World Acceptance Corporation Reports Record Third Quarter

Jan 28, 2010, 06:30 ET from World Acceptance Corporation

GREENVILLE, S.C., Jan. 28 /PRNewswire-FirstCall/ -- World Acceptance Corporation (Nasdaq:  WRLD) today reported record results for the third quarter of fiscal 2010, including a 64.8% increase in diluted earnings per share, a 13.9% increase in gross loan balances, and a 13.3% increase in revenues for the quarter ended December 31, 2009, compared with the corresponding quarter of the prior fiscal year.

Net income for the third quarter rose 66.4% to $14.8 million compared with $8.9 million for the same quarter of the prior year.  Net income per diluted share increased 64.8% to $0.89 in the third quarter of fiscal 2010 compared with $0.54 in the third quarter of fiscal 2009.  The fiscal 2009 net income for the third quarter was revised from $10.0 million, or $0.61 per share to $8.9 million, or $0.54 per share, due to a change in an accounting principle for the Company's convertible notes.

"World Acceptance's strong earnings momentum was due to growth in our core business, reduced loan losses as a percentage of total loans and a substantial improvement in our expense ratios," stated Sandy McLean, Chairman and CEO of the Company. "Our record loans outstanding benefited from increased loan volume at existing offices and additional volume from offices opened since last year.  We also experienced lower loss ratios over the past three quarters even though they are above our historical levels due to the soft economy."

Total revenues increased to $112.3 million in the third quarter of fiscal 2010, a 13.3% increase over the $99.2 million reported in the third quarter last year.  The revenue increase was consistent with a 13.7% increase in average net loans when comparing the two quarterly periods.  Gross loans outstanding increased to a record high $838.9 million at December 31, 2009, up 13.9% from $736.2 million at December 31, 2008.

The third quarter's results included a number of financial transactions that resulted in pretax non operating gains being approximately $1.0 million lower in fiscal 2010 than in fiscal 2009.  Fiscal 2010 results included $439,000 in net gains for the third quarter, including a $117,000 gain on the repurchase and cancellation of $1 million par value of its convertible notes and a $322,000 gain on its interest rate swaps.  Fiscal 2009 results included approximately $1.4 million in net gains for the third quarter that included a $3.0 million pre-tax gain from the sale of the Company's $10 million foreign exchange currency option and the repurchase and cancellation of $5 million par value of its 3% convertible senior subordinated notes, partially offset by a $1.6 million loss on its interest rate swaps.  

The provision for loan losses increased by 0.5% during the current quarter, to $29.6 million compared with $29.5 million for the fiscal 2009 third quarter. Net charge-offs amounted to $25.7 million, or 17.8% of average net loans on an annualized basis, compared with $24.9 million, or 19.6% of average net loans for the prior year quarter.  Delinquencies 61+ days past due decreased by 30 basis points on both a recency and contractual basis, to 3.0% and 4.3%, respectively, as of the end of the current quarter.

"We experienced a reduction in net charge-off ratios in each of the last three quarters and a steady improvement in our loss ratios during the current year," noted Mr. McLean. "Although these are positive trends, they remain above our historical levels for these credit metrics.  The 180 basis points (annualized) decrease in the third quarter's net charge-off ratio was at least 100 basis points greater than the previous two quarterly reductions.  Additionally, our net charge-offs as a percent of average net loans (annualized) for the first nine months of the current fiscal year loss ratio was approximately 110 basis points greater when compared with the average ratio for the corresponding three quarters of fiscal 2005 through 2008.  Based on the continued softness in the economy, we cannot predict when or if we will return to more historical loan loss ratios, yet believe that our current reserves are adequate at current loss levels."

The Company's general and administrative expenses were $55.5 million in the current quarter, a 7.4% increase over the $51.7 million in the prior year quarter.  This represents 49.5% of total revenues during the current fiscal quarter compared with 52.2% for last year. The improvement resulted from the strong growth in revenues combined with reduced start-up costs associated with a lower number of branch openings in fiscal 2010 compared with the first nine months of fiscal 2009.  The Company opened or acquired 32 new offices during the current year compared with 85 during the same period of the prior year.

Other key return ratios for the third quarter included a 12.2% return on average assets (on a trailing four quarters) and a return on average equity of 22.6% (on a trailing four quarters).  

Nine-Month Results

For the first nine-months of the fiscal year, net income rose 45.9% to $44.0 million compared with $30.2 million for the nine months ended December 31, 2008.  Fully diluted net income per share rose 47.3% to $2.68 in fiscal 2010 compared with $1.82 for the first nine months of fiscal 2009.  The fiscal 2009 net income was revised from $32.7 million, or $1.98 per dilutive share, due to a change in an accounting principle as previously mentioned.  

Total revenues for the first nine-months of fiscal 2010 rose 13.4% to $316.7 million compared with $279.3 million during the corresponding period of the previous year.  Net charge-offs increased $3.9 million, or 6.3%, compared with the prior year first nine-months.  Annualized net charge-offs as a percent of average net loans were 16.0% compared with 17.1% during the prior year nine-month period.

During the first nine-months of the fiscal year, the Company opened 32 offices and closed 1 office, resulting in a total of 975 offices at December 31, 2009.

