Edgar Filing: WORLD ACCEPTANCE CORP

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2009.

¨ 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: 0-19599

WORLD ACCEPTANCE CORPORATION

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

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

108 Frederick Street

Greenville, South Carolina 29607

(Address of principal executive offices)

(Zip Code)

(864) 298-9800

(registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted and posted on its corporate Web site, if any, ever Interactive Data File required to be submitted and posted 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 and post such files). Yes ¨ No ¨

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

Large Accelerated Filer ¨		Accelerated Filer x
Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company ¨

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 November 2, 2009 was 16,249,812.

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

TABLE OF CONTENTS

		Page

PART I - FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):

	Consolidated Balance Sheets as of September 30, 2009, March 31, 2009 and September 30, 2008	3

	Consolidated Statements of Operations for the three and six months ended September 30, 2009 and 2008	4

	Consolidated Statements of Shareholders' Equity and Comprehensive Income (loss) for the year ended March 31, 2009 and the six months ended September 30, 2009	5

	Consolidated Statements of Cash Flows for the six months ended September 30, 2009 and 2008	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	26

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 4.	Submission of Matters of a Vote of Security Holders	27

Item 6.	Exhibits	28

Signatures		30

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			March 31,			September 30,
	2009			2009			2008
				As adjusted (Note 2)
ASSETS

Cash and cash equivalents	$	7,287,502			6,260,410			8,070,083
Gross loans receivable		754,853,611			671,175,985			667,178,690
Less:
Unearned interest and fees		(198,898,768	)		(172,743,440	)		(175,250,949	)
Allowance for loan losses		(43,682,344	)		(38,020,770	)		(38,120,647	)
Loans receivable, net		512,272,499			460,411,775			453,807,094
Property and equipment, net		23,120,785			23,060,360			22,969,529
Deferred income taxes		12,975,338			12,250,834			12,629,849
Other assets, net		10,249,313			9,541,757			9,285,885
Goodwill		5,580,946			5,580,946			5,384,021
Intangible assets, net		8,045,652			8,987,551			9,927,166
Total assets	$	579,532,035			526,093,633			522,073,627

LIABILITIES & SHAREHOLDERS' EQUITY

Liabilities:
Senior notes payable		145,400,000			113,310,000			146,700,000
Convertible senior subordinated notes payable		85,000,000			95,000,000			110,000,000
Debt discount		(8,135,041	)		(11,268,462	)		(15,464,789	)
Income taxes payable		4,761,236			11,412,722			367,598
Accounts payable and accrued expenses		23,679,446			21,304,466			16,406,308
Total liabilities		250,705,641			229,758,726			258,009,117

Shareholders' equity:
Preferred stock, no par value
Authorized 5,000,000 shares, no shares issued or outstanding		-			-			-
Common stock, no par value
Authorized 95,000,000 shares; issued and Outstanding 16,244,062 and 16,211,659 shares at September 30, 2009 and March 31, 2009, respectively		-			-			-
Additional paid-in capital		19,311,095			17,046,310			16,054,120
Retained earnings		312,765,165			283,518,260			248,411,201
Accumulated other comprehensive loss		(3,249,866	)		(4,229,663	)		(400,811	)
Total shareholders' equity		328,826,394			296,334,907			264,064,510
Commitments and contingencies
	$	579,532,035			526,093,633			522,073,627

See accompanying notes to consolidated financial statements.

