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Jun 4, 2008

Conn's, Inc. Reports Earnings for the Quarter Ended April 30, 2008

BEAUMONT, Texas, Jun 04, 2008 (BUSINESS WIRE) -- Conn's, Inc. (NASDAQ/NM:CONN), a specialty retailer of home appliances, consumer electronics, computers, lawn and garden products, furniture and mattresses, today announced earnings results for the quarter ended April 30, 2008.

Total revenues for the quarter ended April 30, 2008, increased 6.5% to $218.6 million compared with $205.3 million for the quarter ended April 30, 2007. This increase in revenues included increases in net sales of $13.7 million, or 7.6%, and a decrease in "Finance charges and other" of $0.4 million, or 1.9%. The Company recorded a non-cash reduction in the fair value of its "Interests in securitized assets" that negatively impacted "Finance charges and other" by $3.1 million during the quarter ended April 30, 2008, as compared to a non-cash increase of $0.1 million in the prior year period. Same store sales (revenues earned in stores operated for the entirety of both periods) increased 1.0% for the first quarter of fiscal 2009. Net income for the first fiscal quarter was $10.6 million, after a non-cash charge, net of tax, of $2.0 million to reduce the fair value of the Company's "Interests in securitized assets," compared with net income of $12.9 million for the first quarter of last year, which included a non-cash fair value increase, net of tax, of $0.1 million. Earnings for the first quarter of the prior year also benefited from $0.8 million of gains, before tax, recognized on the sales of two properties. Diluted earnings per share, net of a $0.09 per diluted share reduction as a result of the non-cash fair value charge, decreased 13.0% to $0.47, compared with $0.54 for the first quarter of last year.

The credit portfolio delinquencies declined during the first quarter, and the annualized net charge-off rate was 3.2% for the three months ended April 30, 2008, consistent with the Company's previously announced expectations. More information on the credit portfolio and its performance may be found in the table included with this press release and in the Company's filing with the Securities and Exchange Commission on Form 10-Q which will be filed later today.

"We are off to a solid start this year with improved execution in many areas of our company," said Thomas J. Frank, Sr., the Company's Chairman and CEO. "I am very pleased by the results of our cost control initiatives, improving credit portfolio performance and sales growth in a very challenging economic environment."

The non-cash fair value charge recorded during the three months ended April 30, 2008, was driven primarily by an increase in the discount rate risk premium assumption included in the Company's estimate of the fair value of its "Interests in securitized assets." The change in the discount rate risk premium was increased principally due to external market conditions, and was not a result of changes in the underlying economics or expected cash flows of the securitization program. More information on these changes may be found in the notes to the financial statements in the Company's filing with the Securities and Exchange Commission on Form 10-Q which will be filed later today.

The Company now has 71 stores in operation, after opening one new store in the Dallas/Fort Worth market and one in Lufkin, Texas, in May 2008. The Company also opened two replacement stores during the quarter, and has six additional stores under development, including one replacement store, that it expects to open by January 31, 2009, giving it a total of seven new stores and three replacement stores in the current fiscal year.

EPS Guidance

Today, the Company revised its guidance for its fiscal year 2009 (the year ending January 31, 2009) to earnings per diluted share in a range of $1.76 to $1.86, after adjusting for the $0.09 non-cash fair value charge recorded during the three months ended April 30, 2008, and excluding the impact of potential fair value adjustments during the remainder of the fiscal year.

Conference Call Information

Conn's, Inc. will host a conference call and audio webcast today, June 4, 2008, at 10:00 AM, CDT, to discuss financial results for the quarter ended April 30, 2008. The webcast will be available live at www.conns.com and will be archived for one year. Participants can join the call by dialing 877-675-4757 or 719-325-4859.

About Conn's, Inc.

