World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its fourth fiscal quarter and fiscal year
ended March 31, 2019.
Three-month results
Gross loans outstanding in the US increased to $1.13 billion as
of March 31, 2019, a 12.3% increase from the $1.00 billion of
gross loans outstanding as of March 31, 2018. The Company’s
unique borrowers in the US as of March 31, 2019, increased by
9.4%, from March 31, 2018. This is compared to an increase of 5.8%,
during fiscal 2018.
As previously disclosed, the Company sold the Mexico operations
effective July 1, 2018. As a result of the sale, the Company
classified the Mexico business as discontinued operations on the
statements of operations and balance sheets for the applicable
periods. Net income from continuing operations for fiscal 2019
fourth quarter increased $12.3 million to $37.9 million compared to
$25.7 million for the same quarter of the prior year. Net income
from continuing operations per diluted share increased to
$4.22 in the fourth quarter of fiscal 2019 compared to $2.80
in the prior year quarter. Net income for the fourth quarter of
fiscal 2019 increased to $37.9 million from the $29.1 million
reported for the same quarter of the prior year. Net income per
diluted share increased to $4.22 in the fourth quarter of
fiscal 2019 from $3.18 in the prior year quarter. Prior year net
income and net income per diluted share were impacted by the
recognition of the deemed repatriation transition tax (the
"Transition Tax"), as described below. Excluding the impact of the
Transition Tax, net income for the fourth quarter increased 11.7%
to $37.9 million compared to $34.0 million for the same quarter of
the prior year. Excluding the Transition Tax, net income per
diluted share increased 14.0% to $4.22 in the fourth quarter
of fiscal 2019 compared to $3.70 in the prior year quarter. See
"Non-GAAP financial measures" below.
Earnings per share for the quarter benefited from World
Acceptance’s share repurchase program. The Company repurchased
approximately 600,000 shares of common stock on the open market at
an aggregate purchase price of approximately $67.9 million during
the quarter. The Company had approximately 8.5 million common
shares outstanding excluding unvested restricted shares as of March
31, 2019.
Total revenues in the US for the fourth quarter increased to
$157.0 million, an 11.0% increase from the $141.4 million reported
for the same quarter of the prior year. The revenues from the
1,125 branches open throughout both quarterly periods increased by
9.8%. Interest and fee income increased 9.0%, from $114.0 million
in the fourth quarter of fiscal 2018 to $124.2 million in the
fourth quarter of fiscal 2019, primarily due to an increase in
average earning loans. Insurance and other income increased by
19.6% to $32.8 million in the fourth quarter of fiscal 2019
compared to $27.4 million in the fourth quarter of fiscal 2018. The
increase was primarily related to a $4.3 million increase in
revenue from the Company’s tax preparation business compared to the
fourth quarter of fiscal 2018.
Accounts in the US that were 61 days or more past due increased
to 5.8% on a recency basis at March 31, 2019, compared to 5.4%
at March 31, 2018. Accounts in the US that were 61 days or
more past due on a contractual basis increased to 7.8% at
March 31, 2019, compared to 7.5% at March 31, 2018. The
Company’s allowance for loan losses compared to net loans was 9.7%
at March 31, 2019, compared to 8.9% at March 31,
2018.
Net charge-offs in the US as a percentage of average net loans
on an annualized basis increased from 16.2% to 17.4% when comparing
the fourth quarter of fiscal 2019 to the fourth quarter of fiscal
2018. The provision for loan losses increased by $11.9 million when
comparing the fourth quarter of fiscal 2019 to the fourth quarter
of fiscal 2018. Net charge-offs increased $6.5 million when
comparing the fourth quarter of fiscal 2019 to the fourth quarter
of fiscal 2018. There was a $3.3 million increase in the US
provision due to an increase during the quarter in US accounts 90
days past due when comparing the fourth quarter of fiscal 2019 to
the fourth quarter of fiscal 2018. The provision also increased due
to a $2.5 million release of the allowance in the prior year fourth
quarter.