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended				Six months ended
	September 30,				September 30,
	2009		2008		2009		2008
			As adjusted				As adjusted
			(Note 2)				(Note 2)

Revenues:
Interest and fee income	$	91,540,199		80,053,547		176,607,997		156,403,033
Insurance and other income		12,665,568		11,667,020		27,828,135		23,738,565
Total revenues		104,205,767		91,720,567		204,436,132		180,141,598

Expenses:
Provision for loan losses		25,156,035		23,307,132		45,584,298		41,164,045
General and administrative expenses:
Personnel		33,911,917		31,199,851		70,203,226		64,515,626
Occupancy and equipment		7,113,165		6,477,994		13,816,838		12,531,644
Data processing		494,415		580,950		1,028,011		1,170,397
Advertising		2,448,594		2,531,623		4,821,094		5,241,588
Amortization of intangible assets		567,688		623,200		1,132,458		1,223,547
Other		7,219,156		6,965,683		14,086,053		12,486,354
		51,754,935		48,379,301		105,087,680		97,169,156

Interest expense		3,617,034		3,891,920		6,727,181		7,500,483
Total expenses		80,528,004		75,578,353		157,399,159		145,833,684

Income before income taxes		23,677,763		16,142,214		47,036,973		34,307,914

Income taxes		9,065,930		6,196,833		17,790,068		13,019,334

Net income	$	14,611,833		9,945,381		29,246,905		21,288,580

Net income per common share:
Basic	$	0.90		0.61		1.80		1.31
Diluted	$	0.89		0.60		1.79		1.29

Weighted average common shares outstanding:
Basic		16,235,346		16,213,658		16,230,347		16,242,334
Diluted		16,418,257		16,492,710		16,369,820		16,534,674

See accompanying notes to consolidated financial statements.

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

							Accumulated
							Other
	Additional						Comprehensive			Total			Total
	Paid-in			Retained			Income			Shareholders’			Comprehensive
	Capital			Earnings			(Loss)			Equity			Income

Balances at March 31, 2008	$	1,323,001			232,812,768			169,503			234,305,272
Cumulative effect of change in accounting principle (Note 2)		14,961,722			(4,466,014	)		-			10,495,708
Proceeds from exercise of stock options (142,683 shares), including tax benefits of $1,320,974		2,975,335			-			-			2,975,335
Common stock repurchases (288,700 shares)		(6,527,680	)		(1,321,084	)		-			(7,848,764	)
Issuance of restricted common stock under stock option plan (78,592 shares)		1,418,031			-			-			1,418,031
Stock option expense		3,232,229			-			-			3,232,229
Repurchase and cancellation of convertible notes		(336,328	)		-			-			(336,328	)
Other comprehensive loss		-			-			(4,399,166	)		(4,399,166	)		(4,399,166	)
Net income		-			56,492,590			-			56,492,590			56,492,590
Total comprehensive income		-			-			-			-			52,093,424
Balances at March 31, 2009 (As Adjusted – Note 2)		17,046,310			283,518,260			(4,229,663	)		296,334,907

Proceeds from exercise of stock options (15,700 shares), including tax benefits of $107,369		247,666			-			-			247,666
Issuance of restricted common stock under stock option plan (16,703 shares)		956,268			-			-			956,268
Stock option expense		1,486,500			-			-			1,486,500
Repurchase and cancellation of convertible notes		(425,649	)		-			-			(425,649	)
Other comprehensive income		-			-			979,797			979,797			979,797
Net income		-			29,246,905			-			29,246,905			29,246,905
Total comprehensive income.		-			-			-			-			30,226,702
Balances at September 30, 2009	$	19,311,095			312,765,165			(3,249,866	)		328,826,394

See accompanying notes to consolidated financial statements.

WORLD ACCEPTANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended
	September 30,
	2009			2008
				As adjusted
				(Note 2)
Cash flows from operating activities:
Net income	$	29,246,905			21,288,580

Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets		1,132,458			1,223,547
Amortization of loan costs and discounts		215,958			381,631
Provision for loan losses		45,584,298			41,164,045
Gain on the extinguishment of debt		(2,361,180	)		-
Amortization of convertible note discount		1,984,432			2,356,836
Depreciation		2,738,254			2,198,658
Deferred income tax benefit (expense)		(724,504	)		2,869,226
Compensation related to stock option and restricted stock plans		2,442,768			2,668,042
Unrealized gains on interest rate swap		(568,588	)		(749,925	)

