UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
| CURRENT REPORT |
| PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
| Date of Report: |
|
(Date of earliest event reported) |
| August 27, 2009 |
CONN’S, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware |
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(State or other Jurisdiction of Incorporation or Organization) |
|
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000-50421 |
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06-1672840 |
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(Commission File Number) |
(IRS Employer Identification No.) |
| 3295 College Street |
| Beaumont, Texas 77701 |
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(Address of Principal Executive Offices and zip code) |
| (409) 832-1696 |
| (Registrant's telephone |
| number, including area code) |
| N/A |
| (Former Name or Former Address, if Changed Since Last Report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On August 27, 2009, the Company issued a press release announcing its earnings for the quarter ended July 31, 2009. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01(c) Exhibits.
Exhibit 99.1 Press Release, dated August 27, 2009
All of the information contained in Item 2.02 and Item 9.01(c) in this Form 8-K and the accompanying exhibit shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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CONN'S, INC. |
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Date: |
August 27, 2009 |
By: |
/s/ Michael J. Poppe |
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Michael J. Poppe |
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Chief Financial Officer |
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EXHIBIT INDEX
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Exhibit No. |
Description |
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| 99.1 | Press Release, dated August 27, 2009, for July 31, 2009 Earnings |
4
Exhibit 99.1
Conn’s, Inc. Reports Results for the Quarter Ended July 31, 2009
BEAUMONT, Texas--(BUSINESS WIRE)--August 27, 2009--Conn’s, Inc. (NASDAQ/NM:CONN), a specialty retailer of consumer electronics, home appliances, furniture, mattresses, computers and lawn and garden products today announced its operating results for the quarter ended July 31, 2009.
Highlights for the quarter include:
- Total revenues increased to $220.2 million,
- Same store sales declined 5.2%, though the Company believes it gained market share, as total television unit sales grew 28%, total furniture and mattress revenues grew 10.7% and total home appliance revenues grew 2.6%,
- Credit portfolio annualized net charge-off rate was 3.4%, and
- Diluted earnings per share were $0.22 for the second quarter of fiscal 2010.
Total revenues for the quarter ended July 31, 2009, increased 0.8% to $220.2 million, as compared to the same quarter in the prior fiscal year. Total net sales declined 0.2% to $190.3 million, as compared to the same quarter in the prior fiscal year. Revenue growth in furniture and mattresses and appliances was offset by declines in the consumer electronics and lawn and garden categories and service maintenance agreement commissions. Finance charges and other increased 2.5% to $29.8 million, and same store sales (revenues earned in stores operated for the entirety of both periods) decreased 5.2% during the second quarter of fiscal 2010. The same store sales decline was impacted by the increasingly challenging economic conditions experienced in the Company’s markets and the decline in average selling prices on flat-panel televisions. While the Company’s product sales increased only 0.1% during the quarter, it believes it grew its market share in consumer electronics, home appliances and furniture and mattresses. Retail sales for electronics and appliance stores in the United States declined approximately 14% during the quarter and retail sales for furniture and home furnishings retailers declined approximately 13% during the quarter, according to the U.S. Census Bureau News – Advance Monthly Sales for Retail and Food Services.
“While our second quarter performance did not meet our expectations, we feel that we gained market share across our core categories. As economic conditions continue to weigh on consumers, our customers are searching for value, customer service and financing, all of which are part of our unique shopping experience,” said the Company’s President and CEO, Timothy L. Frank. “For the second half of the year, we are focused on executing in our stores, growing our market share, maintaining strong credit quality in our credit portfolio and continuing to invest in the business to drive growth, while implementing identified cost saving opportunities and maintaining our focus on cost control.”
The Company delivered Net income on a GAAP basis of $4.9 million, or diluted earnings per share of $0.22, for the second quarter of fiscal 2010, despite the challenging economic conditions. Adjusted net income, excluding the non-cash fair value adjustments, was $4.9 million for the second quarter of fiscal 2010, compared with adjusted net income, excluding non-cash fair value adjustments, of $11.0 million for the second quarter of the prior fiscal year. Adjusted diluted earnings per share, excluding the non-cash fair value adjustments in both periods, was $0.22 for the second quarter of fiscal 2010, compared with $0.49 for the second quarter of the prior fiscal year. Income in the current year quarter was reduced by the growth in the Company’s reserve for bad debts of $2.0 million, before taxes, or $0.06 per diluted share as a result of retaining customer receivables on its balance sheet. Prior to August 2008, the Company transferred substantially all new receivables to its off-balance sheet asset-backed securitization facility, as opposed to retaining the receivables on balance sheet under its asset-based loan facility completed in August 2008.