General and administrative (“G&A”) expenses amounted to
$78.6 million in the fourth quarter of fiscal 2019 compared to
$75.3 million in the same quarter of the prior fiscal year. As a
percentage of revenues, G&A expenses decreased from 53.2%
during the fourth quarter of fiscal 2018 to 50.1% during the fourth
quarter of fiscal 2019. G&A expenses per average open branch
increased by 2.4% when comparing the two fiscal quarters, primarily
due to an increase in personnel expense.
Personnel expense increased $3.7 million, or 7.5%, during the
fourth quarter of fiscal 2019 as compared to the fourth quarter of
fiscal 2018. Personnel expense in the US increased by $5.7 million
during the fourth quarter of fiscal 2019, as compared to the fourth
quarter of fiscal 2018 due to additional share-based compensation
associated with the LTIP and director equity awards. The prior year
included $2.5 million in severance related amounts as a result of
the separation agreement entered into with the Company’s former
CEO. World Acceptance also recorded a $1.8 million charge due to a
change in the Company's paid time off policy in the prior year.
Interest expense for the quarter ended March 31, 2019,
decreased by $140,000, or 2.7%, from the corresponding quarter of
the previous year. The decrease in interest expense is due to a
3.8% decrease in the average debt outstanding, from $316.2 million
to $304.1 million for the quarters ended March 31, 2018 and
2019, respectively. The Company’s debt to equity ratio remained at
0.5:1 consistent with March 31, 2018.
The Tax Cuts and Jobs Act (“TCJA”) was enacted on December 22,
2017. US accounting standards required the remeasurement of all US
deferred income tax assets and liabilities for temporary
differences from the then-current corporate tax rate of 35% to the
new corporate tax rate of 21%. The TCJA required companies to pay a
one-time transition tax on earnings of certain foreign subsidiaries
that were previously tax deferred and creates new taxes on certain
foreign-sourced earnings. As previously disclosed, the Company
recorded a provisional Federal and state Transition Tax obligation
of $4.8 million in the fourth quarter of fiscal 2018.
Other key return ratios for the fourth quarter of fiscal 2019
included a 8.8% return on average assets and a return on average
equity of 13.6% (both on a trailing 12-month basis).
Twelve-month results
In accordance with accounting principles generally accepted in
the US, World Acceptance recognized a $31.3 million cumulative
translation loss in the first quarter of fiscal 2019 as a result of
classifying the Company’s Mexico operating segment as held for
sale. This cumulative translation loss is due to the devaluation of
the Mexican Peso versus the US Dollar since the date of the
Company’s investment. The cumulative translation loss increased the
Company’s investment in Mexico from $51.6 million to $82.9 million
in the impairment analysis, which resulted in an impairment to
reflect an estimated fair value of $43.9 million. Due to this
impairment, net income for the year ended March 31, 2019, decreased
by $16.5 million to $37.2 million compared to the $53.7 million in
net income reported for the prior year. This resulted in net income
of $4.05 per diluted share compared to net income of $5.99 per
share in the prior year.
Total revenues in the US for fiscal 2019 increased 8.3% to
$544.5 million compared with $502.7 million for fiscal 2018.
Net charge-offs as a percent of average net loans increased from
14.9% for fiscal 2018 to 16.1% for fiscal 2019.
Other matters
As previously disclosed, World Acceptance retained outside legal
counsel and forensic accountants, upon receipt of an anonymous
letter regarding compliance matters, to conduct an investigation of
the Company’s operations in Mexico. The investigation focuses on
the legality under the US Foreign Corrupt Practices Act and certain
local laws of certain payments related to loans, the maintenance of
the Company’s books and records associated with such payments, and
the treatment of compensation matters for certain employees. The
Company voluntarily contacted the SEC and the U.S. Department of
Justice (“DOJ”) in June 2017 to advise both agencies that an
investigation was underway. The Company is committed to compliance
with applicable laws and regulations and intend to cooperate fully
with both the SEC and the DOJ.