Change in accounts:
Other assets, net		(1,031,973	)		(13,828	)
Income taxes payable		(6,616,041	)		(17,768,065	)
Accounts payable and accrued expenses		2,896,712			(1,709,680	)
Net cash provided by operating activities		74,939,499			53,909,067

Cash flows from investing activities:

Increase in loans receivable, net		(96,103,452	)		(75,558,979	)
Assets acquired from office acquisitions, primarily loans		(628,363	)		(7,883,393	)
Increase in intangible assets from acquisitions		(190,559	)		(1,184,732	)
Purchases of property and equipment, net		(2,628,868	)		(6,478,677	)

Net cash used in investing activities		(99,551,242	)		(91,105,781	)

Cash flows from financing activities:

Proceeds of senior revolving notes payable, net		32,090,000			42,200,000
Repayment of convertible senior subordinated notes payable		(6,750,000	)		-
Repurchases of common stock		-			(6,159,203	)
Repayment of other notes payable		-			(400,000	)
Proceeds from exercise of stock options		140,297			1,327,435
Excess tax benefit from exercise of stock options		107,369			708,990

Net cash provided by financing activities		25,587,666			37,677,222

Increase in cash and cash equivalents		975,923			480,508

Cash and cash equivalents at beginning of period		6,260,410			7,589,575

Effect of foreign currency fluctuation on cash		51,169			-

Cash and cash equivalents at end of period	$	7,287,502			8,070,083

See accompanying notes to consolidated financial statements.

WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2009 and 2008

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The Consolidated Financial Statements of the Company at September 30, 2009, and for the three and six months then ended were prepared in accordance with the instructions for Form 10-Q and are unaudited; however, in the opinion of management, all adjustments (consisting only of items of a normal recurring nature) necessary for a fair presentation of the financial position at September 30, 2009, and the results of operations and cash flows for the periods ended September 30, 2009 and 2008, 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.

Certain reclassification entries have been made for fiscal 2009 to conform with fiscal 2010 presentation. These reclassifications had no impact on shareholders’ equity and comprehensive income or net income.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

These Consolidated Financial Statements do not include all disclosures required by U.S. generally accepted accounting principles and should be read in conjunction with the Company's audited Consolidated Financial Statements and related notes for the fiscal year ended March 31, 2009, included in the Company's 2009 Annual Report to Shareholders.

NOTE 2 – SUMMARY OF SIGNIFICANT POLICIES

Change in Accounting Principle

In May 2008, the Financial Accounting Standards Board (“FASB”) issued FASB ASC 470-20 (Prior authoritative literature: FASB Staff Position No. APB 14-1 “Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement)”). FASB ASC 470-20 applies to any convertible debt instrument that at conversion may be settled wholly or partly with cash, requires cash-settleable convertibles to be separated into their debt and equity components at issuance and prohibits the use of the fair-value option for such instruments. FASB ASC 470-20 is effective for the first fiscal period beginning after December 15, 2008 and must be applied retrospectively to all periods presented with a cumulative effect adjustment being made as of the earliest period presented. The Company adopted FASB ASC 470-20 effective April 1, 2009. The impact on our Consolidated Financial Statements is as follows:

	Three Months Ended September 30,
	2008							2007
						Upon							Upon
	As		Impact of			Adoption		As		Impact of			Adoption
	Previously		FASB			of FASB		Previously		FASB			FASB
	Reported		ASC 470-20			ASC 470-20		Reported		ASC 470-20			ASC 470-20
	(in thousands, except per share data)
Consolidated Statements of Operations
Interest expense	$	2,749		1,143			3,892		2,932		1,085			4,017
Income before income taxes		17,285		(1,143	)		16,142		16,919		(1,085	)		15,834
Income taxes		6,622		(425	)		6,197		6,454		(404	)		6,050
Net income		10,663		(718	)		9,945		10,465		(681	)		9,784

