World Acceptance Corp (WRLD) 2006 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter earnings conference call.

At this time, all participants are in a listen-only mode.

Later there will be a question and answer session, and instructions will follow at that time. [OPERATOR INSTRUCTIONS].

As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Mr. Doug Jones, President and CEO.

Sir, you may begin.

Thank you, Adrienne.

Good afternoon and welcome to your company's third quarter earnings conference call for fiscal year 2006.

I'm Doug Jones, your President and CEO.

Joining me are Charlie Walters, your Chairman;

Sandy McLean, your Chief Financial Officer;

Mark Roland, your Chief Operations Office; as well as several other members of the your senior management team.

I'll give you a brief overview of the third quarter ending December 31st and my perspective on your company's current condition.

Afterwards, Sandy McLean will review the financial reports in detail.

At the end of the call, we'll open the floor for any questions or comments that any of you may have.

Although our earnings did not reflect it, your company had a very good third quarter.

The most important thing that we can accomplish during our third quarter is to attract new and former customers and to grow our outstanding ledger balance.

To that end, we were very successful.

Our 2005 growth season was our best growth season ever.

Your company ended the quarter with 619 offices in 11 states and Mexico, serving over 562,000 customers with loan balances at a record $464.4 million.

This represents a 20.7% increase in ledger from December to December and a 32.1% increase for the fiscal year-to-date.

The compares to a 24% increase in the same nine months of last year.

While Texas certainly led the way driven by their law change in September, the other 10 states all had solid growth.

These excellent results were achieved without significant acquisitions, which have been $8.3 million year-to-date versus 19.6 million during the same period last year.

This growth in balances puts us in an accident position as we enter our fourth, and traditionally, our most profitable quarter.

While we're pleased with the third quarter's growth results, we're disappointed in the earnings, which were negatively impacted primarily by three things.

First, our charge-offs as a percentage of average net loans on an annualized basis increased from 15.9% during the third quarter of last year to 17.4% during the third quarter of this year.

This is our highest quarterly percentage in recent years and it slightly exceeds the 17% in December of 2001.

A 19% increase in bankruptcy filings for the third quarter is the single most identifiable contributor to this increase.

While one might assume that this is a credit quality issue, that's not supported by our delinquency trends, which are much improved in both contractual and recency delinquency.

Not only are the percentages down, the actual dollars delinquent are less than December, 2004.

Second, as expected, our interest expense for the quarter increased from 1.3 million to 2.1, for a 63% increase.

Thirdly, the impact on our provision for loan losses resulting from the increase in our general ledger allowance for losses due to the large increase in loans during the third quarter.

Fundamentally, there have been no changes in how World operates, and therefore no change in you management team's optimism for the future.

Our Mexico project is progressing very well, with our first branch achieving a profit in its fourth month of operation.

We anticipate opening an additional five branches early next fiscal year in Mexico.

On the legislative horizon, [fees] continue to look very positive causing us to be cautiously optimistic.

We currently have positive bills introduced in Arizona, Indiana, and Kansas.

Discussions on favorable legislation are continuing in Kentucky, North Carolina, and are in the early stages in Florida.

Any of this legislation that passes would have a positive impact for your company.

I'll now turn the floor over to your CFO, Sandy McLean, who will share further financial details.

Sandy?

Thank you, Doug.

For the quarter ending December 31st, 2005, net income amounted to 5.686 million or $0.30 per share.

This is a 3.4% increase over the 5.5 million for the quarter ending December 31st 2004, which had a $0.28 earning per share.

Year-to-date, our net earnings amounted to 20.4 million or $1.07 per share compared to 19.7 or $1.01 for the nine-month period ending December 31, 2004.

This is a 3.8% year-over-year earnings growth.

As Doug said, while the earnings did not reflect it, we are pleased with the overall quarter results.

Of most important is our loan growth.

As Doug mentioned, we ended the year with gross loan balances of 464 million compared to 384.7 at 12-31-04, which is a 20.7% increase.

Our average net loan balances during the quarter were 316.2 million compared to 274.2 million for the same quarter of last year, which was 15.3%.