The credit portfolio performance reported for the quarter included an annualized net charge-off rate of 3.4% for the three months ended July 31, 2009, as compared to the 3.0% rate experienced during the quarter ended April 30, 2009, and the 2.8% rate experienced in the second quarter of the prior fiscal year. The net charge-off rate for the twelve month period ended July 31, 2009, was 3.3%. Additionally, the 60+ day delinquency rate was 7.6% at July 31, 2009, as compared to 6.9% at April 30, 2009, and 7.0% at July 31, 2008. 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.
Total revenues for the six months ended July 31, 2009, increased 3.3% to $451.5 million, as compared to the same period in the prior fiscal year. Total net sales increased 1.2% to $390.5 million and Finance charges and other increased 7.1% to $59.6 million. Same store sales (revenues earned in stores operated for the entirety of both periods) decreased 4.9% during the first six months of fiscal 2010. The Company reported Net income on a GAAP basis of $16.5 million, or diluted earnings per share of $0.73, for the first six months of fiscal 2010. Adjusted net income, excluding the non-cash fair value adjustments, was $15.5 million for the first six months of fiscal 2010, compared with adjusted net income, excluding non-cash fair value adjustments, of $23.6 million for the first six months of the prior fiscal year. Adjusted diluted earnings per share, excluding the non-cash fair value adjustments in both periods, was $0.68 for the first six months of fiscal 2010, compared with $1.04 for the first six months of the prior fiscal year. Income in the current year-to-date period was reduced by growth in the Company’s reserve for bad debts of $2.8 million, before taxes, or $0.08 per diluted share as a result of retaining customer receivables on its balance sheet, as discussed above.
The Company has 75 stores in operation with plans to add three to five stores during the current fiscal year.
EPS Guidance
Today, as a result of the challenging economic environment the Company faced during the second quarter and its outlook for the remainder of the fiscal year, it revised its guidance for fiscal year 2010 (the year ending January 31, 2010) to earnings per diluted share, excluding fair value adjustments, of $1.40 to $1.60. The guidance includes an increased provision for bad debts, as compared to the prior year, due to the planned increase in the balance of customer receivables retained on the Company’s balance sheet, to provide the required reserve for future estimated losses. The Company expects the actual credit portfolio performance to be consistent with its historical performance.
Conference Call Information
Conn’s, Inc. will host a conference call and audio webcast today, August 27, 2009, at 10:00 AM, CDT, to discuss its financial results for the quarter ended July 31, 2009. The webcast will be available live at www.conns.com and will be archived for one year. Participants can join the call by dialing 877-419-6596 or 719-325-4856.
About Conn’s, Inc.
The Company is a specialty retailer currently operating 75 retail locations in Texas, Louisiana and Oklahoma: with 23 stores in the Houston area, 19 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, 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: 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 ability to offer flexible financing programs; the Company's ability to fund operations, debt repayment and expansion from cash flow from operations, borrowings on its revolving lines of credit and proceeds from securitizations and from accessing equity or debt markets; the ability of the Company and the QSPE to obtain additional funding for the purpose of funding the receivables generated by the Company, including limitations on the ability of the QSPE to obtain financing through its commercial paper-based funding sources and its ability to maintain the current credit ratings of its securities; the ability of the financial institutions providing lending facilities to the Company or the QSPE to fund their commitments; the effect on borrowing costs of downgrades by rating agencies or changes in laws or regulations on the Company’s or the QSPE’s financing providers; the cost of any renewed or replacement credit facilities; growth trends and projected sales in the home appliance and consumer electronics industry and the Company's ability to capitalize on such growth; the pricing actions and promotional activities of competitors; relationships with the Company's key suppliers; interest rates; general economic conditions; 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; potential goodwill impairment charges; the outcome of litigation or government investigations; 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 26, 2009. 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
