World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its second fiscal quarter and six months
ended September 30, 2016.
Net income for the second quarter decreased 19.3% to $15.5
million compared to $19.2 million for the same quarter of the prior
year. Net income per diluted share decreased 20.7% to $1.76 in
the second quarter of fiscal 2017 compared to $2.22 in the prior
year quarter.
Total revenues decreased to $129.3 million for the second
quarter of fiscal 2017, a 5.2% decrease from the $136.4 million
reported for the second quarter last year. Revenues from the
1,279 offices open throughout both quarterly periods decreased by
3.8%. Interest and fee income decreased 5.6%, from $124.0 million
to $117.0 million in the second quarter of fiscal 2017 due
primarily to a decrease in average earning loans and an unfavorable
move in exchange rates. Insurance and other income decreased by
1.3% to $12.3 million in the second quarter of fiscal 2017 compared
with $12.4 million in the second quarter of fiscal 2016. The
decrease was related to a $1.2 million decrease in insurance
revenue offset by a $1.0 million increase in other income compared
with the second quarter of fiscal 2016. Other income was negatively
impacted in the prior year quarter by a buyback of charged-off
accounts sold in the fourth quarter of fiscal 2015. The buyback
resulted in a $1.5 million net loss during the second quarter of
fiscal 2016.
Accounts in the US that were 61 days or more past due increased
to 5.3% on a recency basis and to 7.0% on a contractual basis at
September 30, 2016, compared to 4.8% and 6.5%, respectively, at
September 30, 2015. On a consolidated basis, accounts that were 61
days or more past due increased to 5.5% on a recency basis and to
7.7% on a contractual basis at September 30, 2016, compared to 5.0%
and 7.0%, respectively, at September 30, 2015. As a result of the
higher delinquencies, our allowance to net loans increased from
9.5% at September 30, 2015, to 9.7% at September 30, 2016.
As previously disclosed, the Company ceased all in-person visits
effective December 18, 2015. During the fourth quarter of fiscal
2016, the Company experienced higher than normal delinquencies in
January and February as well as higher than normal charge-offs,
especially in the month of March, as accounts became more than 90
days past due. We continue to see elevated net charge-offs and
delinquencies, however, the provision for the quarter decreased
$1.7 million quarter over quarter. This is primarily due to the
Company recording an additional $5.0 million provision during the
second quarter of fiscal 2016. This was off-set by an increase in
net charge-offs and a larger increase in accounts 90 days past due
quarter over quarter. Net charge-offs as a percentage of average
net loans on an annualized basis increased from 13.6% to 15.6% when
comparing the two quarters. The prior year net charge-off rate
benefited from one monthly sale of accounts previously charged-off
totaling approximately $0.3 million. Consolidated net charge-offs
excluding the impact of the charge-off sale were up $2.1 million
when comparing the two fiscal quarters. Accounts 90 days past due
in the US, which are fully reserved, increased by $1.3 million in
the current quarter versus the same quarter last year.
General and administrative expenses amounted to $63.5 million in
the second fiscal quarter, compared to $63.4 million in the same
quarter of the prior fiscal year. As a percentage of revenues,
G&A expenses increased from 46.5% during the second quarter of
fiscal 2016 to 49.1% during the current quarter. G&A expenses
per average open office increased by 1.3% when comparing the two
fiscal quarters.
Personnel expenses increased $1.0 million when comparing the two
quarters. The prior year quarter benefited from the release of
expense previously accrued under the Group B performance based
restricted stock awards. The release in the prior quarter resulted
in a decrease in personnel expense of approximately $2.6 million.
Personnel expense in the prior year quarter also benefited from the
release of accruals related to the retirement of the previous CEO.
The impact of the reversal on the prior year was $1.5 million.
Excluding the impact of the prior year reversals, personnel expense
decreased $3.1 million, or 7.2% quarter over quarter. Occupancy
expense decreased $1.4 million quarter over quarter. This is
primarily related to a $1.3 million loss taken in the prior year
quarter as a result of the sale of the corporate jet. The Company’s
advertising expense increased $700,000 from prior year quarter as
the Company shifted its marketing spend from the first quarter to
the second quarter.
Interest expense for the quarter ended September 30, 2016,
decreased by $1.8 million, or 24.1% from the corresponding quarter
of the previous year. The decrease in interest expense is due to a
26.1% decrease in the average debt outstanding, from $493.9 million
to $365.0 million for the quarters ended September 30, 2015, and
2016, respectively. The Company’s debt to equity ratio decreased
from 1.4:1 at September 30, 2015, to 0.9:1 at September 30,
2016.
The Company’s second quarter effective income tax rate increased
to 36.6% compared with 31.8% in the prior year’s second quarter.
The increase was primarily due to the decrease in reserves related
to an initial state ruling in favor of the Company and state refund
claims in the prior year’s quarter.
Gross loans decreased to $1.10 billion as of September 30, 2016,
a 5.8% decrease from the $1.16 billion of loans outstanding as of
September 30, 2015. Gross loans in the US decreased 7.0%. Gross
loans in Mexico increased 7.7% in US dollars. However, gross loans
in Mexico increased 23.0% in Mexican pesos. The shift in the mix of
our loan portfolio leveled off over the past 12 months and at
September 30, 2016, consisted of 61.2% small loans, 38.7% larger
loans and 0.1% sales finance. This compares to 60.8%, 38.8% and
0.4% at September 30, 2015. Additionally, the overall 5.8% decrease
in loan balances resulted from a 3.9% decrease in the number of
accounts outstanding and a 1.9% decrease in average balances
outstanding. The number of loans to first time and former borrowers
was approximately 157,000 during the current quarter, which is up
4.5% compared to the same quarter of the prior fiscal year.