While our average balances were not equal, our average balance percent growth was not as much as at year end -- I mean, quarter end growth.

This is due to the higher percent increase in balances that we experienced during the December quarter.

What is also very important is that most of this growth is internally generated.

The ledger balance at March 31st, 2005, was 351.5 million.

This represents an increase at December 31st of 112.9 million, or a 32.1% increase.

The growth in loan balances from March 31st, 2004 to December 31st, 2004 was 74.6 million or 24%.

While acquisitions are very important to our growth strategy, they were less important during the current year.

During the first nine months of the year, we had 20 transactions or offices for 10,318 accounts, or $8.3 million.

During the same period of last year, we had 52 transactions for 24,000 customers or 19.5 million in gross ledger growths.

Primarily as a result of the growth in Texas, we had a slight change in our mix.

The small loan portfolio were represented 330 -- amounted to 336 million or 72% of the portfolio as of December 31st, 2005.

At the same time the prior year, it was 273 million or 71.0%.

This is a 23% increase on our small loan balances.

This larger loan balances as far as the mix is concerned was 24 -- 26.8% last year, 25.7 during the current year.

And of course, our sales financed were approximately 2% for both periods.

As would be expected with the increase in balances, our loan volume was also very strong during the quarter.

During the quarter, we had 421,000 loans for a total amount of $366.996 million.

This compared to -- it's a 19% increase over the 306.9 million during the quarter -- same quarter of last year.

Year-to-date, we've had a loan volume of 954.3 million, which is 17.9% over the 809 million -- 809.2 million during the previous year's nine month period.

Total revenue is beginning to reflect the increases in these balances.

For the quarter, our total revenues amounted to 61.3 million which is a 15.3% increase over the 53.2 million for the same quarter of the prior year.

For the year-to-date numbers, total revenue amounted to 169.8 million or a 12.9% increase over the 150.4 million during the nine months ending December 31, 2004.

The revenue increases mirror the increases in average net loans for both the nine month and quarterly periods.

Our same store revenue in the 516 offices that were open throughout both periods increased by 11.7% on a quarter-over-quarter basis and a 7.4% over year-over-year basis.

Our interest cost, as Doug mentioned, did have a negative impact on our earnings during the most recent quarter.

Our interest of 2.1 million represented a 63% increase over 1.3 million for the same quarter last year.

While our average debt only increased by 13.2%, we have had an impact of the continuing rise in interest rates.

Our office expansion, we began the year with 579 offices.

We have opened 43 new offices.

We have purchased 3 new locations and merged 6 nonperforming offices to end the period at December 31st with 619 offices.

Another important -- another group of statistics which are very important to the profitability of the Company, as you know and as Doug mentioned, is our net charge-offs in delinquencies. et charge-offs for the quarter amounted to 17.4% on an annualized basis compared to 15.9% for the same quarter of the prior year.

Year-to-date, these charge-off percentages have risen from 14.7 for the prior year to 15.8.

While we have seen increases on charge-off ratios during the fiscal year, we are encouraged by the reductions in our delinquencies.

On a recency basis, our total delinquencies have actually dropped from 12.5 million to 11.7, or as a percentage of gross loans outstanding, from 3.2% at December 31st, 2004, to 2.5% at the end of the most recent quarter.

On a contractual basis, our delinquencies have dropped from right at 18 million to 17.1, or 4.7% to 3.7% at the end of the most recent quarter.

Our general and administrative expenses were up a little more than usual; however, we still showed improvements as a percentage in revenues.

Our total G&A for the quarter amounted to 33.4 million or 13.4% over the 29.5 million for the same quarter of the prior year.

As a percent of revenues, our G&A dropped from 55.4% for the prior year quarter to 54.5% for the most recent quarter.

Year-to-date, our general and administrative expenses have increased from 82.4 million to 92.8 million or for 12.6% and as a percentage of revenues have dropped from 54.8% to 54.6%.

Our G&A expenses as -- for average open office during the year has increased by 6.6% for the most recent quarter and 4.9% year-to-date.

ParaData was once again profitable, which is their primary goal.

