EXHIBIT 99.1
QC Holdings, Inc. Reports Second Quarter Earnings;
Second Quarter 2004 Net Income Increases 41% on Revenue Growth of 25%
KANSAS CITY, Kan.--(BUSINESS WIRE)--Aug. 5, 2004--QC Holdings,
Inc. (NASDAQ: QCCO) reported a 41% increase in net income during
second quarter 2004, growing to $3.8 million for the three months
ended June 30, 2004, from $2.7 million for the three months ended June
30, 2003. For the six months ended June 30, 2004, net income totaled
$9.0 million, which is approximately 64% higher than the $5.5 million
in comparable 2003. The significant increases in net income from 2003
to 2004 reflect strong revenue growth and operating margin
improvements.
Don Early, QC's Chairman and Chief Executive Officer, commented:
"We are pleased that our earnings for second quarter and six months
ended June 30, 2004, continued the momentum from our first quarter.
Ongoing efforts by our store personnel and regional management group
to improve operations, while driving loan volumes, have been
instrumental to our success during 2004, as evidenced by our
double-digit comparable store growth rates."
QC reported store gross margins of 38.0% in second quarter 2004
and 41.9% for the six months ended June 30, 2004, versus 32.9% in
second quarter 2003 and 34.2% for the six months ended June 30, 2003.
The Company's ability to attain these margins is indicative of the
variability in QC's business model and favorable loss experience
resulting from the Company's customer service approach to collections.
Darrin Andersen, QC's President and Chief Operating Officer, said,
"We believe the Company's store gross margins are a meaningful
indicator of the financial strength and value of our company."
--SECOND QUARTER--
For the three months ended June 30, 2004, revenues reached $28.9
million, a 24.6% increase from the $23.2 million during the three
months ended June 30, 2003. This revenue growth was primarily a result
of higher payday loan volumes, together with higher average payday
loan fees. QC originated approximately $181.1 million of payday loans
during second quarter 2004 compared to $140.6 million during second
quarter 2003, an increase in loan volume of 28.8%. Average fees
received from customers per loan increased 6.9%, from $46.68 in second
quarter 2003 to $49.90 in second quarter 2004.
Revenues for comparable stores (defined as those stores that were
open for all of the two periods being compared, which means the 15
months since March 31, 2003) improved $4.2 million, or 18.5%, to $26.9
million in second quarter 2004, largely as a result of higher payday
loan volume during the current year period driven by the Company's
convenient lending policy and the continued strong demand by consumers
for the payday loan product. Second quarter 2004 revenues also
benefited from the inclusion of 32 stores that were opened during the
last three quarters of 2003, which contributed $1.8 million in
revenues, and nine stores that were opened during 2004, which
contributed $115,000.
Revenues from check cashing, title loans and other sources totaled
$2.8 million during second quarter 2004, a 5.1% decrease from the
comparable prior year period. This decrease reflects declining
volumes, primarily in check cashing and title loans.
Store gross profit improved $3.4 million, or 44.7%, from $7.6
million in second quarter 2003 to $11.0 million in second quarter
2004. This improvement was due to a higher rate of growth in revenues
than in store expenses quarter to quarter. With respect to store
expenses, salaries increased by $1.0 million for the three months
ended June 30, 2004, compared to prior year, primarily as a result of
new personnel to operate the 31 stores added subsequent to June 30,
2003.
The Company reported favorable loss experience in second quarter
2004 compared to second quarter 2003. While absolute loss totals
increased from $5.5 million in second quarter 2003 to $6.0 million in
second quarter 2004, this rate of increase was lower than revenue
growth, resulting in a decline in losses as a percentage of revenues
from 23.8% during second quarter 2003 to 20.9% during second quarter
2004. The Company believes the second quarter loss ratio of 20.9%,
which is within the range of 20% to 22% that management believes is
reasonable on an annualized basis, improved over prior year's quarter
due to QC's customer service approach to collections, which focuses on
maintaining a positive relationship with the customer through efforts
to minimize the number of checks presented to the bank for payment.
Other expense components, including occupancy, depreciation and
amortization and various other costs, increased $774,000 quarter to
quarter. Occupancy costs as a percentage of revenues declined during
second quarter 2004 versus 2003, indicative of the fixed nature of
these costs.
Store gross margin, which is store gross profit as a percentage of
revenues, improved to 38.0% from 32.9%. This improvement reflected the
Company's strong revenue growth, together with efficient operations
and favorable loss experience. Specifically, comparable stores during
second quarter 2004 reported a gross margin of 41.0% versus 35.1% in
second quarter 2003. Stores opened during the last nine months of
2003, of which 10 were opened during second quarter and 22 were opened
during the last six months, reported second quarter 2004 gross profit
of $312,000.