Earnings per common share
Basic	$	0.66		(0.05	)		0.61		0.61		(0.04	)		0.57
Diluted		0.65		(0.05	)		0.60		0.60		(0.04	)		0.56

	Six Months Ended September 30,
	2008							2007
						Upon							Upon
	As		Impact of			Adoption		As		Impact of			Adoption
	Previously		FASB			of FASB		Previously		FASB			FASB
	Reported		ASC 470-20			ASC 470-20		Reported		ASC 470-20			ASC 470-20
	(in thousands, except per share data)
Consolidated Statements of Operations
Interest expense	$	5,229		2,272			7,501		5,268		2,156			7,424
Income before income taxes		36,580		(2,272	)		34,308		34,565		(2,157	)		32,408
Income taxes		13,865		(846	)		13,019		13,249		(803	)		12,446
Net income		22,715		(1,426	)		21,289		21,316		(1,354	)		19,962

Earnings per common share
Basic	$	1.40		(0.09	)		1.31		1.23		(0.08	)		1.15
Diluted		1.37		(0.08	)		1.29		1.20		(0.07	)		1.13

	As of March 31, 2009							As of September 30, 2008
						Upon							Upon
	As		Impact of			Adoption		As		Impact of			Adoption
	Previously		FASB			of FASB		Previously		FASB			FASB
	Reported		ASC 470-20			ASC 470-20		Reported		ASC 470-20			ASC 470-20
	(in thousands)
Consolidated Balance Sheets
Deferred income taxes	$	16,983		(4,732	)		12,251		18,387		(5,757	)		12,630
Other assets, net		9,970		(428	)		9,542		9,795		(509	)		9,286
Total assets		531,254		(5,160	)		526,094		528,341		(6,267	)		522,074

Convertible senior subordinated notes payable, net of discount		95,000		(11,269	)		83,731		110,000		(15,465	)		94,535
Income taxes payable		11,253		160			11,413		239		129			368
Total liabilities		240,868		(11,109	)		229,759		273,346		(15,337	)		258,009

Additional paid-in capital		2,421		14,625			17,046		1,092		14,962			16,054
Retained earnings		292,195		(8,677	)		283,518		254,304		(5,893	)		248,411
Total shareholders’ equity		290,386		5,949			296,335		254,995		9,070			264,065

Total liabilities and shareholders’ equity		531,254		(5,160	)		526,094		528,341		(6,267	)		522,074

Recent Accounting Pronouncements:

FASB Accounting Standards Codification

In June 2009, the FASB issued ASC 105 (“SFAS 168”), “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.” ASC 105 replaces SFAS 162 and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. ASC 105 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of this pronouncement did have an impact to the Company’s financial statement disclosures, as all references to authoritative accounting literature have been referenced in accordance with the Codification.

Business Combinations

In December 2007, the FASB issued FASB ASC 805-10 (Prior authoritative literature: FASB Statement 141 (R), “Business Combinations,” which replaces FASB Statement No. 141). FASB ASC 805-10 is effective for the Company April 1, 2009 and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. FASB ASC 805-10 will change how business combinations are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. The adoption of FASB ASC 805-10 did not have an impact on the Company’s financial position and results of operations although it may have a material impact on accounting for business combinations in the future which cannot currently be determined.

In April 2009, the FASB issued FASB ASC 805-10-05 (Prior authoritative literature: FSP 141(R)-1 “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arises from Contingencies”). For business combinations, the standard requires the acquirer to recognize at fair value an asset acquired or liability assumed from a contingency if the acquisition date fair value can be determined during the measurement period. FASB ASC 805-10-05 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, with early adoption prohibited. The Company adopted these provisions at the beginning of the fiscal year April 1, 2009. FASB ASC 805-10-05 will be applied prospectively for acquisitions in fiscal 2010 or thereafter.

