Exhibit 99.1
QC Holdings, Inc. Reports Record Revenue and Store Growth
During Fourth Quarter; Full Year 2004 Earnings Increase 33% over 2003
KANSAS CITY, Kan.--(BUSINESS WIRE)--Feb. 15, 2005--QC Holdings,
Inc. (Nasdaq:QCCO) reported a 27.5% increase in revenues during fourth
quarter 2004, growing to $35.7 million for the three months ended
December 31, 2004 from $28.0 million for the three months ended
December 31, 2003. This revenue improvement, which was attributable to
growth in payday loan volumes, helped increase net income to $4.9
million in fourth quarter 2004 compared to $4.8 million in prior
year's fourth quarter.
For the year ended December 31, 2004, net income totaled $18.5
million, which was approximately 33.1% higher than the $13.9 million
in 2003. This $4.6 million increase in net income was driven by a
$26.3 million, or 26.7%, increase in revenues compared to prior year,
together with an improved loss ratio year to year.
During the fourth quarter of 2004, the Company added 51 stores -
22 de novo and 29 through acquisition - compared to 10 in prior year's
fourth quarter. For the year, the Company added 83 stores versus 45
stores in 2003. The 84% increase in the number of stores added over
2003 reflects the Company's effort to invest the proceeds from its
initial public offering in July 2004.
Don Early, QC's Chairman and Chief Executive Officer, commented,
"Our fourth quarter financial results reflect the acceleration of unit
store growth through a combination of de novo build-outs and
acquisitions. Because the bulk of our growth occurred in late
2004, our earnings in fourth quarter were affected by higher
losses associated with newer stores, as well as by substantial revenue
growth that was concentrated during the month of December. We are
pleased that our store personnel continue to focus on driving payday
loan volumes and that our regional management group is actively
seeking de novo store opportunities."
QC reported store gross margins of 34.9% in fourth quarter 2004
and 38.5% for the year ended December 31, 2004 versus 41.4% in fourth
quarter 2003 and 36.7% for the year ended December 31, 2003. Darrin
Andersen, QC's President and Chief Operating Officer, noted, "Given
our higher-than-expected unit store growth during the fourth quarter,
our gross margin was strong, largely due to the 20.7% increase in
comparable store revenues quarter to quarter. For the year, our store
margins continued to exceed industry averages, indicative of our
strong per-store revenue figures and our ongoing operational
excellence program."
- FOURTH QUARTER -
For the three months ended December 31, 2004, revenues totaled
$35.7 million, a 27.5% increase from the $28.0 million during the
three months ended December 31, 2003. This revenue growth was
attributable to higher payday loan volumes and an increase in the
average loan size. QC originated approximately $233.6 million of
payday loans during fourth quarter 2004, which was an increase of
37.3% compared to $170.1 million during fourth quarter 2003. The
average loan (including fee) totaled $351.24 versus $324.83 in fourth
quarter 2003. Average fees per loan increased 7.0%, from $49.30 in
fourth quarter 2003 to $52.74 in fourth 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 September 30, 2003) improved 20.7%, or $5.7 million, to
$33.2 million in fourth quarter 2004. This improvement reflects
increased payday loan volumes during the current year period as a
result of the Company's convenient lending policy, the continued
strong demand by consumers for the payday loan product and the benefit
of a targeted direct mail campaign during early December 2004. Fourth
quarter 2004 revenues also included $1.6 million from the 83 stores
that were added during 2004 and approximately $801,000 from the 10
stores that were opened during fourth quarter 2003.
Revenues from check cashing, title loans and other sources totaled
$2.9 million during the three months ended December 31, 2004 and 2003.
Increases in check cashing revenues due to new stores were offset by
the overall lower volumes of checks cashed as a result of the
declining trend in the United States in the number of checks.
Store gross profit improved $0.9 million, or 7.8%, from $11.6
million in fourth quarter 2003 to $12.5 million in fourth quarter
2004, primarily due to growth in revenues, partially offset by higher
store expenses quarter to quarter. Salaries and benefits for stores
increased by $1.8 million for the three months ended December 31, 2004
versus 2003 as a result of new personnel to operate stores added after
December 31, 2003.
