World Acceptance Corp (WRLD) 2008 Q1 法說會逐字稿

Good morning and welcome to the World Acceptance Corporation's sponsored first quarter press release conference call. Today's call is being recorded. At this time all participants have been placed on listen-only mode. A question and answer session will follow the presentation by the corporation's CEO and its other officers.

Before we begin, the corporation has requested that I make the following announcement. 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 risk 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 be recognized by the corporation's filing with the Securities and Exchange Commission.

At this time it is my pleasure to turn the floor over to your host Sandy McLean, CEO.

Thank you kindly. Welcome to the World Acceptance Corporation first quarter conference call. As she said, I am Sandy McLean, CEO. Also with me is Kelly Malson, our CFO and other members of our management team. I will spend a few minutes reviewing the quarter results and then we will be happy to answer any questions.

I am very pleased with the results of the first quarter although we did not achieve the level of profitability that many expected. Net income for the quarter was $10.9 million or $0.61 per diluted share compared to $10 million or $0.53 per diluted share during the prior year first quarter. This was an 8.7% increase in net income and a 15.1% increase in earnings per share. The higher increase in diluted earnings per share and in net income was due to the (inaudible) of the 1.2 million shares repurchased during the prior fiscal year.

Gross loans amounted to $545 million at June the 30th 2007, a 21.7% increase over the $448 million outstanding at June the 30th 2006 on a 7.7% increase since the beginning of the fiscal year. We are very pleased that we have been able to sustain the year over year growth rate in our loan portfolio that we experienced during the prior fiscal year. One key indicator is that our growth is not concentrated in any specific area. 7 of the 11 states where we have offices had year over year growth rate exceeding 15% and 5 of them exceeded 25% growth rates.

Acquisitions continues to be an important part of our overall growth strategy. During the quarter we acquired loans from 16 offices for a total of $2.7 million in gross balances. Twelve of these offices remain open and the other four were merged into existing World offices.

Our growth is also supported by the new offices that we continue to open. Since June the 30th 2006 we have opened or acquired 141 net new offices. Additionally we opened 38 new offices during the most recent quarter compared to 23 offices during the first quarter of fiscal 2007. As we have previously stated we made a strategic decision to accelerate our office openings which has negatively affected earnings in the short term, however, we believe that this strategy will greatly enhance earnings in the future. We plan to open a total of 75 new offices in the United States excluding acquisitions and an additional 20 new offices in Mexico during fiscal 2008.

Total revenue for the most recent quarter amounted to $76.4 million which is a 19.7% increase over the $63.8 million during the first quarter of the prior fiscal year. This is very close to the 21% increase in average net loans when comparing the two quarterly periods. Revenues from the 612 offices opened throughout both periods increased by 9.7%.

Another factor effecting this quarter's profitability was an increase in delinquencies and charge offs. Accounts that were 61 days or more passed due increased from 2.4 to 2.6% on a recency basis and from 3.6 to 3.7% on a contractual basis when comparing the two quarterly, quarter ends to business. Net charge offs as a percentage of average net loans increased from 11.5% annualized during the prior year first quarter to 12.7% annualized during the most recent quarter. This is a fairly large increase from the prior year quarter. It compares favorably to the 13.9%, 12.5% and 13.4% ratios all annualized for the quarters ended June 30th 2005, 2004, and 2003 respectively. We had expected charge off ratios to return to more historical levels now that the benefit from the change in the bankruptcy regulations has completed its cycle.

General and administrative expenses amounted to $42.2 million during the first quarter, a 21.1% increase over the $34.8 million during the prior year quarter. As a percentage of revenue it was 55.2% during the current quarter compared to 54.6% during the corresponding quarter of the prior year. As stated previously this increase is due largely to the additional offices opened during the quarter. We believe that the increase in new office openings is an investment that should improve returns in the future. Our G&A for average opened office increased by 0.3% when comparing the two quarterly periods.

Highlights of our expansion into Mexico include the following. Two offices were opened during the quarter giving us a total of 17 offices at quarter end. We now have 15,300 accounts and approximately $6,950,000 in gross loans. We have had a total charge off of approximately $30,000 and our 60 window days of delinquencies are 1% and 1.9% on a recency and contractual basis. We made approximately $25,000 during the quarter which we feel is very good in a new and rapidly expanding market.

Finally, the companies return on average assets 10.3% and return on equity of 19.7% continue their excellent historical trend.

At this time any of us will be happy or glad to try to answer any questions that you may have.

