World Acceptance Corporation (NASDAQ: WRLD) today reported
financial results for its fourth fiscal quarter and twelve months
ended March 31, 2016.
Net income for the fourth quarter decreased 41.0% to $28.6
million compared to $48.5 million for the same quarter of the prior
year. Net income per diluted share decreased 38.4% to $3.29 in
the fourth quarter of fiscal 2016 compared to $5.34 in the prior
year quarter.
The Company did not repurchase any shares in the fourth 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 6.7% when comparing the two twelve month
periods. Excluding unvested restricted shares, there were 8.7
million shares outstanding as of March 31, 2016.
Total revenues decreased to $142.3 million for the fourth
quarter of fiscal 2016, a 15.0% decrease from the $167.4 million
reported for the fourth quarter last year. The decrease in
revenues in the fourth quarter of fiscal 2016 compared to the
fourth quarter of last year resulted primarily from a $16 million
gain related to the sale of charge-offs taken in the prior year as
well as a decrease in our average earning assets for the quarter.
Revenues from the 1,231 offices open throughout both quarterly
periods decreased by 6.7%. Interest and fee income decreased 6.3%,
from $129.7 million to $121.5 million in the fourth 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 44.9% to $20.8 million in the fourth quarter of
fiscal 2016 compared with $37.7 million in the fourth quarter of
fiscal 2015. The decrease in other income was primarily due to a
$16.0 million gain from the sale of previously charged-off accounts
during the fourth quarter of fiscal 2015, as mentioned above. The
decrease in other income was partially offset by an increase in tax
preparation revenue of $2.0 million. The tax preparation business
benefited from the introduction of an interest and fee free tax
advance loan to qualifying customers this tax season. Further,
there was a $2.8 million decrease in insurance revenue. Insurance
is primarily down due to a decrease in loan volume where our
insurance products are available to the customer.
Accounts in the US that were 61 days or more past due increased
to 4.4% on a recency basis and to 6.5% on a contractual basis at
March 31, 2016, compared to 4.2% and 6.2%, respectively, at March
31, 2015. On a consolidated basis, accounts that were 61 days or
more past due increased to 4.7% on a recency basis and to 7.1% on a
contractual basis at March 31, 2016, compared to 4.4% and 7.0%,
respectively, at March 31, 2015. As a result of the higher
delinquencies, our allowance to net loans in the US has increased
from 8.7% at March 31, 2015, to 9.0% at March 31, 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. Net charge-offs as a percentage of average net loans
on an annualized basis increased from 13.0% to 18.9% when comparing
the two quarterly periods. The provision for the quarter increased
$10.9 million dollars quarter over quarter. The higher provision is
due to an $11.3 million increase in net charge-offs quarter over
quarter. While we may continue to see slightly elevated net
charge-offs in the near term, we believe that the impact of ceasing
field calls is largely behind us from a credit quality standpoint.
As noted above, loans in the US 61 days or more past due have
returned to levels consistent with prior years. Loans past due less
than 61 days have also returned to levels consistent with prior
year.
General and administrative expenses amounted to $66.6 million in
the fourth fiscal quarter, a 6.8% decrease over the $71.4 million
in the same quarter of the prior fiscal year. As a percentage of
revenues, G&A expenses increased from 42.7% during the fourth
quarter of fiscal 2015 to 46.8% during the current quarter. G&A
expenses per average open office decreased by 8.8% when comparing
the two fiscal quarters. G&A expense decreased primarily due to
a decrease in personnel costs. Specifically, share based
compensation decreased by approximately $4.6 million. Share based
compensation decreased $1.7 million during the quarter due to the
release of expense previously accrued for the Group B performance
based restricted stock awards. During the quarter the Company
determined that the earnings per share target of $13.00 per share
is not achievable during the measurement period which ends 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. The officers were
required to forfeit their remaining Group B shares as a part of the
amendment.
Interest expense for the fourth quarter increased $1.3 million
compared to the fourth quarter of the prior year despite a 17.0%
decrease in the average debt outstanding due to a 48.0% increase in
the effective rate. The Company has reduced its outstanding debt by
$126.5 million as of March 31, 2016, compared to March 31, 2015.
This is a result of not repurchasing shares during the fiscal year
as well as a decrease in loans outstanding.
The Company’s fourth quarter effective income tax rate decreased
to 35.5% compared with 36.9% in the prior year’s fourth
quarter.
Gross loans decreased to $1.07 billion as of March 31, 2016, a
3.9% decrease from the $1.11 billion of loans outstanding as of
March 31, 2015. Gross loans in the US decreased 5.1%, and gross
loans in Mexico increased 8.6% in US dollars due to an unfavorable
move in exchange rates. Gross loans in Mexico increased 23.0% in
Mexican pesos. The shift in the mix of our loan portfolio from
smaller loans to larger loans leveled off over the past 12 months
and at March 31, 2016, consisted of 59.8% small loans, 40.1% larger
loans and 0.1% sales finance. This is compared to 59.5%, 39.7% and
0.8% at March 31, 2015. Additionally, the overall 3.9% decrease in
loan balances resulted from a 4.9% decrease in the number of
accounts outstanding offset by a 1.0% increase in average balances
outstanding. The number of loans to first time and former borrowers
was approximately 122,000 during the current quarter, which is up
27.1%, or 26,000 borrowers, compared to the same quarter of the
prior fiscal year when the tax advance loans mentioned above are
included. Excluding the 30,000 tax advance loans, loans to new and
former customers decreased by 4,000. Of the 30,000 tax advance
loans, 8,000 were to customers who had not previously had a loan
with us.
