Exhibit 99.1
QC Holdings, Inc. Reports Strong Third Quarter Earnings;
23 New Stores Added During the Quarter
KANSAS CITY, Kan.--(BUSINESS WIRE)--Nov. 4, 2004--QC Holdings,
Inc. (NASDAQ: QCCO) reported a 21.6% increase in net income during
third quarter 2004, growing to $4.5 million for the three months ended
September 30, 2004, from $3.7 million for the three months ended
September 30, 2003. This improvement in net income was primarily due
to revenue growth of $6.0 million, or 23.0%, over prior year's third
quarter. For the nine months ended September 30, 2004, net income
totaled $13.6 million, which is approximately 49.5% higher than the
$9.1 million in comparable 2003. Higher net income during the nine
months ended September 30, 2004, reflects an $18.6 million increase in
revenue compared to prior year, together with an improved loss ratio
period to period.
Don Early, QC's Chairman and Chief Executive Officer, commented:
"Our third quarter met our expectations from both an earnings and
growth standpoint. In addition to increasing revenues and earnings
over comparable prior year periods, our store personnel and managers
opened 23 stores during the third quarter, which is more than we
opened during the entire second half of 2003."
QC reported store gross margins of 36.3% in third quarter 2004 and
39.9% for the nine months ended September 30, 2004, versus 35.6% in
third quarter 2003 and 34.8% for the nine months ended September 30,
2003. Darrin Andersen, QC's President and Chief Operating Officer,
noted, "The store margins experienced during the quarter and
year-to-date 2004 periods continue to meet or exceed the 33% to 38%
range we believe is reasonable given our expectation to add stores at
a rate of 20% to 30% each year over the next few years."
Third Quarter
For the three months ended September 30, 2004, revenues totaled
$32.1 million, a 23.0% increase from the $26.1 million during the
three months ended September 30, 2003. This revenue growth was
primarily a result of higher payday loan volumes, together with higher
average payday loan fees. QC originated approximately $199.9 million
of payday loans during third quarter 2004, which was an increase of
25.0% compared to $159.9 million during third quarter 2003. Average
fees received from customers per loan increased 6.9%, from $48.17 in
third quarter 2003 to $51.51 in third 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 June 30, 2003) improved $4.5 million to $30.1 million in
third quarter 2004. This 17.6% improvement was attributable to
increased 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. Third quarter 2004
revenues also included $1.5 million from the 22 stores that were
opened during the last half of 2003 and $413,000 from the 32 stores
that were opened during 2004.
Revenues from check cashing, title loans and other sources totaled
$2.8 million during the three months ended September 30, 2004,
compared to $2.9 million in the prior year period. Lower volumes,
primarily in check cashing and title loans, caused this decline period
to period.
Store gross profit improved $2.3 million, or 24.7%, from $9.3
million in third quarter 2003 to $11.6 million in third quarter 2004,
primarily due to growth in revenues, partially offset by higher store
expenses quarter to quarter. With respect to store expenses, salaries
increased by $1.5 million for the three months ended September 30,
2004, versus 2003 as a result of new personnel to operate stores added
after September 30, 2003.
Continuing the trend from the first two quarters of 2004, the
Company reported favorable loss experience during third quarter 2004
compared to prior year. Losses increased from $6.6 million in third
quarter 2003 to $7.8 million in third quarter 2004. The 18.2% increase
in losses, however, was lower than revenue growth, resulting in a
decline in losses as a percentage of revenues from 25.2% during third
quarter 2003 to 24.2% during third quarter 2004. Historically, the
second quarter and third quarter loss ratios are the highest,
reflecting the volume-related seasonality of the payday loan business.
The improvement in the loss ratio quarter to quarter reflects a
reduced number of checks initially presented to the bank for payment,
which eliminates the back-end collection effort.
