BEAUMONT, Texas, Oct 22, 2010 (BUSINESS WIRE) -- Conn's, Inc. (NASDAQ/NM:CONN), a specialty retailer of consumer electronics, home appliances, furniture, mattresses, computers and lawn and garden products today announced the record date for a possible rights offering, plans for refinancing its existing debt facilities and an update regarding current business trends.
In conjunction with plans to refinance its existing debt facilities, the Board of Directors approved a possible rights offering which would permit the Company to raise equity capital through the sale of common stock without diluting existing shareholders who exercise their rights in full. Shareholders of record as of the close of business on November 1, 2010, would receive one right for every share of common stock held by them as of such date if a rights offering is commenced. While the size of the offering, exercise price of the rights, and other material terms would be determined and announced at a later date, the Company expects the rights would be tradable, thereby allowing existing shareholders that are not interested in exercising their rights to sell their rights in the public market. The Company also expects the rights to carry oversubscription rights, which would allow holders who exercise their rights in full the opportunity to subscribe for additional shares of common stock to the extent rights were not exercised by other holders. Certain affiliates of Stephens Inc. and of The Stephens Group, LLC that own approximately 21.3% and 26.0%, respectively, of the Company's outstanding shares of common stock, have indicated to us that it is their present intention to exercise their basic subscription rights and oversubscription rights in full, subject to their review of the final terms of the possible rights offering to be determined by the Company and announced on the commencement date.
The Company expects the refinancing of its debt facilities will include an expanded asset based loan facility, of up to $375 million, and a new $100 million senior secured term loan, with maturity dates in 2013 and 2014, respectively. The Company's current debt arrangements include an asset based loan facility of $210 million and asset-backed securitization facilities of $320 million. Borrowings under the new facilities will be governed by borrowing base calculations and will have fixed charge coverage and leverage ratio covenants, similar to the existing asset based loan facility, among other covenants. The asset based loan facility will typically bear interest at LIBOR plus a spread ranging from 375 basis points to 400 basis points, based on the leverage ratio. The term loan will bear interest at the greater of 3.0% or LIBOR, plus approximately 1360 basis points, including the amortization of closing fees. The Company expects that the proceeds from these borrowing facilities and the rights offering will be used to repay the outstanding balances under the Company's existing asset-backed securitization program. The possible rights offering would be expected to raise approximately $25 million of equity capital, before offering expenses. Additionally, the Company expects after the completion of the proposed transactions to be better positioned to review its strategic business plan.
The Company continues to face challenging conditions as a result of:
As a result of the conditions described above, the Company has experienced the following sales and credit portfolio performance during the first two months of its third fiscal quarter, ending October 31, 2010:
In response to the challenging conditions, the Company is expanding its use of the third-party rent-to-own financing option and is adjusting its marketing and promotion programs to improve sales results, while closely monitoring its underwriting standards to improve the credit quality of the customer receivables portfolio. Additionally, the Company has continued to focus on cost control by reducing staffing levels to meet current business volumes, reducing its use of non-interest bearing cash option credit programs and is currently considering the closure of one store in the Dallas market, among other opportunities being pursued. As a result of the recent trends and expected increase in cost related to the refinancing activities, the Company will report a loss for its third fiscal quarter ending October 31, 2010, and could report a loss for its fourth fiscal quarter ending January 31, 2011. The Company can provide no assurance about when it will return to profitability.
All of the above amounts are preliminary estimates and are subject to change upon completion of the Company's quarter and upon completion of the Company's quarter end financial statement closing process. Actual results may differ significantly from the preliminary estimates. The Company expects to report its net sales results for the three months ended October 31, 2010, on November 5, 2010.
Conference Call Information
Conn's, Inc. will host a conference call and audio webcast today, October 22, 2010, at 11:30 AM, CDT, to discuss the information presented in this release. The webcast will be available live at www.conns.com. Participants can join the call by dialing 877-754-5302 or 678-894-3020.
The Company has filed a registration statement (including a prospectus) with the SEC (File No. 333-157390) and intends to file a prospectus supplement with respect to its proposed rights offering. Before you invest, you should read the prospectus in the registration statement and, when filed, the prospectus supplement and other documents the Company has filed with the SEC for more complete information about the Company and the rights offering.
When available, you may obtain the foregoing documents, including the prospectus supplement, for free by visiting EDGAR on the SEC web site at www.sec.gov. Alternatively, copies of the prospectus and prospectus supplement for the rights offering may be obtained, when available, from the information agent to be identified in the prospectus supplement. Investors should read the prospectus and prospectus supplement carefully before making any investment decision because these documents will contain important information.
About Conn's, Inc.
The Company is a specialty retailer currently operating 76 retail locations in Texas, Louisiana and Oklahoma: with 23 stores in the Houston area, 20 in the Dallas/Fort Worth Metroplex, nine in San Antonio, five in Austin, five in Southeast Texas, one in Corpus Christi, four in South Texas, six in Louisiana and three in Oklahoma. It sells home appliances, including refrigerators, freezers, washers, dryers, dishwashers and ranges, and a variety of consumer electronics, including LCD, LED, 3-D, plasma and DLP televisions, camcorders, digital cameras, computers and computer accessories, Blu-ray and DVD players, video game equipment, portable audio, MP3 players, GPS devices and home theater products. The Company also sells lawn and garden products, furniture and mattresses, and continues to introduce additional product categories for the home to help respond to its customers' product needs and to increase same store sales. Unlike many of its competitors, the Company provides flexible in-house credit options for its customers. In the last three years, the Company financed, on average, approximately 61% of its retail sales.
This press release contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "could," "estimate," "should," "anticipate," or "believe," or the negative thereof or variations thereon or similar terminology. Although the Company believes that the expectations reflected in such forward-looking statements will prove to be correct, the Company can give no assurance that such expectations will prove to be correct. The actual future performance of the Company could differ materially from such statements. Factors that could cause or contribute to such differences include, but are not limited to:
Further information on these risk factors is included in the Company's filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K/A filed on April 12, 2010 and the Company's quarterly report on Form 10-Q filed on August 26, 2010. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, the Company is not obligated to publicly release any revisions to these forward-looking statements to reflect the events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.
SOURCE: Conn's, Inc.
Conn's, Inc., Beaumont
Chief Financial Officer
Michael J. Poppe, 409-832-1696 Ext. 3294
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