Other key return ratios for the fourth quarter included a 10.0%
return on average assets and a return on average equity of 24.0%
(both on a trailing 12-month basis).
We remain optimistic about our Mexican operations. We have
approximately 147,000 accounts and approximately $102.4 million in
gross loans outstanding in Mexico. This represents an 8.6% increase
in loan balances in US dollars over last year, and an increase of
23.0% in Mexican pesos over March 31, 2015. Annualized Mexican net
charge-offs as a percent of average net loans decreased from 14.7%
in fiscal 2015 to 10.3% during the current fiscal year.
Additionally, our Mexican 61+ day delinquencies were 7.3% and 12.3%
on a recency and contractual basis, respectively, as of March 31,
2016, a change from 6.1% and 15.4%, respectively, as of March 31,
2015. Excluding intercompany charges of $2.7 million in fiscal 2016
and $2.8 million in fiscal 2015, fiscal 2016 Mexican pretax
earnings amounted to $8.2 million, a 30.8% decrease from the $11.9
million in pretax earnings during fiscal 2015.
Twelve-Month Results
For the twelve-months of fiscal 2016, net income decreased 22.2%
to $86.2 million compared with $110.8 million for the twelve-months
ended March 31, 2015. Fully diluted net income per share decreased
16.7% to $9.92 in fiscal 2016 compared with $11.90 for fiscal
2015.
Total revenues for fiscal 2016 declined 9.0% to
$555.6 million compared with a revised $610.2 million during
fiscal 2015. Net charge-offs as a percent of average net loans
increased from 12.9% during fiscal 2015 to 14.8% for fiscal 2016.
Similar to the quarter, revenues were impacted by a decrease in
average earning loans during the year. The prior year also
benefitted from a $16 million gain on the sale of previously
charged-off accounts during the fourth quarter of fiscal 2015. Net
charge-offs for fiscal 2016 were negatively impacted by the
cessation of in-person visits as discussed above. The prior year
net charge-off ratio also benefitted from a change in branch level
incentives made in the second quarter of fiscal 2015.
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 1,339 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
https://www.webcaster4.com/Webcast/Page/1118/14543. 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, 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 Year
Ended March 31, March 31,
2016
2015
2016
2015
Interest & fees
$
121,461
129,676
495,133 524,277 Insurance & other
20,794 37,722
60,454
85,936 Total revenues
142,255 167,398
555,587 610,213 Expenses: Provision for loan losses
24,373 13,483
123,598 118,830 General and
administrative expenses Personnel
43,989 48,017
169,573 192,419 Occupancy & equipment
11,492
10,876
44,461 41,717 Advertising
2,322 2,962
16,863 17,300 Intangible amortization
121 157
529 723 Other
8,631 9,399
37,714 39,893
66,555
71,411
269,140 292,052 Interest expense
6,959
5,673
26,849
23,301 Total expenses
97,887
90,567
419,587 434,183
Income before taxes
44,368 76,831
136,000 176,030
Income taxes
15,752 28,317
49,814 65,197
Net income
$
28,616
48,514
86,186
110,833
Diluted earnings per share
$
3.29
5.34
9.92
11.90 Diluted weighted average shares
outstanding
8,708
9,089
8,692
9,317
Consolidated Balance
Sheets (unaudited and in thousands)
March 31,
March 31,
2016
2015
ASSETS Cash
$
12,377
38,339 Gross loans receivable
1,066,964 1,110,145 Less:
Unearned interest & fees
(292,548 ) (297,402 )
Allowance for loan losses
(69,566 )
(70,438 ) Loans receivable, net
704,850 742,305 Property and
equipment, net
25,297 25,907 Deferred income taxes
38,131 37,345 Goodwill
6,121 6,121 Intangibles
2,917 3,364 Other assets
14,637
12,750
$
804,330
866,131
LIABILITIES AND
SHAREHOLDERS' EQUITY Liabilities: Notes payable
374,685
501,150 Income tax payable
7,580 18,204 Accounts payable and
accrued expenses
31,373 31,209
Total liabilities
413,638 550,563 Shareholders' equity
390,692 315,568
$
804,330
866,131
Selected Consolidated Statistics (dollars in
thousands)
Three Months Ended Year Ended
March 31, March 31,
2016
2015
2016
2015
Expenses as a percent of total revenues: Provision for loan
losses
17.1 % 8.1 %
22.2 % 19.5 %
General and administrative expenses
46.8 % 42.7 %
48.4 % 47.9 % Interest expense
4.9 %
3.4 %
4.8 % 3.8 % Average gross loans
receivable
1,145,503 1,182,040
1,147,956 1,174,391
Average net loans receivable
834,048 862,942
834,964 856,712 Loan volume
$ 504,409 $
517,960
$ 2,621,413 $ 2,724,243 Net
charge-offs as percent of average loans
18.9 % 13.0 %
14.8 % 12.9 % Return on average assets
(trailing 12 months)
10.0 % 12.5 %
10.0
% 12.5 % Return on average equity (trailing 12
months)
24.0 % 36.6 %
24.0 % 36.6 %
Offices opened (closed) during the period, net
(11
) 6
19 49 Offices open at end of period
1,339 1,320
1,339 1,320
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160505005296/en/
World Acceptance CorporationJohn L. Calmes Jr.,
864-298-9800Chief Financial Officer
World Acceptance (NASDAQ:WRLD)
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