Mar 31, 2005
Conn's, Inc. Reports Record Earnings for Fourth Quarter and Fiscal Year 2005
Conn's, Inc. Reports Record Earnings for Fourth Quarter and Fiscal Year 2005
Net income available for common stockholders for the fourth quarter increased 12.6% to $9.2 million compared to $8.2 million for the fourth quarter of last year. Diluted earnings per share available for common stockholders were $0.39 compared with $0.38 for the fourth quarter of last year. Total revenues for the quarter ended January 31, 2005 increased 13.0% to $162.7 million compared with $144.0 million for the quarter ended January 31, 2005. This increase in revenue included net sales increases of $13.2 million, or 10.3%, and increases from "Finance charges and other" of $5.5 million, or 35.3%. Same store sales (revenues earned in stores operated for the entirety of both periods) increased 0.9% for the fourth quarter of fiscal 2005. On a pro forma basis, as though all shares issued in the initial public offering were outstanding in both periods for the full period, diluted earnings per share increased 8.3% to $0.39 for the quarter ended January 31, 2005 from $0.36 for the previous period in fiscal 2004.
Total revenues for the year ended January 31, 2005 increased 13.6% to $567.1 million compared with $499.3 million for the year ended January 31, 2004. This increase in revenue included net sales increases of $53.3 million, or 12.1%, and increases from "Finance charges and other" of $14.5 million, or 24.8%. Same store sales increased 3.6% for the year ended January 31, 2005. Net income available for common stockholders for the year ended January 31, 2005 increased 34.6% to $30.1 million compared to $22.4 million for the same period last year. Diluted earnings per share available for the common stockholder increased 4.1% to $1.27 for the year ended January 31, 2005 from $1.22 in the prior year. On a pro forma basis, as though all shares issued in the initial public offering were outstanding in both periods for the full year, diluted earnings per share increased 17.6% to $1.27 for the year ended January 31, 2005 from $1.08 for the previous fiscal year.
During the fourth quarter, the Company continued its expansion into the Dallas/Fort Worth Metroplex with the opening of two additional stores, bringing the store count in this market to eight as of January 31, 2005. A freestanding clearance center in San Antonio was closed during the fourth quarter and the clearance operation was consolidated in a nearby, existing San Antonio store location. Earlier in the year, three additional stores were opened in the Dallas/Fort Worth market as well as a new store in McAllen, Texas bringing the Company's total store count to 50. By the end of January 2006, the Company expects to operate approximately 56 to 58 stores.
"We continue to focus on execution at every level of the organization which is evident from our performance this year. We are pleased with our sales performance, particularly in our track sales, mattress sales and the strengthening of our position in major appliances," said Thomas J. Frank, Conn's Chairman and Chief Executive Officer. "While the fourth quarter was challenging when compared to the prior year's fourth quarter, we met our earnings goals due to superior merchandising, effective promotional efforts and aggressive cost containment."
EPS Guidance
The Company also issued guidance for fiscal year 2006 of earnings per diluted share of approximately $1.40 to $1.46. The earnings guidance does not give effect, if any, for changes resulting from the required adoption of Statement of Financial Accounting Standards No. 123R, Share-Based Payment, during fiscal 2006 which would likely have a negative impact on earnings. Comparable store sales increases are projected in the low to mid single digit range. The estimate of earnings per diluted share is calculated in accordance with current generally accepted accounting principles.
Conference Call Information
Conn's, Inc. will host a conference call and audio webcast today, March 31, 2005 at 10:00 AM, CST, to discuss financial results for the quarter and year ended January 31, 2005. The webcast will be available at www.conns.com and will be archived for 30 days. The webcast is also being distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at www.fulldisclosure.com. Institutional investors can access the call via StreetEvents (www.streetevents.com).
About Conn's, Inc.