Their pretax earnings for the current year of 329,000 is about 60% greater than the 204,000 they had for the prior year.

While these earnings are not significant to the combined totals, ParaData, as a company continues to be very significant to the overall success and profitability of World Acceptance.

Our tax return business, while it's too early to project the results from this part of our operations, we're very encouraged by the very start of the season, which seems to be at a very good pace.

As you remember, we prepared approximately 55,000 returns for 6.8 million in fees during fiscal 2005, and we believe that those numbers -- we should easily surpass those numbers during the current upcoming fourth quarter.

Other ratios, a return on assets year-to-date of 8.5% is down from 9.2% for the same annualized numbers for the current year.

And return on equity has dropped from 16% to 14.4%.

Our share repurchase program, while not active during the most recent quarter, has been active this year as we have repurchased 800 -- 800,400 shares for 20.8 million in total repurchases.

And finally as a short update on our Mexican expansion, as Doug mentioned, we have opened 2 offices in September.

As of the end of December, we had 1,105 accounts and approximately $634,000 in gross loans outstanding.

To this date, we have had no charge-offs and very little delinquencies and 1 office was profitable in the fourth month of operations.

We are in the process of opening 5 additional offices in the next six months and look forward to the possibilities in Mexico.

At this point in time, we'd be more than happy to answer any questions that you may have.

[OPERATOR INSTRUCTIONS].

Henry Coffey.

Good afternoon, everyone.

Three questions.

The first two are just clerical.

Sandy, I didn't catch the delinquency ratios that you shared with us, both on a recency and a contractual basis.

As a percentage of loans?

Yes.

Okay.

On a recency basis, there was 13.2% at December 31st, 2004, and 2.5% at the end of the most recent quarter.

13.2?

3.2.

Yes, I know.

It's -- okay, 3.2%.

Versus 2.5.

And it was 2.5 in '05?

That's correct.

So the recency and the contractual delinquencies were?

4.7 and 3.7.

Okay.

So those -- your delinquencies are down, obviously?

And obviously, [inaudible] these are the 60 day delinquencies and greater.

As a percentage of net or gross loans?

Gross loans, these are gross balances to gross balances.

Okay.

I know you talked about repurchasing 800 -- how many shares?

800,400.

400 shares, okay.

Could you characterize -- your losses increased, that wasn't surprising.

Could you characterize, however, the set of patterns in the losses?

I mean, if you looked at it month by month, if you look at October, November, and December, did you see some patterns that could give us some sense of how the bankruptcy bill was affecting you, how much of this was tied to the new loan product in Texas, et cetera?

Just kind of a taste for what the trend might be.

Henry, on the -- on the bankruptcy side, we don't have a month-by-month breakdown, but it certainly was not spread evenly throughout the Company.

To -- just to give you some specifics, Missouri had an 85% increase in filings, Kentucky an 82, Illinois a 78, and Alabama a 58.

The losses in those states trailed the higher filings while the Company only had a 19% increase.

There were certain states that took it much harder than others.

Those were -- you -- Missouri -- the four states you just mentioned.

Missouri, Kentucky, Illinois, and Alabama.

And you're -- your bankruptcies were up about 19%.

Company had 19, but we had a couple of states that really took a licking there.

Oklahoma was up 81%, and then we had states --

81% for yourself?

Yes, for us.

And then you've got states like Louisiana that were actually down.

So it's certainly not everywhere.

It is pretty state-specific.

If you were looking to your -- what was it -- the 290ish basis point increase in charge-offs on a year-over-year basis, how much of that would you attribute to bankruptcies and --

Henry, I don't have a number there that I could actually give you right now.

I'd have to look at it.

I've got the unit, but I don't have the dollars.

Then you -- well -- then you made a -- you made comment about some regulatory changes.

Would these be bills equivalent to what you saw in Texas?

No, Texas was just a -- pretty much a doubling of the existing law.

These would be new fee-based laws similar to what we have in Alabama, what went into Tennessee several years ago.

And that would be fee based --

Which is similar to the rates that we're seeing -- I don't know exactly, but certainly similar to the rates you're seeing in Texas.