Thank you. The question and answer session will be conducted electronically today. (OPERATOR INSTRUCTIONS) And we will go first to Daniel O'Sullivan from Utendahl.

Good morning. Thank you for taking my questions. Just taking a look at the expenses, can you tell us if there was anything in the [non-loss] expenses that might be non-recurring or is this the kind of run that we should look at going forward?

Well it is not a non-recurring expense, but one thing that is different this quarter from the prior year is our 123R equity type expense dealing with options last year was about $700,000 as we roll this in over a period of time and it has been increasing. It was about $1,350,000. But other than that everything is more typical of a regular G&A.

Okay. And just taking a look at the delinquency trends, did you see that reverse course later on in the quarter, or has there been any change this month, or has it been kind of ticking up all quarter long? Can you give us some more color on that?

We actually saw a slight tick up in the fourth quarter of last year, if you remember, compared to the previous quarter. And it has been higher all quarter than the previous year. And we kind of expected it. But there hasn't been any major shift one way or the other.

Okay. And can you kind of break out or give us a sense of -- taking a look at (inaudible) have opened up and acquired quite a few centers over the last year. The delinquency trends in the centers say that are a year or more older, have those stabled or are those ticking up as well too. Is this more related to newer center openings or?

I'm really staying -- I can't answer that because I don't have that level of breakdown. I mean we have it available but I have not looked at it from that stand point. Generally speaking the newer offices would have lower charge off ratios than more established offices, certainly. But as far as breaking down the 1% increase we had on the year over year basis, I think it is pretty much across the board. But I could not tell you, stratify it in a way to tell you what you are asking.

Okay, and on that same note, taking a look at your customer base, have you seen anything change there as far as gasoline prices, any type of [impairment] on their end?

Well certainly all of these things affect all of us. A certain amount of our customers are home owners and they may be impacted by what is going on in the mortgage market. But it is hard for us to specifically identify any specific thing other than the bankruptcy aspect of it because that is something that we can quantify because of the way it is coded from our losses and so forth. So there is no question that a part of that is from bankruptcies. Now what is generating that is difficult to say but by no means can we attribute 100% of it to the bankruptcy change.

And do you have a handle Sandy on what percentage of your customer base, maybe just a range, are homeowners?

I do not. I mean it would be a guess. We have done these studies in the past. We know that there is a certain percentage that if I had to guess it would be in the 30% range, 30 to 40%, but emphasized that that is a guess.

Okay. It is still very helpful. And lastly, competition. A number of the PayDay lenders have mentioned moving in to doing consumer installment loans, your bread and butter product. Have you seen any increase in competition on that front?

We have had numerous discussions with you and other folks that that industry is in the process of doing that. But I have seen no direct evidence that that is taking place especially in the markets where we are operating. I think they would have to be, if they are offering those products, they would have to be offering them with a different license than they possibly have right now. And if they are doing so, you know, we go through extensive training and a lot of established procedures to make these loans profitably. So if they are doing so with their current level of training than my hats off to them. But I do not have any specific knowledge of that in our markets.

Okay, I appreciate the feedback. Take care.

Okay, thank you Dan.

And we will take our next question from Dennis Telzrow from Stephens Inc.

Good morning, Sandy.

Hi Dennis.

Store openings, it looks like you increased them for this year. My thought was you were going to do 50 so you (inaudible) that up? Is that correct?

That is correct. Generally in our presentations in the passed we have used the words 'at least', up until a year ago we used the words 'at least 25' and we tried to exceed that. And then this year we have used the words 'at least 50'. But then in our annual report, after going through our current year planning we came up with pretty specific numbers and now that we know those numbers and we knew that we would see these effects, we try to be a little more specific. So our target this year for new offices as I said in here is about 95 offices plus whatever we acquire. And we know there will be an impact of that on short run but hopefully it will be a wise, I mean, a good strategic move for us.

And nothing changed on the legislative front? No states considering [installment] loans, I guess most of them are shut down by now in their legislative sessions.

I am happy to say that it has been very quite this quarter from that standpoint. So to answer your question, no, nothing has happened.

And refresh my memory. Do you have anything left on your share buyback?

Yes, we do, about $2.8 from the buyback that was. Kelly what would you say?

In October of 2006 the board authorized $55 million and we have $2.8 million left.

And we would expect to be going back to the board at some point to increase that.

Okay, thank you Sandy.

Okay, Dennis.

And we will go next to Dan Bandi from Integrity Asset Management.

