QC Holdings, Inc. Reports Third Quarter Results

QC Holdings, Inc. Reports Third Quarter Results

Board Declares $0.05 Dividend Per Common Share

OVERLAND PARK, Kan., Nov. 9, 2012 (GLOBE NEWSWIRE) -- QC Holdings, Inc.
(Nasdaq:QCCO) reported income from continuing operations of $2.0 million and
revenues of $48.8 million for the quarter ended September 30, 2012. For the
nine months ended September 30, 2012, income from continuing operations
totaled $9.2 million and revenues were $138.3 million. For the three months
and nine months ended September 30, 2011, income from continuing operations
totaled $2.5 million and $8.2 million, respectively, and revenues were $46.9
million and $134.7 million, respectively.

The nine months ended September 30, 2012 include a $739,000 gain resulting
from the cash settlement of an expiring life insurance policy. The nine months
ended September 30, 2011 include a $2.0 million expense resulting from the
settlement of an outstanding legal matter. The three months and nine months
ended September 30, 2012 and 2011 also include discontinued operations
relating to branches that were closed (or scheduled for closure) during each
period. Schedules reconciling adjusted EBITDA to income from continuing
operations for the three months and nine months ended September 30, 2012 and
2011 are provided below.

** Third Quarter **

Revenues increased $1.9 million, or 4.1%, quarter-to-quarter. This improvement
is attributable to the inclusion of fees and interest from the company's
Canadian online lending subsidiary (Direct Credit), which was acquired on
September 30, 2011. The revenue increase from Direct Credit was partially
offset by lower payday loan revenues in the company's US branches compared to
the three months ended September 30, 2011.

The bulk of the decline in US-based payday revenues is due to lower volume in
the state of Missouri compared to prior year, which the company believes was
attributable to customer uncertainty regarding the ongoing availability of the
payday product given the failed effort by industry opponents to eliminate the
product through a ballot referendum.

Branch operating costs, exclusive of loan losses, increased $2.1 million to
$22.9 million during the three months ended September 30, 2012 compared to
prior year's $20.8 million. Higher current year costs were largely a result of
the inclusion of Direct Credit, as well as an increase in collection-related
banking costs.

Loan losses increased $1.9 million during the three months ended September 30,
2012, totaling $13.0 million versus $11.1 million in prior year's quarter. The
loss ratio was 26.7% in third quarter 2012 versus 23.6% in third quarter 2011.
The higher loss ratio is primarily attributable to a lower collection rate in
the current quarter versus prior year.

QC's branch gross profit in third quarter 2012 was $12.8 million, down $2.2
million from $15.0 million in third quarter 2011. This decline is attributable
to reduced margins in the company's US branches, partially offset by the
addition of Direct Credit.

Regional and corporate expenses totaled $8.5 million during the three months
ended September 30, 2012 compared to $9.5 million in third quarter 2011.
Reduced overall regional and corporate expenses were largely attributable to
lower legal and other professional expenses quarter-to-quarter.

The company's effective tax rate was 40.8% for third quarter 2012 compared to
39.9% in third quarter 2011. The higher rate reflects the effect of current
year permanent tax items on reduced pretax earnings.

"Earnings declined during third quarter due to higher losses in the majority
of our states," noted QC President and Chief Executive Officer Darrin
Andersen. "Fortunately, our field personnel have managed through challenging
loss environments over the years and are well-equipped to improve collection
rates and reduce the number of returned items.

"We continue to see nice growth in our longer-term installment loan products,"
noted Andersen. "As we gain more experience with these products, we will begin
to actively market them, which provides an exciting growth opportunity for
QC."

** Nine Months Ended September 30 **

The company's revenues increased 2.7% to $138.3 million during the nine months
ended September 30, 2012 versus $134.7 million in 2011. This increase is
attributable to the addition of Direct Credit ($6.1 million through September
30, 2012), partially offset by reduced payday loan volumes period-to-period.
The decline in payday revenues is attributable to lower demand in Missouri as
noted in the quarterly discussion above, as well as to customer usage
restrictions resulting from changes in the payday law in Illinois that became
effective in March 2011.

Branch operating costs, exclusive of loan losses, totaled $67.0 million during
the nine months ended September 30, 2012, $4.2 million higher than the prior
year period. This increase reflects the inclusion of Direct Credit, higher
healthcare-related and bank collection costs, and typical annual rent
increases.

During the nine months ended September 30, 2012, the company reported loan
losses of $29.0 million compared to $25.8 million during the nine months ended
September 30, 2011. The company's loss ratio was 20.9% through September 2012
versus 19.1% in the same 2011 period. The higher ratio period-to-period
reflects losses at Direct Credit and a lower collection rate of returned
items.

