World Acceptance Corp. (WRLD, Financial) filed Quarterly Report for the period ended 2009-06-30.
World Acceptance Corporation is engaged in the small-loan consumer finance business offering short-term small loans medium-term larger loans related credit insurance and ancillary products and services to individuals. World Acceptance Corp. has a market cap of $384.98 million; its shares were traded at around $23.72 with a P/E ratio of 6.39 and P/S ratio of 0.98. World Acceptance Corp. had an annual average earning growth of 20.3% over the past 10 years. GuruFocus rated World Acceptance Corp. the business predictability rank of 5-star.
Insurance commissions and other income increased by $3.1 million, or 25.6%, between the two quarterly periods. Insurance commissions increased by approximately $813,000, or 10.7%, 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 increased by approximately $2.3 million, or 51.3%, over the two corresponding quarters primarily due to the repurchase and cancellation of $10 million face value of the convertible notes, which resulted in a $2.4 million pre-tax gain.
The provision for loan losses during the quarter ended June 30, 2009 increased by $2.6 million, or 14.4%, from the same quarter last year. Although the total amount of delinquencies and charge-offs continued to increase during the first quarter as in the ongoing difficult economic environment, accounts that were 61 days or more past due decreased from 2.9% to 2.8% on a recency basis and remained consistent at 4.0% on a contractual basis when comparing the two quarter end statistics. Net charge-offs as a percentage of average net loans decreased from 14.5% (annualized) during the prior year first quarter to 13.8% (annualized) during the most recent quarter. The 13.8% is more in line with historical charge-off ratios for a first fiscal quarter; for instance, charge-off ratios were 13.9% in June 2005, 13.4% in June 2003 and 13.5% in June 2002.
General and administrative expenses for the quarter ended June 30, 2009 increased by $4.5 million, or 9.3% over the same quarter of fiscal 2009. Overall, general and administrative expenses, when divided by average open offices, decreased by approximately 1.5% when comparing the two periods. During the first quarter of fiscal 2010, the Company opened 5 branches compared to 34 branches opened or acquired in the first quarter of fiscal 2009. The total general and administrative expense as a percent of total revenues decreased from 55.2% for the three months ended June 30, 2008 to 53.2% for the three months ended June 30, 2009.
As discussed in the Notes to Consolidated Financial Statements (Note 13), as of July 31, 2009, the Company amended its revolving credit facility with a syndicate of banks. As of July 31, 2009, the credit facility was increased to $213.3 million, with no seasonal revolving credit commitment, and the expiration date was amended to 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 of 4.0% per annum. Prior to the amendment the borrowing rate was, at the company s option, at either the agent bank s prime rate or LIBOR rate plus 1.8%.
The Company s financial instruments consist of the following: cash, loans receivable, senior notes payable, convertible senior subordinated notes payable, and interest rate swaps. Fair value approximates carrying value for all of these instruments, except the convertible notes payable, for which the fair value of $58.2 represents the quoted market price. Loans receivable are originated at prevailing market rates and have an average life of approximately four months. Given the short-term nature of these loans, they are continually repriced at current market rates. The Company s outstanding debt under its revolving credit facility was $137.7 million at June 30, 2009. At June 30, 2009, interest on borrowings under this facility was based, at the Company s option, on the prime rate or LIBOR plus 1.80%. As discussed in the Notes to the Consolidated Financial Statements (Note 13), the interest on borrowings under this facility was increased to LIBOR plus 3.0%, with a minimum of 4.0% per annum.
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World Acceptance Corporation is engaged in the small-loan consumer finance business offering short-term small loans medium-term larger loans related credit insurance and ancillary products and services to individuals. World Acceptance Corp. has a market cap of $384.98 million; its shares were traded at around $23.72 with a P/E ratio of 6.39 and P/S ratio of 0.98. World Acceptance Corp. had an annual average earning growth of 20.3% over the past 10 years. GuruFocus rated World Acceptance Corp. the business predictability rank of 5-star.
Highlight of Business Operations:
Net income increased to $14.6 million for the three months ended June 30, 2009, or 29.0%, from the three month period ended June 30, 2008. Operating income (revenues less provision for loan losses and general and administrative expenses) increased approximately $4.7 million, or 21.6%, interest expense decreased by 13.8% and income taxes increased by 27.9%.Insurance commissions and other income increased by $3.1 million, or 25.6%, between the two quarterly periods. Insurance commissions increased by approximately $813,000, or 10.7%, 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 increased by approximately $2.3 million, or 51.3%, over the two corresponding quarters primarily due to the repurchase and cancellation of $10 million face value of the convertible notes, which resulted in a $2.4 million pre-tax gain.
The provision for loan losses during the quarter ended June 30, 2009 increased by $2.6 million, or 14.4%, from the same quarter last year. Although the total amount of delinquencies and charge-offs continued to increase during the first quarter as in the ongoing difficult economic environment, accounts that were 61 days or more past due decreased from 2.9% to 2.8% on a recency basis and remained consistent at 4.0% on a contractual basis when comparing the two quarter end statistics. Net charge-offs as a percentage of average net loans decreased from 14.5% (annualized) during the prior year first quarter to 13.8% (annualized) during the most recent quarter. The 13.8% is more in line with historical charge-off ratios for a first fiscal quarter; for instance, charge-off ratios were 13.9% in June 2005, 13.4% in June 2003 and 13.5% in June 2002.
General and administrative expenses for the quarter ended June 30, 2009 increased by $4.5 million, or 9.3% over the same quarter of fiscal 2009. Overall, general and administrative expenses, when divided by average open offices, decreased by approximately 1.5% when comparing the two periods. During the first quarter of fiscal 2010, the Company opened 5 branches compared to 34 branches opened or acquired in the first quarter of fiscal 2009. The total general and administrative expense as a percent of total revenues decreased from 55.2% for the three months ended June 30, 2008 to 53.2% for the three months ended June 30, 2009.
As discussed in the Notes to Consolidated Financial Statements (Note 13), as of July 31, 2009, the Company amended its revolving credit facility with a syndicate of banks. As of July 31, 2009, the credit facility was increased to $213.3 million, with no seasonal revolving credit commitment, and the expiration date was amended to 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 of 4.0% per annum. Prior to the amendment the borrowing rate was, at the company s option, at either the agent bank s prime rate or LIBOR rate plus 1.8%.
The Company s financial instruments consist of the following: cash, loans receivable, senior notes payable, convertible senior subordinated notes payable, and interest rate swaps. Fair value approximates carrying value for all of these instruments, except the convertible notes payable, for which the fair value of $58.2 represents the quoted market price. Loans receivable are originated at prevailing market rates and have an average life of approximately four months. Given the short-term nature of these loans, they are continually repriced at current market rates. The Company s outstanding debt under its revolving credit facility was $137.7 million at June 30, 2009. At June 30, 2009, interest on borrowings under this facility was based, at the Company s option, on the prime rate or LIBOR plus 1.80%. As discussed in the Notes to the Consolidated Financial Statements (Note 13), the interest on borrowings under this facility was increased to LIBOR plus 3.0%, with a minimum of 4.0% per annum.
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