Exhibit 99.1
QC Holdings, Inc. Reports First Quarter Results;
44 Stores Added during First Quarter
OVERLAND PARK, Kan.--(BUSINESS WIRE)--May 12, 2005--QC Holdings,
Inc. (Nasdaq:QCCO) reported a 24.5% increase in revenues during first
quarter 2005, improving to $35.1 million from $28.2 million in first
quarter 2004. The $6.9 million increase in revenues was attributable
to growth in payday loan volumes. Net income for the three months
ended March 31, 2005 totaled $3.6 million, a $1.7 million decline from
prior year's first quarter. This decline reflects less favorable loan
loss experience in the current year quarter and costs associated with
the addition of more than 90 stores in the last six months.
During first quarter 2005, the Company opened 41 de novo stores,
acquired three payday loan stores and closed one location. During the
same period in 2004, the Company opened two de novo stores and closed
one.
Don Early, QC's Chairman and Chief Executive Officer, commented,
"The significant increase in the number of stores added during first
quarter 2005 compared to 2004 reflects our effort to fulfill one of
the stated goals for the capital raised in our public offering last
summer and our desire to capitalize on the significant growth
opportunities we believe exist in our industry. Our field managers and
employees have demonstrated the ability to manage this level of
growth, with success in identifying good locations and in operating
the new stores in an efficient manner. We believe that continued
strong demand for the payday loan product by our customers, together
with our strong balance sheet, provide the Company a unique window for
accelerated growth."
The 24.5% improvement in revenues quarter to quarter was
attributable to higher payday loan volumes, which reflects the
increase in the number of stores and an increase in the average loan
size. QC originated approximately $215.4 million of payday loans
during first quarter 2005, which was an increase of 27.6% over the
$168.8 million during first quarter 2004. The average loan (including
fee) totaled $356.00 versus $325.28 during the three months ended
March 31, 2004. Average fees per loan increased 8.1%, from $49.29 in
first quarter 2004 to $53.26 in first quarter 2005.
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 December 31, 2003) improved 15.5%, or $4.3 million, to
$32.1 million during the three months ended March 31, 2005, indicative
of continued strong customer demand driving payday loan volumes and
ongoing benefits from the Company's late-fourth quarter 2004 direct
mail campaign. First quarter 2005 revenues also included $2.9 million
from the 82 stores that were added during 2004 and approximately
$144,000 from the 44 stores that were added during first quarter 2005.
Revenues from check cashing, title loans and other sources totaled
$3.8 million during the three months ended March 31, 2005, up slightly
from the $3.7 million in prior year's quarter. Check cashing revenues
for both years reflect the higher level of activity typically
experienced in the first quarter as a result of tax refunds received
by our customers.
The Company's first quarter 2005 store operating costs increased
to $23.0 million from $15.2 million in prior year's first quarter.
Higher costs were particularly evident in salaries and benefits for
stores, which increased by $2.5 million for the three months ended
March 31, 2005 versus 2004. Salaries and benefits represented 24.4% of
revenues in first quarter 2005 compared to 21.7% of revenues in first
quarter 2004. This increase in the ratio of salaries and benefits to
revenues is directly correlated to the number of new stores, as
demonstrated by the consistent ratio for comparable stores quarter to
quarter (roughly 21.5%).
During the three months ended March 31, 2005, the Company reported
provision for losses of $6.8 million compared to $3.8 million in the
same 2004 period. As a percentage of revenues, losses were 19.4% and
13.5% during first quarter 2005 and 2004, respectively. The less
favorable loss ratio in the current year period was caused by two
factors: i) higher loss rates associated with accelerated unit store
growth and ii) increased losses at comparable stores.
The Company has added 118 stores through de novo openings and
acquisitions since June 30, 2004. Newer stores historically experience
higher loss rates than seasoned, comparable stores, particularly in
the initial year of operation when loss ratios may range between 30%
and 35%. Stores added during 2004 (which have been open for
approximately six months on average) and 2005 reported provision for
losses of approximately $1.4 million during the three months ended
March 31, 2005. With respect to comparable stores, losses totaled $5.4
million in first quarter 2005 versus $3.7 million in the same 2004
period, primarily due to exceptionally favorable collections
experience in prior year's first quarter. The Company believes that
prior year's experience was largely attributable to tax refunds to
customers as a result of the tax law changes implemented during the
last half of 2003.
