World Acceptance Corporation (WRLD) Q1 2013 Earnings Report, Transcript and Summary

Good morning and welcome to the World Acceptance Corporation sponsored first quarter press release conference call. This call is being recorded. [Operator Instructions] A question-and-answer session will follow the presentation by the Corporation 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 Securities and Exchange Act that represent the Corporation’s expectations and beliefs concerning future events. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties. Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include changes 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 the Corporation’s filings 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 Dan, and once again welcome to the World Acceptance Corporation’s fiscal 2013 first quarter conference call. As usual Mark and Kelly, our President and our CFO are with me along with other members of our management team. I’ll spend just a few minutes reviewing our quarterly results after which we’ll be happy to answer any questions. To begin, I am very pleased to be able to report another very good quarter for the Company. Our results on the first quarter of fiscal 2013 continued with many of the trends that we experienced during fiscal 2012. We’re glad to be able to report the ongoing expansion of our office network, moderate growth in our receivable portfolio, ongoing control of our operating expenses as well as maintaining our improved level of loan loss ratios. Net income for the first fiscal quarter was $22.6 million or $1.63 per diluted share compared with $20.2 million or $1.27 per diluted share for the first quarter of fiscal 2012. This represents a 12.1% increase in net income, a 28.3% increase in net income per diluted share when comparing the 2 quarterly periods. The large difference between the growth in net income and the growth in diluted EPS is due to the ongoing benefit from our share repurchase program. During the quarter, the Company repurchased 908,000 shares at an aggregate price of $61.7 million. This combined with the 2.2 million shares repurchased during fiscal 2012 has provided a great deal of EPS accretion during the quarter. The benefits from the repurchase program should continue during the remainder of the fiscal year and beyond. Additionally, of the $113 million increase in our credit facility that was announced during the quarter, $100 million was added primarily for the use of share repurchases. Of that $100 million, $38 million remains that can be used for share repurchases during the rest of fiscal 2013. The timing of these repurchases will depend upon our rate of growth -- our rate of loan growth during the next 2 quarters. Gross loans amounted to $1.03 billion at June 30, 2012, a 9.4% increase over the $939 million outstanding at June 30, 2011, and a 5.6% increase since the beginning of the fiscal year. During the quarter we continued to see a slight shift in the mix in our own portfolio. At June 30, 2012 the mix consisted of 67.7% small loans, 31% larger loans and 1.3% sales finance. This compares to a 70.8%, 27.8% and 1.4% at June 30, 2011. Additionally, the overall 9.4% growth in loan balances came from the 4.6% increase in small loans and 21.7% increase in larger loans and a 6.9% increase in the sales finance portfolio. Equally important the 9.4% growth in loans resulted from a 5.1% increase in customers and a 4.3% increase in average balances outstanding. While the shift in larger balance loans has led to a decline in our interest and fees as a percent of average net loans. This is partially offset by an increase in our commissions from our insurance products as well as a slight decline in our loan loss ratios. Acquisitions will continue to be an important factor in our overall growth strategy, however the company did not make any significant purchases during the first fiscal quarter which is consistent with the acquisition activity during the first quarter of fiscal 2012. The expansion of branch network during the first fiscal quarter was in line with our projections. We began fiscal 2013 with 1,137 offices. Opened 10 and merged 2, giving us the total of 1,145 offices at June 30, 2012. Our plan for fiscal 2013, are to open 55 offices in the U.S. and 10 in Mexico plus evaluate acquisitions as opportunities arise. Total revenue for the quarter amounted to a $132.8 million which is a 7.9% increase over the $123.2 million during the first quarter of the prior fiscal year. Revenues from the 1,064 offices opened throughout both quarterly periods increased by 6.0%. Delinquencies and charge-offs remained relatively flat during the first quarter of fiscal 2013. Accounts that were 61 days or more past due remained the same at 2.6% on a regency basis and increased slightly from 3.7% to 3.8% on a contractual basis at the end of the 2 quarters. Net charge-off as a percentage of average net loans on an annualized basis decreased slightly from 12.5% to 12.2% when comparing the 2 quarterly periods. General and administrative expenses amounted to $69.2 million in the first fiscal quarter, a 7.2% increase over $64.5 million in the same quarter of the prior fiscal year. As a percentage of revenues, our G&A decreased from 52.4% during the first quarter of fiscal 2012 to 52.1% during the current quarter. Our G&A per average opened office increased to 1.2% when comparing the 2 fiscal quarters. We continue to be very pleased with the progress being made in our Mexican operations. We have 104 offices opened as of June 30, 2012. One closed during the current quarter. We now have approximately 119,000 accounts and approximately $62.17 million in gross loans outstanding. This rate represents a 10.5% increase in accounts and a 12% increase in ledger over the last year. During the past 12 months, there has been a strengthening in the value of the dollar to the peso. The growth in the Mexican ledger balance would have been 28% in a constant exchange rate environment. Revenues in Mexico grew by 5% in U.S. dollars and by 21.2% in Mexican pesos when comparing the 2 quarters. Net charge-off as a percent of average net loans on an annualized basis decreased slightly from 16.3% to 16.2% when comparing the 2 quarters. Additionally, our 61 day delinquencies are 4.5% and 7.3% on a regency and contractual basis respectively, up slightly from the prior year. As expected, this was [indiscernible] beginning to generate enhanced profits. During the quarter excluding inter-company charges, pre-tax earnings amounted to $1.2 million, a 60% increase over the $770,000 in pre-tax earnings during the first quarter of fiscal 2012. This profitability should continue to improve as we grow our outstanding receivables in our existing offices. Company’s return on average assets of 13.8% and return on average equity of 44.9% on a trailing 12 months basis continues the excellent historical trend during the first quarter of fiscal 2013. Finally I’d like to provide a brief update on the regulatory and legislative landscape, Company’s greatest risk factor. Unfortunately or fortunately depending on how you look at it, there is very little news to report at this time. At the state level, there is very little activity with no material legislation pending in any of the states where we currently operate. There is our initiative in the state of Missouri that is proposing a 36% rate cap on all consumer credit products. A trial court judge has ruled that the economic impact study prepared in conjunction with the referendum was not done correctly. Therefore the signatures of paying to-date were not valid. This ruling is being reviewed at the appellate court with a decision expected shortly. At a Federal level, the primary focus and concern is the ongoing development with the Consumer Financial Protection Bureau. We will continue to work with National Trade Associations, the American Financial Services Association, the National Installment Lenders Association. We are meeting with few regulators as the process moves forward and are providing comments and other inputs as new regulations are created and implemented. We continue to believe that the value of the vital service we provide that is providing credit opportunities to so many individuals that have limited access to the credit markets will continue to be recognized by this bureau as this progresses and it’s almost like and over non-bank financial services. At this point in time, any of us will be glad to answer any questions. Thank you.

