Sandy McLean - Chairman and Chief Executive Officer John Calmes - Vice President, Chief Financial Officer and Treasurer.

Bob Ramsey - FBR Capital Markets Vincent Caintic - Macquarie Henry Coffey - Sterne, Agee.

Good morning, and welcome to the World Acceptance Corporation sponsored Fourth Quarter Press Release Conference Call. This call is being recorded. At this time, all participants have been placed in listen-only mode. Before we begin, the Corporation has requested that I make the following announcements.

The comments made during this conference call may contain forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 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.

Statements other than those of historical facts, as well as those identified by the words anticipate, estimate, intend, plan, expect, believe, may, will, and should, or any variation of the foregoing and similar expressions, are forward-looking statements.

Additional information regarding forward-looking statements, and any factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements are included in the paragraphs discussing forward-looking statements in today’s earnings press release and in the Risk Factors section of the Corporation’s most recent Form 10-K for the fiscal year ended March 31, 2014 and subsequent reports filed with or furnished to the SEC from time-to-time.

The Corporation does not undertake any obligation to make an update any forward-looking statements it makes. At this time, it is my pleasure to turn the floor over to your host, Sandy McLean, CEO..

Thank you, Shannon. Good morning, and welcome to the World Acceptance Corporation fourth quarter conference call. Fiscal 2015 was a very challenging year in many respects, but I feel really good about the progress that we made during the year.

Our biggest challenge remains our ability to attract new customers into our branches, but we continue to refine the new initiatives that we have been discussing in last quarters. We have also – we have been dealing with the CFPB for over a year now, and we would very much like to get this investigation resolved.

But it appears that this will not take place for several more quarters. However, we are still very pleased with the financial performance of the company during fiscal 2015. The company's return on average assets of 12.5% and return on average equity of 36.6% continued into excellent historical trend during the current year.

Also in fiscal 2015, after adjusting for currency fluctuations, we grew our gross loan portfolio by $13.5 million, repurchased $115.3 million worth of shares, reduced our net debt and notes payable less our cash, by $23.1 million by using approximately $151.9 million in cash generated during the period.

We are very pleased with these results and I hope everybody has had a chance to get – review our press release and our summary of operations for the quarter. And at this point, we would be more than happy to answer any questions.

Shannon?.

Thank you. [Operator Instructions] And we will take our first question from Bob Ramsey with FBR Capital Markets..

Hey, good morning, Sandy. I guess first question I’ve got for you, I know you all mentioned that there was a sale of charged-off loans, which benefited earnings by a fair amount, $10 million.

Just curious if you could provide any more detail around that transaction? Maybe when the loans were charged off? If there are other charged-off loans that could potentially be sold? If there's any sort of remaining liability or exposure you guys have as terms of that sale, or just how that came together?.

Sure. I'd be happy to. It's something we've been working on for some time. A lot of work was done by a lot of people. Of course, we've never really gone through these formal sales in the past, but it's something we've been evaluating.

But anyway, we basically sold most of our in-statute previously charged-off accounts, or anything that has been charged-off for greater than six months Obviously, we sold several hundred-million-dollars worth of these accounts.

And the actual figure that was reflected in the income statement was $16 million net of certain commissions and potential buybacks that we may have to incur going forward.

Because while this is a complete sale, if, in fact, we don't have the proper documentation on account or something was not properly charged as having legal action, then we will be responsible for those isolated repurchases. But other than that, it's a totally 100% non-recourse sale.

In addition to that, we also sold the ongoing flow going forward for the next year and a half, meaning those accounts that become -- we did not sell the six month or less charge-offs. So each month, there will be a new batch of accounts that reach that greater than six month level that has been pre-sold.

And it should have an impact on earnings of somewhere about $1 million a month going forward for the next year and a half.

Did that help?.

Yes, that helps a lot. That's helpful. And then how – I know the debt collection is sort of an issue or a focus, I should say, for a lot of regulators.

How are you all ensuring that whoever has purchased these charge-off loans is still collecting on them and treating your customers in a way that is acceptable to you?.

That was of utmost concern during this process. And we only dealt with very reputable companies in the bidding process. And before we actually closed the transaction, we sent a team in to do due diligence on their operations, and had to feel very comfortable with their policies and procedures..