Other expense components, including occupancy, depreciation and
amortization, increased $2.3 million quarter to quarter. Occupancy
costs as a percentage of revenues increased from 10.7% to 12.1% in
first quarter 2005, which reflects the high number of stores at early
stages in the store lifecycle.
Store gross profit declined $0.8 million, or 6.2%, from $12.9
million in first quarter 2004 to $12.1 million in the current year
quarter. Store gross margin, which is store gross profit as a
percentage of revenues, was 34.4% during the three months ended March
31, 2005 versus 45.9% during the three months ended March 31, 2004.
Comparable stores during first quarter 2005 reported a gross margin of
44.3% versus 47.0% in first quarter 2004. The 82 stores added during
2004 and the 44 stores added in 2005 reported net losses of $1.1
million and $847,000, respectively, in first quarter 2005. Expenses
associated with stores that were not yet opened as of March 31, 2005
totaled $330,000.
Regional and corporate expenses increased $2.5 million during the
three months ended March 31, 2005, to $6.1 million from $3.6 million.
Together, regional and corporate expenses were 17.3% of revenues in
first quarter 2005 (versus 12.8% in prior year's quarter). The higher
level of expenses in first quarter 2005 reflects a 65% increase in the
number of employees at the corporate office to ensure efficient
support to the field related to the de novo growth and an increase of
approximately $500,000 in costs associated with being a public company
(e.g., insurance, accounting, legal).
The Company reported interest income of $166,000 during the three
months ended March 31, 2005 compared to interest expense of $356,000
during the three months ended March 31, 2004. 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 38.5% during first
quarter 2005 from 40.4% in comparable 2004 as a result of state and
local tax planning during the current year.
Commenting on first quarter 2005, Darrin Andersen, President and
Chief Operating Officer, noted, "Given the general softness in the
retail sectors during first quarter 2005, we were particularly pleased
with the efforts of our field personnel to drive comparable store
revenues. We continued to emphasize collections to our store
personnel, which we believe was instrumental in maintaining our loss
ratio at a level that was consistent with 2003 and 2002 first quarter
levels. Overall, our first quarter represented a confident initial
step to our long-term strategy."
- BUSINESS OUTLOOK -
Mr. Early concluded, "We are in a tremendous industry that
continues to demonstrate its durability due to a strong and growing
customer base. We are executing on the strategy we set forth earlier
this year and are progressing as expected. While we are committed to
accelerated unit store growth, we will continue to demand excellence
in our vintage stores, both in driving revenues and success in
collections.
"During this stage in our company's lifecycle, our rate of growth
hampers short-term earnings. We believe, however, that the long-term
benefits that are created as these newer stores season, and begin to
generate revenues and profits similar to our comparable stores, are
substantial. We look forward to tending to the details that ultimately
will provide the best opportunities for success."
QC will present its financial results for the three months ended
March 31, 2005 in a conference call on May 12, 2005 at 2:00 p.m. EDT.
Stockholders and other interested parties are invited to listen online
at www.qcholdings.com or dial 866-800-8649, code 75797030. The
accompanying slides to the presentation are expected to be available
on the QC Web site on the morning of May 12. A replay of the audio
portion of the presentation will be available online until the close
of business on June 12. The replay can also be accessed by telephone
for seven days at 888-286-8010, code 75298690.
About QC Holdings, Inc.
Headquartered in Overland Park, Kansas, QC Holdings, Inc. provides
consumer financial services, principally payday loans, through 414
stores in 23 states as of March 31, 2005. 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 414 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
Annual Report on Form 10-K for the year ended December 31, 2004 filed
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.
(Financial and Statistical Information Follows)
QC Holdings, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
-------------------
2004 2005
--------- --------
Revenues
Payday loan fees $ 24,516 $ 31,302
Other 3,667 3,809
-------- --------
Total revenues 28,183 35,111
-------- --------
Store expenses
Salaries and benefits 6,117 8,570
Provision for losses 3,797 6,823
Occupancy 3,014 4,237
Depreciation and amortization 366 474
Other 1,953 2,916
-------- --------
Total store expenses 15,247 23,020
-------- --------
Store gross profit 12,936 12,091
Regional expenses 1,820 2,297
Corporate expenses 1,791 3,787
Depreciation and amortization 132 147
Interest expense (income), net 356 (166)
Other, net 30 150
-------- --------
Income before taxes 8,807 5,876
Provision for income taxes 3,556 2,260
-------- --------
Net income $ 5,251 $ 3,616
======== ========
Earnings per share (a):
Basic $ 0.34 $ 0.18
Diluted $ 0.32 $ 0.17
Weighted average number of common shares
outstanding (a):
Basic 11,688 20,499
Diluted 12,347 21,560
(a) See computations of earnings per share on following table
QC Holdings, Inc.
