QC Holdings DEF 14A 2006
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x Filed by a Party other then the Registrant ¨
Check the appropriate box:
QC HOLDINGS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
April 27, 2006
Dear Fellow Stockholder:
You are invited to attend the annual meeting of stockholders of QC Holdings, Inc. The meeting will be held at 10:00 a.m., local time, on Wednesday, June 7, 2006, at the Doubletree Hotel, 10100 College Boulevard, Overland Park, Kansas 66210. At the annual meeting you will be asked to elect seven members to the companys board of directors. We will also be discussing our results for the past year and answering your questions.
Whether or not you attend the annual meeting, it is important that your shares be represented and voted at the meeting. Please mark, sign and date your proxy card today and return it in the envelope provided. Many of you can also vote by telephone or via the Internet as described on the proxy card.
Thank you for your support of QC Holdings and your involvement in this important process.
Chairman and Chief Executive Officer
QC HOLDINGS, INC.
9401 Indian Creek Parkway, Suite 1500
Overland Park, Kansas 66210
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Wednesday, June 7, 2006
TO THE STOCKHOLDERS OF QC HOLDINGS, INC.
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of QC Holdings, Inc. will be held at the Doubletree Hotel, 10100 College Boulevard, Overland Park, Kansas 66210 at 10:00 a.m., local time, on Wednesday, June 7, 2006, for the following purposes:
These items of business are more fully described in the proxy statement accompanying this notice.
Only stockholders of record at the close of business on April 18, 2006, are entitled to notice of and to vote at the meeting or any adjournment or postponement thereof. On April 18, 2006, the record date for the annual meeting, there were 20,378,925 shares of common stock outstanding. Each outstanding share is entitled to one vote.
The board of directors of the company encourages you to mark, sign and date your proxy card and return it today in the enclosed postage prepaid envelope, or vote by telephone or via the Internet (as described on the proxy card), whether or not you intend to be present at the annual meeting.
By Order of the Board of Directors
Mary Lou Andersen
Overland Park, Kansas
April 27, 2006
QC HOLDINGS, INC.
9401 Indian Creek Parkway, Suite 1500
Overland Park, Kansas 66210
ANNUAL MEETING OF STOCKHOLDERS
Wednesday, June 7, 2006
SOLICITATION AND REVOCABILITY OF PROXIES
This proxy statement and the enclosed proxy card are furnished to the stockholders of QC Holdings, Inc., a Kansas corporation, in connection with the solicitation of proxies by the company for use at the companys annual meeting of stockholders, and any adjournments or postponements thereof, to be held at the Doubletree Hotel, 10100 College Boulevard, Overland Park, Kansas at 10:00 a.m., local time, on Wednesday, June 7, 2006. The mailing of this proxy statement, the proxy card, the notice of annual meeting and the accompanying 2005 annual report to stockholders is expected to begin on April 27, 2006. All costs of solicitation will be borne by the company.
You are requested to vote your shares by following the instructions on the proxy card for voting by telephone or via the Internet or by completing, signing, dating and returning the proxy promptly in the enclosed postage prepaid envelope. Your proxy may be revoked by written notice of revocation delivered to the secretary of the company, by executing and delivering a later dated proxy or by voting in person at the annual meeting. Attendance at the annual meeting will not constitute a revocation of your proxy unless you vote in person at the annual meeting or deliver an executed and later dated proxy. Proxies duly executed and received in time for the annual meeting will be voted in accordance with the stockholders instructions. If no instructions are given, proxies will be voted as follows:
OUTSTANDING VOTING SECURITIES OF THE COMPANY
Only the record holders of shares of common stock as of the close of business on April 18, 2006, are entitled to vote on the matters to be presented at the annual meeting, either in person or by proxy. At the close of business on April 18, 2006, there were outstanding and entitled to vote a total of 20,378,925 shares of common stock, constituting all the outstanding voting securities of the company.
The presence at the annual meeting, in person or by proxy, of the holders of at least a majority of the shares of common stock as of the record date is necessary to constitute a quorum. Abstentions and broker non-votes are counted for purposes of determining the presence of a quorum at the annual meeting. Each share of common stock is entitled to one vote for each director to be elected and for each other matter properly brought to a vote of the stockholders at the annual meeting. A plurality of the votes cast at the annual meeting is required to elect the directors.