[Operator Instructions] And we’ll take our first question from John Rowan with Sidoti & Company.

Sandy, can you just go over the customer growth and balance growth figures again, I didn’t get them down?

Okay. One second. Do you want me to go through the whole paragraph or are you interested in only in the mix?

No, just you said the growth was based on I think it was 5% growth in customers and x percent growth in balance outstanding?

5.1% increase in customers and a 4.3% increase in average balances outstanding.

Okay. So that’s that. Just to be clear, some of the concerns that have arisen recently by some media [indiscernible]. The OCT [ph] has no regulatory authority over World, correct?

That’s correct.

Okay. And the CFPB, are we still waiting for the definition of larger participants in the installment loan space before we even [indiscernible] cash judgment as to whether or not [indiscernible] technical regulatory authority over World?

That is correct.

Okay. Okay, so that’s that.

Yes, we have regulatory authority over World but whether or not, we won’t be -- I am sorry. Go ahead.

No, you keep it on.

Okay, all right.

Okay. And then the period end shares outstanding, I’m just curious if there were any material repurchases made after the June quarter and what we should expect so I can understand the range of what we’re looking for, for the second quarter in terms of shares outstanding?

We are in a blackout period from the 20th of the month through the day after the press release. So no, there have been no shares repurchased since the end of the quarter. As I said it is our intent to spend -- intended to spent at least $38 million that we set aside for that purchase but a lot depends upon the growth and the timing of the growth. So I am not prepared to tell you exactly when we’ll be in the market not so far but certainly it’s going to be an ongoing process.

Okay. I am just curious to based on the timing of the repurchases, what the period end shares looked like, diluted shares?

Okay. Kelly, tell me that.

It was...

Yes. Well while you’re getting that, let me ask the next question, you said that there was $30 million left from the $100 million that you had set aside for repurchases. That was left under I guess what you would assume would be -assume that you had a $100 million authorization or is that just what’s left from the revolver that you had set aside for repurchases?

