World Acceptance Corporation Reports Fiscal 2019 Fourth Quarter and Fiscal Year Ended Results

GREENVILLE, S.C.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24WRLD&src=ctag” target=”_blank”gt;$WRLDlt;/agt;–World Acceptance Corporation (NASDAQ: WRLD) today reported financial
results for its fourth fiscal quarter and fiscal year ended March 31,
2019.

Three-month results

Gross loans outstanding in the US increased to $1.13 billion as of
March 31, 2019, a 12.3% increase from the $1.00 billion of gross loans
outstanding as of March 31, 2018. The Company’s unique borrowers in the
US as of March 31, 2019, increased by 9.4%, from March 31, 2018. This is
compared to an increase of 5.8%, during fiscal 2018.

As previously disclosed, the Company sold the Mexico operations
effective July 1, 2018. As a result of the sale, the Company classified
the Mexico business as discontinued operations on the statements of
operations and balance sheets for the applicable periods. Net income
from continuing operations for fiscal 2019 fourth quarter increased
$12.3 million to $37.9 million compared to $25.7 million for the same
quarter of the prior year. Net income from continuing operations per
diluted share increased to $4.22 in the fourth quarter of fiscal 2019
compared to $2.80 in the prior year quarter. Net income for the fourth
quarter of fiscal 2019 increased to $37.9 million from the $29.1 million
reported for the same quarter of the prior year. Net income per diluted
share increased to $4.22 in the fourth quarter of fiscal 2019 from $3.18
in the prior year quarter. Prior year net income and net income per
diluted share were impacted by the recognition of the deemed
repatriation transition tax (the “Transition Tax”), as described below.
Excluding the impact of the Transition Tax, net income for the fourth
quarter increased 11.7% to $37.9 million compared to $34.0
million for the same quarter of the prior year. Excluding the Transition
Tax, net income per diluted share increased 14.0% to $4.22 in the fourth
quarter of fiscal 2019 compared to $3.70 in the prior year quarter. See
“Non-GAAP financial measures” below.

Earnings per share for the quarter benefited from World Acceptance’s
share repurchase program. The Company repurchased approximately 600,000
shares of common stock on the open market at an aggregate purchase price
of approximately $67.9 million during the quarter. The Company had
approximately 8.5 million common shares outstanding excluding unvested
restricted shares as of March 31, 2019.

Total revenues in the US for the fourth quarter increased to $157.0
million, an 11.0% increase from the $141.4 million reported for the same
quarter of the prior year. The revenues from the 1,125 branches open
throughout both quarterly periods increased by 9.8%. Interest and fee
income increased 9.0%, from $114.0 million in the fourth quarter of
fiscal 2018 to $124.2 million in the fourth quarter of fiscal 2019,
primarily due to an increase in average earning loans. Insurance and
other income increased by 19.6% to $32.8 million in the fourth quarter
of fiscal 2019 compared to $27.4 million in the fourth quarter of fiscal
2018. The increase was primarily related to a $4.3 million increase in
revenue from the Company’s tax preparation business compared to the
fourth quarter of fiscal 2018.

Accounts in the US that were 61 days or more past due increased to 5.8%
on a recency basis at March 31, 2019, compared to 5.4% at March 31,
2018. Accounts in the US that were 61 days or more past due on a
contractual basis increased to 7.8% at March 31, 2019, compared to 7.5%
at March 31, 2018. The Company’s allowance for loan losses compared to
net loans was 9.7% at March 31, 2019, compared to 8.9% at March 31, 2018.

Net charge-offs in the US as a percentage of average net loans on an
annualized basis increased from 16.2% to 17.4% when comparing the fourth
quarter of fiscal 2019 to the fourth quarter of fiscal 2018. The
provision for loan losses increased by $11.9 million when comparing the
fourth quarter of fiscal 2019 to the fourth quarter of fiscal 2018. Net
charge-offs increased $6.5 million when comparing the fourth quarter of
fiscal 2019 to the fourth quarter of fiscal 2018. There was a $3.3
million increase in the US provision due to an increase during the
quarter in US accounts 90 days past due when comparing the fourth
quarter of fiscal 2019 to the fourth quarter of fiscal 2018. The
provision also increased due to a $2.5 million release of the allowance
in the prior year fourth quarter.