We remain optimistic about our Mexican operations. We have
approximately 155,000 accounts and approximately $103.5 million in
gross loans outstanding in Mexico. Net charge-offs as a percent of
average net loans decreased from 11.2% in fiscal 2016 to 10.5%
during the current fiscal year. Additionally, our 61+ day
delinquencies were 7.4% and 13.6% on a recency and contractual
basis, respectively, as of September 30, 2016, a change from 7.1%
and 13.5%, respectively, as of September 30, 2015.
Other key return ratios for the second quarter included a 9.0%
return on average assets and a return on average equity of 19.6%
(both on a trailing 12-month basis).
Six-Month Results
For the first six-months of the fiscal year, net income
decreased 25.0% to $32.1 million compared with $42.8 million for
the six-months ended September 30, 2015. Fully diluted net income
per share decreased 25.9% to $3.65 in the first six months of
fiscal 2017 compared with $4.93 for the first six-months of fiscal
2016.
Total revenues for the first six-months of fiscal 2017
declined 6.3% to $256.3 million compared with a revised $273.6
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 six-months of fiscal 2016 to
15.3% for the first six-months of fiscal 2017.
Other Matters
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 1,322 offices in 15 states
and Mexico.
Second 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
https://www.webcaster4.com/Webcast/Page/1118/17328. 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
(CID) or the notice and opportunity to respond and advise (NORA)
letter 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; 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, 2016 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 Six Months Ended
September 30, September 30,
2016
2015
2016
2015
Interest & fees
$
116,980 123,964
231,024 246,803 Insurance & other
12,289 12,447
25,325 26,834
Total revenues
129,269 136,411
256,349 273,637
Expenses: Provision for loan losses
35,871 37,557
67,885 63,785 General and administrative expenses Personnel
40,401 39,445
82,396 82,664 Occupancy & equipment
10,631 12,030
21,133 22,423 Advertising
4,093
3,411
6,444 6,580 Intangible amortization
164 136
274 276 Other
8,167 8,414
16,157
19,061
63,456 63,436
126,404 131,004 Interest
expense
5,519 7,269
11,105 12,741
Total expenses
104,846 108,262
205,394
207,530 Income before taxes
24,423 28,149
50,955 66,107 Income taxes
8,932 8,963
18,845 23,288 Net income
$
15,491 19,186
32,110 42,819
Diluted earnings per share $
1.76 2.22
3.65
4.93 Diluted weighted average shares outstanding
8,805 8,649
8,787 8,680
Consolidated Balance Sheets (unaudited and in thousands)
September 30, March 31, September 30,
2016
2016
2015
ASSETS Cash $
16,255 12,377 12,558 Gross loans
receivable
1,095,577 1,066,964 1,162,836 Less: Unearned
interest & fees
(305,080 ) (290,659 ) (318,478 )
Allowance for loan losses
(76,421 ) (69,566 ) (80,318
) Loans receivable, net
714,076 706,739 764,040 Property and
equipment, net
23,898 25,297 23,349 Deferred income taxes,
net
41,891 38,131 38,518 Goodwill
6,067 6,121 6,121
Intangibles, net
2,697 2,917 3,169 Other assets, net
12,514 14,637 15,825 $
817,398
806,219 863,580
LIABILITIES AND
SHAREHOLDERS' EQUITY Liabilities: Notes payable
360,586
374,685 489,585 Income tax payable
10,114 8,259 1,336
Accounts payable and accrued expenses
28,882 31,374
25,820 Total liabilities
399,582 414,318
516,741 Shareholders' equity
417,816 391,901
346,839 $
817,398 806,219 863,580
Selected Consolidated Statistics
(dollars in thousands)
Three Months Ended Six Months
Ended September 30, September 30,
2016
2015
2016
2015
Expenses as a percent of total revenues: Provision for loan
losses
27.7 % 27.5 %
26.5 % 23.3 %
General and administrative expenses
49.1 % 46.5 %
49.3 % 47.9 % Interest expense
4.3 %
5.3 %
4.3 % 4.7 % Average gross loans
receivable
$ 1,098,722 $ 1,160,364
$
1,086,278 $ 1,142,983 Average net loans receivable
$ 792,684 $ 842,043
$ 785,474 $ 831,536
Loan volume
$ 617,746 $ 666,534
$
1,265,875 $ 1,364,775 Net charge-offs as percent of
average loans
15.6 % 13.6 %
15.3 % 12.8
% Return on average assets (trailing 12 months)
9.0
% 12.4 %
9.0 % 12.4 % Return on average
equity (trailing 12 months)
19.6 % 34.2 %
19.6
% 34.2 % Offices opened (closed) during the period,
net
(2 ) 15
(17 ) 26 Offices
open at end of period
1,322 1,346
1,322 1,346
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161103005253/en/
World Acceptance CorporationJohn L. Calmes Jr.,
864-298-9800Chief Financial Officer
World Acceptance (NASDAQ:WRLD)
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