QCCO (MM)

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 EndedDecember 31,												Year EndedDecember 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 EndedDecember 31, 2016				Year EndedDecember 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