ELECTION OF DIRECTORS
At the annual meeting, the stockholders will elect seven directors to hold office for one year terms until the companys 2007 annual meeting of stockholders and until their successors are duly elected and qualified. It is intended that the names of the nominees listed below will be placed in nomination at the annual meeting to serve as directors and that the persons named in the proxy will vote for their election. All nominees listed below are currently members of the board of directors. Mr. Richardson was elected to the board effective April 18, 2006, expanding the companys board to seven directors. Each nominee has consented to being named in this proxy statement and to serve if elected. If any nominee becomes unavailable to serve as a director for any reason, the shares represented by the proxies will be voted for the person, if any, designated by the board of directors. The board of directors has no reason to believe that any nominee will be unavailable to serve.
The nominees for director of the company, as well as certain information about them, are as follows:
Don Early has served as chairman of the board of directors and chief executive officer of the company since May 2004. Mr. Early founded the company in 1984 and has served as a director since then. He served as president and chief executive officer from 1984 until May 2004. Mr. Early is married to Ms. Andersen. Mr. Early holds a degree in business administration from the University of Missouri.
Mary Lou Andersen has served as vice chairman of the board of directors since May 2004. She has been employed by the company in a variety of executive positions since 1988, including vice president and chief operating officer until May 2004. Ms. Andersen became a director of the company in 1997. Ms. Andersen is married to Mr. Early and is the mother of Darrin Andersen, the president and chief operating officer of the company.
Richard B. Chalker joined the companys board of directors in July 2004 immediately following the companys initial public offering. Mr. Chalker currently serves as a director of PBI/Gordon Corporation, an employee-owned manufacturer of pesticides and professional turf and agricultural products, and Decorize, Inc., a manufacturer of home furnishings and accessories listed on the American Stock Exchange. Mr. Chalker retired in 2004 as Division Vice President, Tax and Customs, of Hallmark Cards after eight years of service. Mr. Chalker also spent 32 years at Ernst & Young LLP, including 19 years as a partner specializing in taxation. He holds a degree in industrial administration from Yale University and a law degree from DePaul University.
Gerald F. Lamberti joined the companys board of directors in July 2004 immediately following the companys initial public offering. Mr. Lamberti retired from the Federal Deposit Insurance Corporation (FDIC) in 1998, where he was an attorney for over 25 years, including the last 13 years as Regional Counsel, Kansas City Region, FDIC. Prior to joining the FDIC, Mr. Lamberti was Deputy General Counsel of the United States Catholic Conference in Washington, D.C. He holds a degree in accounting from St. Johns University School of Commerce and a law degree from St. Johns University Law School. Mr. Lamberti served three years in the U.S. Air Force in the Korean War, in which he received the Distinguished Flying Cross.
Francis P. Lemery joined the companys board of directors in July 2004 immediately following the companys initial public offering. Mr. Lemery retired in 1999 as Senior Vice President and Actuary of Kansas City Life Insurance Company, a Nasdaq Capital Market company. He served on the board of directors of Kansas City Life from 1985 to 1999. Mr. Lemery has been a Fellow of the Society of Actuaries since 1968, and a member of the American Academy of Actuaries since 1969. He holds a degree in business administration and a masters degree in actuarial science from the University of Michigan.
Mary V. Powell joined the companys board of directors in July 2004 immediately following the companys initial public offering. Ms. Powell has been a partner in Johnson-Powell Accounting Services for more than 25 years, where she provides accounting, auditing and tax preparation services primarily to privately-owned businesses. Ms. Powell has been engaged in providing accounting, auditing and tax preparation services to individuals and private businesses since 1968.
