Aug 30, 2005
Conn's, Inc. Reports Record Earnings for the Quarter and Six Months Ended July 31, 2005
Conn's, Inc. Reports Record Earnings for the Quarter and Six Months Ended July 31, 2005
Net income for the second quarter increased 37.3% to $9.3 million compared to $6.8 million for the second quarter of last year. Diluted earnings per share were $0.39 compared with $0.29 for the second quarter of last year. Total revenues for the quarter ended July 31, 2005 increased 20.3% to $164.4 million compared with $136.6 million for the quarter ended July 31, 2004. This increase in revenue included net sales increases of $25.0 million, or 21.0%, and increases from "Finance charges and other" of $2.8 million, or 15.6%. Same store sales (revenues earned in stores operated for the entirety of both periods) increased 12.1% for the second quarter ended July 31, 2005.
Net income for the six months ended July 31, 2005 increased 31.3% to $19.1 million compared to $14.6 million for the six months ended July 31, 2004. Diluted earnings per share were $0.80 compared with $0.61 for the first six months of last year. Total revenues for the six months ended July 31, 2005 increased 18.8% to $322.5 million compared with $271.5 million for the six months ended July 31, 2004. This increase in revenue included net sales increases of $45.4 million, or 19.1%, and increases from "Finance charges and other" of $5.7 million, or 16.6%. Same store sales (revenues earned in stores operated for the entirety of both periods) increased 10.0% for the six months ended July 31, 2005.
During the second 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 eleven as of July 2005. Along with a new store opened in Harlingen, Texas, the first week of August 2005, this brings the Company's total store count to 54. The Company's continuing development efforts could result in the Company operating 56 to 58 stores by the end of January 2006. In early September, the Company expects to begin distributing product in the Dallas/Forth Worth market from its new 150,000 square foot distribution center located between Dallas and Forth Worth and will expand its existing service center to better serve this growing market.
"We are obviously pleased with both the top line and bottom line growth and performance so far this year," said Thomas J. Frank, Conn's Chairman and Chief Executive Officer. "The very positive results in same store sales reflect the determination and commitment to execution by Conn's associates throughout our company. We have achieved our goals in opening new stores thus far this year and with the new DC opening in Dallas we are optimistic about our continued growth for the remainder of the year."
EPS Guidance
As a result of its performance for the first six months, the Company is increasing its guidance for the year ending January 31, 2006 of earnings per diluted share from approximately $1.40 to $1.46 to approximately $1.50 to $1.55. The estimate of earnings per diluted share is calculated in accordance with current accounting principles, generally accepted in the United States. Comparable store sales increases for the year are projected in the mid, single digit range.
Conference Call Information
Conn's, Inc. will host a conference call and audio webcast today, August 30, 2005 at 10:00 a.m. CDT, to discuss financial results for the quarter and six months ended July 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 54 retail locations in Texas and Louisiana: eighteen stores in the Houston area, eleven in the Dallas/Fort Worth Metroplex, seven in San Antonio, five in Austin, four in Southeast Texas, one in Corpus Christi, two in South Texas 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, DLP 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 its 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 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 annual report on Form 10-K filed on April 5, 2005 and 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 Six Months Ended
July 31, July 31,
------------------- -------------------
2004 2005 2004 2005
--------- --------- --------- ---------
Revenues
Total net sales $118,851 $143,849 $237,393 $282,783
Finance charges and other 17,750 20,526 34,085 39,755
--------- --------- --------- ---------
Total revenues 136,601 164,375 271,478 322,538
Cost and expenses
Cost of goods sold,
including warehousing
and occupancy costs 85,704 103,579 170,479 204,496
Cost of parts sold,