General and administrative (“G&A”) expenses amounted to $78.6 million in
the fourth quarter of fiscal 2019 compared to $75.3 million in the same
quarter of the prior fiscal year. As a percentage of revenues, G&A
expenses decreased from 53.2% during the fourth quarter of fiscal 2018
to 50.1% during the fourth quarter of fiscal 2019. G&A expenses per
average open branch increased by 2.4% when comparing the two fiscal
quarters, primarily due to an increase in personnel expense.

Personnel expense increased $3.7 million, or 7.5%, during the fourth
quarter of fiscal 2019 as compared to the fourth quarter of fiscal 2018.
Personnel expense in the US increased by $5.7 million during the fourth
quarter of fiscal 2019, as compared to the fourth quarter of fiscal 2018
due to additional share-based compensation associated with the LTIP and
director equity awards. The prior year included $2.5 million in
severance related amounts as a result of the separation agreement
entered into with the Company’s former CEO. World Acceptance also
recorded a $1.8 million charge due to a change in the Company’s paid
time off policy in the prior year.

Interest expense for the quarter ended March 31, 2019, decreased by
$140,000, or 2.7%, from the corresponding quarter of the previous year.
The decrease in interest expense is due to a 3.8% decrease in the
average debt outstanding, from $316.2 million to $304.1 million for the
quarters ended March 31, 2018 and 2019, respectively. The Company’s debt
to equity ratio remained at 0.5:1 consistent with March 31, 2018.

The Tax Cuts and Jobs Act (“TCJA”) was enacted on December 22, 2017. US
accounting standards required the remeasurement of all US deferred
income tax assets and liabilities for temporary differences from the
then-current corporate tax rate of 35% to the new corporate tax rate of
21%. The TCJA required companies to pay a one-time transition tax on
earnings of certain foreign subsidiaries that were previously tax
deferred and creates new taxes on certain foreign-sourced earnings. As
previously disclosed, the Company recorded a provisional Federal and
state Transition Tax obligation of $4.8 million in the fourth quarter of
fiscal 2018.

Other key return ratios for the fourth quarter of fiscal 2019 included a
8.8% return on average assets and a return on average equity of 13.6%
(both on a trailing 12-month basis).

Twelve-month results

In accordance with accounting principles generally accepted in the US,
World Acceptance recognized a $31.3 million cumulative translation loss
in the first quarter of fiscal 2019 as a result of classifying the
Company’s Mexico operating segment as held for sale. This cumulative
translation loss is due to the devaluation of the Mexican Peso versus
the US Dollar since the date of the Company’s investment. The cumulative
translation loss increased the Company’s investment in Mexico from $51.6
million to $82.9 million in the impairment analysis, which resulted in
an impairment to reflect an estimated fair value of $43.9 million. Due
to this impairment, net income for the year ended March 31, 2019,
decreased by $16.5 million to $37.2 million compared to the $53.7
million in net income reported for the prior year. This resulted in net
income of $4.05 per diluted share compared to net income of $5.99 per
share in the prior year.

Total revenues in the US for fiscal 2019 increased 8.3% to
$544.5 million compared with $502.7 million for fiscal 2018. Net
charge-offs as a percent of average net loans increased from 14.9% for
fiscal 2018 to 16.1% for fiscal 2019.

Other matters

As previously disclosed, World Acceptance retained outside legal counsel
and forensic accountants, upon receipt of an anonymous letter regarding
compliance matters, to conduct an investigation of the Company’s
operations in Mexico. The investigation focuses on the legality under
the US Foreign Corrupt Practices Act and certain local laws of certain
payments related to loans, the maintenance of the Company’s books and
records associated with such payments, and the treatment of compensation
matters for certain employees. The Company voluntarily contacted the SEC
and the U.S. Department of Justice (“DOJ”) in June 2017 to advise both
agencies that an investigation was underway. The Company is committed to
compliance with applicable laws and regulations and intend to cooperate
fully with both the SEC and the DOJ.