Kevin A. Richardson II joined the companys board of directors effective April 18, 2006. Mr. Richardson is a founding member of the investment firms Prides Capital LLC and Prides Capital Partners, LLC. Mr. Richardson is a managing member of the sole general partner of Prides Capital Fund I, LP, which, as of April 18, 2006, owned approximately 12% of the issued and outstanding common stock of the company. Prior to forming Prides Capital in January 2004, Mr. Richardson was a partner for nearly five years at Blum Capital Partners and served as an investment management professional for 12 years prior to that. Mr. Richardson has a B.S. from Babson College and an M.B.A. from Kenan-Flagler Business School at the University of North Carolina. Mr. Richardson is also a member of the board of directors of HealthTronics, Inc., a Nasdaq National Market company.
The Board of Directors recommends a vote FOR
the election of the nominees for director named above.
OTHER BOARD INFORMATION
Board and Committee Meetings
During 2005, the board of directors met six times. The board of directors has established an executive committee, an audit committee and a compensation committee. The independent members of the board of directors oversee the companys procedures regarding nominations and corporate governance. In 2005, each director attended more than 75% of the meetings of the board of directors and of the board committees on which he or she served. All of the directors attended the 2005 annual meeting of stockholders, other than Mr. Lamberti, and the company anticipates that all directors will attend the 2006 annual meeting of stockholders, other than Mr. Richardson, who will be attending the stockholders meeting of another company on whose board he serves.
The following table provides membership and meeting information for each of the board committees:
In 2005, each non-employee director received $25,000 for his or her service to the company. It is the current policy of the board of directors to grant each non-employee director an option to purchase 7,500 shares of common stock upon joining the board, and 10,000 shares of common stock on an annual basis in consideration of his or her continued service on the board. In accordance with this policy, on April 18, 2006, Mr. Richardson received an option to purchase 7,500 shares of common stock at $14.03 per share, the closing price for common stock on the Nasdaq National Market on that date, and on January 3, 2006, each of the other non-employee directors received an option to purchase 10,000 shares of common stock at $11.68 per share, the closing price for the common stock on the Nasdaq National Market on that date. All options granted to the non-employee directors were fully vested on the date of grant.
The companys non-employee directors currently receive the following fees for board and committee participation:
Following the companys initial public offering in July 2004, the company ceased compensating its employee directors for their service on the board other than reimbursement provided to all directors for reasonable out-of-pocket expenses incurred in attending board and committee meetings.
The following is a description of each committee of the board of directors. The board has determined that all of the members of the audit committee and the compensation committee, and each of the members of the executive committee, other than Mr. Early, are independent directors as defined in Nasdaq Rule 4200(a)(15), and that each of those directors was independent throughout 2005.
The executive committee was formed in December 2004 to act on behalf of the board of directors between the regularly scheduled and special meetings of the full board. The executive committee has the power and authority to act on all matters that can be brought before the full board of directors other than certain actions that are reserved to the board in the companys bylaws.
The audit committee of the board of directors is responsible for overseeing managements financial reporting practices and internal controls. The audit committee acts under a written charter that was adopted by the board of directors on June 15, 2004. A copy of the audit committees charter can be found on the companys corporate website, www.qcholdings.com, by selecting Corporate Governance under the heading Investor Relations. The board of directors has determined that each member of the audit committee is an audit committee financial expert as defined by the rules of the Securities and Exchange Commission (SEC). The audit committee was established in accordance with all applicable rules of the SEC.
Audit and Other Service Fees
Grant Thornton LLP has audited the financial statements of the company for 2005 and 2004, and the audit committee has reappointed Grant Thornton LLP as independent registered public accounting firm for 2006. A representative of Grant Thornton LLP will be present at the annual meeting with the opportunity to make a statement if he or she desires and will be available to respond to questions.
The following table sets forth the aggregate fees billed to the company for fiscal years ended December 31, 2005, and 2004 by the companys principal accounting firm, Grant Thornton LLP:
The audit committee has considered whether the provision of non-audit services is compatible with maintaining Grant Thorntons independence. Additionally, the audit committee approved all non-audit and tax services performed by Grant Thornton LLP in 2005 in accordance with the pre-approval policy of the audit committee described below.