Is -- are a lot of these laws being changed by legislators to give you sort of a competitive product vis-a-vis the payday loan product or --

That would certainly be my perspective.

And it was Arizona, Indiana, Kansas, Kentucky, North Carolina, and Florida?

Well, Indiana, Arizona, and Kansas already have bills presented, either in the House, Senator or both.

The other three states -- Kentucky, we're probably looking at a bill in the next two to three weeks, North Carolina and Florida are still in the talking stages.

Nothing has actually been presented.

But I don't remember in a long time when you've had this many sort of favorable bills in the hopper.

We haven't had any real negative legislation.

No, no, but I mean this is all --

This is pretty exciting to us.

Great.

Well, thank you very much.

Thanks, Henry.

Dennis Telzrow.

Good afternoon, gentlemen.

Two questions, one, you mentioned expansion in Mexico, would that be in the same geographic area that you're in?

I guess you're in --

Juarez.

Juarez now, Dennis, and our plan is to get to 6 or 7 branches there in Juarez so that we'd have one district pretty centrally located before we start looking on expansion into other areas.

And refresh my memory, what's the average size of the loan or rate you're charging down there?

About $500.

It's roughly $500, of course in pesos and so forth.

But the -- basically, we've got 1,000 -- at the end of December, we had 1,105 accounts on $634,000 outstanding and most -- a lot of these are new loans so that would certainly be an indication of the gross loan.

So it's seeing between 5 and $600.

The rates are very favorable.

They're actually a little bit better than what we're experiencing in the state of Texas.

And the proverbial question, I guess, a tradeoff here between fixing and the interest rate on the debt and keeping float.

Any comment on that?

Well, obviously, we have fixed quite a bit more of it quite -- a year ago, but we have entered a $30 million interest rate swap where we have fixed the 30 million in pay in LIBOR, so that should offer some protection going forward.

And as you know, during the quarter that we're getting into, because of the reduction in our ledger balances as well as the profitability of the quarter, we should see those -- the outstanding debt drop dramatically as it has done in prior years.

This interest rate swap, is that brand new?

Well, it was entered into I believe in the first of October.

Okay, thank you.

Thanks, Dennis.

Dan Fannon.

Thanks, guys.

Hey, Dan.

Could you give a few of the metrics.

You talk about 19% increase in BKs.

I mean, can you give us the number of bankruptcies you normally experience in a quarter and just give us -- kind of quantify that outside of just percentage increases.

Numbers 4,000 -- fiscal '05, we had 4,851 bankruptcies filed and fiscal '06 we had 5,792 at the company level.

Okay.

And the 19% increase that you quantified that was in the quarter or is that --

Yes, that was quarter -- quarter over quarter.

Okay.

That's an increase of about 941 bankruptcies.

Okay.

All right.

That's helpful.

And then you said it -- four months for your first store in Mexico to turn profitable.

What is the typical time period for a store domestically to turn profitable?

A lot longer than that.

Dan, really, it's hard to say.

A lot of it depends on the location, the manager that you put in there, the success of the marketing programs.

There's no set thing, but generally it takes, it could take up take up to eight or nine months.

Generally, you have to go through a busy season, which we're not -- we're not seeing the same thing in Mexico.

But certainly eight to nine months, and then it may take up to two years for the profits to actually recoup the initial losses you've had in that branch.

But it can vary all over the board.

Okay.

But generally, as Doug said, longer than the four months.

Okay.

And then last question, Doug, there's a quote in the press release talking about you guys being positioned for excellent earnings growth during the fourth quarter.

Is that -- are you talking on a year-over-year basis?

For that I obviously know it's your most profitable quarter, but when you look at your earnings growth and kind of what's happened the first three quarters, do you think there could be an acceleration on a year-over-year basis when you enter the fourth quarter?

If you wouldn't mind, I'd like to answer that, Dan, from the standpoint that yes, we have not seen that.

We began the year, as you know, with a -- like a 13% year-over-year balance growth and we've been -- had a lot of growth momentum from a balance standpoint going forward, but it's been a very difficult struggle to get those year-over-year earnings comparisons up to the level that we like.