During fourth quarter 2004, the Company reported loan losses of
$8.3 million compared to $5.3 million in the same 2003 period. As a
percentage of revenues, losses were 23.1% and 19.1% during fourth
quarter 2004 and 2003, respectively. The less favorable loss ratio in
the current year period reflected the higher loss rate associated with
accelerated unit store growth, together with reduced collections
during fourth quarter 2004, partially due to favorable collection
experience in prior year's fourth quarter as a result of tax refunds
during the last half of 2003.
Other expense components, including occupancy, depreciation and
amortization, increased $2.0 million quarter to quarter. Other store
costs comprised $1.3 million of the increase in these other expense
components, approximately one-half of which represented higher
advertising attributable to a targeted direct mail campaign initiated
in early December 2004. Occupancy costs as a percentage of revenues
were essentially unchanged during fourth quarter 2004 versus 2003.
Store gross margin, which is store gross profit as a percentage of
revenues, was 34.9% during the three months ended December 31, 2004
versus 41.4% during the three months ended December 31, 2003. The
decline in store gross margin was attributable to the effects of
higher costs associated with accelerated unit store growth and higher
loan losses in comparable stores. Comparable stores during fourth
quarter 2004 reported a gross margin of 40.8% versus 42.6% in fourth
quarter 2003. The 10 stores added during the final three months of
2003 reported fourth quarter 2004 gross profit of $227,000, or a gross
margin of 28.4%. Stores opened during 2004 reported a net loss of
approximately $1.1 million during fourth quarter 2004 and expenses
associated with stores that were not yet opened as of December 31,
2004 totaled $285,000.
Regional and corporate expenses increased $1.9 million during the
three months ended December 31, 2004, to $5.0 million from $3.1
million. Together, regional and corporate expenses were 14.0% of
revenues in fourth quarter 2004, which continues to remain below the
Company's expected annual range of 15% to 16% of revenues. The higher
level of regional and corporate expenses reflects the additional
reporting and compliance costs of being a public company, as well as
continued growth of the corporate infrastructure.
The Company reported interest income of $143,000 during fourth
quarter 2004 compared to interest expense of $339,000 during the three
months ended December 31, 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 in July 2004 and the investment of the remaining proceeds in
cash equivalents. The effective income tax rate declined to 34.0%
during fourth quarter 2004 from 38.2% in comparable 2003 as a result
of return to provision differences associated with the filing of
various state income tax returns. The Company expects the 2005
effective income tax rate to range between 38.2% and 38.8%.
Commenting on fourth quarter 2004, Mr. Andersen noted, "Fourth
quarter presented a great challenge for our regional and area
managers, as well as our store personnel, as we moved down several
important paths. Our efforts ranged from a strong focus on maximizing
loan volumes at our comparable stores, to building out de novo stores
with an emphasis on improving the key processes, to acquiring and
integrating stores with unique strategic benefits. While our loss
experience was disappointing from a historical perspective, given the
rapid rate of growth in our store base during the last half of 2004,
the loss ratio during the fourth quarter was consistent with our
expectations and is a reasonable estimate for future losses at similar
rates of accelerated unit store growth."
- YEAR ENDED DECEMBER 31 -
For the year ended December 31, 2004, revenues grew $26.3 million,
or 26.7%, to $124.8 million from the $98.5 million during the year
ended December 31, 2003. The increase in revenues was primarily due to
higher payday loan volumes and a 7.6% increase in the average loan
size. QC originated approximately $783.5 million of payday loans
during the year ended December 31, 2004, a 32.8% increase compared to
$590.1 million during the prior year. The average loan size (including
fees) increased to $337.97 during 2004 from $314.14 in 2003. Average
fees per loan increased from $47.76 in 2003 to $50.99 in 2004.
Revenues for comparable stores (defined as those stores that were
open for all of the two periods being compared, which means the 24
months since December 31, 2002) improved $16.6 million, or 17.8%, to
$109.9 million for the year ended December 31, 2004, primarily as a
result of higher payday loan volume during the current year period.
