World Acceptance Corp. (WRLD)

F1Q11 (Qtr End 06/30/10) Earnings Call

July 27, 2010 10:00 a.m. ET

Executives

Sandy McLean - CEO

Kelly Malson - CFO

Mark Roland - President & COO

Analysts

John Rowan - Sidoti & Company

David Burtzlaff - Stephens Inc.

Henry Coffey - Sterne, Agee

Dan Bandi - Integrity Asset Management

Bill Dezellem - Tieton Capital Management

Charles Walters - World Acceptance

Presentation

Operator

Good morning and welcome to the World Acceptance Corporation sponsored First Quarter Press Release Conference Call. Today's conference is being recorded. At this time all participants are in a listen-only mode. And question-and-answer session will follow the presentation's party, Corporation's CEO one of their officers. Before we begin, the Corporation has requested that I make the following announcements.

The comments made during this conference may contain certain forward-looking statements within the meaning of Section 27A of the Securities and Exchange Act that represent the Corporation's expectations and 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 changes to the timing, amount of revenues that may be recognized by the Corporation, changes in current revenue and expense trends, changes in the Corporation's market and changes in the economy. Such factors are discussed in greater detail in the Corporation's filings with the Securities and Exchange Commission.

At this time, it's my pleasure to turn the floor over to your host, Sandy McLean, Chairman and CEO. Please go ahead.

Sandy McLean

Thank you, Anthony. Welcome to World Acceptance Corporation's first quarter conference call. As Anthony said I'm Sandy McLean, the Company's Chairman and CEO. With me is Kelly Malson, our CFO along with other members of our management team.

Mark Roland, our President and Chief Operating Officer is out of town but joining us by phone. As it is customary, I'll spend a few minutes reviewing the quarter results after which we will be happy to answer any questions.

Once again, I'm very pleased by the quarterly financial performance. Our results during the first quarter of fiscal 2011 continued the positive trends that we have experienced during the latter quarters of fiscal 2010.

We are glad to be able to report the ongoing expansion of our office network, excellent growth and our receivable portfolio, improved control of our operating expenses as well as continued improvement in our loan loss ratios. Net income for first fiscal quarter was $18.7 million, $1.14 per diluted share, compared to 14.6 million or $0.19 per diluted share for the first quarter of fiscal 2010.

This represents a 27.9% increase of net income, and a 26.7% increase of net income per diluted share when comparing the two quarterly periods. Additionally, the earnings for the first quarter of fiscal 2010 benefited from 2 million pre-tax gain from the early repayment of 10 million base amount of our convertible bond. This resulted in an increase of 1.5 million in net earnings, and $0.09 per diluted share during the prior year quarter that was not present during the current quarter.

Gross loans manage 824.9 million at June 30, 2010, a 13.6% increase over the 726.1 million outstanding to June 30, 2009 and a 7.1% increase since the beginning of the fiscal year. This growth was barely even distributed throughout the company with eight our eleven states experience and at least a 10% growth in gross loan.

While acquisitions continued to be an important part of our overall growth strategy, Company did not make any significant purchases during the first fiscal quarter. Four small offices consisting of approximately 1,000 account and 857,000 gross loans for purchase, two of which will emerge into existing offices; this was very similar to the acquisition activity during the first quarter of the prior year.

As planned the expansion of our branch network during the first fiscal quarter was increased from the prior year level. We began fiscal 2011 with 990 offices, opened 18 in purchase to given us the total of 1,010 offices at June 30, 2010.

Our plans for fiscal 2011, we have opened 55 offices in the U.S and 115 in Mexico plus evaluate acquisitions as opportunities arise. Total revenue for the quarter amounted to a $110.4 million, which is a 10.1% increase over the $100.2 million during the first quarter of the prior fiscal year.

Excluding the 2.4 million gain from the convertible notes repurchases during the prior year first quarter, the increase in total revenues would have been 12.8% on a quarter-over-quarter basis. This is more in line with the 14% increase of net loans when comparing the two quarterly periods.

Revenue from 935 offices opened throughout both quarterly periods increased by 8.8%. Delinquencies and charge-offs once again showed signs of improvement during the first quarter, a continuation of the trend that we experienced during the later quarters of fiscal 2010.

Accounts that were 61 days or more past due decreased slightly from 2.7% to 2.5% on a regency basis and from 4% to 3.6% on a contractual basis when comparing the two year quarter end statistics.

Net charge offs is a percentage of average net loans decreased from 13.8% annualized during the prior first quarter to 12.5% annualized during the most recent quarter. This 12.5% is more in line with historical charge off ratios for the first fiscal quarter. From a historical basis charge off ratios were 12% in Q1 of '02 to 13.5% of Q1 of '03, 13.4 if you want to look in '04 and 12.5 in '05, 13.9 in '06, 11.6 in '07 and 12.7 in '08.

Read the rest of this transcript for free on seekingalpha.com