It’s the revolver. The $13 million remaining under the current Board authorization that it would be my expectation that as that is depleted the Board with approve the additional $25 million as when the time comes.

And John, as of June 30, the shares outstanding were 13,060,192.

And that’s the non-diluted number? Is dilution still running around 400,000 shares?

The dilution number runs 300,000 [ph] and 400,000 yes.

Okay. And then one last question, I guess Sandy, do you see any effect from oil and gas prices at all?

Certainly it can’t hurt, but Mark would be in a better -- what do you think, Mark?

I think in the range that gas prices have been in for the last quarter, I mean that’s kind of baked in the cake. They are rising here, I don’t know what they are doing elsewhere, we’ve seen about a $0.20 to $0.25 rise in the last 3 weeks. So it’s just something that we watch, it’s not --at roughly $3, it’s not a tremendous impact.

And we’ll take our next question from Brad Golding with CRC.

I was a little confused by your answer on the earlier question about the regulation from the CFPB, you are regulated by the CFPB. Where they have the potential to regulate you is that correct?

That is correct.

Okay. Which kind of leads me to my first of 2 questions. The CFPB came out in I believe February with Examination Procedures for Short-Term, Small-Dollar Lending? How was this…

That’s not correct. I believe it was Examination Procedures for the Payday Loan Product.

I believe the name of the document is Procedures for Short-Term, Small-Dollar Lending with the assumption that it will be primarily for payday. Do you feel you are not covered by that?

If you read the preamble to that whole thing, it’s defined exactly what that document is intended to cover which includes only loans that are secured by deferred presentment.

But I mean from that if and when they decide to come in from a supervisory standpoint to World, I would certainly anticipate that some of the RE [ph] guidelines presented in that document would be relevant to us also.

Okay. Sorry about that error, that was kind of my assumption. Do you feel there are any business practices you need to change, modify I guess any evolution to mitigate any potential regulatory scrutiny?

Well I mean we believe that our practices are very transparent and that’s not been a complicated contract, but as time goes on and as we get further direction from the CFPB and what they are looking at and so forth, they may or may not be, but we’ve been a regulated industry for the past 50 years and we’ve been [indiscernible] at the state level throughout that entire period of time and have had a great relationship with our state regulators. And I would anticipate going forward to have the same type of cooperative relationship with the CFPB if and when they start visiting our offices.

Okay, thank you. My second question should maybe the Consumer Federation of America produce an overview [indiscernible] primarily the failures in the military lending act. One mean to just expand the regulation include installment loans or I guess broadly choosing act as a template for consumer protection? You’re reading from Page 6 of that before I guess 36% is the magic number but we add [indiscernible] rates higher than 36%, military allotment prepayment penalties and I would assume that would include the Rule of 78, restrictions on loans and again on mandatory arbitration. There is some scratches seen [indiscernible] relatively heavily on this. If the world changes how can you roll with the punches.

Well I mean depending upon the nature of changes we may or may not be able to provide products. Once again it depends on how you define 36% of include ancillary products. If you remember the Department of Defense actually set up the cap lines from the original military bill that was passed as part of the Tyler [ph] amendments of several years ago and the Department of Defense recognized the need of installment loans and did not exclude them. They specifically excluded 3 products but if in fact the bill is passed, it changes that and depending on how it’s changed and so forth, it could certainly have an impact on our ability to provide loans to the military.

Can you continue to provide loans without the Rule of 78 if that was a key issue. I know this has been raised a hundred times but given the way the world looks now if there was a -- did you provide loans to military if you were allowed let’s say allotment where you could dock their pay or couldn’t use the Rule of 78, would that still become a problem without [indiscernible] a profitable business for you?

Certainly we can, I mean the Rule of 78 was designed to approximate the interest method and certainly if the states or if the federal level came in and said we no longer allow and that could well continue to operate certainly we could.

So you only operate in states. Okay, this is I guess I don’t want to get too [indiscernible] but one of your competitors regional operates in states and needs the Rule of 78.

We do both currently.

Okay. I am sorry, let’s say if you operate in the general [indiscernible] Rule of 78.

I don’t really want this become a continuing debate about the possibilities that may take place when we are at this point in time we don’t know what the CFPB can do. So...