Subsequent Events

In May 2009, the FASB issued ASC Topic 855 (Prior authoritative literature: “SFAS No. 165”), “Subsequent Events”, which establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before financial statements are available to be issued (“subsequent events”). More specifically, ASC 855 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition in the financial statements, identifies the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that should be made about events or transactions that occur after the balance sheet date. ASC 855 provides largely the same guidance on subsequent events which previously existed only in auditing literature. The disclosure is required in financial statements for interim and annual periods ending after June 15, 2009. The Company has performed an evaluation of subsequent events through November 2, 2009, which is the date these Consolidated Financial Statements are filed.

Useful Life of Intangible Assets

In April 2008, the FASB issued FASB ASC 350-30-55-1c (Prior authoritative literature: FASB Staff Position No. FAS 142-3), “Determination of the Useful Life of Intangible Assets”. FASB ASC 350-30-55-1c applies to all recognized intangible assets and its guidance is restricted to estimating the useful life of recognized intangible assets. FASB ASC 350-30-55-1c is effective for the first fiscal period beginning after December 15, 2008 and must be applied prospectively to intangible assets acquired after the effective date. The Company adopted FASB ASC 350-30-55-1c effective April 1, 2009 with no significant impact to the Consolidated Financial Statements.

Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that Are Not Orderly

FASB ASC 820-10-65-4 (Prior authoritative literature: FASB Staff Position No. FAS 157-4), “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that Are Not Orderly,” provides additional guidance for estimating fair value in accordance with ASC 820 when the volume and level of activity for the asset or liability have significantly decreased. FASB ASC 820-10-65-4 also provides guidance for determining when a transaction is an orderly one. The Company adopted FASB ASC 820-10-65-4 during the quarter ended June 30, 2009 and the adoption did not have a significant impact on the Company’s Consolidated Financial Statements.

Recognition and Presentation of Other-Than-Temporary Impairments

FASB ASC 320-10-65 (Prior authoritative literature: FASB Staff Position FAS 115-2 and FAS 124-2), “Recognition and Presentation of Other-Than-Temporary Impairments,” amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FASB ASC 320-10-65 is effective for interim reporting periods ending after June 15, 2009, and did not have a significant impact on the Company’s Consolidated Financial Statements.

Instruments Indexed to an Entity’s Own Stock

In June 2008, the FASB ratified FASB ASC 815-40 (Prior authoritative literature: EITF Issue 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” ). FASB ASC 815-40 provides a new two-step model to be applied to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative in FASB ASC 815-10-15 (Prior authoritative literature: FASB No. 133, “Accounting for Derivative Instruments and Hedging Activities,”) in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for scope exception. It also adds clarity on the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. FASB ASC 815-40 also applies to any freestanding financial instrument that is potentially settled in an entity’s own stock, regardless of whether the instrument has all the characteristics of a derivative in FASB ASC 815-10-15. The Company adopted FASB ASC 815-40 during the quarter ended June 30, 2009 and the adoption did not have a material impact on the Company’s Consolidated Financial Statements.

Interim Disclosures about Fair Value of Financial Instruments

In April 2009, the FASB issued FASB ASC 825-10-65 (Prior authoritative literature: FASB Staff Position No. FAS 107-1, “Disclosures about Fair Value of Financial Instruments” and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”), which requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This Standard is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted FASB ASC 825-10-65 during the first quarter ended June 30, 2009. See Note 3.

NOTE 3 – FAIR VALUE

Effective April 1, 2008, the first day of fiscal 2009, the Company adopted the provisions of FASB ASC 820 (Prior authoritative literature: SFAS No. 157, “Fair Value Measurements”) for financial assets and liabilities, as well as any other assets and liabilities that are carried at fair value on a recurring basis in financial statements. FASB ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FASB ASC 820 applies under other accounting pronouncements in which the FASB has previously concluded that fair value is the relevant measurement attribute. Accordingly, FASB ASC 820 does not require any new fair value measurements. Effective April 1, 2009, the Company adopted the provisions of FASB ASC 820 for nonfinancial assets and liabilities which were previously deferred under the provisions of FASB ASC 820-10-65 (Prior authoritative literature: FSP FAS 157-2).