Computations of Earnings per Share
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
------------------
2004 2005
-------- -------
Net income $ 5,251 $ 3,616
Less: dividend and participation rights associated
with mandatory stock redemption (a) (1,242)
------- --------
Income available to common stockholders $ 4,009 $ 3,616
======= ========
Weighted average number of actual
common shares outstanding 15,308 20,499
Less: weighted average number of shares from
mandatory stock redemption (a) (3,620)
------- --------
Weighted average basic common shares outstanding 11,688 20,499
Incremental shares from assumed conversion
of stock options 659 1,061
------- -------
Weighted average diluted common shares outstanding 12,347 21,560
======= ========
Basic earnings per share $ 0.34 $ 0.18
Diluted earnings per share $ 0.32 $ 0.17
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. 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) 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
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, March 31,
2004 2005
------------ -----------
ASSETS (Unaudited)
Current assets
Cash, cash equivalents and short-term
investments $ 40,526 $ 49,673
Loans receivable, less allowance for losses
of $1,520 at December 31, 2004 and $1,320
at March 31, 2005 49,385 41,026
Prepaid expenses and other current assets 2,893 2,902
-------- --------
Total current assets 92,804 93,601
Property and equipment, net 17,236 21,927
Goodwill 7,298 7,382
Other assets, net 1,098 1,025
-------- --------
Total assets $118,436 $123,935
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 396 $ 924
Accrued expenses and other liabilities 2,751 2,523
Deferred revenue 2,926 2,335
Deferred income taxes 3,428 3,091
-------- --------
Total current liabilities 9,501 8,873
Deferred income taxes 2,643 2,632
-------- --------
Total liabilities 12,144 11,505
-------- --------
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value: 75,000,000
shares authorized; 20,371,000 shares issued
and outstanding at December 31, 2004;
20,700,250 shares issued and
outstanding at March 31, 2005 204 207
Additional paid-in capital 69,417 71,936
Retained earnings 36,671 40,287
-------- --------
Total stockholders' equity 106,292 112,430
-------- --------
Total liabilities and stockholders' equity $118,436 $123,935
======== ========
QC Holdings, Inc.
Selected Statistical and Operating Data
(in thousands, except Store Data, Average Loan and Average Fee)
Three Months Ended
March 31,
---------------------
2004 2005
--------- ---------
(Unaudited) (Unaudited)
Store Data:
Number of stores, beginning of period 294 371
De novo stores opened 2 41
Acquired stores 3
Stores closed (1) (1)
-------- --------
Number of stores, end of period 295 414
======== ========
Comparable Store Data:
Total revenues generated by all comparable
stores $ 27,826 $ 32,067
Total number of comparable stores 288 288
Average revenue per comparable store $ 96 $ 111
Percentage increase in
comparable store revenues 15.5%
Operating Data:
Loan volume $168,848 $215,388
Average loan (principal plus fee) 325.28 356.00
Average fee 49.29 53.26
Loss Data:
Allowance for loan losses:
Balance, beginning of period $ 1,090 $ 1,520
Adjustment to provision for losses based
on evaluation of outstanding receivables (390) (200)
-------- --------
Balance, period end $ 700 $ 1,320
======== ========
Provision for losses:
Charged-off to expense $ 11,156 $ 15,830
Recoveries (6,969) (8,807)
Adjustment to provision for losses based
on evaluation of outstanding receivables (390) (200)
-------- --------
Total provision for losses $ 3,797 $ 6,823
======== ========
Provision for losses as a
percentage of revenues 13.5% 19.4%
Provision for losses as a
percentage of loan volume 2.2% 3.2%
CONTACT: QC Holdings, Inc.
Douglas E. Nickerson, 913-234-5154