World Acceptance Corporation Reports Record Third Quarter
January 28, 2010
GREENVILLE, SC – January 28, 2010 – World Acceptance Corporation (NASDAQ:WRLD) today reported record results for the third quarter of fiscal 2010, including a 64.8% increase in diluted earnings per share, a 13.9% increase in gross loan balances, and a 13.3% increase in revenues for the quarter ended December 31, 2009, compared with the corresponding quarter of the prior fiscal year.
Net income for the third quarter rose 66.4% to $14.8 million compared with $8.9 million for the same quarter of the prior year. Net income per diluted share increased 64.8% to $0.89 in the third quarter of fiscal 2010 compared with $0.54 in the third quarter of fiscal 2009. The fiscal 2009 net income for the third quarter was revised from $10.0 million, or $0.61 per share to $8.9 million, or $0.54 per share, due to a change in an accounting principle for the Company’s convertible notes.
World Acceptance’s strong earnings momentum was due to growth in our core business, reduced loan losses as a percentage of total loans and a substantial improvement in our expense ratios, stated Sandy McLean, Chairman and CEO of the Company. Our record loans outstanding benefited from increased loan volume at existing offices and additional volume from offices opened since last year. We also experienced lower loss ratios over the past three quarters even though they are above our historical levels due to the soft economy.
Total revenues increased to $112.3 million in the third quarter of fiscal 2010, a 13.3% increase over the $99.2 million reported in the third quarter last year. The revenue increase was consistent with a 13.7% increase in average net loans when comparing the two quarterly periods. Gross loans outstanding increased to a record high $838.9 million at December 31, 2009, up 13.9% from $736.2 million at December 31, 2008.
The third quarter’s results included a number of financial transactions that resulted in pretax non operating gains being approximately $1.0 million lower in fiscal 2010 than in fiscal 2009. Fiscal 2010 results included $439,000 in net gains for the third quarter, including a $117,000 gain on the repurchase and cancellation of $1 million par value of its convertible notes and a $322,000 gain on its interest rate swaps. Fiscal 2009 results included approximately $1.4 million in net gains for the third quarter that included a $3.0 million pre-tax gain from the sale of the Company’s $10 million foreign exchange currency option and the repurchase and cancellation of $5 million par value of its 3% convertible senior subordinated notes, partially offset by a $1.6 million loss on its interest rate swaps.
The provision for loan losses increased by 0.5% during the current quarter, to $29.6 million compared with $29.5 million for the fiscal 2009 third quarter. Net charge-offs amounted to $25.7 million, or 17.8% of average net loans on an annualized basis, compared with $24.9 million, or 19.6% of average net loans for the prior year quarter. Delinquencies 61+ days past due decreased by 30 basis points on both a recency and contractual basis, to 3.0% and 4.3%, respectively, as of the end of the current quarter.
We experienced a reduction in net charge-off ratios in each of the last three quarters and a steady improvement in our loss ratios during the current year, noted Mr. McLean. Although these are positive trends, they remain above our historical levels for these credit metrics. The 180 basis points (annualized) decrease in the third quarter’s net charge-off ratio was at least 100 basis points greater than the previous two quarterly reductions. Additionally, our net charge-offs as a percent of average net loans (annualized) for the first nine months of the current fiscal year loss ratio was approximately 110 basis points greater when compared with the average ratio for the corresponding three quarters of fiscal 2005 through 2008. Based on the continued softness in the economy, we cannot predict when or if we will return to more historical loan loss ratios, yet believe that our current reserves are adequate at current loss levels.
The Company’s general and administrative expenses were $55.5 million in the current quarter, a 7.4% increase over the $51.7 million in the prior year quarter. This represents 49.5% of total revenues during the current fiscal quarter compared with 52.2% for last year. The improvement resulted from the strong growth in revenues combined with reduced start-up costs associated with a lower number of branch openings in fiscal 2010 compared with the first nine months of fiscal 2009. The Company opened or acquired 32 new offices during the current year compared with 85 during the same period of the prior year.
Other key return ratios for the third quarter included a 12.2% return on average assets (on a trailing four quarters) and a return on average equity of 22.6% (on a trailing four quarters).
Nine-Month Results
For the first nine-months of the fiscal year, net income rose 45.9% to $44.0 million compared with $30.2 million for the nine months ended December 31, 2008. Fully diluted net income per share rose 47.3% to $2.68 in fiscal 2010 compared with $1.82 for the first nine months of fiscal 2009. The fiscal 2009 net income was revised from $32.7 million, or $1.98 per dilutive share, due to a change in an accounting principle as previously mentioned.