Other expense components, including occupancy, depreciation and
amortization, increased $980,000 quarter to quarter. Occupancy costs
as a percentage of revenues declined during third 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 36.3% from 35.6%. Comparable stores during the
three months ended September 30, 2004, reported a gross margin of
39.9% versus 37.7% in third quarter 2003. Stores opened during the
last half of 2003 reported third quarter 2004 gross profit of
$329,000, or a gross margin of 22.2%. Stores opened during 2004
totaled a net loss of approximately $537,000.
Regional and corporate expenses increased $1.3 million during the
three months ended September 30, 2004, to $4.4 million from $3.1
million. This increase was largely attributable to additional
personnel to support the growth in the number of stores, as well as
higher professional fees. Together, regional and corporate expenses
were 14.0% of revenues in third 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.
The Company reported interest income of $40,000 during third
quarter 2004 compared to interest expense of $193,000 during the three
months ended September 30, 2003. This change quarter to quarter
reflects the repayment of all indebtedness with a portion of the
proceeds received in connection with the Company's initial public
offering completed in July 2004 and the investment of the remaining
proceeds in cash equivalents.
Commenting on third quarter 2004, Mr. Andersen noted, "Our third
quarter results continued several favorable trends from the first half
of the year, including high-teen comparable store revenue growth,
improved loss ratios and very competitive levels of administrative
expenses."
Nine Months Ended September 30
For the nine months ended September 30, 2004, revenues grew $18.6
million, or 26.4%, to $89.1 million from the $70.5 million during the
nine months ended September 30, 2003. The increase in revenues was
primarily due to higher payday loan volumes and a 6.7% increase in the
average payday loan fee. QC originated approximately $549.8 million of
payday loans during the nine months ended September 30, 2004, a 30.9%
increase compared to $420.0 million during the prior year period.
Average fees received from customers per loan increased from $47.14 in
the nine months of September 30, 2003 to $50.30 in the same 2004
period.
Revenues for comparable stores (defined as those stores that were
open for all of the two periods being compared, which means the 21
months since December 31, 2002) improved $12.3 million, or 18.2%, to
$80.0 million for the nine months ended September 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 $7.2 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
declined to $9.3 million during the nine months ended September 30,
2004, from $9.6 million during the nine months ended September 30,
2003, as a result of lower check cashing and title loan volumes.
Salaries and benefits increased to $19.1 million in the nine
months ended September 30, 2004 versus $15.5 million in comparable
2003. This 23.2% increase was primarily attributable to compensation
for employees at new stores and higher bonuses for employees at
existing stores due to improved store gross profit. Losses for the
nine months ended September 30, 2004, totaled $17.6 million, a 10.0%
increase over the comparable 2003 period. As noted in the third
quarter discussion, this rate of increase was lower than revenue
growth, resulting in a decline in losses as a percentage of revenues
from 22.6% during the nine months ended September 30, 2003, to 19.8%
during comparable 2004. The decline in the loss ratio period to period
reflects very favorable experience in first quarter 2004 attributable
to the non-recurring tax benefits received by our customers associated
with the changes in the income tax laws passed during mid-2003.
Other expense components, including occupancy, depreciation and
amortization, increased $2.3 million period to period, primarily due
to the addition of stores after September 30, 2003.
Store gross margin improved to 39.9% for the nine months ended
September 30, 2004, from 34.8% for the nine months ended September 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 43.9% versus 38.4% in the same 2003
period. Stores opened during 2003 reported a gross margin of 20.9%
during the nine months ended September 30, 2004. Stores opened during
2004 totaled a net loss of $853,000 in the current year period.
Regional and corporate expenses increased $3.3 million, from $8.8
million during the nine months ended September 30, 2003, to $12.1
million in the current year period, for the same reasons noted in the
quarterly discussion above.
The effective income tax rate for the nine months ended September
30, 2004, increased to 39.5% from 38.7% 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: "We continue to emphasize to our store personnel
the importance of providing superior customer service and initiating
our collection process at the origination of the loan by educating the
customer about the importance of returning in person to repay their
obligation. This emphasis is particularly important to the development
and success of our newer stores as they cultivate their customer
base."