Regional and corporate expenses were $4.1 million during the three
months ended June 30, 2004, compared to $2.9 million in the prior year
quarter. This increase reflects higher administrative expenses, such
as salaries, benefits and travel, as a result of the increase in the
number of stores and the development of support functions. Together,
regional and corporate expenses totaled 14.1% of revenues in second
quarter 2004, which is below the Company's expected annual range of
15% to 16% of revenues. The higher expected level of regional and
corporate expenses reflects the additional costs of being a public
company and the anticipated related reporting and compliance expenses.
Interest expense increased $138,000 quarter to quarter as a result
of higher average debt balances in second quarter 2004, primarily due
to the $15 million repurchase of approximately 3.7 million shares of
common stock during fourth quarter 2003. In July 2004, the Company
repaid all of its outstanding indebtedness with a portion of the
proceeds received in connection with the Company's initial public
offering, which closed on July 21, 2004.
Commenting on second quarter 2004, Mr. Andersen noted: "We were
particularly pleased to maintain store gross margins of 38% during the
typically slower second quarter of the year. Our ability to increase
revenues over prior year and this year's first quarter, while
maintaining competitive loss ratios, highlights the benefits of our
Operational Excellence program."
-- SIX MONTHS ENDED JUNE 30 --
For the six months ended June 30, 2004, revenues grew $12.5
million, or 28.1%, to $57.0 million from the $44.5 million during the
six months ended June 30, 2003. The increase in revenues was primarily
due to higher payday loan volumes and a 6.6% increase in the average
payday loan fee. QC originated approximately $349.9 million through
payday loans during the six months ended June 30, 2004, compared to
$260.0 million during the prior year period. Average fees received
from customers per loan increased from $46.53 in the first half of
2003 to $49.61 in comparable 2004.
Revenues for comparable stores (defined as those stores that were
open for all of the two periods being compared, which means the 18
months since December 31, 2002) improved $8.6 million, or 20.0%, to
$51.7 million for the six months ended June 30, 2004, primarily as a
result of higher payday loan volume during the current year period.
Stores added during 2003 and 2004 resulted in a $4.5 million increase
in revenues period to period. The aggregate increase from comparable
stores and new stores was partially offset by the lack of revenues
from nine stores that were closed during 2003.
Revenues from check cashing, title loans and other sources totaled
$6.7 million and $6.5 million for the six months ended June 30, 2003,
and 2004, respectively. This slight decline reflects lower check
cashing and title loan volumes.
Salaries and benefits increased by $2.2 million in the first half
of 2004 compared to 2003 because of compensation to employees at new
stores and higher bonuses for employees at existing stores due to
improved store gross profit. Losses for the six months ended June 30,
2004, totaled $9.8 million, a 4.9% increase over the comparable 2003
period. As in the second quarter, this rate of increase was lower than
revenue growth, resulting in a decline in losses as a percentage of
revenues from 21.1% during the six months ended June 30, 2003, to
17.3% during comparable 2004.
Other expense components, including occupancy, depreciation and
amortization and various other costs, increased $1.2 million period to
period, primarily due to the addition of stores subsequent to June 30,
2003.
Store gross margin improved to 41.9% for the six months ended June
30, 2004, from 34.2% for the six months ended June 30, 2003. This
improvement reflected the Company's strong revenue growth and
favorable loss experience. Comparable stores during year to date 2004
reported a gross margin of 45.4% versus 37.6% in the same 2003 period.
Stores opened during 2003 reported a gross margin of 20.1% during the
first half of 2004.
Regional and corporate expenses increased $2.0 million, from $5.7
million during the six months ended June 30, 2003, to $7.7 million in
the current year period, for the same reasons noted in the quarterly
discussion above. The effective income tax rate for the six months
ended June 30, 2004, increased to 40.6% from 38.6% in the comparable
prior year period due to state and local tax planning strategies that
reduced the 2003 provision for income taxes.
-- BUSINESS OUTLOOK --
Mr. Early noted: "Consistent with our long-standing beliefs, we
are pleased that our store personnel continue to make the loan process
convenient and quick for our customers. We believe their efforts were
key to driving our comparable store revenue and gross profit growth
for each of the periods in 2004."
Mr. Early concluded: "With our initial public offering behind us,
we believe that we are positioned to capitalize on opportunities that
are evident in the payday industry. During 2002 and 2003, we were able
to achieve de novo unit store growth of 27% and 17%, respectively.
With nine stores already opened in 2004 through June 30, and
approximately 40 to 50 more set to open by the end of the year, we
believe we can achieve 20% to 30% unit store growth over the next few
years. We believe our balance sheet and operational strength situate
us favorably in the market to pursue growth from a position of
strength and flexibility."