Non-GAAP financial measures

On December 22, 2017, the Tax Cut and Jobs Act (TCJA) was signed into
law. The results of the fourth quarter of fiscal 2018 and the fiscal
year ended March 31, 2018, reflect the impact of its enactment, which
resulted in a $4.8 million decrease in net income for the fourth
quarter. Net income and earnings per share excluding the impact of these
significant items are non-GAAP financial measures. Management believes
these measures help investors understand the impact of these items on
reported results.

About World Acceptance Corporation

World Acceptance Corporation is one of the largest small-loan consumer
finance companies, operating 1,193 branches in sixteen states as of
March 31, 2019.

Fourth 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/1118/30491.
The call will be available for replay on the Internet for approximately
30 days.

Cautionary Note Regarding Forward-looking Information

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 current 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. The Company’s actual results and financial condition may
differ materially from those indicated in the forward-looking
statements. Therefore, you should not rely on any of these
forward-looking statements. Important 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, including the effect of changes in tax law, such as
the effect of the TCJA that was enacted on December 22, 2017; the nature
and scope of regulatory authority, particularly discretionary authority,
that may be exercised by regulators, including, but not limited to, the
SEC, U.S. Department of Justice (“DOJ”), U.S. Consumer Financial
Protection Bureau (“CFPB”), and individual state regulators having
jurisdiction over the Company; the unpredictable nature of regulatory
proceedings and litigation; developments in, and the outcome of, our
ongoing investigation into certain transactions and payments in Mexico,
including any legal proceedings or government enforcement actions which
could arise out of the matters under review, and any remedial actions
World Acceptance may take in connection therewith; any determinations,
findings, claims or actions made or taken by regulators or other third
parties in connection with or resulting from the Company’s ongoing
investigation or the SEC’s formal order of investigation; the recent
sale of the Company’s Mexico subsidiaries, including claims or
litigation resulting therefrom; uncertainties associated with management
turnover and the effective succession of senior management; the impact
of changes in accounting rules and regulations, or their interpretation
or application, which could materially and adversely affect the
Company’s reported consolidated financial statements or necessitate
material delays or changes in the issuance of the Company’s audited
consolidated financial statements; the Company’s assessment of its
internal control over financial reporting; changes in interest rates;
risks relating to expansion; risks inherent in making loans, including
repayment risks and value of collateral; cybersecurity threats,
including the potential misappropriation of assets or sensitive
information, corruption of data or operational disruption; the Company’s
dependence on debt and the potential impact of limitations in the
Company’s amended revolving credit facility; the timing and amount of
revenues that may be recognized by the Company; changes in current
revenue and expense trends (including trends affecting delinquency and
charge-offs); 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, 2018 filed with the 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 AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)

 
 
     

Three months ended
March 31,

   

Twelve months ended
March 31,

2019     2018 2019     2018
Revenues:
Interest and fee income $ 124,221 $ 113,984 $ 469,154 $ 435,702
Insurance income, net and other income 32,777 27,415 75,389   66,967  
Total revenues 156,998 141,399 544,543 502,669
 
Expenses:
Provision for loan losses 28,533 16,631 148,427 117,620
General and administrative expenses:
Personnel 52,453 48,787 180,823 164,496
Occupancy and equipment 10,522 10,078 41,304 39,114
Advertising 3,598 3,594 22,495 21,196
Amortization of intangible assets 616 258 1,528 990
Other 11,437 12,565 42,153   43,312  
Total general and administrative expenses 78,626 75,282 288,303 269,108
 
Interest expense 4,914 5,052 17,934   19,090  
Total expenses 112,073 96,965 454,664 405,818
       
Income from continuing operations before income taxes 44,925 44,434 89,879 96,851
Income taxes 6,984 18,778 15,981   47,758  
Net income from continuing operations 37,941 25,656 73,898 49,093
 
Discontinued operations (1)

Income (loss) from discontinued operations before impairment loss
and income taxes

4,243 2,342 4,354
Impairment loss (38,378 )
Income taxes 756 627   (243 )
Net income (loss) from discontinued operations 3,487 (36,663 ) 4,597
       
Net income (loss) $ 37,941 $ 29,143 $ 37,235   $ 53,690  
 
Net income per common share from continuing operations, diluted $ 4.22 $ 2.80 $ 8.03 $ 5.48
Net income (loss) income per common share from discontinued
operations, diluted
$ $ 0.38 $ (3.98 ) $ 0.51  
Net income (loss) income per common share, diluted $ 4.22 $ 3.18 $ 4.05   $ 5.99  
Weighted average diluted shares outstanding 8,988 9,178 9,204 8,959
 

(1) As previously disclosed, the Company sold the Mexico
operations effective July 1, 2018. As a result of the sale, the Company
classified the Mexico business as discontinued operations on the
statements of operations and balance sheets for the applicable periods.