In August 2004, the audit committee adopted a pre-approval policy under which audit, non-audit and tax services to be rendered by the companys independent public accountants are pre-approved by the audit committee. Pursuant to this policy, the audit committee pre-approves audit, non-audit and tax services to be provided by the independent registered public accounting firm, at specified dollar levels, which dollar levels are reviewed by the committee periodically, and no less often than annually. Any proposed services exceeding the pre-approved fee level or budgeted amount requires specific pre-approval by the audit committee. Additionally, the audit committee may provide explicit prior approval of specific engagements not within the scope of a previous pre-approval resolution. The pre-approval policy also specifies certain services (consistent with the SEC rules and regulations) that may not be provided by the companys independent registered public accounting firm in any circumstance.
The fee for attestation work provided by Grant Thorton in 2005 in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, which amount is included in audit fees, exceeded the pre-approval limits adopted by the audit committee. The audit committee subsequently approved the increased audit fee.
Audit Committee Report
In connection with the consolidated financial statements for the fiscal year ended December 31, 2005, the audit committee has:
Based on these actions, the audit committee recommended to the board of directors that the companys audited financial statements be included in its annual report on Form 10-K for the year ended December 31, 2005, for filing with the SEC.
Richard B. Chalker, Chairman
Francis P. Lemery
Mary V. Powell
Audit Committee of the Board of Directors
The compensation committee is responsible for overseeing and evaluating the compensation of the executive officers, including the chief executive officer, of the company and its subsidiaries, and their performance relative to compensation, in order to assure that they are compensated in a manner consistent with the stated compensation strategy of the company, internal equity considerations, competitive practices and the requirements of applicable regulatory bodies. In addition, the committee evaluates and makes recommendations regarding the compensation of non-employee directors, including their compensation for service on board committees and the terms of any stock compensation awards.
The compensation committee periodically evaluates the companys annual and long-term incentive plans, equity-related plans and certain employee benefit programs. The compensation committee administers the companys 2004 equity incentive plan. Under the plan, the compensation committee may award stock options, stock appreciation rights, restricted stock awards, performance share awards, cash bonuses or other incentive awards permitted by the plan. Historically, the committee has granted only stock option awards under the 2004 plan, and has determined (i) the times when options will be granted, (ii) the number of shares of common stock of the company subject to each option granted to the non-employee directors, officers and other employees of the company, and (iii) the option exercise price for each option granted under the plan. In January 2006, the compensation committee awarded shares of restricted stock to certain employees of the company who are not executive officers. The compensation committee exercises all other rights granted to the committee or the board of directors under the companys equity incentive plan. The compensation committees report is found later in this proxy statement under the heading Executive CompensationCompensation Committee Report.
On June 15, 2004, the company adopted procedures regarding nominations and corporate governance. The policy can be found on the companys website, www.qcholdings.com, by selecting Corporate Governance under the heading Investor Relations. Directors of the company meeting the independence standards set forth in Nasdaq Rule 4200(a)(15) are charged with enforcement of the policy.
The independent directors evaluate and select nominees to the board based on their ability to fulfill the duties of care and loyalty to the companys stockholders. To be considered for nomination to the board of directors, an individual should:
The seven nominees for election at the 2006 annual meeting of stockholders were nominated pursuant to these nominating procedures. All nominees are already serving as directors of the company.
Mr. Richardson was elected to the board effective April 18, 2006, expanding the companys board to seven directors. Mr. Richardson is a managing member of the sole general partner of Prides Capital Fund I, LP, which acquired 500,000 additional shares of common stock of the company on April 18, 2006, bringing its ownership position in the company to 2,547,607 shares, or approximately 12% of the issued and outstanding common stock of the company. Mr. Richardson was elected to the board of directors at his request in order to facilitate an investment in the company by Prides in excess of its approximately 10% ownership level held by Prides as of December 31, 2005. Mr. Richardson was nominated for reelection by the independent directors of the board. Mr. Richardson has not presently been appointed to any committees of the board. Although Mr. Richardson is deemed to be a 10% owner of common stock of the company, the company considers Mr. Richardson to be an independent director under the Nasdaq National Market rules.
The board of directors will consider nominees recommended by stockholders for the 2007 annual meeting of stockholders, provided that the name of each nominee is submitted in writing, no later than January 3, 2007, to the corporate secretary or the nominating committee, QC Holdings, Inc., 9401 Indian Creek Parkway, Suite 1500, Overland Park, Kansas 66210. Each submission must include a statement of the qualifications of the nominee, the consent of the nominee evidencing a willingness to serve as a director, if elected, and a commitment by the nominee to meet personally with the board of directors. Additional submission requirements are contained in the companys bylaws, a copy of which may be obtained from the companys secretary at the address shown above.