Non-GAAP financial measures
On December 22, 2017, the Tax Cut and Jobs Act (TCJA) was signed
into law. The results of the fourth quarter of fiscal 2018 and the
fiscal year ended March 31, 2018, reflect the impact of its
enactment, which resulted in a $4.8 million decrease in net income
for the fourth quarter. Net income and earnings per share excluding
the impact of these significant items are non-GAAP financial
measures. Management believes these measures help investors
understand the impact of these items on reported results.
About World Acceptance Corporation
World Acceptance Corporation is one of the largest small-loan
consumer finance companies, operating 1,193 branches in sixteen
states as of March 31, 2019.
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/1118/30491. The call will
be available for replay on the Internet for approximately 30
days.
Cautionary Note Regarding Forward-looking Information
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 current
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. The Company’s actual results and financial condition
may differ materially from those indicated in the forward-looking
statements. Therefore, you should not rely on any of these
forward-looking statements. Important 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, including the effect of changes
in tax law, such as the effect of the TCJA that was enacted on
December 22, 2017; the nature and scope of regulatory authority,
particularly discretionary authority, that may be exercised by
regulators, including, but not limited to, the SEC, U.S. Department
of Justice (“DOJ”), U.S. Consumer Financial Protection Bureau
(“CFPB”), and individual state regulators having jurisdiction over
the Company; the unpredictable nature of regulatory proceedings and
litigation; developments in, and the outcome of, our ongoing
investigation into certain transactions and payments in Mexico,
including any legal proceedings or government enforcement actions
which could arise out of the matters under review, and any remedial
actions World Acceptance may take in connection therewith; any
determinations, findings, claims or actions made or taken by
regulators or other third parties in connection with or resulting
from the Company’s ongoing investigation or the SEC's formal order
of investigation; the recent sale of the Company’s Mexico
subsidiaries, including claims or litigation resulting therefrom;
uncertainties associated with management turnover and the effective
succession of senior management; the impact of changes in
accounting rules and regulations, or their interpretation or
application, which could materially and adversely affect the
Company’s reported consolidated financial statements or necessitate
material delays or changes in the issuance of the Company’s audited
consolidated financial statements; the Company's assessment of its
internal control over financial reporting; changes in interest
rates; risks relating to expansion; risks inherent in making loans,
including repayment risks and value of collateral; cybersecurity
threats, including the potential misappropriation of assets or
sensitive information, corruption of data or operational
disruption; the Company’s dependence on debt and the potential
impact of limitations in the Company’s amended revolving credit
facility; the timing and amount of revenues that may be recognized
by the Company; changes in current revenue and expense trends
(including trends affecting delinquency and charge-offs); 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, 2018 filed
with the 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 AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per
share amounts)
Three months endedMarch 31,
Twelve months endedMarch 31,
2019 2018
2019 2018
Revenues: Interest and fee income
$ 124,221 $ 113,984
$ 469,154 $ 435,702 Insurance income, net and other
income
32,777 27,415
75,389 66,967
Total revenues
156,998 141,399
544,543 502,669
Expenses: Provision for loan losses
28,533 16,631
148,427 117,620 General and administrative expenses:
Personnel
52,453 48,787
180,823 164,496 Occupancy and
equipment
10,522 10,078
41,304 39,114 Advertising
3,598 3,594
22,495 21,196 Amortization of intangible
assets
616 258
1,528 990 Other
11,437 12,565
42,153 43,312 Total general and administrative
expenses
78,626 75,282
288,303 269,108
Interest expense
4,914 5,052
17,934 19,090
Total expenses
112,073 96,965
454,664 405,818
Income from continuing operations
before income taxes
44,925 44,434
89,879 96,851
Income taxes
6,984 18,778
15,981 47,758
Net income from continuing operations
37,941 25,656
73,898 49,093 Discontinued operations (1)
Income (loss) from discontinued operations
before impairment loss and income taxes
— 4,243
2,342 4,354 Impairment loss
— —
(38,378 ) — Income taxes
— 756
627
(243 ) Net income (loss) from discontinued operations
— 3,487
(36,663 ) 4,597
Net income (loss)
$ 37,941 $ 29,143
$
37,235 $ 53,690 Net income per common
share from continuing operations, diluted
$ 4.22 $
2.80
$ 8.03 $ 5.48 Net income (loss) income per
common share from discontinued operations, diluted
$
— $ 0.38
$ (3.98 ) $ 0.51 Net
income (loss) income per common share, diluted
$ 4.22
$ 3.18
$ 4.05 $ 5.99 Weighted average
diluted shares outstanding
8,988 9,178
9,204 8,959
(1) As previously disclosed, the Company sold the Mexico
operations effective July 1, 2018. As a result of the sale, the
Company classified the Mexico business as discontinued operations
on the statements of operations and balance sheets for the
applicable periods.
