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QC Holdings, Inc. Reports Fourth Quarter 2017 Results

/EIN News/ -- OVERLAND PARK, Kan., April 23, 2018 (GLOBE NEWSWIRE) -- QC Holdings, Inc. (OTC PINK:QCCO) reported a net loss of $3.5 million and revenues of $98.2 million for the year ended December 31, 2017. Net loss totaled $16.8 million and revenues totaled $117.2 million for the year ended December 31, 2016.

The year ended December 31, 2017 includes severance and corporate relocation charges of approximately $569,000. The year ended December 31, 2016 includes charges of $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, a $2.7 million loan loss reserve for a business-to-business receivable and approximately $800,000 in severance and other costs.

The decline in revenues during 2017 compared to 2016 was primarily attributable to 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. For the 229 company branches not a part of the store swap, revenues improved 2% year-to-year due to an increase in new customers.

Loan loss rates dropped to 26.1% during 2017 from 35.7% in the prior year.  This decline is attributable to $3.5 million in 2016 loan loss reserves as noted above, improvements in installment loan underwriting and product offerings, and 2017 recoveries in the business factoring portfolio.

During 2016, the company determined that due to the net operating losses incurred for the years ended December 31, 2015 and 2016, the company did not meet the accounting requirements that would indicate that available domestic loss carry-forwards and deferred tax assets will be recognized in the future. Accordingly, a valuation allowance of $8.5 million was established at December 31, 2016, which resulted in a net tax charge for 2016. During 2017, the company established a valuation allowance related to the net operating loss carry-forwards associated with its Canadian operations, which resulted in a net tax charge for 2017.

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 258 branches in 14 states at December 31, 2017. 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 many 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 recently announced regulations 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
December 31,
    Year Ended
December 31,
 
    2016       2017       2016       2017  
Revenues                    
Consumer loan interest and fees $     24,526     $     23,932     $   108,108     $     88,841  
Other       2,253           2,445           9,131           9,373  
Total revenues       26,779           26,377           117,239           98,214  
Provision for losses     10,687         8,380         41,833         25,670  
Operating expenses       13,471           12,222           59,617           49,053  
Gross profit     2,621         5,775         15,789         23,491  
             
Corporate and Regional expenses     6,139         5,597         27,446         23,592  
Other expense, net       981           646           627           2,465  
Loss before income taxes     (4,499 )         (468 )       (12,284 )       (2,566 )
Provision for income taxes       7,201           645           4,484           973  
Net loss $     (11,700 )   $     (1,113 )   $     (16,768 )   $     (3,539 )
             
Loss per share:            
Basic            
  Net loss $     (0.68 )   $     (0.06 )   $     (0.97 )   $     (0.20 )
             
Diluted            
  Net loss $     (0.68 )   $     (0.06 )   $     (0.97 )   $     (0.20 )
Weighted average number of common shares outstanding:            
Basic     17,333         17,333         17,333         17,333  
Diluted     17,333         17,333         17,333         17,333  
                               


QC Holdings, Inc.
Consolidated Condensed Balance Sheets
(in thousands)
       
       
  December 31,
2016
  December 31,
2017
ASSETS     (Unaudited)  
Current assets          
Cash and cash equivalents $   16,660     $   16,198  
Restricted cash     1,865         1,879  
Loans receivable, less allowance for losses of $9,836 at  December 31, 2016 and $7,755 at December 31, 2017     32,586         32,921  
Other current assets       6,500           3,748  
Total current assets     57,611         54,746  
Non-current loans receivable, less allowance for losses of $623 at  December 31, 2016 and $83 at December 31, 2017     1,664         258  
Property and equipment, net     6,039         8,241  
Other assets, net       8,041           7,313  
Total assets $   73,355     $   70,558  
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
Accounts payable and other current liabilities $   10,420     $     9,355  
Revolving credit facility     2,250         2,500  
Subordinated debt       7,736           8,168  
Total current liabilities     20,406         20,023  
           
Non-current liabilities       3,361           4,471  
Total liabilities     23,767         24,494  
           
Stockholders’ equity       49,588           46,064  
Total liabilities and stockholders’ equity $   73,355     $   70,558  
           


       
QC Holdings, Inc.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
       
  Year Ended
December 31, 2016
  Year Ended
December 31, 2017
           
Operating activities:      
Net loss $   (16,768 )   $     (3,539 )
Adjustments to reconcile net loss to net cash     51,049         29,394  
Changes in assets and liabilities       (29,110 )         (23,409 )
   Net operating       5,171           2,446  
       
Investing activities:      
Capital expenditures     (3,781 )       (3,345 )
Other       (867 )         3  
   Net investing       (4,648 )         (3,342 )
       
Financing activities:      
Net repayment of borrowings         375  
Other       (83 )         (50 )
   Net financing       (83 )         325  
       
Effect of exchange rate changes on cash and cash equivalents       105           109  
       
Net increase (decrease) in cash and cash equivalents     545         (462 )
Cash and cash equivalents at beginning of year       16,115           16,660  
Cash and cash equivalents at end of year $   16,660     $   16,198  
       

 


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


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