Branch gross profit decreased to $42.3 million for the nine months ended
September 30, 2012 from $46.1 million during the nine months ended September
30, 2011.

Regional and corporate expenses decreased $4.1 million during 2012 (totaling
$24.8 million versus $28.9 million during the same 2011 period). The nine
months ended September 30, 2012 include a $739,000 gain resulting from the
cash settlement of an expiring life insurance policy. The nine months ended
September 30, 2011 include a $2.0 million expense resulting from the
settlement of an outstanding legal matter. The remainder of the improvement
period-to-period is primarily attributable to lower legal and other
professional expenses.

Net interest expense increased approximately $1.2 million during the nine
months ended September 30, 2012 compared to the prior year as a result of
higher average blended rates and debt balances, as well as amortization of
debt issue costs.

The company reported $1.4 million of other income for the nine months ended
September 30, 2012 compared to other expense of $482,000 in prior year. This
change is largely due to the reversal of the liability that was recorded to
estimate the fair value of the contingent supplemental earn-out payment in
connection with the Company's acquisition of Direct Credit in September 2011.
Pursuant to generally accepted accounting principles, any changes to the fair
value of the contingent consideration liability are recorded through the
income statement.

The company's effective tax rate was 37.9% through September 30, 2012 compared
to 39.7% in 2011. The reduced rate is due to the favorable tax treatment
associated with the gain realized in connection with the cash settlement of
the expiring life insurance.

-DIVIDEND DECLARATION-

QC's Board of Directors declared a regular quarterly dividend of $0.05 per
common share, payable December 6, 2012 to stockholders of record as of
November 22, 2012.

-BUSINESS OUTLOOK-

"As the broader economy continues to languish, we are fortunate that our
well-tenured field management group has experienced the volatility that comes
with various business cycles," commented QC Chairman Don Early. "This
experience is key to maintaining our focus on providing superb customer
service when originating, managing and collecting an increasingly diverse
group of loan products.

"We were pleased with the Missouri Secretary of State's decision to invalidate
the efforts of industry opponents as they attempted to eliminate the
short-term consumer lending product in Missouri. The decision helps to
preserve a customer's right to access competitive credit alternatives that
provide solutions for immediate financial needs.

"We believe there is significant potential in the consumer financial services
credit industry. We are energized about our business and growth opportunities,
and believe we are positioned to deliver long-term value to our shareholders."

About QC Holdings, Inc.

Headquartered in Overland Park, Kansas, QC Holdings, Inc. is a leading
provider of short-term loans in the United States and Canada. In the United
States, QC offers various products, including payday, installment and title
loans, check cashing, debit cards and money transfer services, through 466
branches in 23 states at September 30, 2012. In Canada, the company, through
its subsidiary Direct Credit Holdings Inc., is engaged in short-term, consumer
Internet lending in various provinces. In addition, the company operates five
buy here, pay here automotive dealerships in the Kansas City metropolitan
area. During fiscal 2011, the company advanced nearly $1.0 billion to
customers and reported total revenues of $187.5 million.

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 payday lending practices, including
particularly changes in Washington, South Carolina, Virginia, Illinois and
Arizona, (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 future regulations proposed
or adopted by the Bureau of Consumer Financial Protection, which is created by
that Act, (3) ballot referendum initiatives by industry opponents to cap the
rates and fees that can be charged to customers, (4) litigation or regulatory
action directed towards us or the payday loan industry, (5) volatility in our
earnings, primarily as a result of fluctuations in loan loss experience and
closures of branches, (6) risks associated with the leverage of the company,
(7) negative media reports and public perception of the payday loan industry
and the impact on federal and state legislatures and federal and state
regulators, (8) changes in our key management personnel, (9) integration risks
and costs associated with acquisitions, including our recent Canadian
acquisition, (10) risks associated with owning and managing non-U.S.
businesses and (11) the other risks detailed under Item 1A. "Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2011 filed with
the Securities and Exchange Commission. QC will not update any forward-looking
statements made in this press release to reflect future events or
developments.