I’ll just provide -- let’s say if you're operating now that doesn’t [indiscernible] Rule of 78.

I don’t want to be debated with you please. I think we discussed it.

You made a casual statement. I ask for a clarification. I apologize for that.

For example Illinois is not a Rule of 78 state.

We will take our next question from Bob Ramsey with FBR Capital Markets.

I think you all have had mentioned in the last quarter that you were looking at entering a new state with a larger installment loan product and just haven’t heard anything on that. I was curious where those plans stand right now?

We are -- that state is Indiana and we have submitted an application and we have a few details that we have to get before our application is complete and then we’ll be waiting for the regulators over there to tell us whether or not our application is approved.

Okay, great. And you did highlight your de novo branch plans earlier on the call and activity this quarter has been a little slow, maybe how should we think about the ramp through the rest of the year?

Bob, the actual openings, you’re right are actually they were kind of on target but as far as leases that have already been completed in whatever its in high 30s, 38 or 39 in the U.S. So it’s just a matter of timing of when they open. We’ve got 38 or 39 completed and 4 or 5 that are currently in negotiations. So we should see a ramp up in the openings in the second quarter.

And generally speaking these are offices in Mexico. It’s a goal we get the offices in the U.S opened prior to the third fiscal quarter because of the importance of the growth season, the Christmas season and so forth and that is not as important in Mexico so the timing there will be possibly little slower.

Okay. And then in terms of loan growth, I guess CashAmerica is a little bit different business model but they were talking this morning about slowing consumer loan demand in the United States. I am just curious, what your thoughts are on loan growth outlook, loan demand from your consumers and what you’re seeing on that front?

Well we have over the last I guess close to 20 years since we’ve been a public company, we have kind of maintained somewhere around the mid-teens loan growth and then in the last couple of years it’s been closer to the low-teen type of growth and then for the first quarter is obviously less than 10%. So I would certainly say that there has been a slowing but I don’t know necessarily believe that this is a ongoing long-term trend.

In the short run, will you expect it to continue around the pace of this quarter or could it drop a little bit slower still?

I don’t like to make predictions because I don’t have really the idea, I can say that we’ve seen somewhat of an increase in the month of July but I don’t know if that’s representative of what to expect for the entire quarter.

Okay, great. And then maybe last question and I know you all have seen all the news around Capital One's enforcement action which pertain to deceptive telephone sales practices by an outside third-party provider they used on payment protection plans. I was just hoping you could contrast sort of those sales practices a bit with your own model given I do think they are very different?

Sure. Obviously Capital One is a credit card issuer. It used a third-party vendor for the marketing of these products. And if you look at the alleged practices in the consent order, if they are in fact actually and accurately portrayed then probably and I would have to agree that some of those practices were deceptive. And [indiscernible] installment loan provider. All of our transactions are closed in the office, person to person and the individual actually specifically signs, [indiscernible] provides his signature as next to each product that he chooses to take. So it’s about in most cases it’s a voluntary product and the customer knows exactly what they are getting and the cost of it. So I think that our practices are substantially different.

And we’ll take our next question from Bill Armstrong with C.L. King & Associates.

My questions have all been answered.

And we’ll take our next question from Doug Smith [ph] with Norton Capital [ph].

I'd just like to understand a little better the contribution of credit insurance to your overall revenue and net income. So for example I can see the $47 million commission revenue which is what you recorded last year.

In the first quarter, $17.5 million of the $132.8 million total revenues came from insurance and other income. And Kelly what was the breakdown between the insurance?

The insurance represented $12.4 million and the other was $5 million.

Okay. And should I -- does this revenue mostly fall to the bottom line, are there direct costs associated with it?

Well our commission associated with it, I mean we are an agent for a third-party insurance company. So obviously there is the insurance company is life insurance, has a profit plus less any claims associated with it. So does that fall to the bottom line? Any part of revenue could [indiscernible] could fall to the bottom line but certain amount of it is used for expenses and so forth and it depends how you look at it, I mean there are no costs associated with that net revenue number at this point [ph].

Sure. And then there is another component which is your lending the customer an additional amount to pay for the insurance premium, is that correct?

That’s not correct. We actually make a loan for a certain amount and if that customer chooses to buy the insurance from the proceeds of the loan or retain from the amount financed.

Got it, okay. I think you are saying the same thing. But there is a component of interest income that’s tied to lending on the insurance premium.