Great, thank you. Sandy I know that you all don't really give quarter to quarter guidance so it is sometimes a little harder to model on such slight changes as just a few pennies a share, but when you look at the quarter and how it transpired from a credit basis were credit expenses higher than what you all were looking at internally for the quarter?

Credit? Excuse me, when you say credit I presume you are referring to charge offs?

Correct Sandy.

Not, I mean, I don't think they were really that much higher than what we expected. Maybe. But on a month to month basis it is very easy to see a slight tick up. Maybe it was a little bit higher than what we expected on an overall quarter basis. But we certainly did anticipate an increase from the prior year quarter. And we more or less said so in previous filings that we did not think we could maintain the level of charge offs that we have previously seen. And I expect that we will have a similar, not almost like [September] but we will certainly be looking at an increase in the second quarter on a quarter over quarter basis. Then I would expect as we get into the December to March quarter we would see a little leveling off. But generally we don't believe that we are directly impacted by what is going on on a macro economics level, but certainly we will just have to wait and see as to what kind of impact the current economy will have.

Do you have a feel, and I know this is hard to answer, but do you have a feel for whether this is a credit normalization or is it a deterioration, are we are going to go passed normal such that it keeps getting worse? And not on a year over year basis because I understand, like you said, you have the whole bankruptcy thing. But going back versus '05 as opposed to --

And what I tried to do in my remarks was to, if I can go back, is to say that while this quarter was a pretty substantial increase over the prior year quarter. It really was not unfavorable when you look, if I could repeat those numbers, in June of '05, '04, and '03 our quarterly numbers on an annualized basis were 13.9%, 12.5%, and 13.4%. So where we are with that is currently favorable to those numbers. So I think we are still in a level of charge offs that we are very comfortable with.

And could you talk just a little bit about the decision to accelerate the branch expansion? Maybe give a little color as to what management is seeing that made you think that now is a good time to go ahead and increase the number of branches. And also could you share with us maybe a little bit of the geography of the new branches?

Actually this decision goes back to last year, at the beginning of last year, we viewed that the larger we became the easier it is for us to open more offices. Currently the expansion into Mexico we believe is very important, so the 15 last year, the 20 this year that we anticipate opening. Why? There is a tremendous market there. We certainly have some training issues. But we are pretty much across the board. We have a couple of states like South Carolina that is more saturated than others. But of course, South Carolina and Georgia benefited from the Titan acquisition last year. Georgia has licensing issues so we are less likely to grow there, but Texas is a really big state with a lot of opportunities there. And then certain other states, Alabama, Missouri, Illinois, they are relatively new states for us. So our expansion this year will be pretty much across all of those geographical regions. And the decision was made to do this because we believed that in the long run the best way to ensure good profitable growth was to expand our presence in other markets.

I just didn't know if there was something that you saw coming down the pike or that just made now sort of the right time to do it as opposed to last quarter or two quarters ago or two quarters from now. I didn't know if there was any particular region as to why now.

It was not a magic moment per se that said let's do this. It has been, I think in the annual report I think we said we averaged 22 offices a year for 5 years. Then we went to 41 and then we went last year to, do you remember?

60.

60, and then we hope to be at 100 this year. So this has been a strategy that we have been moving toward all along. And the bigger you are, well, the bigger you have to become. And the only way to do so is to expand your geographical presence.

Right. And you had talked about in your comments kind of the G&A on a per branch basis. If you stripped out the new branches, can you give, or do you want to give G&A on a same store basis?

Well what we do not do that per se, this is our effort to do something similar. And what we do is just take the average number of offices opened during the period and then divide it by total G&A, and that number was almost flat. It was like at a 0.3%. Could we do that the other way? Yes. We never have. I think this gives us an idea of what is going on from an overall standpoint.

Okay, great. Thank you very much, Sandy. I appreciate it.

Sure.

And we will take our next question from Henry Coffey from Harris, Baker, Watts.

Yes, the first question is in terms of bankruptcy. Sandy can you give us a sense of what the losses from bankruptcies were last year?

During the quarter?

Yes.

Bear with me one second. It was roughly $900,000 for the same quarter of last year and was about $1.5 million this year. So it is up about 50 basis points of the total; so about half of our increase was directly due to the bankruptcies.

Now you are maintaining a pretty hefty reserve account. It looks like it is almost 7% alone.

It is roughly 6 to 7% of the net loan. That is correct.

And is that just sort of your historical comfort level or is that--

We did not, as our charge offs came down last year, we did not lower our reserves because we did not believe that this was a permanent change in our loss ratio. So we have maintained roughly the same level of allowance and reserves that we have had previously.