The Company is a specialty retailer currently operating 50 retail locations in Texas and Louisiana: 18 stores in the Houston area, eight in the Dallas/Fort Worth Metroplex, seven in San Antonio, five in Austin, four in Southeast Texas, one in Corpus Christi, one in McAllen and six stores in Louisiana. It sells major home appliances, including refrigerators, freezers, washers, dryers and ranges, and a variety of consumer electronics, including projection, plasma and LCD televisions, camcorders, computers and computer peripherals, DVD players, portable audio and home theater products. The Company also sells lawn and garden products and mattresses, and continues to introduce additional product categories for the home to help increase same store sales and to respond to our customers' product needs.
Unlike many of its competitors, the Company provides flexible in-house credit options for its customers. Historically, it has financed, on average, approximately 56% 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 from these assets. The Company transfers receivables, consisting of retail installment contracts and revolving accounts extended to its customers, to a qualifying special purpose entity, or the issuer, in exchange for cash and subordinated securities represented by asset-backed and variable funding notes issued to third parties.
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 have been 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 or expand existing stores; the Company's estimated capital expenditures and costs related to the opening of new stores or the update or expansion of existing stores; 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; 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; 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 current report on Form 8-K filed in connection with this press release. 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
(in thousands, except earnings per share)
Three Months Ended Twelve Months Ended
January 31, January 31,
------------------- -------------------
2004 2005 2004 2005
--------- --------- --------- ---------
Revenues
Total net sales $128,499 $141,721 $440,918 $494,235
Finance charges and other 15,505 20,983 58,392 72,857
--------- --------- --------- ---------
Total revenues 144,004 162,704 499,310 567,092
Cost and Expenses
Cost of goods sold,
including warehousing and
occupancy costs 91,079 102,157 313,637 355,159
Cost of parts sold,
including warehousing and
occupancy costs 984 1,197 4,075 4,551
Selling, general and
administrative expense 37,615 42,779 135,174 152,900
Provision for bad debts 1,254 1,615 4,657 5,637
--------- --------- --------- ---------
Total cost and expenses 130,932 147,748 457,543 518,247
--------- --------- --------- ---------
Operating income 13,072 14,956 41,767 48,845
Interest expense 573 595 4,577 2,359
--------- --------- --------- ---------
Income before minority interest
and income taxes 12,499 14,361 37,190 46,486
Minority interest in limited
partnership - (241) - 118
--------- --------- --------- ---------
Income before income taxes 12,499 14,602 37,190 46,368
Total provision for income
taxes 4,089 5,355 12,850 16,243
--------- --------- --------- ---------
Net income 8,410 9,247 24,340 30,125
Less preferred dividends 195 - 1,954 -
--------- --------- --------- ---------
Net income available for common
shareholders $8,215 $9,247 $22,386 $30,125
========= ========= ========= =========
Earnings per share
Basic $0.40 $0.40 $1.26 $1.30
Diluted $0.38 $0.39 $1.22 $1.27
Average common shares
outstanding
Basic 20,744 23,230 17,726 23,192
Diluted 21,379 23,764 18,335 23,754
Conn's, Inc.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(in thousands)
January 31,
2004 2005
---------- ----------
Assets
Current assets
Cash and cash equivalents $12,942 $7,027
Interests in securitized assets and accounts
receivable, net 92,240 131,294
Inventories 53,742 62,346
Deferred income taxes 4,148 4,901
Prepaid expenses and other assets 3,031 3,356
---------- ----------
Total current assets 166,103 208,924
Non-current deferred tax asset 3,945 1,523
Total property and equipment, net 54,825 47,710
Goodwill and other assets, net 9,887 9,846
---------- ----------
Total assets $234,760 $268,003
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $- $5,500
Current portion of long-term debt 338 29