The interest income is calculated on the amount financed. So if in fact part of that amount financed is used to pay the premium on the insurance product then yes some of the interest income would be associated to those proceeds output.

Yes. And so could you …

Wait. If the customer deemed voluntarily not to elect that insurance we would still earn the finance charge on that portion of the amount financed regardless of whether it was used to go to the borrower or to go to the insurance company in the form of a premium.

Okay. And could you -- how much of the loan balance -- of your loan balance do you think is associated with the portion that goes towards insurance premium?

I couldn’t begin to tell you.

In numerous case, there is no insurance.

I couldn’t begin to tell you that because it’s all part of the amount financed.

Yes. Well let me -- can we get it at this, what do you think -- since we know the dollars of commission you’re receiving, can we kind of back in to the amount of the premium based on the commission rate?

That is the case [ph].

And would you know roughly what commission rate you’re getting paid?

That’s our proprietary information.

Okay. I mean you [indiscernible] yourself right?

I am sorry, what’s the question?

Your insurance providers like the default, right?

That’s correct.

And they are a public company?

That’s correct.

All right. So I mean it looks like they pay out about -- for every dollar premium they are paying out $0.64 as commission to their customers of which you're one of them. I am just wondering if that math...

Again, that’s proprietary information. This is confidential information. I can’t discuss it. I mean that would be an indication of what they do for all their customers, so certainly we might be somewhere in that range but...

Right. So if I am taking, so if you’re getting $47 million of commission on an annual book basis and the commission rate is say 68% that implies you’re getting -- there is $80 million of premium that’s being paid. In other words you’re financing $80 million of premium. Is that -- do you think I'm in the ballpark?

If those assumptions were correct that would certainly be the case.

Okay. I mean is there anything that’s obviously wrong about that?

Once again I mean, if in fact the assumptions you are making are correct then the math would be correct.

Okay. And then so $80 million if you’re financing $80 million of premium that’s slightly over that could be 15% of your loan balance.

Our loan volume last year was $3.1 billion.

Net loans.

The loan volume. This is the amount of loans that we made during the course of the year.

I am just trying -- I am trying to get as to what percentage of the average loan balance of any given period is consistent lending for the insurance premium.

I cannot answer that question. I don’t know the answer to that question.

And can you…

But roughly, if your number of $80 million is accurate then that percentage is of $2.2 billion of loan base.

Can you -- just help us think about what would just the total impact to net income from credit insurance?

I guess it would be the $12 million in the first quarter. If it disappears that revenue would disappear.

Okay. But also there'd be interesting [indiscernible] component that would disappear as well?

No.

No, because that borrower would simply receive those proceeds as part of the amount financed as opposed to being paid to a third-party insurance carrier.

Presumably the borrower, I mean the borrower is borrowing the amount they need and if they decide not to get credit insurance they are just not going to -- they are not going to borrow more than they need.

Whatever you say, that’s if you want to look basically that’s fine.

We will take our next question from John Hecht with Stephens.

First one is I think you mentioned how much the exchange rate impact of the operating income out of Mexico. Can you repeat that figure?

I think I mentioned the impact on the balances. It would have had 28% growth in a constant exchange rate environment as opposed to the 12% growth but I am not sure.

Yes, that’s the thing I was looking for.

But our revenues in Mexico grew by 5% in U.S. dollars and 21% in Mexican pesos. So the impact of that on the overall operating income on consolidated basis, I could tell you but I cannot tell you what I don’t know.

Okay. No, this I think should be good enough for me to get a sense. Mostly other questions have been asked but I guess the final one conceptualize your credit charge-offs and delinquencies have been relatively consistent despite somewhat of a choppy economy. I am wondering what you attribute this to and what factors should we look forward that would shake these -- the trends?

Well I think if you go back and look over the last 15 years, our charge-off ratios has been relatively stable except in fiscal 2008 and fiscal 2009 and 2010. No it think its fiscal ‘08 and ‘09 and to a large extent we attribute that to the turmoil that was going on in that period of time as well as to the dramatic increase in gas and other commodity prices. So I think that is a very big component of what makes our ratios, it might be all about -- we have not really changed our underwriting gap lines throughout the history of our company. We tried to determine the ability, stability and willingness of the individual to make this loan. And once they meet that criteria as long as they were never made on [indiscernible] we believe that he has -- he will repay that loan but everybody, lot of our customers run into circumstances unanticipated and for that reason when they are getting those difficulties then we have our charge-offs but I cannot predict what may come in the future that may have an impact. I think inflation would certainly be a big factor.