What are the trends then since the end of June in terms of delinquencies either on a recency or a contractual basis?

We don't even measure them except on a month end basis. I mean if they continue to decrease and then at the end of the quarter (inaudible), I couldn't tell you. But as you know our delinquencies over a long period of time remain relatively stable.

It didn't seem like a very large increase.

Because of our aggressive charge off policies even in the worst of times we have very tight delinquency margins.

Is this the kind of financial environment where you are likely to hold back on the buyback program to retain equity for growth or do you think you will be able to put a lot of money to work given where your stock price is?

I think given where our stock price is, you know, we bought a substantial amount in the 40s and we felt like that was a good investment. So I believe that, certainly in the 30s it would make sense to continue that program.

When can you get back into the market on that?

We are blacked out through tomorrow. So it will be the first of the week before we will be able to do anything.

Great, thank you.

Okay.

And we will take our next question from Bill Drezellem from Tieton Capital Management.

First of all, circling back to Mexico, you had mentioned that there were roughly $30,000 of charge offs that you have had in Mexico. And we weren't clear if that was cumulative or if that was this quarter.

That was for the quarter.

Okay, that makes a lot more sense. Thank you.

Which is still a pretty small ratio on $6 million in gross loans.

Absolutely. And then did we understand correctly that your view point relative to the sub-prime mortgage phenomenon or debacle, however you want to call it, you really do not see that impacting your customer base? Nothing out of the ordinary?

I didn't say that. What I said is that whatever homeowners or property owners we have that could potentially have those mortgage products could have an impact. As their payments go up or whatever that certainly could have an impact on us. But it is hard for us to quantify that number and have a direct correlation of how it is going to impact us.

Okay, that is helpful. And then correct me if this is wrong -- up to this point you have not seen what you can say is a direct impact from the sub prime situation? You may in the future but you have not up to this point?

Well it could very well be that some of the increase -- I cannot say one way or the other. It could very well be that part of the increase that we experienced in the first quarter was a direct result of some of those individuals having difficulties. I do not know that for sure. I know for a fact that roughly 0.5% was due to an increase in bankruptcies. The other 0.5% of those --- it is people can't pay for whatever reason that is.

Right, okay. That is helpful. Thank you. And then circling back to the decision to accelerate the store openings, when was that philosophical decision made?

I think it has been a gradual process over time. But as of the first of last year we, Mark and I and Kelly decided that if we were going to maintain the type of growth rates that we want we have to do so through by expanding our geographical network so it began at that point in time.

Great, and then in this quarter the number of offices opened was roughly 50 offices. What was the split between acquired and opened offices? And then the same question for the 141 that were opened in the last 12 months?

We opened 38 offices and we purchased 12. We actually had 16 acquisitions but as I said earlier almost 12 remained open. Unfortunately I don't remember the exact breakdown from last year. Kelly, do you know?

This first quarter last year we had 21 new offices, but off the top of my head I don't remember how many purchases we had.

That is quite alright.

But last year of the 141, quite a few of them, at least 50 were acquisitions primarily due to Titan. But most of them were by far from (inaudible) openings.

And what is your current perspective as look at opening offices between acquiring locations and opening those from scratch and what does the acquisition landscape look like today relative to the past?

As I have said in the past, we have no pipeline of acquisitions. We have no targets per se. Acquisitions generally come to us when independent operators for some reason decide that they are ready to sell. And at that point they will approach one of our managers at the field that they have known through these trade associations and so forth. We have had two acquisitions in the first quarter, ten offices in Illinois and a couple of offices in South Carolina. And those were brought to our attention probably less than a week before they were actually closed. So it is a very short time frame from identifying a potential purchase to closing on that. So the acquisition outlook is the same as it always is. We know that there will be acquisition opportunities to present themselves but there are zero right now that we are looking at.

And basically if we would understand what you said correctly, from a business plan perspective you have your Greenfield store openings that you would plan on and then if and when the acquisitions come about you have your pricing model and if a seller is able to fit within your pricing model, the deal is done very quickly and then you just move back to the regular opening plan.

That is correct. As I've said, we are going to open 75 offices in the US excluding any acquisitions. So right now that number is looking -- because we already have 12 -- that number is going to be 87 right now in the US alone. So the number could grow.

Great. Thank you.

Okay.

And we will take our next question from Dan Fannon from Jeffries.

Good morning. In the insurance and other income are there any one-time items in that $11 million?

There is a one-time item of about, how much is it in the swap that we had a gain?

