net loans receivable in the current period.
Net income for fiscal 2019 was $37.2 million, a 30.6% decrease from the $53.7 million earned during fiscal 2018. We recognized a $39.0 million impairment loss on our investment in our Mexico operations in the first quarter of fiscal 2019. In accordance with GAAP, our testing for, and subsequent recognition of, the impairment was triggered by the change in classification of our Mexico operations from continuing operations to held for sale. Of the total impairment loss, $31.3 million is directly attributable to the cumulative translation loss on the investment stemming from the devaluation of the Mexican Peso relative to the U.S. Dollar since the date of our investment.
Operating income (revenues less provision for loan losses and general and administrative expenses) from continuing operations decreased $8.1 million.