Financial assets and liabilities measured at fair value 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 following financial liabilities were measured at fair value on a recurring basis at September 30, 2009:

	Fair Value Measurements Using
			Quoted Prices
			In Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	September 30,		Assets		Inputs		Inputs
	2009		(Level 1)		(Level 2)		(Level 3)
Interest rate swaps
2009	$	1,875,077	$	-	$	1,875,077	$	-
2008	$	920,693	$	-	$	920,693	$	-

The Company’s interest rate swap was valued using the “income approach” valuation technique. This method used valuation techniques to convert future amounts to a single present amount. The measurement was based on the value indicated by current market expectations about those future amounts.

There were no assets or liabilities measured at fair value on a non recurring basis during the first six months of fiscal 2010.

Fair Value of Long-Term Debt

The book value and estimated fair value of our long-term debt was as follows (in thousands):

	September 30,		March 31,		September 30,
	2009		2009		2008

Book value:
Senior Note Payable	$	145,400		113,310		146,700
Convertible Notes, net of discount		76,865		83,732		94,535
	$	222,265		197,042		241,235

Estimate fair value:
Senior Note Payable	$	145,400		113,310		146,700
Convertible Notes		73,644		61,702		92,004
	$	219,044		175,012		238,704

The difference between the estimated fair value of long-term debt compared with its historical cost reported in our Condensed Consolidated Balance Sheets at September 30, 2009 and March 31, 2009 relates primarily to market quotations for the Company’s 3.0% Convertible Senior Subordinated Notes due October 1, 2011.

NOTE 4 – COMPREHENSIVE INCOME (LOSS)

The Company applies the provisions of FASB ASC 220-10 (Prior authoritative literature: SFAS No. 130 “Reporting Comprehensive Income”). The following summarizes accumulated other comprehensive income (loss) as of September 30:

	Three months						Six months
	ended September 30,						ended September 30,
	2009			2008			2009			2008

Balance at beginning of period	$	(2,616,950	)		630,931			(4,229,663	)		169,503

Unrealized income (loss) from foreign Exchange translation adjustment		(632,916	)		(1,031,742	)		979,797			(570,314	)

Balance at end of period	$	(3,249,866	)		(400,811	)		(3,249,866	)		(400,811	)

NOTE 5 – ALLOWANCE FOR LOAN LOSSES

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

	Three months						Six months
	ended September 30,						ended September 30,
	2009			2008			2009			2008

Balance at beginning of period	$	40,786,537			35,288,061			38,020,770			33,526,147

Provision for loan losses		25,156,035			23,307,132			45,584,298			41,164,045
Loan losses		(24,228,011	)		(22,115,145	)		(43,943,362	)		(40,288,288	)
Recoveries		2,009,248			1,627,137			3,958,386			3,375,249
Translation adjustment		(41,465	)		(73,599	)		62,252			(44,715	)
Allowance on acquired loans		-			87,061			-			388,209
Balance at end of period	$	43,682,344			38,120,647			43,682,344			38,120,647

The Company adopted FASB ASC 310 (Prior authoritative literature: Statement of Position No. 03-3, "Accounting for Certain Loans or Debt Securities Acquired in a Transfer"), which prohibits carry over or creation of valuation allowances in the initial accounting of all loans acquired in a transfer that are within the scope of this ASC. The Company believes that a loan has shown deterioration if it is over 60 days delinquent. The Company believes that loans acquired since the adoption of FASB ASC 310 have not shown evidence of deterioration of credit quality since origination, and therefore, are not within the scope of FASB ASC 310 because the Company did not pay consideration for, or record, acquired loans over 60 days delinquent. Loans acquired that are more than 60 days past due are included in the scope of FASB ASC 310 and therefore, subsequent refinances or restructures of these loans would not be accounted for as a new loan.