Other than the submission requirements set forth above, there are no differences in the way the non-employee directors evaluate their own nominees for director and the way they evaluate a nominee recommended by a stockholder.
Officers are elected on an annual basis by the board of directors and serve at the discretion of the board. Certain biographical information about the executive officers of the company follows:
Darrin J. Andersen has served as the companys president and chief operating officer since May 2004. Mr. Andersen joined the company in February 1998 and served as chief financial officer from December 1999 until April 2004. Prior to joining the company, Mr. Andersen worked in the accounting department of Newell Rubbermaid, a manufacturing company listed on the New York Stock Exchange, and in the audit group of Deloitte & Touche. Mr. Andersen is the president of the Community Financial Services Association of America. Mr. Andersen is the son of Mary Lou Andersen. Mr. Andersen holds a degree in accounting from the University of Kansas, and earned a certified public accountant certificate in 1992.
Douglas E. Nickerson joined the company as chief financial officer in April 2004. Prior to joining the company, Mr. Nickerson served for eight years in various management positions with Stilwell Financial Inc., now known as Janus Capital Group, Inc., a New York Stock Exchange provider of diversified financial services. From 2001 to 2003, Mr. Nickerson served as vice presidentcontroller and treasurer of Stilwell, and from 1999 to 2001 served as vice presidentcontroller. Mr. Nickerson holds a degree in accounting from Kansas State University and a law degree from the University of MissouriKansas City. He is a certified public accountant.
Robert L. Albin joined the company as senior vice president in February 2003, after serving as a consultant to the company for approximately six months. Prior to that, Mr. Albin served three years with Western Union North America, a financial services company, as Executive Vice President and Chief Operating Officer. Mr. Albin was formerly president of First Data Payment Services, a division of First Data Corp, a New York Stock Exchange financial services company. Mr. Albin also served as president-domestic retail services for First Data Corp, overseeing the American Express money order and money gram worldwide money wiring services. Mr. Albin holds a degree in history and political science from Missouri Valley College.
R. Michael Peck has served as senior vice president of administration since January 1, 2006. From December 2004 to December 2005, Mr. Peck served as senior vice president, western U.S. and served as regional vice president, western U.S., from January 2000 to December 2004. Prior to joining the company, Mr. Peck spent 24 years with House of Lloyds, a direct marketing consumer products company, as an operations manager and vice president of sales. Mr. Peck holds degrees in biology and administration and a masters degree in education from the University of Missouri.
David M. Kusuda has served as senior vice president of development since January 1, 2006. From December 2004 to December 2005, Mr. Kusuda served as senior vice president, eastern U.S. and served as regional vice president, eastern U.S., from December 2001 to December 2004. Prior to joining the company,
Mr. Kusuda spent seven years with First Data Corp, in its Western Union division as senior vice president, agent network management. Before joining First Data Corp he served for three years as national sales manager of Innovative Services of America. Mr. Kusuda also spent 14 years with Citicorp, where he held various sales and marketing positions. Mr. Kusuda holds a degree in business administration from Regis University.
Michael O. Walrod has been with the company for over 13 years. He has served as vice president of operations, western U.S. since January 1, 2006. Mr. Walrod served as vice president of operations from December 2004 to December 2005. Mr. Walrod began his career working in the companys branch locations and has served in various roles, including positions as regional director, regional manager, director of development and several other field-related roles. Mr. Walrod holds a degree in business administration from the University of Kansas.