The Company is a specialty retailer currently operating 71 retail locations in Texas, Louisiana and Oklahoma: 22 stores in the Houston area, 18 in the Dallas/Fort Worth Metroplex, 10 in San Antonio, five in Austin, five in Southeast Texas, one in Corpus Christi, three in South Texas, six in Louisiana and one in Oklahoma City. It sells home appliances, including refrigerators, freezers, washers, dryers, dishwashers and ranges, and a variety of consumer electronics, including LCD, plasma and DLP televisions, camcorders, digital cameras, computers and computer accessories, 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 has financed, on average, approximately 59% of retail sales. Customer receivables are financed substantially through an asset-backed securitization facility, from which the Company derives servicing fee income and interest income. The Company transfers receivables, consisting of retail installment contracts and revolving accounts extended to its customers, to a qualifying special purpose entity (QSPE) in exchange for cash and subordinated securities. The QSPE funds its purchases of the receivables through the issuance of medium-term and variable funding notes issued to third parties and secured by the receivables, and subordinated securities issued to the Company.

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: the Company's growth strategy and plans regarding opening new stores and entering new markets; the Company's intention to update, relocate or expand existing stores; the Company's estimated capital expenditures and costs related to the opening of new stores or the update, relocation or expansion of existing stores; the Company's ability to introduce additional product categories; the Company's cash flow from operations, borrowings from its revolving line of credit and proceeds from securitizations to fund operations, debt repayment and expansion; the ability of the QSPE to obtain additional funding for the purpose of purchasing the Company's receivables, including limitations on the ability of the QSPE to obtain financing through its commercial paper-based funding sources and its ability to maintain its current credit rating; growth trends and projected sales in the home appliance and consumer electronics industry and the Company's ability to capitalize on such growth; relationships with the Company's key suppliers; the results of the Company's litigation; interest rates; weather conditions in the Company's markets; delinquency and loss trends in the receivables portfolio; changes in the assumptions used in the calculation of the fair value of its interests in securitized assets; changes in the Company's stock price; and the actual number of shares of common stock outstanding. 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 filed on March 27, 2008. 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.

                             Conn's, Inc.
           CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
                             (unaudited)
              (in thousands, except earnings per share)

                                                   Three Months Ended
                                                        April 30,
                                                   -------------------

                                                     2007      2008
                                                   --------- ---------

Revenues
  Total net sales                                  $181,365  $195,073
  Finance charges and other                          23,880    26,552
  Increase (decrease) in fair value                      65    (3,067)
                                                   --------- ---------

    Total revenues                                  205,310   218,558

Cost and expenses
  Cost of goods sold, including warehousing and
   occupancy costs                                  124,393   139,058
  Cost of parts sold, including warehousing and
   occupancy costs                                    1,866     2,330
  Selling, general and administrative expense        59,214    60,368
  Provision for bad debts                               560       259
                                                   --------- ---------

    Total cost and expenses                         186,033   202,015
                                                   --------- ---------

Operating income                                     19,277    16,543
Interest income, net                                   (240)      (15)
Other income, net                                      (831)      (22)
                                                   --------- ---------

Income before income taxes                           20,348    16,580

Provision for income taxes                            7,402     5,984
                                                   --------- ---------

Net income                                         $ 12,946  $ 10,596
                                                   ========= =========

Earnings per share
  Basic                                            $   0.55  $   0.47
  Diluted                                          $   0.54  $   0.47
Average common shares outstanding
  Basic                                              23,567    22,382
  Diluted                                            24,121    22,560

                             Conn's, Inc.
                CONDENSED, CONSOLIDATED BALANCE SHEETS
                            (in thousands)

                                               January 31,  April 30,
                                                  2008        2008
                                               ----------- -----------

                    Assets
Current assets
   Cash and cash equivalents                    $   11,015 $    45,454
   Interests in securitized assets and accounts
    receivable, net                                214,250     203,229
   Inventories                                      81,495      89,813
   Deferred income taxes                             2,619       4,677
   Prepaid expenses and other assets                 4,449       3,973
                                               ----------- -----------
      Total current assets                         313,828     347,146
Non-current deferred income tax asset                    -       1,388
Total property and equipment, net                   59,253      61,453
Goodwill and other assets, net                       9,771       9,842
                                               ----------- -----------
       Total assets                             $  382,852 $   419,829
                                               =========== ===========
     Liabilities and Stockholders' Equity
Current Liabilities
   Notes payable                                $        - $         -
   Current portion of long-term debt                   102          74
   Accounts payable                                 28,179      43,801
   Accrued compensation and related expenses         9,748       7,529
   Accrued expenses                                 21,487      24,592
   Other current liabilities                        17,549      26,566
                                               ----------- -----------
      Total current liabilities                     77,065     102,562
Long-term debt                                          17          16
Non-current deferred income tax liability              131           -
Deferred gains on sales of property                  1,221       1,129
Total stockholders' equity                         304,418     316,122
                                               ----------- -----------
         Total liabilities and stockholders'
          equity                                $  382,852 $   419,829
                                               =========== ===========