Great. And that's going to be….

And all of that is incorporated in a detailed contract..

Great. Shifting gears to Mexico, obviously, you all were able to recover a little bit of the provision that you all had set aside there in the last couple quarters. I guess – I know you all pointed out there still is a pretty sizable reserve for those contracts, which seem to be starting to be paying.

Would it be your expectation that you are able to return or recover the rest of that reserve over the next couple, few quarters? And could you just maybe provide a little bit of an update on, I guess, the government starting to turn those payments back on?.

Well, what happened was starting January 1, in that union, the federal government started – these union poised became under the federal government for payment purposes. Prior to January 1, the state was actually making those payroll deductions and so forth. So it's the state that owes us those past payments.

And the federal government immediately started passing those payments forward as they withheld them. So yes, there is a sizable portion of payments that are still due us. We still believe that there is a very good chance that we will receive those payments.

And there is some legal recourse that we can take, but we would prefer to get those payments without going down a legal channel..

Okay..

And then, Bob, about 15% of those – the members of that union who aren't being processed by the federal government, so that 15% is still – we still have to go through the state to get those payments..

Okay, great. I know in your opening comments as well, as it pertains to the CID, you all said that you are working hard, but anticipate it will take several more quarters to sort of make some progress.

Just curious if there's anything that helps you arrive at that timeline? Or whether it's more of just a sense of it's not going to happen now, and that's anyone's best guess.

And then if you could also maybe share any other details that you could with us about sort of the – now that you have had a little dialogue back from the Bureau, sort of what you're hearing..

Well, the timing is two-fold. First, that is the – our attorneys are advising us that this is the normal process that they have seen on previous CID's. And the second is that the original CID we received in March of last year, it was almost an entire year before we heard back from the CFPB.

And the second request for information involves a great deal of detailed information surrounding the loan portfolio. And so I think it's going to take them quite a while to do whatever it is they intend to do with that data.

So, that would just indicate that it's going to be quite some time before they go through the content of our second submission, and then if we can go from there. But the biggest thing is, those experts that have been involved with this process on numerous other occasions have indicated that this is a normal process..

Okay.

And the request for information, are they focused on any particular aspects of your business?.

I could not – I'm not able to determine what that aspect is. I still think it's all aspects of our business. It's just a tremendous amount of data that I presume that they are going to gather and analyze..

Okay. Fair enough. All right. I appreciate the help. I'll step back in the queue..

Okay. Thank you, Bob..

And we will take our next question from Vincent Caintic with Macquarie..

Hey, good morning, guys. Thanks for taking my questions. Yeah, just wanted to also touch on the regulatory front. First on the CID. It's been already a year now.

Could you remind us, was that – the CID originally was about your insurance – credit insurance, was that…?.

No, it was not. It was a very broad request for information that dealt with all areas of our operation. Between our manuals, our policies, our procedures, our marketing, our training, our compliance function, it's very broad in nature.

And the second request is very detailed as far as specific detailed information regarding our portfolio over a period of time. So, I just – I cannot discern at this point if they have any issues, and if they do have issues, what are the nature of those issues..

Got it, okay. And then the second part, at a conference call earlier today from one of your peers, they highlighted risks to unsecured installment lending from the recent CFPB proposal. I just wanted to get your thoughts on this.

And what are you doing, if anything, to prepare for any issues that you might see?.

Well, we were – the initial proposal, as is described in the summary of our quarterly results, I think we've devoted a paragraph to that. But this was generally focused on payday, title and other type of small loan credits and so forth. We don't believe currently that it's going to have a material impact on the operations of World Acceptance.

We do not have access to a customer's check-in account. So, generally speaking, we are not subject to these rules. But however, we do go through an underwriting process to determine the customer's ability to pay.

And the only place that it could have an impact on us is that somewhere around 10% by number and 20% by volume of our loans do, in fact, have an automobile pledged as collateral. So, in those cases, we would be subject to these rules. However, it does not mean we cannot make these loans.

It means that if it follows – if it's an automobile loan, and if, in fact, they do qualify and meet the guidelines of the ability to pay, then you may not be able to renew them under certain circumstances. And at this point in time, they have not determined what those circumstances are.