QC will present its financial results for the three and six months
ended June 30, 2004, in a conference call on August 5, 2004, at 2:00
p.m. EDT. Stockholders and other interested parties are invited to
listen online at www.qcholdings.com or dial 800-901-5217. The
accompanying slides to the presentation are expected to be available
on the QC Web site on the morning of August 5. A replay of the audio
portion of the presentation will be available online until the close
of business on August 19. The replay can also be accessed by telephone
for seven days at 888-286-8010, code #42521180.
About QC Holdings, Inc.
Headquartered in Kansas City, Kansas, QC Holdings, Inc. provides
consumer financial services, principally payday loans, through 301
stores in 22 states as of June 30, 2004. With more than 20 years of
operating experience in the retail consumer finance industry, the
Company entered the payday loan market in 1992 and, since 1998, has
grown from 48 stores to 301 stores through a combination of new, or de
novo, stores and acquisitions. During fiscal 2003, the Company
advanced more than $590 million to customers through payday loans and
reported total revenues of $98.5 million.
Forward-Looking Statement Disclaimer: This press release and the
conference call referenced above contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on the Company's
current expectations and are subject to a number of risks and
uncertainties, which could cause actual results to differ materially
from those forward-looking statements. These risks include (1) changes
in laws governing consumer protection or payday lending practices; (2)
changes in our key management personnel; (3) litigation or regulatory
action directed toward the Company or the payday loan industry; (4)
the Company's role as an agent for a national bank in North Carolina
for payday loans and changes in federal or state laws affecting that
relationship; (5) federal or state litigation challenging the
Company's national bank relationship in North Carolina or in other
states in which the Company may use that or a similar arrangement; (6)
negative media reports and public perception of the payday loan
industry; (7) volatility in the Company's earnings, primarily as a
result of fluctuations in loan loss experience; (8) turnover in our
store managers and store-level employees; and (9) the other risks
detailed under the caption "Risk Factors" in the Company's
Registration Statement on Form S-1, as amended, Registration No.
333-115297, filed on July 9, 2004, with the Securities and Exchange
Commission. QC will not update any forward-looking statements made in
this press release or the conference call referenced above to reflect
future events or developments.
QC Holdings, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2003 2004 2003 2004
--------- -------- -------- --------
Revenues
Payday loan fees $20,238 $26,040 $37,797 $50,556
Other 2,962 2,811 6,666 6,478
--------- -------- -------- --------
Total revenues 23,200 28,851 44,463 57,034
--------- -------- -------- --------
Store expenses
Salaries and benefits 5,196 6,202 10,136 12,319
Provision for losses 5,510 6,043 9,383 9,840
Occupancy 2,764 2,968 5,460 5,982
Depreciation and amortization 299 393 565 759
Other 1,791 2,267 3,693 4,220
--------- -------- -------- --------
Total store expenses 15,560 17,873 29,237 33,120
--------- -------- -------- --------
Store gross profit 7,640 10,978 15,226 23,914
Regional expenses 1,375 1,850 2,774 3,670
Corporate expenses 1,568 2,208 2,941 3,999
Depreciation and amortization 92 151 173 283
Interest expense 188 326 404 682
Other, net 31 11 56 41
--------- -------- -------- --------
Income before taxes 4,386 6,432 8,878 15,239
Provision for income taxes 1,700 2,638 3,426 6,194
--------- -------- -------- --------
Net income $2,686 $3,794 $5,452 $9,045
========= ======== ======== ========
Earnings per share (a):
Basic $0.14 $0.25 $0.01 $0.59
Diluted $0.14 $0.22 $0.01 $0.55
Weighted average number of common
shares outstanding (a):
Basic 18,915 11,751 18,915 11,720
Diluted 19,399 12,924 19,390 12,636
(a) See computations of earnings per share on following page
QC Holdings, Inc.
Computations of Earnings per Share
(in thousands, except per share amounts)
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------
2003 2004 2003 2004
---------- -------- -------- --------
Net income $2,686 $3,794 $5,452 $9,045
Less: reduction to retained
earnings from shares subject to
redemption (a) 5,296
Less: dividend and participation
rights from mandatory stock
redemption (b) 893 2,135
---------- -------- -------- --------
Income available to common
stockholders $2,686 $2,901 $156 $6,910
========== ======== ======== ========
Weighted average number of
actual common
shares outstanding 18,915 15,371 18,915 15,340
Reduction in weighted average
shares from mandatory stock
redemption (b) 3,620 3,620
---------- -------- -------- --------
Weighted average number of common
shares outstanding 18,915 11,751 18,915 11,720
Incremental shares from assumed
conversion of stock options 484 1,173 475 916
---------- -------- -------- --------
Weighted average number of
diluted common shares
outstanding 19,399 12,924 19,390 12,636
========== ======== ======== ========
Basic earnings per share $0.14 $0.25 $0.01 $0.59
Diluted earnings per share $0.14 $0.22 $0.01 $0.55
Notes:
(a) Basic and diluted earnings per share computations through
June 30, 2003 were adjusted to reflect the Company's obligation to
purchase shares from two principal stockholders upon their death
pursuant to a stockholders agreement with them. For purposes of
computing income available to common stockholders in the earnings
per share calculations, the Company is required to include as a
reduction to net income the increase in the carrying amount of the
shares subject to redemption associated with this obligation that
is charged directly to retained earnings in any given period.