The swap was relatively flat.

I know, but in the quarter.

$388,000.

So by $400,000 we had a gain from the swap but it did not impact the comparisons because we had a similar gain during the prior year. But other than that there was nothing else.

Okay. And then in the last couple of quarters you guys have given us some states in terms of loan growth and where you guys have grown year over year. Can you give us a little bit of color as to what regions are accelerating or performing well for you?

If you like I will tell you those numbers by state.

Sure.

Georgia was 35%, South Carolina was 34%, Texas was 14%, Oklahoma 27%, Louisiana 39%, Tennessee 18%, Illinois 23%, Missouri 13%, New Mexico 27%, Kentucky 6% and Alabama 14%. And of course Mexico was 100 -- just a large number.

And the one thing to remember about Georgia and South Carolina was the Titan acquisition last year that happened in the third quarter.

Okay, so if you could -- you went through those a little quick for me. Could you give me Illinois and Kentucky again, please?

Sure, Illinois was 23% and Kentucky was 6%.

Okay great. Thank you very much.

Okay.

And we will go next to Hemant Hirani from Litchfield Capital.

Hi guys. I was just wondering if you could just talk about the employment trends in various states especially some of your states like Texas, Georgia, probably a lot of the employment is (inaudible) and also stays in the last six months or so, other than the mortgage problem have seen a slow down in [construction] activity. If you could answer that, that would be great.

So I am not sure I am understanding you. Are you saying the employment trends in certain states?

Yes.

I don't know that we have seen any drastic change in employment trends, and our underwriting standards have not changed in years, I mean since I have been here. We go through the exact same processes. We have not loosened or tightened our underwriting. If you we can determine that that customer is stable, able and willing we will make them a loan today just like we have in the past. And so I don't really think, I can't, I guess I would say that I don't see any major trends effecting in any of our areas. As we have said in the past, we certainly notice in specific locations problems, (inaudible) in Clinton, South Carolina closes, it certainly has an impact on Clinton. But it wouldn't necessarily affect the entire state of South Carolina. I hope that answers your question.

Okay, thanks. I appreciate that.

And we will go next to Jim Montcrest from Southport Capital.

Thanks, my question has been answered.

And we will take a follow up question from Daniel O'Sullivan from Utendahl.

Yes, thank you. Just a couple of quick follow ups. Sandy, I don't know if you said it or not, I apologize if you did -- those 16 offices you required, were those separate deals or all one deal?

Three deals I believe. Three separate deals.

And just going back to, taking a look at your underwriting, the whole thing with the sub prime mortgage market that was been materializing for 3, 4 or 5 months now, did you guys once that kind of cropped up, did you take a look at your underwriting criteria and maybe tighten that up a little bit? And as far as the types of questions or criteria of customers that are coming in? If they were homeowners or had mortgages? Did you guys take a look at that when that was taking place 3 or 4 months ago?

I would have to probably answer that not specifically exactly what questions are asked in any particular the office -- well actually they should be exactly the same, but I would have to answer that no, that we have not really changed our process as a result of that.

Given that we are seeing an acceleration in that market, have you guys done that recently or would you consider doing that?

I certainly believe that for a new customer. I mean generally we would not go through this process for an existing customer that wants to renew a loan if he has a good payment history. But for a new customer or a former customer it certainly would be prudent to ask when you are looking at that credit bureau, it says a mortgage, is this an adjustable rate that is getting ready to go up or something like that. I would think our managers are doing that. If not, it would certainly be a prudent question to ask.

Okay, but you guys haven't sent anything out from the central office?

We have not sent out any special guidelines to combat this particular issue.

And just real quick too on your new offices that have been opened up over the last year. Can you give us a sense as far as the ramp from revenue and if you can too on what the losses are looking like? Compare those to maybe vintage years three or four ago; are they similar or are they a little bit below what you were seeing from new stores that opened up in the first year in say maybe '03 or '04 vintages?

I can tell you that there is all kind of stratifications that we could make but I don't have that information here. But I do know that the 28 offices that we opened last year had about a $600,000 pre-tax loss. The 38 offices that we had this year had about $1.4 million. So there is about an $800,000 difference in pre-tax losses in the quarter this year versus the first quarter of last year. It is not only the number of offices but the timing of the open offices also. We opened those offices earlier this year, so the expense is a little more.

What month do you normally see these offices cross over?

They can be any -- it depends on how successful the manager is. It depends on the location. It could be anything. In Mexico it takes about 2.5 to 3 months. And we have some offices that they take close to a year. I mean it has got to go through a busy season. Most of them become profitable after going through the November/December seasons. But it can be across the board.