Okay. So given what you’re saying what about you shock to unemployment or things of I mean are those things we should look for and final question on that would be given what we’re seeing in the economy and your customer base, it seems like you’re suggesting that the visible feature we see expect is consistent trends persist?

If I could tell you, I try to avoid projecting what the future may hold because it’s just very difficult to know what’s going to happen in the next month or so but currently I see no reason anything could change but like I said I try to avoid that. I guess the best measurement is what we’ve been able to accomplish in the past.

And we’ll take our next question from Bill Dezellem with Tieton Capital Management.

Would you please remind us in general terms the charge-offs tend to be lower or higher with the larger loan balances?

They tend to be lower because as with a larger balance you would certainly have to read a higher threshold of underwriting plus generally it would be better collateral placed against the loan and that’s certainly one of the reasons so there is larger balance. They have a lower yield associated with them. They are -- most of the larger loan products do have those ancillary products so in advance that a customer gets in trouble whether it’s an accident or unemployment or disability and so forth, then those products are there to make the payment or pay off the loan. So that adds to that process.

And so as you are growing your larger loan balance, we actually could see where your charge-offs would go below the historic levels. Is that a fair way to be thinking about this just from a big picture perspective, if your large loan balances continue to grow as a percentage of the total business that we may be able to over time see charge-offs lower than what they historically have been over the businesses life span.

If in fact our mix would continue to change dramatically and I don’t believe it necessarily will change dramatically but if it did then yes, you would see 3 things happen. Number one you would see the top line interest and fee income begin to drop because the yields are larger, loan will be smaller. The second thing is you would see the proceeds revenue from ancillary products possibly go up because you cannot sell those ancillary products on a great deal of the smaller loans so they are allowed to be sold with some of the larger loans so you may see an increase in those other income. And third you could possibly see a reduction in the charge-off ratios. And fourth, you could see a reduction in the G&A to revenue because certainly you’re dealing with less customers with larger balances for the same size offices. So theoretically you may have some type of economies of scale only for office locations but it would take a fairly dramatic mixed change to do that but we would anticipate, we see that in Kentucky today and we would anticipate seeing it in Indiana if we are allowed to get a license there. And we see that within our existing portfolio between the small and larger loans.

So basically from a conceptual perspective my thesis was directionally correct but from your perspective the materiality of it is probably not that significant certainly at this point.

Not at this point but depending upon what future growth and expansion is it just becomes more significant and what point it becomes material in nature that’s yet to be determined.

Actually let me take the question one step further if I may, you had mentioned the 4 areas that you would see adjustments in the P&L, how about if we take it all the way to the bottom line. Does that work out to be a net -- more net income or a net less income?

I think that what you would see. It may be equal to more or less income on a dollar basis but over time I think you would see a reduction to your return on assets just like our return on assets for our smaller loan product historically has been in the 9% and 10% range whereas the bank who uses much larger loans with much lower yields but much higher leverage, typically hopes to have between 1% and 2% return on assets. So it’s not so much a function of what happens to the bottom line as in returns as to what may happen.

We will take our next question from Henry Coffey with Sterne, Agee.

I know you’d obviously watched this discussion for about 20 years. Has the weather accepting the fact that it’s going to be done on the internet and at the Federal level. Two questions, has the rhetoric changed that dramatically over the years from a consumer advocate or is it still kind of the same set of issues and then secondly I know there were hearings of building a house that would in essence create kind of a national footprint, a national pump lift or a installment loan bill. Have you looked at that and have you given, can you give us some sense of what the Safe Harbor embedded in that might be and how you would -- pending development to that bill?

Yes, first let’s take the first question, the rhetoric would come in, I mean I don’t know how to answer that, I think there is always been some ongoing discussions and so forth about various products, I don’t know I don’t know how to answer that. I don’t think things have changed dramatically but certainly there has been more of a hike in progress over the last 3 years due to the growth in the payday lending industry certainly but its math, it did focuses is national level where historically it’s been at a state level. So I guess that certainly a change that we’ve seen over a period of time. And as far as the bill you’re referring to, I am aware of it. It is to provide a national charter and I don’t know a whole lot more about it at this point. I know that I think the payday lending industry is possibly more interested in it than World would be but I really can’t say much more than that. It is not that for me with all the details.