Wayne S. Wood has served as vice president of operations, eastern U.S. since January 1, 2006. Prior to then, Mr. Wood served as regional director, eastern U.S. since August 2003. Mr. Wood joined the company in June 2002 as regional manager for the state of Virginia. Prior to joining the company, Mr. Wood spent four years as a division manager with Advance America Cash Advance Centers, a New York Stock Exchange-listed payday loan company, and in various retail management positions, including 15 years as director of operations with a large national video retailer. Mr. Wood holds a degree in administration of justice from Tidewater Community College.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the beneficial ownership of shares of common stock for (i) each director and nominee for election as a director of the company; (ii) each named executive officer, (iii) all directors and executive officers as a group, and (iv) each person known to the company to be the beneficial owner of more than 5% of the outstanding shares. Except as noted below, beneficial ownership for directors and officers is shown as of April 18, 2006, and beneficial ownership for other 5% or greater stockholders is shown as of December 31, 2005. Except as otherwise indicated, each stockholder has sole voting and investment power with respect to the shares beneficially owned.
Section 16(a) Beneficial Ownership Reporting Compliance
The company is required to identify any director, officer or 10% or greater beneficial owner of common stock who failed to file timely a report with the SEC required under Section 16(a) of the Securities Exchange Act of 1934 relating to ownership and changes in ownership of the companys common stock. The required reports consist of initial statements on Form 3, statements of changes on Form 4 and annual statements on Form 5. Based solely upon a review of reports filed under Section 16(a) of the Exchange Act and certain written representations of directors and officers of the company, the company is not aware of any director, officer or 10% or greater beneficial owner of common stock who failed to file on a timely basis any report required by Section 16(a) of the Exchange Act for calendar year 2005.
Summary Compensation Table
The following table sets forth the cash and other compensation paid in 2005, 2004 and 2003 to the companys chief executive officer and the companys four most highly compensated executive officers whose annual total salary and bonus in 2005 exceeded $100,000 (the named executive officers).
The following table sets forth information concerning stock option grants made to the named executive officers in the year ended December 31, 2005. Options were granted to the named executive officers on January 6, 2006, for the year ended December 31, 2005. The options granted to the named executive officers are for 10-year terms and were all granted at an option exercise price equal to the fair market value of the common stock on the date of grant. When granted, the options were scheduled to vest at the rate of 25% per year over four years beginning one year after the date of grant.
On May 9, 2005, the compensation committee approved accelerating the vesting of all then outstanding employee stock options that were subject to periodic vesting as of that date and that had an exercise price that exceeded the market price on May 9, 2005. As a result, all options granted to Ms. Andersen, Mr. Andersen, Mr. Nickerson and Mr. Kusuda prior to May 9, 2005, which options were originally scheduled to vest 25% over four years, became fully vested at the close of business on May 9, 2005.
Option Grants in the Year Ended December 31, 2005 (1)
The following table sets forth information concerning stock options exercised by the named executive officers during the year ended December 31, 2005, and the number of shares and the value of the options outstanding as of December 31, 2005, for each named executive officer. All information set forth below relates to the grant of stock options under the QC Holdings, Inc. 1999 Stock Option Plan or the 2004 Equity Incentive Plan.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Compensation Committee Report
The compensation committee of the board of directors was formed on June 15, 2004, and consists of four independent members of the board of directors. The compensation committee is responsible for approving the compensation of the chief executive officer and, in consultation with the chief executive officer, the compensation of the other executive officers of the company, and the non-employee members of the board of directors. See Other Board InformationCompensation Committee above for a further description of the functions of the compensation committee. The compensation committee also administers the companys equity incentive plan, and as such, has approved all stock option grants and restricted stock awards to non-employee directors, officers and all other employees of the company under the plan.
In 2004, the compensation committee reviewed the companys historic compensation practices as part of the transition from private-company compensation practices to more traditional compensation practices of publicly-traded companies. In setting base salary and awarding bonuses and stock option grants, 2004 represented the first step in the process of reviewing and formulating an overall compensation program for senior executives, including the chief executive officer. Base salaries for the chief executive officer, the vice chairman and the president were established immediately prior to the companys initial public offering at levels closer to market, and those base salaries have remained unchanged since July 2004. The compensation committee intends to review base salaries for those executives again at the end of 2006 for calendar year 2007.
