World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its fourth fiscal quarter and twelve months
ended March 31, 2017.
Net income for the fourth quarter increased 6.8% to $31.9
million compared to $29.8 million for the same quarter of the prior
year. Net income per diluted share increased 6.4% to $3.64 in
the fourth quarter of fiscal 2017 compared to $3.42 in the prior
year quarter.
Total revenues increased to $144.6 million for the fourth
quarter of fiscal 2017, a 0.3% increase from the $144.1 million
reported for the fourth quarter last year. Revenues from the 1,258
offices open throughout both quarterly periods increased by 1.3%.
Interest and fee income decreased 1.6%, from $121.5 million in the
fourth quarter of 2016 to $119.5 million in the fourth quarter of
fiscal 2017 primarily due to a decrease in average earning loans
and an unfavorable move in exchange rates. Insurance and other
income increased by 10.6% to $25.1 million in the fourth quarter of
fiscal 2017 compared with $22.7 million in the fourth quarter of
fiscal 2016. The increase in other income was primarily due to an
increase in tax preparation revenue of $2.7 million. The tax
preparation business benefited from an interest and fee free tax
advance loan offering to qualifying customers. This was offset by a
$276,000 decrease in insurance revenue.
Accounts in the US that were 61 days or more past due increased
to 5.0% on a recency basis and to 7.0% on a contractual basis at
March 31, 2017, compared to 4.4% and 6.5%, respectively, at March
31, 2016. On a consolidated basis, accounts that were 61 days or
more past due increased to 5.5% on a recency basis and to 7.8% on a
contractual basis at March 31, 2017, compared to 4.7% and 7.1%,
respectively, at March 31, 2016. As a result of the higher
delinquencies, our allowance to net loans increased from 9.0% at
March 31, 2016, to 9.4% at March 31, 2017.
As previously disclosed, the Company ceased all in-person
collection 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 compared to historical levels,
however we have seen an improvement in net charge-offs during the
fourth quarter of fiscal 2017 compared to 2016. The provision for
the quarter decreased $3.7 million when comparing the fourth
quarter of fiscal 2017 to the fourth quarter of fiscal 2016. This
is primarily due to a decrease in net charge-offs. Net charge-offs
as a percentage of average net loans on an annualized basis
decreased from 18.9% to 15.4% when comparing the two quarters. The
prior year net charge-off rate benefited from the monthly sale of
accounts previously charged-off totaling approximately $0.5
million. Consolidated net charge-offs excluding the impact of the
charge-off sale were down $7.5 million when comparing the two
fiscal quarters. The portion of the provision related to a change
in loans outstanding decreased $1.7 million quarter over quarter
due to gross loans outstanding decreasing $105.2 million in the
fourth quarter of 2017 versus $152.2 million in the fourth quarter
of 2016. Accounts 90 days past due in the US, which are fully
reserved, decreased by $5.7 million in the current quarter versus
$9.4 million the same quarter last year, which resulted in a $3.7
million increase in the provision.
General and administrative expenses amounted to $70.0 million in
the fourth fiscal quarter, a 5.2% increase over the $66.6 million
in the same quarter of the prior fiscal year. As a percentage of
revenues, G&A expenses increased from 46.2% during the fourth
quarter of fiscal 2016 to 48.4% during the current quarter. G&A
expenses per average open office increased by 6.6% when comparing
the two fiscal quarters. G&A expense increased primarily due to
an increase in personnel costs. Share based compensation increased
$1.7 million during the quarter due to the release of expense
previously accrued for the Group B performance based restricted
stock awards in the fourth quarter of 2016. During the prior year
quarter, the Company determined that the earnings per share target
of $13.00 per share was not achievable during the measurement
period which ended on March 31, 2017. Subsequently, the
Compensation Committee of the Board of Directors, amended the
awards allowing 25% of the Group B awards to vest for certain
officers. The amendment resulted in a net $1.7 million reduction of
compensation expense in the prior year quarter. The officers were
required to forfeit their remaining Group B shares as a part of the
amendment.
Interest expense for the fourth quarter decreased $1.8 million
compared to the fourth quarter of the prior year due to a 21.6%
decrease in the average debt outstanding. The Company has reduced
its outstanding debt by $79.5 million as of March 31, 2017,
compared to March 31, 2016. This is a result of not repurchasing
shares during the fiscal quarter as well as a decrease in loans
outstanding.
The Company’s fourth quarter effective income tax rate decreased
to 34.6% compared with 35.5% in the prior year’s fourth quarter.
Our effective tax rate benefitted from the settlement of a state
tax matter subsequent to year end.
Gross loans decreased to $1.06 billion as of March 31, 2017, a
0.7% decrease from the $1.07 billion of loans outstanding as of
March 31, 2016. Gross loans in the US decreased 2.2%, and gross
loans in Mexico increased 13.7% in US dollars. Gross loans in
Mexico increased 23.5% in Mexican pesos. Gross loans in the US
benefited from the acquisition of 14 branches and $18.9 million in
gross loans during the quarter. The gross loan balance for the
acquired branches was $18.3 million as of March 31, 2017. Without
the acquisition, consolidated gross loans would have decreased 2.4%
compared to prior year. Our unique borrowers in the US decreased by
62,039 or 7.8% during the fourth quarter of 2017. This is compared
to a decrease of 88,172 or 10.8% in the fourth quarter of 2016 and
a decrease of 73,180 or 8.6% in the fourth quarter of 2015. Year to
date we have increased our unique customers in the US by 7,631 or
1.0%, compared to a decrease of 45,867 or 5.9% in fiscal 2016 and
decrease of 11,914 or 1.5% in fiscal 2015.