For the three months ended and six months ended September 30, 2008, the Company recorded adjustments of approximately $87,000 and $388,000, respectively, to the allowance for loan losses in connection with acquisitions in accordance with generally accepted accounting principles. No adjustments were recorded for the three months ended or the six months ended September 30, 2009. These adjustments represent the allowance for loan losses on acquired loans which do not meet the scope of FASB ASC 310.

NOTE 6 – AVERAGE SHARE INFORMATION

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

	Three months ended September 30,				Six months ended September 30,
	2009		2008		2009		2008

Basic:
Weighted average common shares outstanding (denominator)		16,235,346		16,213,658		16,230,347		16,242,334

Diluted:
Weighted average common shares outstanding		16,235,346		16,213,658		16,230,347		16,242,334
Dilutive potential common shares		182,911		279,052		139,473		292,340
Weighted average diluted shares outstanding (denominator)		16,418,257		16,492,710		16,369,820		16,534,674

Options to purchase 133,474 and 49,251 shares of common stock at various prices were outstanding during the three months ended September 30, 2009 and 2008, respectively, but were not included in the computation of diluted EPS because the options are anti-dilutive. Options to purchase 183,472 and 40,801 shares of common stock at various prices were outstanding during the six months ended September 30, 2009 and 2008. The shares related to the convertible senior notes payable (1,762,519) and related warrants were also not included in the computation of diluted EPS because the effect of such instruments was anti-dilutive.

NOTE 7 – STOCK-BASED COMPENSATION

Stock Option Plans

The Company has a 1992 Stock Option Plan, a 1994 Stock Option Plan, a 2002 Stock Option Plan, a 2005 Stock Option Plan and a 2008 Stock Option Plan for the benefit of certain directors, officers, and key employees. Under these plans, 6,010,000 shares of authorized common stock have been reserved for issuance pursuant to grants approved by the Compensation and Stock Option Committee of the Board of Directors. Stock options granted under these plans have a maximum duration of 10 years, may be subject to certain vesting requirements, which are generally one year for directors and between two and five years for officers and key employees, and are priced at the market value of the Company's common stock on the date of grant of the option. At September 30, 2009, there were 823,023 shares available for grant under the plans.

Stock based compensation is recognized as provided under FASB ASC 718-10 and FASB ASC 505-50 (Prior authoritative literature: FASB Statement 123(R), “Share Based Payment.”). FASB ASC 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 financial statements based on their fair values. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized. The Company elected to use the modified prospective transition method, and did not retroactively adjust results from prior periods. Under this transition method, stock option compensation is recognized as an expense over the remaining unvested portion of all stock option awards granted prior to April 1, 2006, based on the fair values estimated at grant date in accordance with the provisions of FASB ASC 718-10. The Company has applied the Black-Scholes valuation model in determining the fair value of the stock option awards. Compensation expense is recognized only for those options expected to vest, with forfeitures estimated based on historical experience and future expectations.

There were no option grants during the three or six months ended September 30, 2009 and 2008.

Option activity for the six months ended September 30, 2009 was as follows:

				Weighted		Weighted
				Average		Average
				Exercise		Remaining	Aggregated
	Shares			Price		Contractual Term	Intrinsic Value

Options outstanding, beginning of year		1,390,900		$	25.00
Granted		-			-
Exercised		(15,700	)		8.94
Forfeited		(1,150	)		46.29
Options outstanding, end of period		1,374,050		$	25.16	6.74	$	6,062,990
Options exercisable, end of period		591,550		$	23.20	5.09	$	3,490,508

The aggregate intrinsic value reflected in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price on September 30, 2009 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. The total intrinsic value of options exercised during the periods ended September 30, 2009 and 2008 were as follows:

	2009		2008
Three months ended	$	235,131		529,773
Six months ended	$	288,897		2,234,833

As of September 30, 2009, total unrecognized stock-based compensation expense related to non-vested stock options amounted to approximately $4.8 million, which is expected to be recognized over a weighted-average period of approximately 3.02 years.