                (Financial and Statistical Information Follow)

QC Holdings, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
                                                                  
                                         Three Months Ended Nine Months Ended
                                          September 30,      September 30,
                                         2011      2012     2011     2012
Revenues                                                           
Payday loan fees                          $ 31,415  $ 32,151 $ 88,465 $ 91,929
Automotive sales, interest and fees       5,646     6,069    18,231   18,229
Installment interest and fees             4,834     6,152    13,499   15,500
Other                                     4,987     4,396    14,477   12,663
Total revenues                            46,882    48,768   134,672  138,321
Branch expenses                                                    
Salaries and benefits                     9,465     10,316   28,035   30,521
Provision for losses                      11,065    13,005   25,765   28,968
Occupancy                                 5,100     5,242    14,753   15,340
Cost of sales - automotive                2,884     2,983    9,622    8,921
Depreciation and amortization             625       566      1,946    1,744
Other                                     2,754     3,813    8,459    10,522
Total branch expenses                     31,893    35,925   88,580   96,016
Branch gross profit                       14,989    12,843   46,092   42,305
                                                                  
Regional expenses                         3,131     3,156    9,899    9,388
Corporate expenses                        6,333     5,376    18,977   15,388
Depreciation and amortization             466       452      1,641    1,483
Interest expense                          470       801      1,530    2,717
Other expense (income), net               461       (254)    482      (1,428)
Income from continuing operations before  4,128     3,312    13,563   14,757
income taxes
Provision for income taxes                1,647     1,352    5,389    5,586
Income from continuing operations         2,481     1,960    8,174    9,171
Loss from discontinued operations, net of 699       303      1,075    857
income tax
Net income                                $ 1,782   $ 1,657  $ 7,099  $ 8,314
                                                                  
Earnings (loss) per share:                                         
Basic                                                              
Continuing operations                    $ 0.14    $ 0.11   $ 0.46   $ 0.52
Discontinued operations                  (0.04)    (0.02)   (0.06)   (0.05)
Net income                               $ 0.10    $ 0.09   $ 0.40   $ 0.47
                                                                  
Diluted                                                            
Continuing operations                    $ 0.14    $ 0.11   $ 0.46   $ 0.52
Discontinued operations                  (0.04)    (0.02)   (0.06)   (0.05)
Net income                               $ 0.10    $ 0.09   $ 0.40   $ 0.47
Weighted average number of common shares                           
outstanding:
Basic                                     17,014    17,170   17,036   17,165
Diluted                                   17,135    17,271   17,111   17,203

                           Non-GAAP Reconciliations
                               Adjusted EBITDA
                                (in thousands)
                                 (Unaudited)

QC reports adjusted EBITDA (income from continuing operations before interest,
taxes, depreciation, amortization, charges related to stock options and
restricted stock awards, and non-cash gains or losses associated with property
disposition) as a financial performance measure that is not defined by U.S.
generally accepted accounting principles ("GAAP"). QC believes that adjusted
EBITDA is a useful performance metric for our investors and is a measure of
operating and financial performance that is commonly reported and widely used
by financial and industry analysts, investors and other interested parties
because it eliminates significant non-cash charges to earnings. The nine
months ended September 30, 2012 include an additional adjustment to EBITDA for
the cash settlement of an expiring life insurance policy. The nine months
ended September 30, 2011 include an additional adjustment to EBITDA for the
expense associated with the settlement of the Missouri arbitration
proceedings. It is important to note that non-GAAP measures, such as adjusted
EBITDA, should not be considered as alternative indicators of financial
performance compared to net income or other financial statement data presented
in the company's consolidated financial statements prepared pursuant to GAAP.
Non-GAAP measures should be evaluated in conjunction with, and are not a
substitute for, GAAP financial measures. The following table provides a
reconciliation of income from continuing operations to adjusted EBITDA:

                             Three Months Ended        Nine Months Ended
                              September 30,            September 30,
                             2011         2012         2011        2012
                                                                
Income from continuing        $ 2,481      $ 1,960      $ 8,174     $ 9,171
operations
Provision for income taxes    1,647        1,352        5,389       5,586
Depreciation and amortization 1,091        1,018        3,587       3,227
Interest expense              470          801          1,530       2,717
Non-cash (gains) losses       461          (254)        482         (1,428)
Stock option and restricted   501          386          1,675       1,369
stock expense
Gain on settlement of
expiring life insurance                                          (739)
policy (a)
Accrued costs for settlement  --           --           2,000       --
of legal matter (b)
Adjusted EBITDA               $ 6,651      $ 5,263      $ 22,837    $ 19,903
                                                                
(a) For the nine months ended September 30, 2012, adjusted EBITDA excludes
the gain on the cash settlement of an expiring life insurance policy.
(b) For the nine months ended September 30, 2011, adjusted EBITDA excludes
the expense recorded in connection with the settlement of an outstanding legal
matter.