(b) As set forth in Statement of Financial Accounting Standards No.
150 (SFAS 150), Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity, which was adopted
on July 1, 2003, the shares considered to be subject to redemption
under the stockholders agreement for which a liability has been
recorded are excluded from weighted average shares for purposes of
computing basic and diluted earnings per share. Further, SFAS 150
requires that the portion of net income representing dividend and
participation rights associated with the shares subject to
mandatory redemption be removed from income available to common
stockholders pursuant to the two-class method set forth by
Statement of Financial Accounting Standards No. 128, Earnings per
Share.
The stockholders agreement was terminated effective June 30, 2004.
Upon the termination of the stockholders agreement, the computation
for earnings per share will no longer require the various adjustments
associated with the shares subject to mandatory redemption as
described in (a) and (b) above.
QC Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31, June 30,
2003 2004
-------------- ------------
ASSETS Unaudited
Current assets
Cash and cash equivalents $9,497 $8,536
Loans receivable, net of allowance for
losses of $1,090 at
December 31, 2003, and $960 at June 30,
2004 35,933 36,137
Prepaid expenses and other assets 1,352 2,222
-------------- ------------
Total current assets 46,782 46,895
Property and equipment, net 11,852 15,130
Goodwill 5,431 5,431
Other assets, net 864 862
-------------- ------------
Total assets $64,929 $68,318
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $276 $97
Accrued expenses and other liabilities 1,235 2,532
Deferred revenue 2,188 2,141
Income taxes payable 1,051
Deferred income taxes 2,517 2,765
Revolving credit facility 6,256 6,206
Current portion of long-term debt 4,718 4,340
-------------- ------------
Total current liabilities 18,241 18,081
Deferred income taxes 1,475 1,695
Liability for mandatory stock redemption 17,000
Long-term debt, less current portion 18,880 15,654
-------------- ------------
Total liabilities 55,596 35,430
-------------- ------------
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value; 75,000,000
shares authorized; 19,087,600 shares
issued; 15,182,000 shares outstanding at
December 31, 2003 and 15,371,000 at June
30, 2004 191 191
Retained earnings 21,292 27,237
Additional paid-in capital 5,248 22,394
Treasury stock, at cost (17,165) (16,934)
Notes received for equity (233)
-------------- ------------
Total stockholders' equity 9,333 32,888
-------------- ------------
Total liabilities and stockholders'
equity $64,929 $68,318
============== ============
QC Holdings, Inc.
Selected Statistical and Operating Data
(in thousands, except Store Data and Averages)
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2003 2004 2003 2004
--------- --------- --------- ---------
Store Data:
Number of stores, beginning
of period 270 295 258 294
De novo stores opened 10 7 23 9
Stores closed 3 1 4 2
--------- --------- --------- ---------
Number of stores, end of
period 277 301 277 301
========= ========= ========= =========
Comparable Store Data:
Total revenues generated by
all comparable stores $22,655 $26,906 $43,074 $51,699
Total number of comparable
stores 260 260 247 247
Average revenue per
comparable store $87 $103 $174 $209
Percentage increase in
comparable store revenues 18.5% 20.0%
Operating Data:
Loan volume $140,580 $181,056 $260,021 $349,904
Average loan (principal plus
fee) 306.67 329.80 305.43 327.65
Average fee 46.68 49.90 46.53 49.61
Loss Data:
Allowance for loan losses:
Balance, beginning of
period $540 $700 $750 $1,090
Adjustment to provision for
losses based on
evaluation of
outstanding receivables 280 260 70 (130)
--------- --------- --------- ---------
Balance, period end $820 $960 $820 $960
========= ========= ========= =========
Provision for losses:
Charged-off to expense $10,540 $11,498 $20,954 $22,654
Recoveries (5,310) (5,715) (11,641) (12,684)
Adjustment to provision for
losses based on
evaluation of
outstanding receivables 280 260 70 (130)
--------- --------- --------- ---------
Total provision for losses $5,510 $6,043 $9,383 $9,840
========= ========= ========= =========
Provision for losses as a
percentage of
revenues 23.8% 20.9% 21.1% 17.3%
Provision for losses as a
percentage of loan
volume 3.9% 3.3% 3.6% 2.8%
CONTACT: QC Holdings, Inc.
Douglas E. Nickerson, 913-439-1154