QC Holdings, Inc. Reports Third Quarter 2016 Results

OVERLAND PARK, Kan., Nov. 18, 2016 (GLOBE NEWSWIRE) -- QC Holdings, Inc. (OTC PINK:QCCO) reported a net loss of $1.9 million and revenues of $29.6 million for the third quarter ended September 30, 2016. For the nine months ended September 30, 2016, net loss totaled $5.1 million and revenues were $90.5 million. For the three months ended September 30, 2015, net loss totaled $1.5 million and revenues were $34.5 million. Net loss totaled $1.4 million and revenues totaled $101.0 million for the nine months ended September 30, 2015.

The three months and nine months ended September 30, 2016 include charges of $1.6 million (approximately $1.0 million net of income taxes) in connection with recording additional loan loss reserve, severance and lease liability costs in connection with the closure of all of the company's branches in Washington, South Carolina and Virginia. The nine months ended September 30, 2016 include a charge of $2.7 million (approximately $1.7 million net of income taxes) due to a loan loss reserve for a business-to-business receivable and approximately $340,000 (approximately $206,000 net of income taxes) in severance and other costs. The three months and nine months ended September 30, 2015 include $1.5 million (approximately $900,000 net of income taxes) in accrued costs associated with a tentative settlement of an outstanding legal matter.

The decline in revenues during 2016 compared to 2015 reflects lower interest and fees from the company's consumer loan products due to competitive pressures as customers explore alternative loan products and distribution channels. In addition, revenues were affected by the third quarter 2016 store swap transaction, whereby the company acquired 33 branches operated in Illinois, Kansas, Missouri and Utah and sold its 98 branches operated in Alabama, Arizona, California, Mississippi and Ohio. Loan loss rates were higher in 2016 versus 2015 as a result of the business-to-business loan reserve, the additional loan loss reserve associated with the closed branches and an increase in losses during the transition and integration of the branches acquired in the store swap.

About QC Holdings, Inc. Headquartered in Overland Park, Kansas, QC Holdings, Inc. is a leading provider of consumer loans in the United States and Canada. In the United States, QC offers various products, including single-pay, installment and title loans, check cashing, debit cards and money transfer services, through 279 branches in 14 states at October 31, 2016 (after consideration of branches to be closed in South Carolina, Virginia and Washington). In Canada, the company, through its subsidiary Direct Credit Holdings Inc., is engaged in short-term, consumer internet lending in various provinces.

Forward Looking Statement Disclaimer:  This press release contains 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 short-term lending practices, (2) uncertainties relating to the interpretation, application and promulgation of regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act, including the impact of proposed rulemaking by the Consumer Financial Protection Bureau (CFPB), (3) ballot referendum initiatives by industry opponents to cap the rates and fees that can be charged to customers, (4) uncertainties related to the examination process by the CFPB and indirect rulemaking through the examination process, (5) litigation or regulatory action directed towards us or the short-term consumer loan industry, (6) volatility in our earnings, primarily as a result of fluctuations in loan loss experience and closures of branches, (7) risks associated with our dependence on cash management banking services and the Automated Clearing House for loan collections, (8) negative media reports and public perception of the short-term consumer loan industry and the impact on federal and state legislatures and federal and state regulators, (9) changes in our key management personnel, (10) risks associated with owning and managing non-U.S. businesses, and (11) other various risks. QC will not update any forward-looking statements made in this press release to reflect future events or developments.

(Financial and Statistical Information Follows)

QC Holdings, Inc.
Consolidated Condensed Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
 
    Three Months Ended   September 30,       Nine Months Ended   September 30,
  2015   2016   2015   2016
Revenues              
Consumer loan interest and fees $ 32,220     $ 27,186     $ 94,173     $ 83,582  
Other   2,259       2,379       6,809       6,878  
Total revenues   34,479       29,565       100,982       90,460  
Provision for losses   10,525       11,528       29,207       31,146  
Operating expenses   17,191       14,565       49,923       46,146  
Gross profit   6,763       3,472       21,852       13,168  
                                         
Corporate and Regional expenses   7,787       7,513       21,221       21,307  
Other expense (income), net   819       (942 )     2,091       (354 )
Loss from continuing operations before income taxes   (1,843 )     (3,099 )     (1,460 )     (7,785 )
Benefit for income taxes   (350 )     (1,152 )     (72 )     (2,717 )
Net loss $ (1,493 )   $ (1,947 )   $ (1,388 )   $ (5,068 )
                                         
Loss per share:              
Basic              
Net loss $ (0.09 )   $ (0.11 )   $ (0.08 )   $ (0.29 )
                                         
Diluted                                        
Net loss $ (0.09 )   $ (0.11 )   $ (0.08 )   $ (0.29 )
Weighted average number of common shares outstanding:                                        
Basic   17,333       17,333       17,357       17,333  
Diluted   17,333       17,333       17,357       17,333  
                 

QC Holdings, Inc.
Consolidated Condensed Balance Sheets
(in thousands)
 
    December 31, 2015       September 30, 2016
ASSETS             (Unaudited)
Current assets              
Cash and cash equivalents $ 16,115     $ 16,717  
Restricted cash   950       950  
Loans receivable, less allowance for losses of $6,395 at  December 31, 2015 and $10,784 at September 30, 2016   50,555       37,021  
Other current assets     6,286         10,070  
Total current assets   73,906       64,758  
Non-current loans receivable, less allowance for losses of $1,556 at  December 31, 2015 and $782 at September 30, 2016   3,802       1,921  
Property and equipment, net   4,797       6,114  
Other assets, net     11,486         12,289  
Total assets $ 93,991     $ 85,082  
               
LIABILITIES AND STOCKHOLDERS' EQUITY              
Current liabilities              
Accounts payable and other current liabilities $ 11,407     $ 12,482  
Revolving credit facility   6,250          
Subordinated debt     3,553         7,661  
Total current liabilities   21,210       20,143  
               
Non-current liabilities   4,967       3,411  
Subordinated debt              
Total liabilities   26,177       23,554  
               
Stockholders' equity     67,814         61,528  
Total liabilities and stockholders' equity $ 93,991     $ 85,082  
               

QC Holdings, Inc.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
 
    Nine Months Ended September 30, 2015         Nine Months Ended September 30, 2016  
                   
Operating activities:      
Net loss $ (1,388 )   $ (5,067 )
Adjustments to reconcile net loss to net cash   32,215       33,196  
Changes in assets and liabilities   (21,681 )       (22,523 )
Net operating     9,146         5,606  
               
Investing activities:              
Capital expenditures   (928 )     (2,973 )
Other     1,187         58  
Net investing     259         (2,915 )
               
Financing activities:              
Net repayment of borrowings   (9,000 )     (2,265 )
Other     (1,485 )        
Net financing   (10,485 )       (2,265 )
               
Effect of exchange rate changes on cash and cash equivalents     (317 )       176  
               
Net increase (decrease) in cash and cash equivalents   (1,397 )     602  
Cash and cash equivalents at beginning of year     14,220         16,115  
Cash and cash equivalents at end of period $ 12,823     $ 16,717  
               
Contact:Douglas E. Nickerson  (913-234-5154)Chief Financial Officer

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