Revenues from stores added during 2003 increased by $9.0 million, from
$3.1 million to $12.1 million during 2004, and stores added in 2004
resulted in a $2.1 million increase in revenues year to year. The
aggregate increase from comparable stores and new stores was partially
offset by the loss of revenues from stores that were closed.
Revenues from check cashing, title loans and other sources
declined to $12.1 million during the year ended December 31, 2004 from
$12.5 million during the year ended December 31, 2003 as a result of
lower check cashing and title loan volumes.
Salaries and benefits increased $5.4 million to $26.7 million in
2004 versus $21.3 million in 2003. This 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. Loan losses for the year ended December 31, 2004 totaled $25.9
million, a $4.6 million increase over 2003. The rate of increase in
losses was lower than revenue growth, resulting in a decline in losses
as a percentage of revenues from 21.6% during the year ended December
31, 2003 to 20.7% during 2004. The improvement in the loss ratio year
to year 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, partially offset by higher losses in fourth quarter
2004 as indicated in the fourth quarter discussion above.
Other expense components, including occupancy, depreciation and
amortization, increased $4.4 million from 2003 to 2004. While
occupancy costs increased $1.6 million year to year as a result of the
addition of stores after December 31, 2003, occupancy costs as a
percentage of revenues declined from 11.0% in 2003 to 10.0% during
2004, indicative of the fixed nature of these costs. The remainder of
the increase year to year represented higher costs associated with
store growth, together with higher professional fees.
Store gross margin improved to 38.5% for the year ended December
31, 2004 from 36.7% for the year ended December 31, 2003. This
improvement reflected the Company's strong revenue growth and
favorable loss experience in 2004. Comparable stores during the year
reported a gross margin of 43.5% versus 40.4% in 2003. Stores opened
during 2003 reported a gross margin of 23.7% during the year ended
December 31, 2004. Stores opened during 2004 totaled a net loss of
$2.1 million in the current year period and stores not yet opened as
of December 31, 2004 incurred costs of $404,000.
Regional and corporate expenses increased $5.2 million, from $11.9
million during 2003 to $17.1 million in the current year, for the same
reasons noted in the quarterly discussion above.
The effective income tax rate for the year ended December 31, 2004
totaled 38.1%, down slightly from 38.5% in the comparable prior year.
- BUSINESS OUTLOOK -
Mr. Early noted, "As we expand our footprint in the United States,
our core focus is to provide superior customer service and to maximize
payday loan volumes. Communicating and teaching this focus to our
employees is critical to the long-term success of both new and
existing stores. With our growth during the second half of 2004, our
field personnel have done an outstanding job of assisting and training
our employees at new and acquired stores. In addition, we have
strengthened our corporate infrastructure capabilities in a number of
areas, including construction management, training, recruitment and
property, to ensure continuity and consistency in store support."
Mr. Early concluded, "Our initial public offering in July 2004 has
provided our company with the opportunity to pursue growth from a
position of strength. After discussions with our regional management
group and evaluation of market opportunities, we expect to grow at an
accelerated rate throughout 2005 and 2006. During 2005, we expect to
add at least 150 stores, which is a 40% increase from the 371 stores
at December 31, 2004. While this rate of growth will affect short-term
earnings due to the higher losses associated with new stores and the
typical ramp-up period that a new store requires to become profitable,
we believe the long-term earnings and stockholder value benefits are
substantial. As 2005 develops, we look forward to managing the various
challenges and opportunities that will be presented to our company."
QC will present its financial results for the three months and
year ended December 31, 2004 in a conference call on February 15, 2005
at 2:00 p.m. EST. Stockholders and other interested parties are
invited to listen online at www.qcholdings.com or dial (800) 901-5231,
code 86008787. The accompanying slides to the presentation are
expected to be available on the QC Web site on the morning of February
15. A replay of the audio portion of the presentation will be
available online until the close of business on March 15. The replay
can also be accessed by telephone for seven days at (888) 286-8010,
code 91381145.
About QC Holdings, Inc.
