World Acceptance Corp. (WRLD, Financial) filed Quarterly Report for the period ended 2010-06-30.
World Acceptance Corp. has a market cap of $673.2 million; its shares were traded at around $42.7 with a P/E ratio of 9.2 and P/S ratio of 1.5. World Acceptance Corp. had an annual average earning growth of 16.8% over the past 10 years. GuruFocus rated World Acceptance Corp. the business predictability rank of 5-star.WRLD is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, Paul Tudor Jones of The Tudor Group, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, Jeremy Grantham of GMO LLC, Steven Cohen of SAC Capital Advisors.
Insurance commissions and other income decreased by $0.8 million, or 5.5%, between the two quarterly periods. Insurance commissions increased by approximately $1.5, or 18.2%, during the most recent quarter when compared to the prior year quarter due to the increase in loans in those states where credit insurance is sold in conjunction with the loan. Other income decreased by approximately $2.4 million, or 35.3%, over the corresponding quarter primarily due to the repurchase and cancellation in first quarter fiscal 2010 of $10.0 million face value of the Convertible Notes, which resulted in a $2.4 million pre-tax gain in that quarter. During first quarter fiscal 2011, the Company did not repurchase any of the Convertible Notes.
The provision for loan losses during the quarter ended June 30, 2010 decreased by $0.7 million, or 3.6%, from the same quarter last year. Accounts that were 61 days or more past due decreased from 2.8% to 2.5% on a recency basis and decreased from 4.0% to 3.6% on a contractual basis when comparing the two quarter end statistics. Net charge-offs as a percentage of average net loans decreased from 13.8% (annualized) during the prior year first quarter to 12.5% (annualized) during the most recent quarter. The 130 basis point decrease is consistent with the decrease the Company has experienced over the past 3 quarters. The 12.5% net charge-off (annualized) ratio, is consistent with charge-off levels prior to the economic recession. Historical charge-off ratios for first quarter, prior to June 2008, are as follows: 12.7% June 2007, 11.6% June 2006 and 13.9% June 2005.
General and administrative expenses for the quarter ended June 30, 2010 increased by $4.0 million, or 7.4% over the same quarter of fiscal 2010. Overall, general and administrative expenses, when divided by average open offices, increased by approximately 1.7% when comparing the two periods. During the first quarter of fiscal 2011, the Company opened or acquired 20 branches compared to 5 branches opened or acquired in the first quarter of fiscal 2010. The total general and administrative expense as a percent of total revenues decreased from 53.2% for the three months ended June 30, 2009 to 51.9% for the three months ended June 30, 2010.
The Company has a $238.3 million base credit facility with a syndicate of banks. The credit facility will expire on July 31, 2011. Funds borrowed under the revolving credit facility bear interest, at the Company's option, at either the agent bank's prime rate per annum or the LIBOR rate plus 3.0% per annum with a minimum 4.0% interest rate. At March 31, 2010, the interest rate on borrowings under the revolving credit facility was 4.25%. The Company pays a commitment fee equal to 0.375% per annum of the daily unused portion of the revolving credit facility. Amounts outstanding under the revolving credit facility may not exceed specified percentages of eligible loans receivable. On June 30, 2010, $146.1 million was outstanding under this facility, and there was $92.3 million of unused borrowing availability under the borrowing base limitations.
In October 2005, the Company entered into an interest rate swap to economically hedge the variable cash flows associated with $30 million of its LIBOR-based borrowings. This swap converted the $30 million from a variable rate of one-month LIBOR to a fixed rate of 4.755% for a period of five years. In December 2008, the Company entered into a $20 million interest rate swap to convert a variable rate of one month LIBOR to a fixed rate of 2.4%.
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World Acceptance Corp. has a market cap of $673.2 million; its shares were traded at around $42.7 with a P/E ratio of 9.2 and P/S ratio of 1.5. World Acceptance Corp. had an annual average earning growth of 16.8% over the past 10 years. GuruFocus rated World Acceptance Corp. the business predictability rank of 5-star.WRLD is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, Paul Tudor Jones of The Tudor Group, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, Jeremy Grantham of GMO LLC, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:
Net income increased to $18.7 million for the three months ended June 30, 2010, an increase of 27.9%, from the three month period ended June 30, 2009. Operating income (revenues less provision for loan losses and general and administrative expenses) increased approximately $6.9 million, or 26.2%, interest expense increased by 7.8% and income taxes increased by 29.9%.Insurance commissions and other income decreased by $0.8 million, or 5.5%, between the two quarterly periods. Insurance commissions increased by approximately $1.5, or 18.2%, during the most recent quarter when compared to the prior year quarter due to the increase in loans in those states where credit insurance is sold in conjunction with the loan. Other income decreased by approximately $2.4 million, or 35.3%, over the corresponding quarter primarily due to the repurchase and cancellation in first quarter fiscal 2010 of $10.0 million face value of the Convertible Notes, which resulted in a $2.4 million pre-tax gain in that quarter. During first quarter fiscal 2011, the Company did not repurchase any of the Convertible Notes.
The provision for loan losses during the quarter ended June 30, 2010 decreased by $0.7 million, or 3.6%, from the same quarter last year. Accounts that were 61 days or more past due decreased from 2.8% to 2.5% on a recency basis and decreased from 4.0% to 3.6% on a contractual basis when comparing the two quarter end statistics. Net charge-offs as a percentage of average net loans decreased from 13.8% (annualized) during the prior year first quarter to 12.5% (annualized) during the most recent quarter. The 130 basis point decrease is consistent with the decrease the Company has experienced over the past 3 quarters. The 12.5% net charge-off (annualized) ratio, is consistent with charge-off levels prior to the economic recession. Historical charge-off ratios for first quarter, prior to June 2008, are as follows: 12.7% June 2007, 11.6% June 2006 and 13.9% June 2005.
General and administrative expenses for the quarter ended June 30, 2010 increased by $4.0 million, or 7.4% over the same quarter of fiscal 2010. Overall, general and administrative expenses, when divided by average open offices, increased by approximately 1.7% when comparing the two periods. During the first quarter of fiscal 2011, the Company opened or acquired 20 branches compared to 5 branches opened or acquired in the first quarter of fiscal 2010. The total general and administrative expense as a percent of total revenues decreased from 53.2% for the three months ended June 30, 2009 to 51.9% for the three months ended June 30, 2010.
The Company has a $238.3 million base credit facility with a syndicate of banks. The credit facility will expire on July 31, 2011. Funds borrowed under the revolving credit facility bear interest, at the Company's option, at either the agent bank's prime rate per annum or the LIBOR rate plus 3.0% per annum with a minimum 4.0% interest rate. At March 31, 2010, the interest rate on borrowings under the revolving credit facility was 4.25%. The Company pays a commitment fee equal to 0.375% per annum of the daily unused portion of the revolving credit facility. Amounts outstanding under the revolving credit facility may not exceed specified percentages of eligible loans receivable. On June 30, 2010, $146.1 million was outstanding under this facility, and there was $92.3 million of unused borrowing availability under the borrowing base limitations.
In October 2005, the Company entered into an interest rate swap to economically hedge the variable cash flows associated with $30 million of its LIBOR-based borrowings. This swap converted the $30 million from a variable rate of one-month LIBOR to a fixed rate of 4.755% for a period of five years. In December 2008, the Company entered into a $20 million interest rate swap to convert a variable rate of one month LIBOR to a fixed rate of 2.4%.
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