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
March 31, 2019
March 31, 2018
ASSETS Cash and cash equivalents
$ 9,335 $ 12,474 Gross loans receivable
1,127,957 1,004,233 Less: Unearned interest, insurance and
fees
(290,814 ) (258,991 ) Allowance for loan losses
(81,520 ) (66,088 ) Loans receivable, net
755,623 679,154 Property and equipment, net
25,424
22,786 Deferred income taxes, net
23,832 20,175 Other
assets, net
18,400 13,244 Goodwill
7,034 7,034
Intangible assets, net
15,340 6,644 Assets of discontinued
operations (1)
— 79,475 Total assets
$
854,988 $ 840,986
LIABILITIES &
SHAREHOLDERS' EQUITY Liabilities: Senior notes payable
251,940 244,900 Income taxes payable
11,550 14,097
Accounts payable and accrued expenses
39,381 33,503
Liabilities of discontinued operations (1)
— 7,378
Total liabilities
302,871 299,878
Shareholders' equity
552,117 541,108 Total
liabilities and shareholders' equity
$ 854,988
$ 840,986
(1) As previously disclosed, the Company sold the Mexico
operations effective July 1, 2018. As a result of the sale, the
Company classified the Mexico business as discontinued operations
on the statements of operations and balance sheets for the
applicable periods.
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED STATISTICS
((1))
(unaudited and in thousands, except
percentages and branches)
Three months endedMarch 31,
Twelve months endedMarch 31,
2019 2018
2019 2018
Gross loans receivable
$ 1,127,957 $ 1,004,233
$ 1,127,957 $ 1,004,233 Average gross loans
receivable (2)
1,193,057 1,064,530
1,120,112
1,019,005 Net loans receivable (3)
837,143 745,242
837,143 745,242 Average net loans receivable (4)
879,137 786,836
824,763 753,116 Expenses as a
percentage of total revenue: Provision for loan losses
18.2
% 11.8 %
27.3 % 23.4 % General and
administrative
50.1 % 53.2 %
52.9 %
53.5 % Interest expense
3.1 % 3.6 %
3.3
% 3.8 % Operating income as a % of total revenue (5)
31.7 % 35.0 %
19.8 % 23.1 % Loan
volume
619,942 528,832
2,720,351 2,487,066
Net charge-offs as percent of average net
loans receivable
17.4 % 16.2 %
16.1 % 14.9 %
Return on average assets (trailing 12 months)
8.8 %
6.3 %
8.8 % 6.3 % Return on average equity
(trailing 12 months)
13.6 % 10.6 %
13.6
% 10.6 % Branches opened or acquired (merged or
closed), net
(11 ) 3
16 8 Branches open
(at period end)
1,193 1,177
1,193 1,177
(1) As previously disclosed, the Company sold the Mexico
operations effective July 1, 2018. As a result of the sale, the
Company classified the Mexico business as discontinued operations
on the statements of operations and balance sheets for the
applicable periods.
(2) Average gross loans receivable have been determined by
averaging month-end gross loans receivable over the indicated
period, excluding tax advances.
(3) Net loans receivable is defined as gross loans receivable
less unearned interest and deferred fees.
(4) Average net loans receivable have been determined by
averaging month-end gross loans receivable less unearned interest
and deferred fees over the indicated period, excluding tax
advances.
(5) Operating income is computed as total revenues less
provision for loan losses and general and administrative
expenses.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190509005267/en/
John L. Calmes, Jr.Chief Financial and Strategy Officer(864)
298-9800
World Acceptance (NASDAQ:WRLD)
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