World Acceptance Corporation Reports Third Quarter Results

GREENVILLE, S.C.--()--World Acceptance Corporation (NASDAQ: WRLD) today reported financial results for its third fiscal quarter and nine months ended December 31, 2015.

Net income for the third quarter decreased 20.2% to $14.8 million compared to $18.5 million for the same quarter of the prior year. Net income per diluted share decreased 15.5% to $1.70 in the third quarter of fiscal 2016 compared to $2.01 in the prior year quarter.

The Company did not repurchase any shares in the third quarter of fiscal 2016. However, the Company benefited from the 1.4 million shares repurchased during fiscal 2015. The prior year repurchases resulted in a reduction in the Company’s weighted average diluted shares outstanding of 7.5% when comparing the two nine month periods. Excluding unvested restricted shares, there were 8.7 million shares outstanding as of December 31, 2015.

Total revenues decreased to $139.7 million for the third quarter of fiscal 2016, a 6.1% decrease over the revised $148.7 million reported for the third quarter last year. Revenues from the 1,243 offices open throughout both quarterly periods decreased by 6.3%. Interest and fee income decreased 4.2%, from a revised $132.5 million to $126.9 million in the third quarter of fiscal 2016 primarily due to a decrease in average earning loans and an unfavorable move in exchange rates. Insurance and other income decreased by 21.0% to $12.8 million in the third quarter of fiscal 2016 compared with $16.2 million in the third quarter of fiscal 2015. The decrease was related to a $1.9 million decrease in insurance revenue and a $1.5 million decrease in other income compared with the third quarter of fiscal 2015. Insurance is primarily down due to a decrease in loans where our insurance products are available to the customer. Other income is down primarily due to a decrease in World Class Buying Club income of $820,000, which is a result of no longer offering the program as of March 31, 2015.

Accounts in the US that were 61 days or more past due increased to 5.1% on a recency basis and to 6.8% on a contractual basis at December 31, 2015, compared to 4.5% and 6.1%, respectively, at December 31, 2014. The increase in US delinquencies was partially off-set by improvements in delinquencies in our Mexican business. On a consolidated basis, accounts that were 61 days or more past due increased to 5.2% on a recency basis and to 7.2% on a contractual basis at December 31, 2015, compared to 5.0% and 6.7%, respectively, at December 31, 2014. As a result of the higher delinquencies, our allowance to net loans in the US has increased from 8.9% at December 31, 2014 to 9.3% at December 31, 2015.

Net charge-offs as a percentage of average net loans on an annualized basis decreased from 15.5% to 14.6% when comparing the two quarterly periods. The provision for the quarter decreased $2.9 million dollars quarter over quarter. The lower provision benefited from a $3.2 million decrease in net charge-offs, slower loan growth quarter over quarter, and improved delinquencies in Mexico partially off-set by higher delinquencies in the US.

General and administrative expenses amounted to $71.6 million in the third fiscal quarter, a 5.4% decrease over the revised $75.6 million in the same quarter of the prior fiscal year. As a percentage of revenues, G&A expenses increased from a revised 50.9% during the third quarter of fiscal 2015 to 51.2% during the current quarter. G&A expenses per average open office decreased by 8.4% when comparing the two fiscal quarters. G&A expense decreased primarily due to a decrease in personnel costs. Specifically, share based compensation decreased approximately $2.5 million and overtime expense decreased $600,000. Further, regular payroll remained relatively flat, despite increasing the branch count over the last twelve months.

Interest expense for the third quarter increased $1.1 million compared to the third quarter of the prior year despite a 13.1% decrease in the average debt outstanding due to a 37.3% increase in the effective rate. The Company has reduced its outstanding debt by $80 million as of December 31, 2015 compared to December 31, 2014. This is a result of not repurchasing shares during the fiscal year as well as a decrease in loans outstanding.

The Company’s third quarter effective income tax rate increased to 42.2% compared with 35.6% in the prior year’s third quarter. The increase is due to the reversal of a judge’s opinion on a tax position taken in one of the states in which we operate.

Gross loans decreased to $1.22 billion as of December 31, 2015 a 3.4% decrease from the $1.26 billion of loans outstanding as of December 31, 2014. Gross loans in the US decreased 3.4%, and gross loans in Mexico decreased 4.4% in US dollars due to an unfavorable move in exchange rates. Gross loans in Mexico increased 12.3% in Mexican pesos. The shift in the mix of our loan portfolio leveled off over the past 12 months and at December 31, 2015 consisted of 61.9% small loans, 37.9% larger loans and 0.2% sales finance. This is compared to 61.2%, 37.9% and 0.9% at December 31, 2014. Additionally, the overall 3.4% decrease in loan balances resulted from a 3.8% decrease in the number of accounts outstanding offset by a 0.4% increase in average balances outstanding. The number of loans to first time and former borrowers was approximately 172,000 during the current quarter, which is down 2.7%, or 4,700 borrowers, compared to the same quarter of the prior fiscal year.