About World Acceptance Corporation

World Acceptance Corporation is one of the largest small-loan consumer finance companies, operating 975 offices in 11 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.  Interested parties may participate in this call by dialing 1-888-312-9852, passcode 4752518.  A simulcast of the conference call is also available on the Internet at http://tinyurl.com/yflbmtr or www.streetevents.com.  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 Section 27A of the Securities Exchange Act of 1934, as amended, that represent the Company's expectations or beliefs concerning future events.  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:  the continuation or worsening of adverse conditions in the global and domestic credit markets and uncertainties regarding, or the impact of governmental responses to those conditions; changes in interest rates; risks inherent in making loans, including repayment risks and value of collateral, which risks may increase in light of adverse or recessionary economic conditions; recently-enacted or proposed legislation; 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); changes in the Company's markets and general changes in the economy (particularly in the markets served by the Company).  Such factors are discussed in greater detail in the Company's filings with the Securities and Exchange Commission.  World Acceptance Corporation is 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,
                                      ------------          ------------
                                 2009          2008       2009         2008
                                 ----          ----       ----         ----
    
    Interest & fees           $97,610        $84,881   $274,218     $241,284
    Insurance and other        14,700         14,280     42,528       38,019
    
      Total revenues          112,310         99,161    316,746      279,303
    Expenses:
      Provision for loan
       losses                  29,633         29,490     75,217       70,654
      General and
       Administrative 
       expenses
        Personnel              34,028         31,700    104,232       96,216
        Occupancy & equipment   7,658          6,491     21,475       19,023
        Data processing           475            573      1,503        1,743
        Advertising             5,071          5,087      9,892       10,329
        Intangible
         amortization             563            621      1,696        1,845
        Other                   7,742          7,244     21,828       19,730
    
                               55,537         51,716    160,626      148,886
      Interest expense          3,756          3,928     10,483       11,428
    
        Total expenses         88,926         85,134    246,326      230,968
    
    Income before taxes        23,384         14,027     70,420       48,335
    Income taxes                8,633          5,164     26,423       18,183
    
    Net income                $14,751         $8,863    $43,997      $30,152
                              =======         ======    =======      =======
    Diluted earnings per
     share                      $0.89          $0.54      $2.68        $1.82
                                =====          =====      =====        =====
    Diluted weighted
     average shares
     outstanding               16,576         16,342     16,434       16,543
                               ======         ======     ======       ======
    
    
                                Consolidated Balance Sheets
                                ---------------------------
                               (unaudited and in thousands)
    
                                       
                               December 31,      March 31,       December 31,
                                  2009             2009              2008
                                  ----             ----              ----
         ASSETS
    Cash                        $12,946           $6,260            $7,139
    Gross loans receivable      838,864          671,176           736,234
        Less: Unearned
         interest & fees       (223,441)        (172,743)         (194,872)
        Allowance for loan
         losses                 (47,679)         (38,021)          (42,576)
                                -------          -------           -------
          Loans receivable,
           net                  567,744          460,412           498,786
    Property and equipment,
     net                         22,936           23,060            23,069
    Deferred income taxes        13,027           12,251            13,681
    Income taxes receivable           -                -             1,569
    Goodwill                      5,581            5,581             5,584
    Intangibles                   7,541            8,988             9,513
    Other assets                 10,350            9,542             9,162
    
                               $640,125         $526,094          $568,503
                               ========         ========          ========
    
         LIABILITIES AND 
          SHAREHOLDERS' EQUITY
    Liabilities:
        Notes payable           262,494          197,041           276,734
        Income tax payable        5,625           11,413                 -
        Accounts payable and
         accrued expenses        24,854           21,305            22,734
                                 ------           ------            ------
          Total liabilities     292,973          229,759           299,468
    Shareholders' equity        347,152          296,335           269,035
    
                               $640,125         $526,094          $568,503
                               ========         ========          ========
    
    
                              Selected Consolidated Statistics
                              --------------------------------
                                   (dollars in thousands)
    
                                Three Months Ended         Nine Months Ended
                                   December 31,               December 31,
                                   ------------               ------------
                                2009          2008        2009          2008
                                ----          ----        ----          ----
    
    Expenses as a percent of
     total revenues:
      Provision for loan
       losses                   26.4%         29.7%       23.7%         25.3%
      General and
       administrative expenses  49.5%         52.2%       50.7%         53.3%
      Interest expense           3.3%          4.0%        3.3%          4.1%
    
    Average gross loans
     receivable             $785,167      $689,267    $742,518      $652,846
    
    Average loans
     receivable             $577,553      $507,965    $547,060      $481,807
    
    Loan volume             $674,095      $571,975  $1,783,646    $1,517,431
    
    Net charge-offs as
     percent of average
     loans                     17.8%          19.6%       16.0%         17.1%
    
    Return on average assets
     (trailing 4 quarters)     12.2%          10.4%       12.2%         10.4%
    
    Return on average equity
     (trailing 4 quarters)     22.6%          21.1%       22.6%         21.1%
    
    Offices opened (closed)
     during the period, net       9             16          31            85
    
    Offices open at end of
     period                     975            923         975           923

SOURCE World Acceptance Corporation



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