 
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

 
 
      March 31, 2019     March 31, 2018
ASSETS
Cash and cash equivalents $ 9,335 $ 12,474
Gross loans receivable 1,127,957 1,004,233
Less:
Unearned interest, insurance and fees (290,814 ) (258,991 )
Allowance for loan losses (81,520 ) (66,088 )
Loans receivable, net 755,623 679,154
Property and equipment, net 25,424 22,786
Deferred income taxes, net 23,832 20,175
Other assets, net 18,400 13,244
Goodwill 7,034 7,034
Intangible assets, net 15,340 6,644
Assets of discontinued operations (1)   79,475  
Total assets $ 854,988   $ 840,986  
 
LIABILITIES & SHAREHOLDERS’ EQUITY
Liabilities:
Senior notes payable 251,940 244,900
Income taxes payable 11,550 14,097
Accounts payable and accrued expenses 39,381 33,503
Liabilities of discontinued operations (1)   7,378  
Total liabilities 302,871 299,878
 
Shareholders’ equity 552,117   541,108  
Total liabilities and shareholders’ equity $ 854,988   $ 840,986  
 

(1) As previously disclosed, the Company sold the Mexico
operations effective July 1, 2018. As a result of the sale, the Company
classified the Mexico business as discontinued operations on the
statements of operations and balance sheets for the applicable periods.

 
WORLD ACCEPTANCE CORPORATION AND SUBSIDIARIES

SELECTED CONSOLIDATED STATISTICS ((1))

(unaudited and in thousands, except percentages and branches)

 
 
     

Three months ended
March 31,

   

Twelve months ended
March 31,

2019     2018 2019     2018
 
Gross loans receivable $ 1,127,957 $ 1,004,233 $ 1,127,957 $ 1,004,233
Average gross loans receivable (2) 1,193,057 1,064,530 1,120,112 1,019,005
Net loans receivable (3) 837,143 745,242 837,143 745,242
Average net loans receivable (4) 879,137 786,836 824,763 753,116
 
Expenses as a percentage of total revenue:
Provision for loan losses 18.2 % 11.8 % 27.3 % 23.4 %
General and administrative 50.1 % 53.2 % 52.9 % 53.5 %
Interest expense 3.1 % 3.6 % 3.3 % 3.8 %
Operating income as a % of total revenue (5) 31.7 % 35.0 % 19.8 % 23.1 %
 
Loan volume 619,942 528,832 2,720,351 2,487,066
 

Net charge-offs as percent of average net loans receivable

17.4 % 16.2 % 16.1 % 14.9 %
 
Return on average assets (trailing 12 months) 8.8 % 6.3 % 8.8 % 6.3 %
 
Return on average equity (trailing 12 months) 13.6 % 10.6 % 13.6 % 10.6 %
 
Branches opened or acquired (merged or closed), net (11 ) 3 16 8
 
Branches open (at period end) 1,193 1,177 1,193 1,177
 

(1) As previously disclosed, the Company sold the Mexico
operations effective July 1, 2018. As a result of the sale, the Company
classified the Mexico business as discontinued operations on the
statements of operations and balance sheets for the applicable periods.

(2) Average gross loans receivable have been determined by
averaging month-end gross loans receivable over the indicated period,
excluding tax advances.

(3) Net loans receivable is defined as gross loans receivable
less unearned interest and deferred fees.

(4) Average net loans receivable have been determined by
averaging month-end gross loans receivable less unearned interest and
deferred fees over the indicated period, excluding tax advances.

(5) Operating income is computed as total revenues less
provision for loan losses and general and administrative expenses.

Contacts

John L. Calmes, Jr.
Chief Financial and Strategy Officer
(864)
298-9800

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