Mr. Early concluded: "After considering the 32 de novo stores
opened through September 2004 and our recently announced acquisition
of 20 stores in Oklahoma, our number of stores has increased by nearly
18% since December 31, 2003. We expect that by year-end 2004, we will
have achieved unit store growth between 24% and 26%. As we enter the
fourth quarter, we continue to focus on improving processes that will
streamline our operations, as well to benefit from an exceptionally
strong balance sheet that provides us the ability to pursue growth
opportunistically."
QC will present its financial results for the three and nine
months ended September 30, 2004, in a conference call on November 4,
2004, at 2:00 p.m. EST. Stockholders and other interested parties are
invited to listen online at www.qcholdings.com or dial 800-591-6942,
code 64005032. The accompanying slides to the presentation are
expected to be available on the QC Web site on the morning of November
4. A replay of the audio portion of the presentation will be available
online until the close of business on December 4. The replay can also
be accessed by telephone for seven days at 888-286-8010, code
44903516.
About QC Holdings, Inc.
Headquartered in Kansas City, Kansas, QC Holdings, Inc. provides
consumer financial services, principally payday loans, through 350
stores in 22 states as of November 1, 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 350 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,(9) integration risks and
costs associated with acquisitions, and (10) 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 Nine Months Ended
September 30, September 30,
-------------------- ------------------
2003 2004 2003 2004
Revenues
Payday loan fees $23,157 $29,282 $60,954 $79,838
Other 2,921 2,793 9,587 9,271
--------- -------- --------- --------
Total revenues 26,078 32,075 70,541 89,109
--------- -------- --------- --------
Store expenses
Salaries and benefits 5,340 6,811 15,476 19,130
Provision for losses 6,582 7,769 15,965 17,609
Occupancy 2,660 2,975 8,120 8,957
Depreciation and amortization 361 438 926 1,197
Other 1,845 2,433 5,538 6,653
--------- -------- --------- --------
Total store expenses 16,788 20,426 46,025 53,546
--------- -------- --------- --------
Store gross profit 9,290 11,649 24,516 35,563
Regional expenses 1,529 1,846 4,303 5,516
Corporate expenses 1,606 2,637 4,547 6,636
Depreciation and amortization 138 283 311 566
Interest expense (income), net 193 (40) 597 642
Other expense (income), net (180) (251) (124) (210)
--------- -------- --------- --------
Income before taxes 6,004 7,174 14,882 22,413
Provision for income taxes 2,328 2,664 5,754 8,858
--------- -------- --------- --------
Net income $3,676 $4,510 $9,128 $13,555
========= ======== ========= ========
Earnings per share(a):
Basic $0.19 $0.23 $0.17 $0.80
Diluted $0.19 $0.22 $0.17 $0.74
Weighted average number of
common shares outstanding(a):
Basic 14,545 19,556 17,442 14,351
Diluted 15,046 20,807 17,926 15,378
(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 Nine Months Ended
September 30, September 30,
--------------------- ------------------
2003 2004 2003 2004
---------- --------- --------- --------
Net income $3,676 $4,510 $9,128 $13,555
Less: reduction to retained
earnings from shares subject
to redemption(a) 5,296
Less: dividend and
participation rights from
mandatory stock redemption(b) 849 849 2,135
---------- --------- --------- --------
Income available to common
stockholders $2,827 $4,510 $2,983 $11,420
========== ========= ========= ========
Weighted average number of
actual common shares
outstanding 18,915 19,556 18,915 16,755
Reduction in weighted average
shares from mandatory stock
redemption(b) 4,370 1,473 2,404
---------- --------- --------- --------
Weighted average number of
common shares outstanding 14,545 19,556 17,442 14,351
Incremental shares from
assumed conversion of stock
options 501 1,251 484 1,027
---------- --------- --------- --------
Weighted average number of
diluted common shares
outstanding 15,046 20,807 17,926 15,378
========== ========= ========= ========
Basic earnings per share $0.19 $0.23 $0.17 $0.80
Diluted earnings per share $0.19 $0.22 $0.17 $0.74
Notes:
(a) Basic and diluted earnings per share computations through
September 30, 2003, were adjusted to reflect the Company's
obligation through June 30, 2004, 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 was 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 was charged
directly to retained earnings in any given period. The
stockholders agreement was terminated effective June 30, 2004, and
the computation for earnings per share no longer require ongoing
adjustments.