QC Holdings, Inc.
Consolidated Balance Sheets
(in thousands)
                                                               
                                                   December 31, September 30,
                                                    2011         2012
ASSETS                                                          (Unaudited)
Current assets                                                  
Cash and cash equivalents                           $ 17,738     $ 15,952
Restricted cash                                     2,175        1,075
Loans receivable, less allowance for losses of
$6,008 at December 31, 2011 and $6,079 at September 67,357       65,537
30, 2012
Prepaid expenses and other current assets           12,854       10,536
Total current assets                                100,124      93,100
Non-current loans receivable, less allowance for
losses of $2,100 at December 31, 2011 and $2,533 at 6,939        8,388
September 30, 2012
Property and equipment, net                         11,761       11,442
Goodwill                                            23,958       24,262
Intangible assets, net                              5,535        4,512
Other assets, net                                   4,912        5,336
Total assets                                        $ 153,229    $ 147,040
                                                               
LIABILITIES AND STOCKHOLDERS' EQUITY                            
Current liabilities                                             
Accounts payable                                    $ 224        $ 768
Accrued expenses and other liabilities              14,087       9,808
Deferred revenue                                    4,953        4,074
Revolving credit facility                           14,500       22,900
Current portion of long-term debt                   20,490       14,772
Total current liabilities                           54,254       52,322
                                                               
Non-current liabilities                             5,519        5,819
                                                               
Long-term debt                                      14,224       3,122
Total liabilities                                   73,997       61,263
                                                               
Commitments and contingencies                                   
Stockholders' equity                                79,232       85,777
Total liabilities and stockholders' equity          $ 153,229    $ 147,040


QC Holdings, Inc.
Selected Statistical and Operating Data
(in thousands, except Branch Data, Average Loan, Average Term and
Average Fee)
                                                         
                              Three Months Ended Nine Months Ended
                               September 30,       September 30,
                              2011      2012      2011      2012
                              Unaudited           Unaudited
Short-term Lending Branch                                 
Data:
Number of branches, beginning  499       466       523       482
of period
De novo branches opened                 2         2         6
Branches closed                (15)      (2)       (41)      (22)
Number of branches, end of     484       466       484       466
period
                                                                         
Short-term Lending Branch                                 
Data:
Branch revenue                 $ 41,113  $ 40,147  $ 115,623 $ 113,179
Percentage change                      (2.4%)             (2.1%)
Branch net revenues           $ 31,324  $ 29,145  $ 93,125  $ 89,427
Percentage change                       (7.0%)             (4.0%)
                                                                         
Operating Data – Short-term                               
Loans:
Loan volume                    $ 219,591 $ 218,752 $ 602,526 $ 625,853
Average loan (principal plus   376.35    383.87    375.94    382.85
fee)
Average fee                    56.71     57.49     56.85     57.58
                                                                         
Operating Data – Installment                              
Loans:
Loan volume                    $ 8,036   $ 12,689  $ 23,327  $ 31,546
Average loan (principal)       512.60    628.32    512.50    588.56
Average term (days)            182       203       206       192
                                                                         
Operating Data – Automotive                               
Loans:
Loan volume                    $ 4,395   $ 4,379   $ 14,260  $ 13,813
Average loan (principal)       10,057    10,501    9,889     10,293
Average term (months)          33        32        34        33
Locations, end of period       5         5         5         5


QC Holdings, Inc.
Selected Statistical and Operating Data
(in thousands)
                                                                  
                                         Three Months Ended Nine Months Ended
                                          September 30,      September 30,
                                         2011      2012     2011     2012
                                         Unaudited          Unaudited
Other Revenues:                                                    
Credit services fees                      1,982     1,811    5,481    5,166
Check cashing fees                        900       798      3,105    2,669
Title loan fees                           1,490     764      4,018    2,133
Other                                    615       1,023    1,873    2,695
Total                                     $ 4,987   $ 4,396  $ 14,477 $ 12,663
                                                                  
Loss Data:                                                         
Provision for losses, continuing                                   
operations:
Charged-off to expense                    $ 19,409  $ 19,460 $ 50,274 $ 51,313
Recoveries                                (8,047)   (7,625)  (24,299) (23,279)
Adjustment to provision for losses based  (297)     1,170    (210)    934
on evaluation of outstanding receivables
Total provision for losses                $ 11,065  $ 13,005 $ 25,765 $ 28,968
                                                                  
Provision for losses as a percentage of   23.6%     26.7%    19.1%    20.9%
revenues
Provision for losses as a percentage of   4.3%      5.1%     3.7%     4.0%
loan volume (all products)

CONTACT: Investor Relations Contact:
         Douglas E. Nickerson (913-234-5154)
         Chief Financial Officer
        
         Media Contact:
         Tom Linafelt (913-234-5237)
         Director - Corporate Communications
 
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