QC Holdings, Inc. Reports 2016 Results

OVERLAND PARK, Kan., March 31, 2017 (GLOBE NEWSWIRE) -- QC Holdings, Inc. (OTC PINK:QCCO) reported a net loss of $16.8 million and revenues of $117.2 million for the year ended December 31, 2016. Net loss totaled $1.0 million and revenues totaled $135.5 million for the year ended December 31, 2015.

The year ended December 31, 2016 includes charges of: i) $2.7 million due to a loan loss reserve for a business-to-business receivable; ii) $1.6 million related to recording additional loan loss reserve, severance and lease liability costs as part of the closure of the company’s branches in Washington, South Carolina and Virginia during the second half of 2016; and iii) $800,000 in severance and other costs. In addition, due to the net operating losses incurred for the years ended December 31, 2015 and 2016, the company has determined that it has not met the accounting requirements that would indicate that available loss carry-forwards and deferred tax assets will be recognized in the future. Accordingly, a valuation allowance of $8.5 million has been established at December 31, 2016, which resulted in a net tax charge for 2016.

The year ended December 31, 2015 includes $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 276 branches in 14 states at December 31, 2016 (after consideration of branches to be closed in Virginia). 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)
Year Ended
December 31,
2015 2016
Consumer loan interest and fees $126,318 $108,108
Other 9,183 9,131
Total revenues 135,501 117,239
Provision for losses 39,190 41,833
Operating expenses 66,629 59,617
Gross profit 29,682 15,789
Corporate and Regional expenses 28,042 27,446
Other expense, net 2,777 627
Loss from continuing operations before income taxes (1,137) (12,284)
Provision (benefit) for income taxes (94) 4,484
Net loss $ (1,043) $ (16,768)
Loss per share:
Net loss $ (0.06) $ (0.97)
Net loss $ (0.06) $ (0.97)
Weighted average number of common shares outstanding:
Basic 17,351 17,333
Diluted 17,351 17,333

QC Holdings, Inc.
Consolidated Condensed Balance Sheets
(in thousands)
December 31,
December 31,
Current assets
Cash and cash equivalents$16,115 $16,660
Restricted cash 950 1,865
Loans receivable, less allowance for losses of $6,395 at December 31, 2015 and $9,836 at December 31, 2016 50,555 32,586
Other current assets 6,286 6,500
Total current assets 73,906 57,611
Non-current loans receivable, less allowance for losses of $1,556 at December 31, 2015 and $623 at December 31, 2016 3,802 1,664
Property and equipment, net 4,797 6,039
Other assets, net 11,486 8,041
Total assets$ 93,991 $ 73,355
Current liabilities
Accounts payable and other current liabilities$11,407 $10,420
Revolving credit facility 6,250 2,250
Subordinated debt 3,553 7,736
Total current liabilities 21,210 20,406
Non-current liabilities 4,967 3,361
Total liabilities 26,177 23,767
Stockholders’ equity 67,814 49,588
Total liabilities and stockholders’ equity$ 93,991 $ 73,355

QC Holdings, Inc.
Consolidated Condensed Statements of Cash Flows
(in thousands)
Year Ended
December 31,
Year Ended
December 31,
Operating activities:
Net loss$(1,043) $(16,768)
Adjustments to reconcile net loss to net cash 42,806 51,049
Changes in assets and liabilities (31,131) (29,110)
Net operating 10,632 5,171
Investing activities:
Capital expenditures (2,220) (3,782)
Other 1,195 (866)
Net investing (1,025) (4,648)
Financing activities:
Net repayment of borrowings (5,750)
Other (1,535) (83)
Net financing (7,285) (83)
Effect of exchange rate changes on cash and cash equivalents (427) 105
Net increase in cash and cash equivalents 1,895 545
Cash and cash equivalents at beginning of year 14,220 16,115
Cash and cash equivalents at end of year$ 16,115 $ 16,660

Contact: Douglas E. Nickerson (913-234-5154) Chief Financial Officer

Source: QC Holdings