However, given the 20% growth in balances on a year-over-year basis, the reduction in delinquencies as we get into this quarter, the early outlook from the tax return preparation business, there's a lot of factors that we believe that should see some actual, to certain extent, enhanced earnings growth.

Great.

Thank you very much.

Thanks, Dan.

James O'Brien.

Yes, good afternoon.

Actually, all my questions have been answered, thank you.

Thank you.

Dan [Bandy].

Hi, I had a couple of questions.

Was wondering in terms of your acquisition outlook going into '06, I know you guys didn't get much done this year, but anything changing out there that makes you more optimistic, less optimistic regarding acquisitions?

I would say -- one of the -- in the past -- you're right.

This year, it's not that we have looked at acquisitions, we have just not found anything that suitable.

Certainly during the most -- the fourth quarter this year, we had large acquisition -- I mean more in acquisitions than we had the previous six months.

We don't really have a whole lot pending right now, but these are such short-term -- there's no real pipeline of acquisitions out there.

But given the rise in interest rates, that generally is very helpful from an acquisition standpoint and should provide a lot of opportunities going forward.

But that's just something that you never can predict and time will tell.

In terms of your loan growth for the quarter, would you guys comment on that as being better than what you had internally expected as you entered the quarter?

I can certainly say that it was one of the best growth seasons we ever had.

And we were -- it helped a lot by the change in the law in Texas, but as Doug said, that was not entirely what caused it.

I think we're getting -- we continue to work on our marketing program -- I mean marketing plans, direct mail and I think we'd like to think that each year we're getting a little bit better as far as the penetration and results from these programs.

And with the stock where it is today, I mean, would you guys expect to be getting active again in the buyback?

Certainly at these levels -- I mean, we're prohibited from doing anything for the next day -- I mean, actually, today and tomorrow, but certainly these levels, it seems like an attractive opportunity for us.

And if I could just ask you one more question, on an accounting basis, your deferred tax asset dropped this quarter.

Is that just -- what was behind that?

It was a change in accounting method we adopted, as far as the tax return, whereby we are using mark to market accounting.

Which basically previously under the accounting that we were using, we could not deduct the provision until loans were actually charged off and by -- now by using mark to market accounting, we got an earlier tax deduction than we would have previously.

There's no P&L impact other than the savings that we get on the money that has converted from a deferred tax asset to a current.

So -- but that is a strategy that we put into place and we think we certainly would derive some benefit from.

Okay.

Great.

Thanks a lot.

Thank you, Dan.

[Joe Joelson].

Hey, guys.

I just had a point of clarification to ask you.

Did you say that loan balances year-over-year were up 20%?

Yes, we did.

And then you said bankruptcies were up 19% year-over-year, right?

That was -- I believe he said that was the bankruptcy filings during the -- during the third quarter versus bankruptcy filings during the third quarter of the prior year.

So year-over-year?

That's quarter-over-quarter.

So from the second quarter to the third quarter, or the third quarter of the last year --

The third quarter of fiscal '06, our most recent third quarter, compared to the third quarter of '05, the one ending December of last year?

So that's year-over-year, right?

On a quarter-over-quarter basis, that is correct.

And so it -- but is the apples to apples comparison, then, 19% loan growth -- or 20% loan growth and 19% bankruptcy growth?

I don't believe so.

I think that basically these are filings.

When -- was the loan growth year-over-year as well?

Loan growth is a point in time as of the --

But, I mean was it December of '05 versus December of '04?

That's correct.

So that was -- so actually loan growth was faster than bankruptcy growth?

That's correct.

Okay, I just wanted to clear that up.

Thank you.

Joe, we're comparing apples to oranges a little bit there.

On the ledger growth, we're talking about outstanding dollars, on the bankruptcies, we're talking about units.

Our units grew 7% year-over-year, and our bankruptcy units grew 19% year-over-year.

Okay, I got you.

Just the dollar signs.

Yes, we were talking dollars and units, that was a little confusing.

Okay.

Thanks a lot.