Restricted Stock

On April 30, 2009 and May 11, 2009 the Company granted 15,000 shares and 3,000 shares of restricted stock (which are equity classified), respectively, with a grant date fair value of $29.68 and $20.41, respectively, per share to independent directors and a certain officer. All of these grants vested immediately.

On November 10, 2008, the Company granted 50,000 shares of restricted stock (which are equity classified), with a grant date fair value of $16.85 per share, to certain executive officers. One-third of the restricted stock vested immediately and one-third will vest on the first and second anniversary of the grant. On that same date, the Company granted an additional 29,100 shares of restricted stock (which are equity classified), with a grant date fair value of $16.85 per share, to the same executive officers. The 29,100 shares will vest in three years based on the Company’s compounded annual EPS growth according to the following schedule:

		Compounded
Vesting		Annual
Percentage		EPS Growth
100%		15% or higher
67%		12% - 14.99%
33%		10% - 11.99%
0%		Below 10%

On May 19, 2008 the Company granted 12,000 shares of restricted stock (which are equity classified) with a grant date fair value of $43.67 per share to its independent directors and a certain officer. One-half of the restricted stock vested immediately and the other half vested on the first anniversary of the grant.

On November 28, 2007, the Company granted 20,800 shares of restricted stock (which are equity classified), with a grant date fair value of $30.94 per share, to certain executive officers. One-third of the restricted stock vested immediately and one-third will vest on the first and second anniversary of grant. On that same date, the Company granted an additional 15,150 shares of restricted stock (which are equity classified), with a grant date fair value of $30.94 per share, to the same executive officers. The 15,150 shares will vest in three years based on the Company’s compounded annual EPS growth according to the following schedule:

		Compounded
Vesting		Annual
Percentage		EPS Growth
100%		15% or higher
67%		12% - 14.99%
33%		10% - 11.99%
0%		Below 10%

On November 12, 2007, the Company granted 8,000 shares of restricted stock (which are equity classified), with a grant date fair value of $28.19 per share, to certain officers. One-third of the restricted stock vested immediately and one-third will vest on the first and second anniversary of grant.

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 $221,000 and $279,000, respectively, of compensation expense for the quarters ended September 30, 2009 and 2008 and recognized $982,000 and $790,000, respectively, for the six months ended September 30, 2009 and 2008 related to restricted stock. Compensation expense related to restricted stock is included as a component of general and administrative expenses in the Company’s Consolidated Statements of Operations. All shares are expected to vest.

As of September 30, 2009, there was approximately $0.7 million of unrecognized compensation cost related to unvested restricted stock awards granted, which is expected to be recognized over the next 1.6 years.

A summary of the status of the Company’s restricted stock as of September 30, 2009, and changes during the six months ended September 30, 2009, is presented below:

	Number of Shares			Weighted Average Fair Value at Grant Date
Outstanding at March 31, 2009		80,246		$	22.94
Granted during the period		18,000			28.14
Vested during the period		(24,000	)		32.02
Cancelled during the period		(1,297	)		19.75
Outstanding at September 30, 2009		72,949		$	21.29

Total share-based compensation included as a component of net income during the three months ended and six months ended September 30, 2009 and 2008 was as follows:

	Three months ended				Six months ended
	2009		2008		2009		2008
Share-based compensation related to equity classified units:
Share-based compensation related to stock options	$	744,159		942,060	$	1,486,500		1,892,205
Share-based compensation related to restricted stock units		221,393		278,662		981,888		789,986

Total share-based compensation related to equity classified awards	$	965,552		1,220,722		2,468,388		2,682,191

NOTE 8 – ACQUISITIONS

The following table sets forth the acquisition activity of the Company for the six months ended September 30, 2009 and 2008:

	2009		2008

Number of offices purchased		2