July 31, |
Six Months Ended
July 31, |
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| 2008 | 2009 | 2008 | 2009 | ||||||||||||||
| Revenues | |||||||||||||||||
| Total net sales | $ | 190,639 | $ | 190,299 | $ | 385,712 | $ | 390,450 | |||||||||
| Finance charges and other | 29,105 | 29,821 | 55,657 | 59,606 | |||||||||||||
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Increase (decrease) in fair value |
(1,212 | ) | 91 | (4,279 | ) | 1,481 | |||||||||||
| Total revenues | 218,532 | 220,211 | 437,090 | 451,537 | |||||||||||||
| Cost and expenses | |||||||||||||||||
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Cost of goods sold, including warehousing and occupancy costs |
136,787 | 140,761 | 275,845 | 286,631 | |||||||||||||
|
Cost of parts sold, including warehousing and occupancy costs |
2,264 | 2,797 | 4,594 | 5,384 | |||||||||||||
| Selling, general and administrative expense | 62,900 | 64,867 | 123,268 | 127,492 | |||||||||||||
| Provision for bad debts | 333 | 2,746 | 592 | 4,141 | |||||||||||||
| Total cost and expenses | 202,284 | 211,171 | 404,299 | 423,648 | |||||||||||||
| Operating income | 16,248 | 9,040 | 32,791 | 27,889 | |||||||||||||
| Interest (income) expense, net | (85 | ) | 942 | (100 | ) | 1,528 | |||||||||||
| Other (income) expense, net | 128 | (13 | ) | 106 | (21 | ) | |||||||||||
| Income before income taxes | 16,205 | 8,111 | 32,785 | 26,382 | |||||||||||||
| Provision for income taxes | 5,993 | 3,162 | 11,977 | 9,912 | |||||||||||||
| Net income | $ | 10,212 | $ | 4,949 | $ | 20,808 | $ | 16,470 | |||||||||
| Earnings per share | |||||||||||||||||
| Basic | $ | 0.46 | $ | 0.22 | $ | 0.93 | $ | 0.73 | |||||||||
| Diluted | $ | 0.45 | $ | 0.22 | $ | 0.92 | $ | 0.73 | |||||||||
| Average common shares outstanding | |||||||||||||||||
| Basic | 22,407 | 22,454 | 22,395 | 22,450 | |||||||||||||
| Diluted | 22,620 | 22,660 | 22,591 | 22,675 | |||||||||||||
| Conn's, Inc. | |||||||
| CONDENSED, CONSOLIDATED BALANCE SHEETS | |||||||
| (in thousands) | |||||||
| January 31, | July 31 | ||||||
| 2009 | 2009 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 11,798 | $ | 4,852 | |||
| Other accounts receivable, net | 32,878 | 22,763 | |||||
| Customer accounts receivable, net | 61,125 | 115,696 | |||||
| Interests in securitized assets | 176,543 | 164,090 | |||||
| Inventories | 95,971 | 100,867 | |||||
| Deferred income taxes | 13,354 | 14,333 | |||||
| Prepaid expenses and other assets | 5,933 | 10,618 | |||||
| Total current assets | 397,602 | 433,219 | |||||
| Non-current deferred income tax asset | 2,035 | 3,597 | |||||
| Long-term customer accounts receivable, net | 41,172 | 73,573 | |||||
| Total property and equipment, net | 62,551 | 62,820 | |||||
| Goodwill and other assets, net | 13,269 | 13,162 | |||||
| Total assets | $ | 516,629 | $ | 586,371 | |||
| Liabilities and Stockholders' Equity | |||||||
| Current Liabilities | |||||||
| Notes payable | $ | - | $ | - | |||
| Current portion of long-term debt | 5 | 60 | |||||
| Accounts payable | 57,809 | 47,708 | |||||
| Accrued compensation and related expenses | 11,473 | 7,551 | |||||
| Accrued expenses | 23,703 | 25,024 | |||||
| Other current liabilities | 25,541 | 22,735 | |||||
| Total current liabilities | 118,531 | 103,078 | |||||
| Long-term debt | 62,912 | 130,235 | |||||
| Fair value of derivatives | - | 231 | |||||
| Deferred gains on sales of property | 1,036 | 968 | |||||
| Total stockholders' equity | 334,150 | 351,859 | |||||
| Total liabilities and stockholders' equity | $ | 516,629 | $ | 586,371 | |||
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CALCULATION OF GROSS MARGIN PERCENTAGES (dollars in thousands) |
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| Three Months Ended | Six Months Ended | |||||||||||||||||
| July 31, | July 31, | |||||||||||||||||
| 2008 | 2009 | 2008 | 2009 | |||||||||||||||
| A | Product sales | $ | 175,240 | $ | 175,389 | $ | 355,151 | $ | 360,206 | |||||||||
| B | Service maintenance agreement commissions, net | 9,911 | 8,858 | 19,881 | 18,648 | |||||||||||||
| C | Service revenues | 5,488 | 6,052 | 10,680 | 11,596 | |||||||||||||
| D | Total net sales | 190,639 | 190,299 | 385,712 | 390,450 | |||||||||||||