(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 had been
recorded through June 30, 2004, 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, and the computation for earnings per
share no longer require ongoing adjustments.
QC Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share
amounts)
December 31, September 30,
2003 2004
------------ -------------
ASSETS Unaudited
Current assets
Cash and cash equivalents $9,497 $47,378
Loans receivable, net of allowance for
losses of $1,090 at December 31, 2003 and
$1,160 at September 30, 2004 35,933 38,548
Prepaid expenses and other assets 1,352 1,582
----------- ------------
Total current assets 46,782 87,508
Property and equipment, net 11,852 17,417
Goodwill 5,431 5,431
Other assets, net 864 820
----------- ------------
Total assets $64,929 $111,176
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $276 $213
Accrued expenses and other liabilities 1,235 2,353
Deferred revenue 2,188 2,234
Income taxes payable 1,051 567
Deferred income taxes 2,517 2,745
Revolving credit facility 6,256
Current portion of long-term debt 4,718
----------- -------------
Total current liabilities 18,241 8,112
Deferred income taxes 1,475 1,895
Liability for mandatory stock redemption 17,000
Long-term debt, less current portion 18,880
----------- -------------
Total liabilities 55,596 10,007
----------- ------------
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value; 75,000,000
shares authorized; 19,087,600 issued and
15,182,000 shares outstanding at December
31, 2003; 20,371,000 shares issued and
outstanding at September 30, 2004 191 204
Retained earnings 21,292 31,747
Additional paid-in capital 5,248 69,218
Treasury stock, at cost (17,165)
Notes received for equity (233)
----------- -------------
Total stockholders' equity 9,333 101,169
----------- ------------
Total liabilities and stockholders'
equity $ 64,929 $111,176
=========== ============
QC Holdings, Inc.
Selected Statistical and Operating Data
(in thousands, except Store Data, Average Loan and Average Fee)
Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2003 2004 2003 2004
-------- -------- -------- --------
Store Data:
Number of stores, beginning of
period 277 301 258 294
De novo stores opened 12 23 35 32
Stores closed 1 2 5 4
-------- -------- -------- --------
Number of stores, end of
period 288 322 288 322
======== ======== ======== ========
Comparable Store Data:
Total revenues generated by all
comparable stores $ 25,583 $30,116 $67,682 $79,975
Total number of comparable
stores 269 269 246 246
Average revenue per comparable
store $95 $112 $276 $325
Percentage increase in
comparable store revenues 17.6% 18.2%
Operating Data:
Loan volume $159,943 $199,925 $419,964 $549,829
Average loan (principal plus
fee) 317.28 341.57 309.84 332.66
Average fee 48.17 51.51 47.14 50.30
Loss Data:
Allowance for loan losses:
Balance, beginning of period $820 $960 $750 $1,090
Adjustment to provision for
losses based on evaluation
of outstanding receivables 130 200 200 70
-------- -------- -------- --------
Balance, period end $950 $1,160 $950 $1,160
======== ======== ======== ========
Provision for losses:
Charged-off to expense $13,131 $14,382 $34,085 $37,036
Recoveries (6,679) (6,813) (18,320) (19,497)
Adjustment to provision for
losses based on evaluation
of outstanding receivables 130 200 200 70
-------- -------- -------- --------
Total provision for losses $6,582 $7,769 $15,965 $17,609
======== ======== ======== ========
Provision for losses as a
percentage of revenues 25.2% 24.2% 22.6% 19.8%
Provision for losses as a
percentage of loan volume 4.1% 3.9% 3.8% 3.2%
CONTACT: QC Holdings, Inc.
Douglas E. Nickerson, 913-439-1154