So we are not really sure whether it's going to impact us at all, but we believe that however those rules are written, we can certainly manage within those rules..

Right. Got it. So that's very helpful.

So 20% of your loan volume has auto title as collateral, but you're going to be managing – or you can manage through them with your underwriting practices?.

We believe we can, but the final rules have not been issued. But certainly, if, in fact, one of the key criteria is underwriting has to be a customer's ability to pay, then we feel like that we have been doing that on all of our loans for many, many years.

So really, it really comes down to under what circumstances can that customer renew that loan if he would like to..

Right, makes sense. Okay and just one last question for me, on a side note.

The mix shift towards larger loans, could you give us a sense for how those loans differed in terms of, say, the fees and the charge-offs and credit profile versus your current portfolio?.

Not a great deal in depth, but I can give you some kind of general guidelines, because it certainly depends upon the state laws and so forth but that mix has continued to change.

The combination of – basically the larger loan portion of our portfolio, including the old sales finance portion that we are no longer – that we're no longer offering that product. But it is risen from 39.2% as of the end of last fiscal year to 40.5% as of the end of this fiscal year.

So it's still not a dramatic change, but over time it has, that portion of the portfolio has grown more than the smaller loans. But as you would expect, the average loan of what we consider kind of – they are all installment loans, but we kind of internally break them out between the differences.

And it's generally geared towards what the state laws allow for loans less than a certain amount will have alternate rates and so forth.

But the average loan in that portfolio, Johnny is?.

The large loan. It's around $960..

$960 in larger loan portfolio, it’s like.

30, 34 or 33….

$3,000. So obviously you are – with the larger loan portfolio, you dealing with a more qualified customer, and you are dealing with a lot lower fees and charges, but you're also dealing with a lot lower loss ratio. So the returns are very good for both of these portfolios. But you are definitely dealing with a different customer.

And it would be hard to specifically give you averages and so forth because of the changes by state and so forth. But that's – hopefully, that gives you a general picture..

Yes. That's very helpful. Thanks very much, Sandy. I appreciate it..

Okay..

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

Yeah, good morning. Maybe we could dig into this a little more. I know historically you've always taken sort of a long list of collateral when a customer makes a loan, but more as psychological recourse.

And the 20% of the business that you identified as being secured by an auto title, is that title pawn lending? Or is that your conventional installment product and could you make it without that security?.

It is not title pawn lending. There is no balloon payment. It's a typical installment loan. It has the same laws, fees, charges and so forth as a product without an automobile pledged as collateral. But however, an automobile, certainly improves the position. But we rarely will reprocess an automobile.

I mean, we would much prefer that the customer has the ability to repay us. And we prefer not to go down that route.

But potentially, yes, we could still make those loans without automobile as a collateral, but it may limit to – in some respects every positive thing whether it’s collateral, whether it’s person’s free cash flow net worth or whatever, improves a person's ability to pay. So the more deposits is the larger the loan we can make.

So I don’t know if that answers your question directly Henry, but it’s….

Okay. Can you give us some sense of – because I don't think – I don't see your stores as big car lots.

Can you give us some sense of how many repossessions related to the auto business you've made or over the last year?.

It's nominal. I mean, like – the company as a total probably has less than 300 or 400 repossessions in total across the entire branch network. So it is just not a very large number..

And then on the other side of this whole issue, everything that you are doing is being – you're collecting and paying inside the branch.

That seems like – is that a specific – so that suggests that your non-auto related products are not covered by the CFCB's guidelines? Or do you see yourself as being covered?.

So any loan in our portfolio that does not have an automobile pledged as collateral will not fall under the proposed adjusted possible rules because the other key ingredient is that you have to have access to the customer's checking account and we do not do that on a single loan..

Yes. Just as a side issue, it looked like in this current quarter, your – excluding the $16 million, it looked like your – well, not interest income, but your insurance and other related fees grew faster than interest income.

What is that a function of?.

I don’t think insurance and other related fees grew faster than interest income. I think if anything it grew a little bit last because our volume has been down throughout the entire fiscal year because of the changes that took place about a year ago..

I'll double-check that. Thank you..