Other key return ratios for the third quarter included an 11.9% return on average assets and a return on average equity of 31.7% (both on a trailing 12-month basis).

We remain optimistic about our Mexican operations. We have approximately 145,000 accounts and approximately $95.0 million in gross loans outstanding in Mexico. While this represents a 4.4% decrease in loan balances in US dollars over the last year, Mexico’s ledger increased 12.3% in Mexican pesos over December 31, 2014. Annualized net charge-offs as a percent of average net loans decreased from 16.4% in fiscal 2015 to 12.5% during the current fiscal year. Additionally, our 61+ day delinquencies were 6.6% and 12.0% on a recency and contractual basis, respectively, as of December 31, 2015, a change from 10.8% and 14.4%, respectively, as of December 31, 2014. Excluding intercompany charges, pretax earnings amounted to $7.0 million, a 4.0% decrease over the $7.3 million in pretax earnings during the first nine months of fiscal 2015.

Nine-Month Results

For the first nine-months of the fiscal year, net income decreased 7.6% to $57.6 million compared with $62.3 million for the nine-months ended December 31, 2014. Fully diluted net income per share decreased 0.1% to $6.63 in fiscal 2016 compared with $6.64 for the first nine-months of fiscal 2015.

Total revenues for the first nine-months of fiscal 2016 declined 6.7% to $413.3 million compared with a revised $442.8 million during the corresponding period of the previous year. Annualized net charge-offs as a percent of average net loans increased from 12.8% during the first nine-months of fiscal 2015 to 13.4% for the first nine-months of fiscal 2016.

Other Matters

On December 16, 2015, the Consumer Financial Protection Bureau (“CFPB”) issued a compliance bulletin stating that “First-party and third-party debt collectors may run a heightened risk of committing unfair acts or practices in violation of the Dodd-Frank Act when they conduct in-person debt collection visits, including to a consumer's workplace or home.” While the Company is confident that its policies and procedures around in-person visits would prevent unfair practices, the Company ceased all in-person visits effective December 18, 2015.

As previously disclosed, on August 7, 2015, the Company received a letter from the CFPB’s Enforcement Office notifying the Company that, in accordance with the CFPB’s discretionary Notice and Opportunity to Respond and Advise (“NORA”) process, the staff of CFPB’s Enforcement Office is considering recommending that the CFPB take legal action against the Company (the “NORA Letter”). The NORA Letter states that the staff of the CFPB’s Enforcement Office expects to allege that the Company violated the Consumer Financial Protection Act of 2010, 12 U.S.C. §5536. The NORA Letter confirms that the Company has the opportunity to make a NORA submission, which is a written statement setting forth any reasons of law or policy why the Company believes the CFPB should not take legal action against it. Following the CFPB’s NORA Letter, the Company made NORA submissions to the CFPB’s Enforcement Office. The Company understands that a NORA Letter is intended to ensure that potential subjects of enforcement actions have the opportunity to present their positions to the CFPB before an enforcement action is recommended or commenced. The Company continues to believe its historical and current business practices are lawful.

About World Acceptance Corporation

World Acceptance Corporation is one of the largest small-loan consumer finance companies, operating 1,350 offices in 15 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. A simulcast of the conference call will be available on the Internet at The call will be available for replay on the Internet for approximately 30 days.