Jason [Sincal].

Hi.

I actually thought that last point was -- didn't get cleared up, at least for me.

Can you explain the difference between the units and dollars and growth?

The units outstanding are -- that's a point in time on December 31st.

That's a number of people?

That's the number of accounts -- open accounts that we currently have.

Which increased by 7% and the balances increased by 20 -- a little over 20%.

So more loans from the -- than you had new loans.

You had a lot of people that reupped or enlarged their loans?

We certainly had -- our business is an awful lot of renewals, but the increase in Texas had a large impact on that.

Until September, the largest loan we made in Texas was $540 is now $1,080, and that drove a lot of those dollars, but it did not drive the units with the law change in Texas.

So it's your assessment that your increase in the bankruptcies impacted your -- the last quarter, essentially.

Yes, they are certainly not the only thing that impacted that.

But the change in that law and the heavy filings in the third quarter did have an impact.

Okay.

And did you say that you bought back 800 and -- 800,000 shares and -- at about $20 million, was it?

That's correct.

During the first -- not during the quarter.

That was during the first nine months -- actually it was during the first six months of the current fiscal year.

Because we did not buyback anything in the most recent quarter.

Okay.

And why not?

During the -- we're using our funds during the third quarter every year, primarily, to fund loan growth and while we just want to make sure that we don't utilize too much of those funds on a stock repurchase during that period because we'd hate to end up and having growth opportunities and no funds to fund it.

Okay.

And -- great.

Thank you very much.

Thank you.

[OPERATOR INSTRUCTIONS].

Bill Dezellem.

Thank you.

We had a group of questions.

First of all, relative to the acquisitions, walk us through, if you would, please, why you believe you have had fewer acquisitions this year than you have had in past years?

We probably looked at as many acquisitions, as far as just opportunities, as we usually do.

Unfortunately, a lot of those just did not fit in with our core business.

A lot of what we're seeing is offers to get into other line of businesses such as the payday business, or the check-cashing business, we have no interest there.

So we've looked at a lot of different things, but not as many of them fit our core business and our core strategies.

And what is your belief as to why the pipeline of potential acquisitions that actually fit your business or really are your business, why have those diminished versus a prior year level?

I think there could be a couple of things there.

Is -- what drives our acquisitions normally is an independent operator out there who may have 4 to 15 branches, who's ready to retire and calls us and we talk about it.

I'm not sure -- there, obviously, was not as many of those as there usually is.

There's still as many out there as there's ever been.

The other thing is it's been a pretty good year all around for this industry and they're probably not as interested in selling right this minute.

But I think the future is as bright as it's ever been on the acquisition for us on independents.

Thank you.

And then relative to the loans receivable on a net basis, on a sequential basis of fiscal Q3 versus fiscal Q2, the loans receivable net were up 17% versus last year being up 9%.

What are the implications in your mind seeing that significant increase in the sequential loans receivable net?

I think it's just a reflection of the excellent growth season that we had during the most recent quarter.

The net and the gross are going to follow pretty much hand in hand.

And I think you're going to see another slight increase into next quarter because you're beginning the quarter at a 20% year-over-year increase so the average for the quarter should also be up a little bit.

And certainly, as we said, one of the key factors by no means the only factor, but the growth in Texas has contributed to the success of the growth season and the increase in the net and gross balances.

And, Sandy, when you say that the Q4 balances should be up, you're referring to versus the Q4 of fiscal '05, not versus the Q3, are you?

We always try to compare the year-over-year basis because of the seasonality of our business.

Actually, at the end of March we know because of the repayments that we'll have and the payoffs because of people's tax returns and so forth, we know that the gross outstanding ledger balance will decrease by anywhere from 10 to 12 to 13% between December and March.

So comparing outstanding balances from September to December and then December to March really makes no sense unless you want to compare the same increases on a year-over-year basis.

That's why all of our ratios, we try to avoid any comparison to the previous quarter, but we're more concerned on how we stand versus the same quarter of the prior year.

Right.

Okay.

And given, though, that on a sequential basis this year in the growth season that it was stronger than last year, that -- would it be correct to say that that has very strong favorable implications for earnings growth in the fourth fiscal quarter?