Okay..

[Operator Instructions] And we will take a follow-up question from Bob Ramsey with FBR Capital Markets..

Hi, Thanks for taking the follow-ups. First question, you mentioned it with the sale, ongoing sale of charge-off loans, you'll be getting about $1 million a month in fees.

Is that in the March quarter numbers this quarter? Or is that part of the $16 million? Or is that in addition to the $16 million? And does that run – will it run on an all-in basis through the insurance and other line? Or does it show up somewhere else?.

Currently it has not shown up. It is not part of the net $16 million that was recognized during the current quarter. The $16 million was recognized as a gain on sale because of the nature of these previously charged-off accounts.

Beginning in the month of April, and every month going forward for 18 months, we will have a similar sale that will generate approximately, plus or minus $1 million a month and that will be reflected as a reduction to our provision..

Great. Okay, that is helpful. And then I was curious too, if you'd just share any thoughts on share repurchases? Obviously saw the activity in the quarter and seasonally – I know this is a quarter you get a lot of cash flow and you have the additional benefit of the loan sale, but your leverage has certainly dropped in this quarter.

Sort of go through 2016, would you expect most of the buybacks to be in the fiscal fourth quarter? Or how are you thinking about the seasonal progression of buybacks in the year ahead?.

We believe that any excess cash flow that the company has, one of the best uses is the continued repurchase of our stock. And we intend to continually do that on an ongoing basis as long as we have the liquidity and the availability under our various lenders to do so, and still have cushion for whatever possible needs might come around.

So this is – the goal is to continue with those repurchases in a very methodical manner, but it'd be subject to a lot of Johnny's projections and assumptions and so forth going forward. So that's something we continue to evaluate on an ongoing basis..

Okay. Great. And then –.

But I will add that, certainly, the fourth quarter when we have such a large decrease in our outstanding balances because of our customers’ excess cash flow that takes place around tax season, will always be a very good quarter for generating those excess cash flows..

Okay. Okay. Finally, I would be remiss not to ask a little bit about how you guys are feeling about growth. Growth was not phenomenal this quarter, but at least it seems to have sort of leveled off with similar to last quarter.

Just curious, sort of how you're thinking about the outlook, anything different you are hearing on the ground from consumers? And sort of any status on any initiatives to build growth on a go-forward basis?.

Well, there is two pieces. As we anticipated, when we actually stopped soliciting for those low-dollar renewals, we anticipated it would take us a year before we saw that level off. And it just so happens, in March of this year, we did experience a leveling off on that renewal volume. So that's a big plus going forward.

So we don't expect to have the negative aspect of that. The second thing is, as I stated in our opening comments that our biggest challenge does, in fact remain our problem in attracting additional new customers. We've recognized that our primary marketing effort has been direct mail and it’s not been as effective.

And Janet, on the last three quarterly calls, has talked about some of the initiatives that she is doing from online applications to texting to – we're doing some emails now. So, we're doing some local marketing and calls to potential sources of applicants. So, we are doing all the things that we believe need to be done.

A couple of quarters ago, it was suggested on the call that maybe we should do some kind of focus groups to determine those customers that are going elsewhere.

We're going to take that individual's suggestion and Janet has begun the process to do some of those focus groups, to find out are we missing business for reasons that we are not aware of? So it is our number one objective, it is our number one goal and we recognize that the lifeblood of this company is attracting new customers.

So all of our attention is focusing that direction and we don’t believe it's an insurmountable problem..

Okay. Thank you. That's all I've got..

And we’ll take a follow-up question from Vincent Caintic with Macquarie..

Yes. Thanks. Just one more, probably for Johnny. Could you update us on your funding on liquidity? I think, last quarter, you were exploring some new avenues and I just wanted to see if you had any updated thoughts. Thanks..

Yes. There is not really anything else to add to what we've said in the last quarter. So we are continuing to evaluate our options. And we like to have something in place in the next couple of months..

Okay, great. Just wanted to check. Thank you..

[Operator Instructions].

Okay. There doesn't appear to be any other questions. I appreciate your interest in World and your joining us today. Thank you very much. Have a great day..

Thank you for your participation. This concludes the World Acceptance Corporation quarterly teleconference..