Accounts payable 26,412 26,912
Fair value of derivatives 1,121 177
Other current liabilities 22,866 28,232
---------- ----------
Total current liabilities 50,737 60,850
Long-term debt 14,174 5,003
Non-current deferred tax liability 477 704
Deferred gain on sale of property 811 644
Fair value of derivatives 202 -
Minority interest 1,769 -
Total stockholders' equity 166,590 200,802
---------- ----------
Total liabilities and stockholders' equity $234,760 $268,003
========== ==========
Conn's, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Years
Ended Janaury 31,
-------------------
2004 2005
--------- ---------
Net cash provided by operating activities $12,393 $170
Cash flows from investing activities
Purchase of property and equipment (9,401) (19,619)
Proceeds from sale of property 1,291 1,131
--------- ---------
Net cash used by investing activities (8,110) (18,488)
Cash flows from financing activities
Net proceeds from the sale of common stock 58,357 -
Redemption of preferred stock (1,454) -
Net borrowings (payments) under bank credit
facilities (31,999) 10,500
Payments on term note (15,000) -
Net proceeds from stock issued under employee
benefit plans 397 1,603
Debt issuance costs (213) (118)
Payment of promissory notes (4,901) (60)
--------- ---------
Net cash provided by financing activities 5,187 11,925
--------- ---------
Impact on cash of consolidation of SRDS 1,024 478
--------- ---------
Net change in cash 10,494 (5,915)
Cash and cash equivalents
Beginning of the year 2,448 12,942
--------- ---------
End of the year $12,942 $7,027
========= =========
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
PRO FORMA EARNINGS PER SHARE
(in thousands, except earnings per share)
Three Months Ended Years Ended
January 31, January 31,
------------------- --------------------
2004 2005 2004 2005
--------- --------- --------- ----------
Net income available for
common stockholders $8,215 $9,247 $22,386 $30,125
Add interest savings, net of
tax, due to debt payoff 180 - 1,278 -
Add preferred dividends 195 - 1,954 -
--------- --------- --------- ----------
Pro forma net income $8,590 $9,247 $25,618 $30,125
========= ========= ========= ==========
Total shares outstanding
pre-IPO 16,720 16,720 16,720 16,720
Shares issued in IPO,
including over-allotment 4,622 4,622 4,622 4,622
Conversion of preferred stock
into common 1,712 1,712 1,712 1,712
Weighted issuance of shares to
benefit plans 9 176 2 138
Dilution due to outstanding
options 609 534 609 562
--------- --------- --------- ----------
Pro forma shares outstanding 23,672 23,764 23,665 23,754
========= ========= ========= ==========
Pro forma diluted earnings per
share $0.36 $0.39 $1.08 $1.27
========= ========= ========= ==========
Reconciliation of pro forma
shares outstanding to
presentation according to
GAAP:
Pro forma shares outstanding 23,672 23,764 23,665 23,754
Adjustment since shares were
not outstanding for the
full year (2,293) - (5,330) -
--------- --------- --------- ----------
Weighted diluted outstanding
shares according to GAAP 21,379 23,764 18,335 23,754
========= ========= ========= ==========
The use of pro forma information is considered necessary to provide
the reader with more comparable earnings per share information year
over year. As a result of the IPO transaction, the additional shares
issued were significant relative to the shares outstanding in the
prior year and preferred dividends are no longer accrued or paid.
Consequently, the shares outstanding have been adjusted to reflect the
IPO transaction as though it took place on February 1, 2003, interest
expense associated with the debt that would have been paid-off has
been reduced, and preferred dividends have been eliminated in all
periods in order to compute earnings per share on a more comparable
basis.
CALCULATION OF GROSS MARGIN PERCENTAGE
(dollars in thousands)
Three Months Ended Years Ended
January 31, January 31,
------------------- --------------------
2004 2005 2004 2005
--------- --------- --------- ----------
Total revenues $144,004 $162,704 $499,310 $567,092
Less cost of goods and parts
sold, including warehousing
and occupancy cost (92,063) (103,354) (317,712) (359,710)
--------- --------- --------- ----------
Gross margin dollars $51,941 $59,350 $181,598 $207,382
========= ========= ========= ==========
Gross margin percentage 36.1% 36.5% 36.4% 36.6%