This press release may contain various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, that represent the Company’s expectations or beliefs concerning future events. Statements other than those of historical fact, as well as those identified by the words “anticipate,” “estimate,” ”intend,” “plan,” “expect,” ”project,” “believe,” “may,” “will,” “should,” “would,” “could” and any variation of the foregoing and similar expressions are forward-looking statements. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties. Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include the following: recently enacted, proposed or future legislation and the manner in which it is implemented; the nature and scope of regulatory authority, particularly discretionary authority, that may be exercised by regulators, including, but not limited to, the Consumer Financial Protection Bureau (the “CFPB”), having jurisdiction over the Company’s business or consumer financial transactions generically; the unpredictable nature of regulatory proceedings and litigation; any determinations, findings, claims or actions made or taken by the CFPB, other regulators or third parties in connection with or resulting from the previously disclosed civil investigative demand from the CFPB that assert or establish that the Company’s lending practices or other aspects of its business violate applicable laws or regulations; the impact of changes in accounting rules and regulations, or their interpretation or application, which could materially and adversely affect the Company’s reported financial statements or necessitate material delays or changes in the issuance of the Company’s audited financial statements; the Company's assessment of its internal control over financial reporting, and the timing and effectiveness of the Company's efforts to remediate any reported material weakness in its internal control over financial reporting; changes in interest rates; risks related to expansion and foreign operations; risks inherent in making loans, including repayment risks and value of collateral; the timing and amount of revenues that may be recognized by the Company; changes in current revenue and expense trends (including trends affecting delinquencies and charge-offs); the potential impact of limitations in the Company’s amended revolving credit facility; whether the Company can successfully implement its CEO succession and transition plans; and changes in the Company’s markets and general changes in the economy (particularly in the markets served by the Company). These and other factors are discussed in greater detail in Part I, Item 1A, “Risk Factors” in the Company’s most recent annual report on Form 10-K for the fiscal year ended March 31, 2015 filed with the Securities and Exchange Commission (“SEC”) and the Company’s other reports filed with, or furnished to, the SEC from time to time. World Acceptance Corporation does not undertake any obligation to update any forward-looking statements it makes. The Company is also not responsible for updating the information contained in this press release beyond the publication date, or for changes made to this document by wire services or Internet services.

World Acceptance Corporation
Consolidated Statements of Operations
(unaudited and in thousands, except per share amounts)
Three Months Ended Nine Months Ended
December 31, December 31,
2015 2014 2015 2014
Interest & fees $ 126,870 132,464 373,673 394,602
Insurance & other 12,826 16,240   39,660   48,214  
Total revenues 139,696 148,704 413,333 442,816
Provision for loan losses 35,440 38,293 99,226 105,347
General and administrative expenses
Personnel 42,920 46,303 125,584 144,403
Occupancy & equipment 10,546 10,404 32,969 30,841
Advertising 7,961 7,747 14,541 14,338
Intangible amortization 131 176 407 566
Other 10,022 11,009   29,083   30,494  
71,580 75,639 202,584 220,642
Interest expense 7,149 6,038   19,891   17,628  
Total expenses 114,169 119,970   321,701   343,617  
Income before taxes 25,527 28,734 91,632 99,199
Income taxes 10,775 10,245   34,062   36,880  
Net income $ 14,752 18,489   57,570   62,319  
Diluted earnings per share $ 1.70 2.01   6.63   6.64  
Diluted weighted average shares outstanding 8,694 9,209   8,687   9,391  
Consolidated Balance Sheets
(unaudited and in thousands)
December 31, March 31, December 31,
2015 2015 2014
Cash $ 20,942 38,339 16,778
Gross loans receivable 1,219,209 1,110,145 1,262,618
Less: Unearned interest & fees (337,504 ) (297,402 ) (344,993 )
Allowance for loan losses (84,489 ) (70,438 ) (85,019 )
Loans receivable, net 797,216 742,305 832,606
Property and equipment, net 23,314 25,907 26,059
Deferred income taxes 41,037 37,345 41,382
Goodwill 6,121 6,121 6,121
Intangibles 3,038 3,364 3,430
Other assets 15,308   12,750   11,973  
$ 906,976   866,131   938,349  
Notes payable 511,935 501,150 591,950
Income tax payable 4,412 18,204 6,002
Accounts payable and accrued expenses 27,759   31,209   27,327  
Total liabilities 544,106 550,563 625,279
Shareholders' equity 362,870   315,568   313,070  
$ 906,976   866,131   938,349  

Selected Consolidated Statistics
(dollars in thousands)
Three Months Ended Nine Months Ended
December 31, December 31,
2015 2014 2015 2014
Expenses as a percent of total revenues:
Provision for loan losses 25.4 % 25.8 % 24.0 % 23.8 %
General and administrative expenses 51.2 % 50.9 % 49.0 % 49.8 %
Interest expense 5.1 % 4.1 % 4.8 % 4.0 %
Average gross loans receivable 1,180,643 1,216,642 1,156,062 1,180,154
Average net loans receivable 855,911 886,374 840,004 860,311
Loan volume $ 752,229 $ 778,453 $ 2,117,004 $ 2,206,283
Net charge-offs as percent of average loans 14.6 % 15.5 % 13.4 % 12.8 %
Return on average assets (trailing 12 months) 11.9 % 11.2 % 11.9 % 11.2 %
Return on average equity (trailing 12 months) 31.7 % 33.2 % 31.7 % 33.2 %
Offices opened (closed) during the period, net 4 21 30 43
Offices open at end of period 1,350 1,314 1,350 1,314


World Acceptance Corporation
John L. Calmes Jr., 864-298-9800
Chief Financial Officer


World Acceptance Corporation
John L. Calmes Jr., 864-298-9800
Chief Financial Officer