Other key return ratios for the fourth quarter included an 8.8%
return on average assets and a return on average equity of 17.8%
(both on a trailing 12-month basis).
We remain optimistic about our Mexican operations. We have
approximately 160,000 accounts and approximately $116.5 million in
gross loans outstanding in Mexico. This represents a 13.7% increase
in loan balances in US dollars over last year, and an increase of
23.5% in Mexican pesos over March 31, 2016. Annualized Mexican net
charge-offs as a percent of average net loans decreased from 12.2%
in fiscal 2016 to 10.0% during the current fiscal year.
Additionally, our Mexican 61+ day delinquencies were 10.1% and
14.0% on a recency and contractual basis, respectively, as of March
31, 2017, a change from 7.3% and 12.3%, respectively, as of March
31, 2016. Excluding intercompany charges of $0.5 million in fiscal
2017 and $2.7 million in fiscal 2016, fiscal 2017 Mexican pretax
earnings amounted to $8.5 million, a 3.6% increase from the $8.2
million in pretax earnings during fiscal 2016.
Fiscal Year Results
For fiscal 2017, net income decreased 15.8% to $73.6 million
compared with $87.4 million for the year ended March 31, 2016.
Fully diluted net income per share decreased 16.6% to $8.38 in
fiscal 2017 compared with $10.05 for fiscal 2016.
Total revenues for fiscal 2017 declined 4.6% to
$531.7 million compared with $557.5 million during fiscal
2016. Net charge-offs as a percent of average net loans increased
from 14.8% during fiscal 2016 to 15.7% for fiscal 2017. Similar to
the quarter, revenues were impacted by a decrease in average
earning loans during the year. Net charge-offs for fiscal 2017 were
negatively impacted by the cessation of in-person visits as
discussed above.
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 1,327 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.
Fourth 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/1118/20663. 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 that assert or
establish that the Company’s lending practices or other aspects of
its business violate applicable laws or regulations, which may or
may not be 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; 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 Twelve Months
Ended March 31, March 31,
2017 2016 2017
2016 Interest & fees $
119,478
121,461
468,759 495,133 Insurance & other
25,093
22,682
62,975 62,343 Total revenues
144,571 144,143
531,734 557,476 Expenses: Provision for loan losses
20,702 24,373
128,572 123,598 General and
administrative expenses Personnel
47,167 43,989
171,958 169,573 Occupancy & equipment
10,787
11,492
42,438 44,461 Advertising
2,932 2,322
17,866 16,863 Intangible amortization
107 121
490 529 Other
9,027 8,631
34,909 37,714
70,020 66,555
267,661 269,140 Interest expense
5,125 6,959
21,504 26,849 Total expenses
95,847 97,887
417,737 419,587 Income before taxes
48,724 46,256
113,997 137,889 Income taxes
16,873 16,431
40,397 50,493 Net income $
31,851 29,825
73,600 87,396 Diluted earnings per
share $
3.64 3.42
8.38 10.05 Diluted weighted average
shares outstanding
8,754 8,708
8,778 8,692
Consolidated Balance Sheets (unaudited and in thousands)
March 31, March 31, March 31,
2017 2016 2015
ASSETS Cash $
15,200 12,377 38,339 Gross loans
receivable
1,059,804 1,066,964 1,110,145 Less: Unearned
interest & fees
(291,908) (290,659) (297,402) Allowance
for loan losses
(72,195) (69,566) (70,438) Loans receivable,
net
695,701 706,739 742,305 Property and equipment, net
24,184 25,297 25,907 Deferred income taxes, net
39,025 38,131 37,345 Goodwill
6,067 6,121 6,121
Intangibles, net
6,614 2,917 3,364 Other assets, net
13,797 14,637 12,750 $
800,588 806,219 866,131
LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Notes
payable
295,136 374,685 501,150 Income tax payable
12,519 8,259 18,204 Accounts payable and accrued expenses
31,869 31,373 31,209 Total liabilities
339,524
414,317 550,563 Shareholders' equity
461,064 391,902 315,568
$
800,588 806,219 866,131
Selected Consolidated
Statistics (dollars in thousands)
Three Months
Ended Twelve Months Ended March 31, March
31, 2017 2016
2017 2016 Expenses as a
percent of total revenues: Provision for loan losses
14.3
% 16.9 %
24.2 % 22.2 % General and
administrative expenses
48.4 % 46.2 %
50.3
% 48.3 % Interest expense
3.5 % 4.8 %
4.0 % 4.8 % Average gross loans receivable
$ 1,121,434 1,145,503
$ 1,100,700
1,147,956 Average net loans receivable
$
813,985 834,048
$ 796,642 834,964 Loan
volume
$ 517,644 $ 504,409
$ 2,507,840
$ 2,621,413 Net charge-offs as percent of average loans
15.4 % 18.9 %
15.7 % 14.8 %
Return on average assets (trailing 12 months)
8.8 %
10.0 %
8.8 % 10.0 % Return on average equity
(trailing 12 months)
17.8 % 24.0 %
17.8
% 24.0 % Offices opened (closed) during the period,
net
4 (11 )
(12 ) 19 Offices open at
end of period
1,327 1,339
1,327 1,339
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170509005592/en/
World Acceptance CorporationJohn L. Calmes Jr.,
864-298-9800Chief Financial Officer
World Acceptance (NASDAQ:WRLD)
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