including warehousing
and occupancy costs 1,092 1,236 2,195 2,461
Selling, general and
administrative expense 37,521 44,700 72,383 84,182
Provision for bad debts 1,227 443 2,649 1,595
--------- --------- --------- ---------
Total cost and expenses 125,544 149,958 247,706 292,734
--------- --------- --------- ---------
Operating income 11,057 14,417 23,772 29,804
Interest expense, net 567 59 1,149 414
--------- --------- --------- ---------
Income before minority
interest and income taxes 10,490 14,358 22,623 29,390
Minority interest in limited
partnership (131) - (246) -
--------- --------- --------- ---------
Income before income taxes 10,359 14,358 22,377 29,390
Total provision for income
taxes 3,569 5,034 7,814 10,264
--------- --------- --------- ---------
Net income $6,790 $9,324 $14,563 $19,126
========= ========= ========= =========
Earnings per share
Basic $0.29 $0.40 $0.63 $0.82
Diluted $0.29 $0.39 $0.61 $0.80
Average common shares
outstanding
Basic 23,179 23,366 23,163 23,337
Diluted 23,801 24,114 23,769 23,987
Conn's, Inc.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(in thousands)
January 31, July 31,
2005 2005
------------ ------------
Assets
Current assets
Cash and cash equivalents $7,027 $19,049
Interests in securitized assets and
accounts receivable, net 131,294 136,215
Inventories 62,346 60,846
Deferred income taxes 4,901 6,613
Prepaid expenses and other assets 3,356 2,578
------------ ------------
Total current assets 208,924 225,301
Non-current deferred income tax asset 1,523 2,315
Total property and equipment, net 47,710 52,220
Goodwill and other assets, net 9,846 9,777
------------ ------------
Total assets $268,003 $289,613
============ ============
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $5,500 $-
Current portion of long-term debt 29 18
Accounts payable 26,912 33,510
Accrued expenses 19,883 24,596
Fair value of derivatives 177 -
Other current liabilities 8,349 8,973
------------ ------------
Total current liabilities 60,850 67,097
Long-term debt 5,003 -
Non-current deferred income tax liability 704 820
Deferred gain on sale of property 644 560
Total stockholders' equity 200,802 221,136
------------ ------------
Total liabilities and stockholders'
equity $268,003 $289,613
============ ============
Conn's, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Six Months
Ended July 31,
-------------------------
2004 2005
------------ ------------
Net cash provided by operating activities $596 $31,396
------------ ------------
Cash flows from investing activities
Purchase of property and equipment (9,047) (9,964)
Proceeds from sale of property 15 13
------------ ------------
Net cash used in investing activities (9,032) (9,951)
Cash flows from financing activities
Net borrowings (payments) under bank
credit facilities, debt costs 979 (10,500)
Net proceeds from stock issued under
employee benefit plans 687 1,091
Payment of promissory notes (34) (14)
------------ ------------
Net cash provided by (used in) financing
activities 1,632 (9,423)
------------ ------------
Impact on cash of consolidation of SRDS 190 -
------------ ------------
Net change in cash (6,614) 12,022
Cash and cash equivalents
Beginning of the year 12,942 7,027
------------ ------------
End of period $6,328 $19,049
============ ============
CALCULATION OF GROSS MARGIN PERCENTAGE
(dollars in thousands)
Three Months Ended Six Months Ended
July 31, July 31,
------------------- -------------------
2004 2005 2004 2005
--------- --------- --------- ---------
Total revenues $136,601 $164,375 $271,478 $322,538
Less cost of goods and parts
sold, including warehousing
and occupancy cost (86,796) (104,815) (172,674) (206,957)
--------- --------- --------- ---------
Gross margin dollars $49,805 $59,560 $98,804 $115,581
========= ========= ========= =========
Gross margin percentage 36.5% 36.2% 36.4% 35.8%
PORTFOLIO STATISTICS
For the periods ended January 31, 2003, 2004, 2005
and July 31, 2004 and 2005
(dollars in thousands, except average outstanding balance per account)
1/31/03 1/31/04 1/31/05 7/31/04 7/31/05
--------- --------- --------- --------- ---------
Total accounts 285,247 299,717 350,251 320,224 380,717
Total outstanding
balance $303,825 $349,470 $428,700 $382,050 $472,688
Average outstanding
balance per account $1,065 $1,166 $1,224 $1,193 $1,242
60 day delinquency $16,176 $18,267 $23,143 $19,662 $23,015
Percent delinquency 5.3% 5.2% 5.4% 5.1% 4.9%
Loan loss ratio 3.5% 3.4% 2.9% 3.4% 2.7%