Headquartered in Kansas City, Kansas, QC Holdings, Inc. provides
consumer financial services, principally payday loans, through 371
stores in 22 states as of December 31, 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 371 stores through a combination of new, or de
novo, stores and acquisitions. During fiscal 2004, the Company
advanced more than $783 million to customers through payday loans and
reported total revenues of $124.8 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 or regulations or governmental interpretations of existing
laws and regulations governing consumer protection or payday lending
practices, (2) litigation or regulatory action directed towards us or
the payday loan industry, (3) our role as a marketing and servicing
agent for lending banks in North Carolina and Texas and changes in
federal or state laws affecting or the results of industry litigation
and regulatory challenges involving those types of relationships, (4)
volatility in our earnings, primarily as a result of fluctuations in
loan loss experience, (5) negative media reports and public perception
of the payday loan industry and the impact on state legislatures and
federal and state regulators, (6) turnover in our store managers and
store-level employees, (7) changes in our key management personnel,
(8) integration risks and costs associated with acquisitions, and (9)
the other risks detailed under the caption "Risk Factors" in our
Registration Statement on Form S-1, as amended, Registration No.
333-115297, filed on July 9, 2004 with the Securities and Exchange
Commission and our annual report on Form 10-K to be filed with the SEC
on or before March 31, 2005. 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.
(Financial and Statistical Information Follows)
QC Holdings, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
2003 2004 2003 2004
-------------------------------------
Unaudited Unaudited
Revenues
Payday loan fees $25,056 $32,841 $86,010 $112,679
Other 2,897 2,873 12,484 12,144
-------- -------- -------- ---------
Total revenues 27,953 35,714 98,494 124,823
-------- -------- -------- ---------
Store expenses
Salaries and benefits 5,803 7,595 21,279 26,725
Provision for losses 5,328 8,255 21,293 25,864
Occupancy 2,742 3,545 10,862 12,502
Depreciation and amortization 471 477 1,397 1,674
Other 2,033 3,372 7,571 10,025
-------- -------- -------- ---------
Total store expenses 16,377 23,244 62,402 76,790
-------- -------- -------- ---------
Store gross profit 11,576 12,470 36,092 48,033
Regional expenses 1,310 1,888 5,613 7,404
Corporate expenses 1,777 3,121 6,324 9,757
Depreciation and amortization 227 197 538 763
Interest expense (income), net 339 (143) 936 499
Other expense (income), net 159 (56) 35 (266)
-------- -------- -------- ---------
Income before taxes 7,764 7,463 22,646 29,876
Provision for income taxes 2,968 2,539 8,722 11,397
-------- -------- -------- ---------
Net income $4,796 $4,924 $13,924 $18,479
======== ======== ======== =========
Earnings per share (a):
Basic $0.30 $0.24 $0.41 $1.03
Diluted $0.29 $0.23 $0.39 $0.96
Weighted average number of
common shares outstanding (a):
Basic 11,461 20,371 15,935 15,864
Diluted 12,017 21,705 16,436 16,970
(a) See computations of earnings per share on following page
QC Holdings, Inc.
Computations of Earnings per Share
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
2003 2004 2003 2004
-------------------------------------
Unaudited Unaudited
Net income $4,796 $4,924 $13,924 $18,479
Less: reduction to retained
earnings from shares subject to
redemption (a) 5,296
Less: dividend and participation
rights from mandatory stock
redemption (b) 1,313 2,162 2,135
------- ------- -------- ---------
Income available to common
stockholders $3,483 $4,924 $6,466 $16,344
====== ====== ====== ======
Weighted average number of
actual common shares
outstanding 15,831 20,371 18,138 17,664
Reduction in weighted average
shares from mandatory stock
redemption (b) 4,370 2,203 1,800
------- ------- -------- ---------
Weighted average number of common
shares outstanding 11,461 20,371 15,935 15,864
Incremental shares from assumed
conversion of stock options 556 1,334 501 1,106
------- ------- -------- ---------
Weighted average number of diluted
common shares outstanding 12,017 21,705 16,436 16,970
====== ====== ====== ======
Basic earnings per share $0.30 $0.24 $0.41 $1.03
Diluted earnings per share $0.29 $0.23 $0.39 $0.96
Notes:
Basic and diluted earnings per share are computed by dividing
income available to common stockholders by the weighted average number
of common shares outstanding during the period. During 2003 and
through June 30, 2004, the Company used the two-class method for
computing basic and diluted earnings per share to consider the effect
of the mandatory stock redemption under a stockholders agreement
between the Company and two principal stockholders. The Stockholders
Agreement was terminated on June 30, 2004.