                             Conn's, Inc.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (unaudited) (in thousands)

                                                   Three Months Ended
                                                        April 30,
                                                   -------------------
                                                     2007      2008
                                                   --------- ---------

Net cash provided by (used in) operating activities $(5,612)  $39,538

Cash flows from investing activities
  Purchase of property and equipment                 (2,748)   (5,373)
  Proceeds from sale of property                      8,727        32
                                                   --------- ---------
Net cash provided by (used in) investing activities   5,979    (5,341)
Cash flows from financing activities
  Purchases of treasury stock                        (4,554)        -
  Proceeds from stock issued under employee benefit
   plans                                                532       271
  Payment of promissory notes                           (35)      (29)
                                                   --------- ---------
Net cash provided by (used in) financing activities  (4,057)      242
                                                   --------- ---------
Net change in cash                                   (3,690)   34,439
Cash and cash equivalents
  Beginning of the year                              56,570    11,015
                                                   --------- ---------
  End of period                                     $52,880   $45,454
                                                   ========= =========

                CALCULATION OF GROSS MARGIN PERCENTAGE
                        (dollars in thousands)

                                                  Three Months Ended
                                                       April 30,
                                                 ---------------------

                                                    2007       2008
                                                 ---------- ----------

A  Product sales                                 $ 166,639  $ 179,911
B  Service maintenance agreement commissions, net    9,281      9,970
C  Service revenues                                  5,445      5,192
                                                 ---------- ----------
D  Total net sales                                 181,365    195,073
E  Finance charges and other, including fair
    value adjustment                                23,945     23,485
                                                 ---------- ----------
F    Total revenues                                205,310    218,558
G  Cost of goods sold, including warehousing and
    occupancy cost                                (124,393)  (139,058)
H  Cost of parts sold, including warehousing and
    occupancy cost                                  (1,866)    (2,330)
                                                 ---------- ----------
I    Gross margin dollars (F+G+H)                $  79,051  $  77,170
                                                 ========== ==========

   Gross margin percentage (I/F)                      38.5%      35.3%

J  Product margin dollars (A+G)                  $  42,246  $  40,853
K  Product margin percentage (J/A)                    25.4%      22.7%

                         PORTFOLIO STATISTICS
 For the periods ended January 31, 2006, 2007 and 2008 and April 30,
                             2007 and 2008
(dollars in thousands, except average outstanding balance per account)

                              January 31,               April 30,
                     ----------------------------- -------------------
                       2006      2007      2008      2007      2008
                     --------- --------- --------- --------- ---------

Total accounts        415,338   459,065   510,922   463,259   508,778
Total outstanding
 balance             $519,721  $569,551  $654,867  $584,162  $669,958
Average outstanding
 balance per account $  1,251  $  1,241  $  1,282  $  1,261  $  1,317
60 day delinquency   $ 35,537  $ 37,662  $ 49,778  $ 35,185  $ 42,935
Percent delinquency       6.8%      6.6%      7.6%      6.0%      6.4%
Percent of portfolio
 reaged (1)              17.6%     17.8%     16.6%     16.8%     15.5%
Net charge-off ratio
 (annualized)             2.5%      3.3%      2.9%      2.7%      3.2%

Note (1) - The calculation has been adjusted in all periods to report
 reaged accounts on a basis that is consistent with others in the
 industry. This change reduced previously reported percentages by
 approximately 20 to 30 basis points.

CONN-F

SOURCE: Conn's, Inc.

Conn's, Inc., Beaumont
Chairman and CEO
Thomas J. Frank, 409-832-1696 Ext. 3218

Copyright Business Wire 2008

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