In 2005, the compensation committee intended to continue the transition to more traditional compensation practices of publicly-traded companies. That process was more difficult in 2005 than the compensation committee had anticipated because while the financial results of the company in 2005 were disappointing, management achieved certain other key strategic objectives set by the board for 2005. In determining appropriate bonuses and stock option grants for 2005, the compensation committee considered management success in opening 174 de novo stores in 2005, the substantially higher loan loss experience in 2005, only part of which was attributable to de novo stores, and the overall disappointing net income results for the year, due primarily to substantially higher loan loss experience, as well as impact of de novo growth strategy. The compensation committee also considered the compensation levels (base salaries, annual bonuses and equity-based awards) for executive officers at other comparable industry and Kansas City companies.
Bonus and option levels for 2004 were intended to be the first step in a trend for the more senior executives (including the chief executive officer and the vice chairman) to receive higher levels of compensation if financial targets and strategic objectives for the year were attained. The view of the compensation committee is that bonuses should be tied primarily to annual performance, while option grants should provide a longer-term incentive to management. It was difficult, however, to pay higher bonuses in 2005 than were approved in 2004 in light of disappointing net income and earnings per share results for the company in 2005. But, the compensation committee believed that senior management should not be punished by lower bonuses than were awarded in 2004 because losses were, in large part, attributable to managements implementation of the growth strategy in 2005. Accordingly, bonuses and stock option awards for executive officers for 2005 were generally equal to the 2004 levels. The chief executive officer received the same bonus for 2005 as he received for 2004. In 2004, the compensation committee did not grant stock options to the chief executive officer, based in part on discussions with and a recommendation by Mr. Early. In January 2006, the compensation committee awarded Mr. Early 150,000 stock options for 2005 after considering the factors discussed above.
Francis P. Lemery, Chairman
Richard B. Chalker
Gerald F. Lamberti
Mary V. Powell
Compensation Committee of the Board of Directors
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between the companys board of directors or compensation committee and the board of directors or compensation committee of any other company.
The following graph shows the total stockholder return of an investment of $100 in cash for (i) the companys common stock, (ii) the Nasdaq U.S. Index, and (iii) the companys peer group from the date of the companys initial public offering of common stock through the end of the last fiscal year (July 16, 2004 through December 31, 2005). The Nasdaq U.S. Index and the peer group results are calculated by Standard & Poors Institutional Market Services.
The graph assumes that $100.00 was invested in the companys common stock on July 16, 2004, at the price of $14.00 per share, the initial public offering price. The closing sales prices were used for each index on July 16, 2004. All values assume reinvestment of the full amount of any dividends. No cash dividends have been declared on the companys common stock. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.
The companys peer group consists of Ace Cash Express, Inc., Advance America Cash Advance Centers, Inc., Cash America International, Inc., Dollar Financial Corp., EZCorp Inc., and First Cash Financial Services Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 18, 2006, the company entered into a registration rights agreement with Mr. Early and Prides Capital Fund I, LP, a Delaware limited partnership (Prides). Prides, directly or through its affiliated funds, is the holder of 2,547,607 shares of common stock of the company. Mr. Richardson is a managing member of the sole general partner of Prides.
The registration rights agreement provides that, upon written request by Mr. Early, Prides, the estate of Mr. Early, any trust, testamentary or otherwise, that is funded in whole or in part with shares of common stock from Mr. Early or the estate of Mr. Early, or any affiliate of Mr. Early or Prides, or any assignee of Mr. Early or Prides (individually, a holder), who is at the time of the request, individually or as a group, a holder of at least 5% of the outstanding common stock of the company, the company will prepare and file with the SEC, as soon as practicable, a registration statement to enable the reoffer and resale by the requesting holders of the shares of common stock of the company on a delayed or continuous basis under Rule 415 of the Securities Act, and use its best efforts to cause the registration statement to become effective as soon as reasonably practicable after the filing of the registration statement. The company is required to keep the registration statement effective until the holder or holders have completed the distribution described in the registration statement relating thereto, but for no more than 120 days or such lesser period until all the registered securities are sold. The company has granted two demand registration rights under the agreement to each of Mr. Early and Prides.
The registration rights agreement also provides for certain piggyback registration rights, whereby any holder who did not initiate the registration request will have an opportunity to have their shares of common stock registered in conjunction with the initiating holders registration.