We believe -- I mean, whether sequential or not, the fact that the balances outstanding at December 31st, 2005, versus December 31st, 2004, they are the balances on which we will be drawing earnings in the fourth quarter.

So that one fact is the primary indicator of the type of increases that we would hope to see.

Right.

Great.

That is helpful.

And then, I would like to circle back, if we could, please, to the bankruptcy issues.

And given that it was a change, if we understand correctly, in federal bankruptcy laws, why do you believe that you saw differences at the state-specific level at the whole bankruptcy filing process?

Certain states are well known for their attorneys out there that advertise and really solicit bankruptcies and the states where we saw the large increases are certainly states that were no surprise to us.

That's helpful.

Thank you, both.

Howard Flinker.

Howard Flinker.

It was close, what the hell.

We know who it is, Howard.

Yes, I know.

In as much as the business is becoming tougher according to the results you show.

I want to check something.

Are you still willing to buy stock as you said at these levels, even though you may need the money in the business itself?

Certainly.

I mean, I've already indicated I believe at these levels and as we go into our most profitable quarter and we have the reduction in ledger balances, our cash flow is that much greater, certainly I believe it's an opportunity for the Company going forward.

Rather than --

Obviously, we would rather invest in high-yielding loans, but we are making every single high-yielding loan that comes into the door that meets our underwriting guidelines.

So our limit to growth has never been funding, it's always been -- it's been more availability of qualified management to open new offices et cetera, et cetera.

And I take it, then, that the Mexican venture doesn't require that much money?

Well, it certainly, as time goes on, we've only opened 2 offices.

And as time goes on, the more we expand, the more money that will be required.

Yes, but you won't need money until you have 20, or 30, or 40 of them.

Which, hopefully -- and if things continue to go well, hopefully that's a possibility.

Okay, thanks.

Henry Coffey.

How much -- in looking at your pending losses of the March quarter, I don't now how much guidance you want to give, but how much can we read into the lower delinquency figures?

Henry --

How do we end this whole sort of bankruptcy wave?

How do we -- how do we extrapolate in terms of putting together a March?

Henry, the best indicator is a past indicator and I think the only -- it's a positive that we have lower delinquencies, but we can't get into predicting what's going to happen with charge-offs going forward.

So there's no sort of simple metic for translating into what the ratio should look like?

You have people that can't pay and won't pay in 619 offices and every single one of them probably has a different reason in any point in time.

Thank you.

Could you list --

Go ahead.

Operator, did he get cut off on a question?

No, I just said, can you list all 619 reasons.

619 offices.

There's quite a few more than 619 reasons.

Thank you very much.

Yes.

Joe Joelson.

Hey, guys.

Sorry.

I just had a question follow up -- in Texas, you said your average loan size basically doubled?

No, we said that the availability and the potential for us to make a loan doubled.

Our average balance didn't go up anywhere near by -- anywhere near double in Texas.

And these are -- I mean, I just -- conceptually, you guys have been doing this a long time, I'd just be interested in your perspective.

Obviously, the economy is strong and that's a favorable lending environment, but what's the credit availability like these days in general for your kind of typical customer?

Well, it's certainly very competitive out there.

Ten years ago, there was no such thing as payday lender.

Today, they're on every corner.

So they certainly make credit available to our customer.

However, only about 40% of our customers even have a checking account, so they don't make it available to everybody.

But, there's that out there, there's more of everything.

Including the banks and they run in cycles and as the economy gets better, and they get a little aggressive, they start dipping down also.

So it's a very competitive market out there for us right now.

But, I mean, just historically speaking, just because they raise the amount you can loan to your customer, obviously, they're not all capable of handling that level, I'm sure that you're pretty strict on who you actually do that with, I assume, right?

You're absolutely right.

We had -- when that law -- before that law changed, we went in in July and August, had our supervisors review every account that was open in the state of Texas, put a high credit on that account as to what we felt that customer could handle and that's what's been driving our marketing since that time.

Okay, great, thanks, guys.