| E | Finance charges and other | 29,105 | 29,821 | 55,657 | 59,606 | |||||||||||||
| F | Net increase (decrease) in fair value | (1,212 | ) | 91 | (4,279 | ) | 1,481 | |||||||||||
| G | Total revenues | 218,532 | 220,211 | 437,090 | 451,537 | |||||||||||||
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H |
Cost of goods sold, including warehousing and occupancy cost |
(136,787 | ) | (140,761 | ) | (275,845 | ) | (286,631 | ) | |||||||||
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I |
Cost of parts sold, including warehousing and occupancy cost |
(2,264 | ) | (2,797 | ) | (4,594 | ) | (5,384 | ) | |||||||||
| J | Gross margin dollars (G+H+I) | $ | 79,481 | $ | 76,653 | $ | 156,651 | $ | 159,522 | |||||||||
| Gross margin percentage (J/G) | 36.4 | % | 34.8 | % | 35.8 | % | 35.3 | % | ||||||||||
| K | Product margin dollars (A+H) | $ | 38,453 | $ | 34,628 | $ | 79,306 | $ | 73,575 | |||||||||
| Product margin percentage (K/A) | 21.9 | % | 19.7 | % | 22.3 | % | 20.4 | % | ||||||||||
| MANAGED PORTFOLIO STATISTICS | |||||||||||||||||||||||||
| For the periods ended January 31, 2006, 2007, 2008, 2009 and July 31, 2008 and 2009 | |||||||||||||||||||||||||
| (dollars in thousands, except average outstanding balance per account) | |||||||||||||||||||||||||
| January 31, | July 31, | ||||||||||||||||||||||||
| 2006 | 2007 | 2008 | 2009 | 2008 | 2009 | ||||||||||||||||||||
| Total accounts | 415,338 | 459,065 | 510,922 | 537,957 | 515,527 | 537,261 | |||||||||||||||||||
| Total outstanding balance | $ | 519,721 | $ | 569,551 | $ | 654,867 | $ | 753,513 | $ | 694,926 | $ | 745,878 | |||||||||||||
| Average outstanding balance per account | $ | 1,251 | $ | 1,241 | $ | 1,282 | $ | 1,401 | $ | 1,348 | $ | 1,388 | |||||||||||||
| 60 day delinquency | $ | 35,537 | $ | 37,662 | $ | 49,778 | $ | 55,141 | $ | 48,394 | $ | 57,042 | |||||||||||||
| Percent delinquency | 6.8 | % | 6.6 | % | 7.6 | % | 7.3 | % | 7.0 | % | 7.6 | % | |||||||||||||
| Percent of portfolio reaged | 17.6 | % | 17.8 | % | 16.6 | % | 18.7 | % | 15.9 | % | 18.9 | % | |||||||||||||
| Net charge-off ratio (YTD annualized) | 2.5 | % | 3.3 | % | 2.9 | % | 3.2 | % | 3.0 | % | 3.2 | % | |||||||||||||
| NON-GAAP RECONCILIATION OF NET INCOME, AS ADJUSTED | ||||||||||||||||||
| AND DILUTED EARNINGS PER SHARE, AS ADJUSTED | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| (in thousands, except earnings per share) | ||||||||||||||||||
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Three Months Ended
July 31, |
Six Months Ended
July 31, |
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| 2008 | 2009 | 2008 | 2009 | |||||||||||||||
| Net income, as reported | $ | 10,212 | $ | 4,949 | $ | 20,808 | $ | 16,470 | ||||||||||
| Adjustments: | ||||||||||||||||||
| (Increase) decrease in fair value | 1,212 | (91 | ) | 4,279 | (1,481 | ) | ||||||||||||
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Tax impact of fair value adjustment |
(427 | ) | 32 | (1,506 | ) | 521 | ||||||||||||
| Net income, as adjusted | $ | 10,997 | $ | 4,890 | $ | 23,581 | $ | 15,510 | ||||||||||
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Average common shares outstanding - Diluted |
22,620 | 22,660 | 22,591 | 22,675 | ||||||||||||||
| Earnings per share - Diluted | ||||||||||||||||||
| As reported | $ | 0.45 | $ | 0.22 | $ | 0.92 | $ | 0.73 | ||||||||||
| As adjusted | $ | 0.49 | $ | 0.22 | $ | 1.04 | $ | 0.68 | ||||||||||
Basis for presentation of non-GAAP disclosures:
To supplement the Company’s consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles ("GAAP"), the Company also provides adjusted net income and adjusted earnings per diluted share information. These non-GAAP financial measures are not meant to be considered as a substitute for comparable GAAP measures but should be considered in addition to results presented in accordance with GAAP, and are intended to provide additional insight into the Company’s operations and the factors and trends affecting the Company’s business. The Company’s management believes these non-GAAP financial measures are useful to financial statement readers because (1) they allow for greater transparency with respect to key metrics the Company uses in its financial and operational decision making and (2) they are used by some of its institutional investors and the analyst community to help them analyze the Company’s operating results.
CONN-F
CONTACT:
Conn’s, Inc., Beaumont
Chief Financial Officer
Michael
J. Poppe, 409-832-1696 Ext. 3359