Total revenues for the first nine-months of fiscal 2010 rose 13.4% to $316.7 million compared with $279.3 million during the corresponding period of the previous year. Net charge-offs increased $3.9 million, or 6.3%, compared with the prior year first nine-months. Annualized net charge-offs as a percent of average net loans were 16.0% compared with 17.1% during the prior year nine-month period.
During the first nine-months of the fiscal year, the Company opened 32 offices and closed 1 office, resulting in a total of 975 offices at December 31, 2009.
About World Acceptance Corporation
World Acceptance Corporation is one of the largest small-loan consumer finance companies, operating 975 offices in 11 states and Mexico. It is also the parent company of ParaData Financial Systems, a provider of computer software solutions for the consumer finance industry.
Third Quarter Conference Call
The senior management of World Acceptance Corporation will be discussing these results in its quarterly conference call to be held at 10:00 a.m. Eastern time today. Interested parties may participate in this call by dialing 1-888-312-9852, passcode 4752518. A simulcast of the conference call is also available on the Internet at http://tinyurl.com/yflbmtr or www.streetevents.com. The call will be available for replay on the Internet for approximately 30 days.
World Acceptance Corporation
Consolidated Statements of Operations
-------------------------------------
(unaudited and in thousands, except per share amounts)& nbsp;
Three Months Ended Nine Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Interest & fees $97,610 $84,881 $274,218 $241,284
Insurance and other 14,700 14,280 42,528 38,019
Total revenues 112,310 99,161 316,746 279,303
Expenses:
Provision for loan
losses 29,633 29,490 75,217 70,654
General and
Administrative
expenses
Personnel 34,028 31,700 104,232 96,216
Occupancy & equipment 7,658 6,491 21,475 19,023
Data processing 475 573 1,503 1,743
Advertising 5,071 5,087 9,892 10,329
Intangible
amortization 563 621 1,696 1,845
Other 7,742 7,244 21,828 19,730
55,537 51,716 160,626 148,886
Interest expense 3,756 3,928 10,483 11,428
Total expenses 88,926 85,134 246,326 230,968
Income before taxes 23,384 14,027 70,420 48,335
Income taxes 8,633 5,164 26,423 18,183
Net income $14,751 $8,863 $43,997 $30,152
======= ====== ======= =======
Diluted earnings per
share $0.89 $0.54 $2.68 $1.82
===== ===== ===== =====
Diluted weighted
average shares
outstanding 16,576 16,342 16,434 16,543
====== ====== ====== ======
Consolidated Balance Sheets
---------------------------
(unaudited and in thousands)
December 31, March 31, December 31,
2009 2009 2008
---- ---- ----
ASSETS
Cash $12,946 $6,260 $7,139
Gross loans receivable 838,864 671,176 736,234
Less: Unearned
interest & fees (223,441) (172,743) (194,872)
Allowance for loan
losses (47,679) (38,021) (42,576)
------- ------- -------
Loans receivable,
net 567,744 460,412 498,786
Property and equipment,
net 22,936 23,060 23,069
Deferred income taxes 13,027 12,251 13,681
Income taxes receivable - - 1,569
Goodwill 5,581 5,581 5,584
Intangibles 7,541 8,988 9,513
Other assets 10,350 9,542 9,162
$640,125 $526,094 $568,503
======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Notes payable 262,494 197,041 276,734
Income tax payable 5,625 11,413 -
Accounts payable and
accrued expenses 24,854 21,305 22,734
------ ------ ------
Total liabilities 292,973 229,759 299,468
Shareholders' equity 347,152 296,335 269,035
$640,125 $526,094 $568,503
======== ======== ========
&nb sp; Selected Consolidated Statistics
--------------------------------
(dollars in thousands)
Three Months Ended Nine Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Expenses as a percent of
total revenues:
Provision for loan
losses 26.4% 29.7% 23.7% 25.3%
General and
administrative expenses 49.5% 52.2% 50.7% 53.3%
Interest expense 3.3% 4.0% 3.3% 4.1%
Average gross loans
receivable $785,167 $689,267 $742,518 $652,846
Average loans
receivable $577,553 $507,965 $547,060 $481,807
Loan volume $674,095 $571,975 $1,783,646 $1,517,431
Net charge-offs as
percent of average
loans 17.8% 19.6% 16.0% 17.1%
Return on average assets
(trailing 4 quarters) 12.2% 10.4% 12.2% 10.4%
Return on average equity
(trailing 4 quarters) 22.6% 21.1% 22.6% 21.1%
Offices opened (closed)
during the period, net 9 &nb sp; 16 31 85
Offices open at end of
period 975 923 975 923
Source: World Acceptance Corporation