And we’ll take our next question from Jordan Hymowitz with Philadelphia Financial.

Most of my questions have been answered. My other question is to what percent of people that take out a loan with you, do allot credit insurance?

What percent of the people. I do not know that at all. We offer 5 or 6 different products in various combinations throughout basically 10 of our 12 states and certainly a lot of them have no -- all or lot of smaller loans don’t have any insurance products. It would vary across the board between in a state where if it’s a larger loan where credit insurance is allowed and it was possibly in a state where we can require but not necessarily that require from us then it would be a higher percentage than any other state but a specifically I can’t answer that question.

And we’ll take our next question from Nick Bryant with UBS Financial Services.

I have been a shareholder and also investment advisor for 40 years and have been one of your shareholders for 18 or so. And I am very happy with your growth and with what you’re doing. One question I have is, you're kind of sopping up a lot of the marketability of the shares in as much as we’re up to close to $70. Do you have any or are you trying to go private or cut down the marketability or are you planning maybe to do a split stock one of these days and make more market cap out of hard work. Could you [indiscernible]. Any idea to shareholders, any idea of what your long term aims are?

No, we’re not trying to go private through individual repurchases. I believe at that point when you get to the point you're buying those share those last few shares it will be really expensive but no, that is not the intent. What we are doing is we are taking advantage of what I believe is a very good price on that stock and as long as this continues to be accretive to the shareholders, then we will continue to utilize any available excess cash for that purchase, I mean for that purpose. I do not anticipate a stock split because I don’t believe it really accomplishes that much. It just basically it does double the amount of shares outstanding but it basically provides the value that share has. So I do not anticipate a split either. So as far as our long-term goal, we’re not extremely highly leveraged at this point in time, we’re approaching a one to one debt equity ratio which is pretty high for us, but for financial institutions it’s still extremely low. So I think there is still a great deal of borrowing capacity out there if we will move forward in that direction. However I think the key driver is it is a good value investment for our shareholders going forward and that will be the main thing to determine whether or not we will be purchasing shares.

Okay. The marketability of the shares, you’re not a believer that the lower price creates a higher PE ratio?

It may -- you’d be better off telling that you’ve been in the…

That’s my belief and I've been around a long time and that there is a certain price and I talked to my clients and so forth too and they say I won’t buy a $65, $70 stock, give me something cheaper and they think it’s high priced even though the PE ratio when I explained to them is low.

I will take that as under advisement and we would discuss it at the Board level but I can’t say at this point in time that I personally agree but then again I respect anybody who has been in this business 40 years. You’ve gotten the [indiscernible].

That’s my opinion and most of the books wrote on investment do believe they prove that out. And price range of $20, $30 or so very palatable to a buyer where a $60, $70 stock even with a lower PE is not as palatable. Just for your information and thank you.

And we’ll take our next question from Isaac Boltansky with Compass Point Research and Trading.

So I have 2 quick questions, number one you mentioned that you had been communicating with the CFPB through your trade associations. Have you had direct contact with them today?

Today I have been involved in a few meetings with various individuals at the bureau but always so far it’s always been through Axle [ph] I have not personally met with him on an individual basis.

Okay, thank you. My follow-up would just be and I know that you don’t want to look too far on the future but I still have that. Are you currently operating what you will be eventually designated to a larger participant?

We’re not operating any different one way or the other. We’re assuming possibly at some point in time, that the CFPB will be coming by to check our practices and so forth because at this point is what constitutes a larger business are now but I’d like to thank our practices today are in compliance with the things that they would be looking at.

And we’ll take our next question from Bill Armstrong with C.L. King & Associates.

Could you just remind us what is the dollar cutoff between a small loan and a large loan in your definition?

And our definition is generally up in the $1,500 range but there are certain states World breaks that require to be different but generally in that range. $1,500 gross.

And at this time, there are no other questions in queue.

Well I just want to appreciate you all for interest in World and your listening today. Thank you very much. Dan, I’ll turn it over to you. _

Thank you for your participation. Before concluding this morning’s teleconference, the Corporation has asked me 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 and represent the Corporation’s expectations and beliefs concerning future events. Such forward-looking statements are about matters that are inherently subject to risks and uncertainties. Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements, include changes in the timing amounts 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. Those 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.