Thanks.

Jason Sincal.

Sorry, if you guys have gone over this in the past, but other than saving the 15%, I was just curious what the philosophy has been regarding a dividend at the Company?

Historically we have taken the view that any excess cash has been better used in stock repurchases and that has been the director's decision to continue to do that.

We continue to evaluate the possibility of dividends, but we have no plans at this point in time to initiate a dividend in the near future.

Okay.

And so basically your stock has always been, when you've wanted to distribute capital, your stock has always been priced at a -- I guess, an attractive -- because you're essentially making the investment for us, right, back into the Company.

And your Company's never been overpriced, or you just haven't bought back stock or felt you wanted to return capital to shareholders at a time it was --

Well, we'd like to thing that we're -- generally, we like to -- the stock's been has high as 32 and it's been just more recently as low as -- I think this year, as low as 22.

We'd like to think that it's a better investment at 22 than at 32, but hopefully it's still a very good investment at 32.

Okay.

So basically, you're evaluating dividends, but you've always wanted to buyback stock otherwise?

Historically, with any excess cash, that has been the decision to -- so far.

Okay.

And the question that was raised about capital, for instance, in Mexico and to ramp up an area like that, is that something you would have to go out and externally finance, or is that something that could come from available internally generated cash flow?

That is subject to our loan covenants and so forth.

At the current time, it is going to be from our current availability and cash flow.

Depending upon the size, if this Mexican operation grows to a certain extent, then, obviously, we have to discuss these things with our current lending syndicate.

Okay, great.

Thanks, guys.

Thanks, Jeff.

Bill Dezellem.

Thank you.

Relative to the maximum loan size in Texas, you definitely had a measurable impact in loans this quarter and therefore theoretically, a measurable impact on earnings next quarter from that.

But now that we've had this, what I will call a step function change, do you anticipate measurable impact on loans -- total loans, and earnings going forward?

So, I guess, really, my question is one quarter leg, so impact on loans next quarter and impact on earnings in the June quarter and beyond?

Well, once the level of loans pretty much -- once the average balances, let's say, in Texas level out to the point that the underwriting and the needs kind of match, at that point in time, you'd expect more normalized growth in the state of Texas.

But as we've said, Texas contributed to the year-over-year earnings, but the other states during our growth season and comparing year-over-year, we had nine out of the eleven states that the double inflation -- I mean, not inflation, growth on a year-over-year basis, and eight out of those states exceeded 17% growth.

So I think this indicates the demand for our products across the board, and I believe that certainly we've benefited, as I said, in the change in law in Texas, but I believe the demand for our product will continue going forward.

And then -- your answer actually helped me really crystallize what the question I'm trying to get at and that is the underwriting versus then demand from the customers, and when do you anticipate that those two will actually match up and you'll hit equilibrium again, for Texas specifically?

It's hard to predict.

I think we've -- without giving a dumb answer, I mean, we're certainly much closer now than we were in October.

But it's really hard to predict exactly where that equilibrium point will be.

What you're going to be seeing during the fourth quarter in Texas as well as all the other states is a reduction in balances outstanding.

So we have a cycle within this company that the greatest demand takes place in December during our Christmas season and so forth.

Then we have a lot of paybacks and repayments and payoffs and so forth during the fourth quarter.

And then as we go into other seasons, those customers will come back and start reborrowing and opening new accounts and renewing and so forth.

So it's almost impossible to say when that equilibrium, as you say, will be met.

All right.

Thank you.

Thanks, Bill.

There are no further questions.

Thank you very much.

We appreciate it.

We certainly appreciate you calling in and your interest and we certainly appreciate your questions.

Look forward to talking with you at the year end.

Thank you.

Thank you for your participation.

Before concluding this afternoon's teleconference, the corporation has asked to again remind you that 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 represents 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 in the timing, amount of revenues that may by the recognized by the corporation, changes in current revenue and expense trends, changes in the corporation's markets, and changes in the economy.

Such factors are discussed in greater detail in the corporation's filings with the Securities and Exchange Commission.

This concludes the World Acceptance Corporation quarterly teleconference.