(a) Basic and diluted earnings per share computations through
December 31, 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 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 computations
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
computations 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, December 31,
2003 2004
------------------------
ASSETS Unaudited
Current assets
Cash and cash equivalents $9,497 $40,526
Loans receivable, less allowance for losses of
$1,090 at December 31, 2003
and $1,520 at December 31, 2004 35,933 49,385
Prepaid expenses and other assets 1,352 2,893
-------- ---------
Total current assets 46,782 92,804
Property and equipment, net 11,852 17,236
Goodwill 5,431 7,298
Other assets, net 864 1,098
-------- ---------
Total assets $64,929 $118,436
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $276 $396
Accrued expenses and other liabilities 1,235 2,751
Deferred revenue 2,188 2,926
Income taxes payable 1,051
Deferred income taxes 2,517 3,428
Revolving credit facility 6,256
Current portion of long-term debt 4,718
-------- ---------
Total current liabilities 18,241 9,501
Deferred income taxes 1,475 2,643
Liability for mandatory stock redemption 17,000
Long-term debt, less current portion 18,880
-------- ---------
Total liabilities 55,596 12,144
-------- ---------
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value; 75,000,000 shares
authorized; 19,087,600 shares issued and
15,182,000 shares outstanding at December 31,
2003; 20,371,000 shares issued and outstanding
at December 31, 2004 191 204
Retained earnings 21,292 36,671
Additional paid-in capital 5,248 69,417
Treasury stock, at cost (17,165)
Notes received for equity (233)
-------- ---------
Total stockholders' equity 9,333 106,292
-------- ---------
Total liabilities and stockholders' equity $64,929 $118,436
======== =========
QC Holdings, Inc.
Selected Statistical and Operating Data
(in thousands, except Store Data, Average Loan and Average Fee)
Three Months Ended Year Ended
December 31, December 31,
2003 2004 2003 2004
-------------------------------------
Unaudited Unaudited
Store Data:
Number of stores, beginning
of period 288 322 258 294
De novo stores opened 10 22 45 54
Acquired stores 29 29
Stores closed 4 2 9 6
--------- --------- --------- ---------
Number of stores, end of
period 294 371 294 371
========= ========= ========= =========
Comparable Store Data:
Total revenues generated by
all comparable stores $27,462 $33,229 $93,348 $109,908
Total number of comparable
stores 279 279 244 244
Average revenue per
comparable store $98 $119 $383 $450
Percentage increase in
comparable store
revenues 20.7% 17.8%
Operating Data:
Loan volume $170,107 $233,636 $590,071 $783,465
Average loan (principal
plus fee) 324.83 351.24 314.14 337.97
Average fee 49.30 52.74 47.76 50.99
Loss Data:
Allowance for loan losses:
Balance, beginning of
period $950 $1,160 $750 $1,090
Adjustment to provision
for losses based on
evaluation of
outstanding receivables 140 360 340 430
--------- --------- --------- ---------
Balance, period end $1,090 $1,520 $1,090 $1,520
======== ========= ========= =========
Provision for losses:
Charged-off to expense $11,580 $14,920 $45,665 $51,956
Recoveries (6,392) (7,025) (24,712) (26,522)
Adjustment to provision
for losses based on
evaluation of
outstanding receivables 140 360 340 430
--------- --------- --------- ---------
Total provision for
losses $5,328 $8,255 $21,293 $25,864
======== ========= ========= =========
Provision for losses as a
percentage of
revenues 19.1% 23.1% 21.6% 20.7%
Provision for losses as a
percentage of
loan volume 3.1% 3.5% 3.6% 3.3%
CONTACT: QC Holdings, Inc.
Chief Financial Officer
Douglas E. Nickerson, 913-439-1154