Okay, great. I appreciate the comments.

And we will go to Henry Coffey from Ferris, Baker, Watts.

Hey, Sandy. Can we go over some of those state by state statistics again? I know you said Georgia 35%, South Caroline 34%.

I will repeat them, just out more slowly.

Thank you for the older guys on the call.

Not a problem. Texas 14%. Oklahoma 27%. Louisiana 40%. Tennessee 18%. Illinois 23%. Missouri 13%. New Mexico 27%.

Hang on. Missouri was 13%?

Yes.

New Mexico was?

27%. Kentucky 6%. And Alabama 14%.

So that is some pretty significant growth in a couple of those states. Is that because of store openings or are you seeing developments in those states that are driving customers your way?

Nothing out of the ordinary. Obviously Illinois was one of the places where we had some acquisitions this year. And as Kelly mentioned, South Carolina and Georgia have benefited from the acquisitions last year. But it is still pretty good growth across the board.

Since the PayDay Loan has an APR of 360 and yours is about 80, have you done any direct marketing against them. I even understand that in their installment loans they are not really changing the pricing that much.

Our marketing generally is, as you know Henry, is direct mail. We have not done any type of crawl based marketing and certainly have not targeted. I know we have had these discussions in the past, but not targeted directly comparing ourselves to other products.

Great. Thank you.

And we will go next to Bill Drezellem from Tieton Capital Management.

Thank you. Couple of additional questions. First of all, would you please discuss what the dynamics that you are seeing within the bottom 25% or bottom third of the states in terms of rate of growth and why they are growing at a slower rather than the remaining states?

Well the only bottom state, Kentucky is 6%. We had a problem in one of those offices where we had to charge off quite a bit of loans that had an impact on us last year. But otherwise we are certainly happy with the 12, 13%. I think the lowest after that is 13%. The very high areas generally were impacted by the acquisitions that we mentioned. But to answer why is Missouri at 12% and Tennessee at 18%, I could not give you any real flavor to that.

And Kentucky. Would you circle back and provide a little more detail as to what happened there with those charge offs, please?

We just had an issue in an office, and we have about $300,000 or $400,000 in loans that we had to charge off. But that was last year.

And personnel changes have been made as a result of that presumably?

Absolutely.

And one additional question relative to the trade off between share buybacks and opening new offices. Given that you have your new office opening plan in place at the roughly 95 for the year, with that in mind, as you model out your cash flow what do feel is a level of buyback that you could support.

I think we could support a greater level of buyback than the (inaudible) we would be happy with because of the cash flow. But that being the case, we know we have seasonal needs of each year in November and December that we partially have taken care of through a temporary line but we by no means want to get into a position of not being able to make the last loan that we can in December by not having funds available. So I think we can certainly be fairly aggressive in the stock repurchase market and meet our growth needs also.

Great. Thank you again.

(OPERATOR INSTRUCTIONS) And we will go next to Dan Mazur from JMP Asset Management.

Good morning. Just a quick question. Just how do you look at the allowance and how investors should look? This is kind of a follow up to Henry it looks like, Henry's question. The allowance as a percentage of growth is probably the lowest it has been as far as I look back. And with charge offs going up is it expected that that should rebuild? Or how should the provisions just from a modeling standpoint? Or do you look at it a different way? Is that not the way to look at it, allowance as a percent of growth?

You could look at the allowance as a percentage of growth, you can look at the allowance as a percentage of net, but regardless of whatever way you look at it, it should be fairly constant because our approach is pretty standard. And it should be roughly between 5 and 6% of gross loans outstanding. And that has historically been adequate. And as I said we did have reduction in charge offs in the prior year but we did not reduce those allowance following those charge offs because we did not think those levels were necessarily sustainable. But now that they have returned back to more historical levels, we feel very comfortable with our allowance. That is something that we look at very closely all the time, but especially at the end of each quarter and especially at the end of the fiscal year because that is something the accountants are very concerned with; that is one of our most important estimates that we make. So we are certainly comfortable at this level and I hope I have answered your question.

Thanks.

And at this time we have no further questions.

Well thank you very much for joining us today.

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 statement within the meaning of section 27A of the Securities and Exchange Act that represents he corporation's expectations and beliefs concerning future events. Such forward looking statements are about matters that are inherently subject to risk 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 be 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 corporation's filings with the Securities and Exchange Commission.

This concludes the World Acceptance Corporation quarterly teleconference.