The company is obligated to pay customary registration expenses associated with the exercise of demand or piggyback registration rights by either Mr. Early or Prides or their permitted designees, other than underwriting fees and expenses, which will be the responsibility of the selling stockholders. The agreement includes certain other customary provisions for a registration rights agreement, including various obligations of the company to facilitate the filing and effectiveness of the demand registrations.
The company and Mr. Early were parties to a registration rights agreement dated as of June 22, 2004, which granted to the estate of Mr. Early certain registration rights for the common stock of the company held by the estate of Mr. Early and certain other persons. The company and the Mr. Early terminated the 2004 registration rights agreement as of April 18, 2006, without any material early termination penalties incurred by the company. The company continues to maintain $15 million of key man life insurance on Mr. Early, but has no obligation to use any life insurance proceeds to purchase any stock from Mr. Earlys estate.
The compensation committee approves the salary and bonus paid to Mike Waters, the companys vice president of governmental affairs. Mr. Waters is the brother of Mary Lou Andersen and the uncle of Darrin J. Andersen. In 2005, the company paid Mr. Waters salary and bonus totaling in excess of $60,000. On January 6, 2006, the company awarded Mr. Waters 3,500 restricted shares of the companys common stock at $11.92 per share, the closing price for common stock on the Nasdaq National Market on that date.
The company maintains a corporate website, www.qcholdings.com. The following corporate policies of the company and its board of directors are available on the companys website by selecting Corporate Governance under the heading Investor Relations:
The companys Code of Ethics applies to all employees, officers and directors, and specifically the chief executive officer and the chief financial officer of the company.
STOCKHOLDER COMMUNICATIONS WITH DIRECTORS
Stockholders may communicate with the board generally or with a specific director at any time by writing to the companys corporate secretary at 9401 Indian Creek Parkway, Suite 1500, Overland Park, Kansas 66210. The secretary will review all messages received and will forward any message that reasonably appears to be a communication from a stockholder about a matter of stockholder interest that is intended for communication to the board.
Proposals of stockholders intended to be presented at the annual meeting of stockholders to be held in 2007 must be received by the secretary of the company, at QC Holdings, Inc., 9401 Indian Creek Parkway, Suite 1500, Overland Park, Kansas 66210, no later than January 3, 2007, to be eligible for inclusion in the companys proxy statement and proxy related to that meeting. Additionally, if properly requested, a stockholder may submit a proposal for consideration at the 2007 annual meeting of stockholders, but not for inclusion in the companys proxy statement. Under the companys bylaws, for a stockholder to properly request that business be brought before an annual meeting of stockholders, the secretary of the company must receive the request from a stockholder of record entitled to vote at the meeting. Notice of matters proposed to be brought before the 2007 annual meeting of stockholders must be received on or before February 6, 2007. A copy of the companys bylaws, which include additional conditions, may be obtained without charge from the secretary of the company at the address shown above.
The 2005 annual report to stockholders of the company, which includes the companys annual report on Form 10-K, is included with this proxy statement.
The board of directors is not aware of any other matters that will be presented for action at the annual meeting. If other matters properly come before the meeting, it is intended that the holders of the proxies hereby solicited will vote thereon in accordance with their best judgment.
Dated: April 27, 2006
QC HOLDINGS, INC.
ANNUAL MEETING OF STOCKHOLDERS
Wednesday, June 7, 2006
10100 College Boulevard
Overland Park, Kansas 66210
This proxy is solicited by the Board of Directors for use at the Annual Meeting on June 7, 2006.
The undersigned hereby appoints Don Early and Darrin Andersen, and each of them in the order named, proxies with full power of substitution to vote all shares of Common Stock of QC Holdings, Inc. of record in the name of the undersigned at the close of business on April 18, 2006, at the Annual Meeting of Stockholders of QC Holdings, Inc. to be held on June 7, 2006, or at any adjournment or adjournments, hereby revoking all former proxies.
(Continued and to be signed on reverse side)
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MARK, SIGN AND DATE YOUR PROXY CARD AND RETURN IT IN THE POSTAGE-PAID
The Board of Directors Recommends a Vote FOR Item 1.
(PLEASE SEE REVERSE SIDE FOR PROPOSALS TO BE VOTED)
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.