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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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)
November 30, 2006
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CONN'S, INC.
(Exact name of registrant as specified in charter)
Delaware
(State or other Jurisdiction of Incorporation or Organization)
000-50421 06-1672840
(Commission File Number) (IRS Employer Identification No.)
3295 College Street
Beaumont, Texas 77701
(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 Securities Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) 12 under the
Securities Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) 12 under the
Securities Act (17 CFR 240.13e-2(c))
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Item 2.02 Results of Operations and Financial Condition.
On November 30, 2006, the Company issued a press release announcing its
earnings for the quarter and nine months ended October 31, 2006. 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 November 30, 2006
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.
2
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.
CONN'S, INC.
Date: November 30, 2006 By: /s/ David L. Rogers
------------------------------------
David L. Rogers
Chief Financial Officer
3
EXHIBIT INDEX
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Exhibit No. Description
- ----------- -----------
99.1 Press Release, dated November 30, 2006
4
Exhibit 99.1
Conn's, Inc. Reports Earnings for the Quarter
and Nine Months Ended October 31, 2006
BEAUMONT, Texas--(BUSINESS WIRE)--Nov. 30, 2006--Conn's, Inc.
(NASDAQ/NM:CONN), a specialty retailer of home appliances, consumer electronics,
computers, mattresses, furniture and lawn and garden products, today announced
earnings results for the quarter and nine months ended October 31, 2006.
Net income for the third fiscal quarter decreased 19.2% to $7.2 million
compared with $8.9 million for the restated third quarter of last year. Diluted
earnings per share available for common stockholders were $0.30 compared with
$0.36 for the third quarter of last year after restatement and adoption of
FAS123R. Total revenues for the quarter ended October 31, 2006 increased 0.6% to
$173.7 million compared with $172.6 million for the quarter ended October 31,
2005. This increase in revenue included increases in "Finance charges and other"
of $1.8 million, or 9.1%, and a decrease in net sales of $0.7 million, or 0.4%.
Same store sales (revenues earned in stores operated for the entirety of both
periods) decreased 3.7% for the third quarter of fiscal 2007. As previously
disclosed, the same store sales increase for the quarter ending October 31, 2005
of 23.3% was positively impacted 700 to 900 basis points by hurricanes Katrina
and Rita.
Net income for the nine months ended October 31, 2006 decreased 2.4% to
$27.6 million compared with $28.3 million for the restated nine months of the
prior year. Diluted earnings per share available for common stockholders were
$1.14 compared with $1.18 for the nine months of last year after restatement and
adoption of FAS123R. Total revenues for the nine months ended October 31, 2006
increased 10.7% to $548.1 million compared with $495.1 million for the nine
months ended October 31, 2005. This increase in revenue included net sales
increases of $51.9 million, or 11.9%, and increases in "Finance charges and
other" of $1.1 million, or 1.9%. Same store sales (revenues earned in stores
operated for the entirety of both periods) increased 6.5% for the first nine
months of fiscal 2007.
As previously disclosed, during the third quarter of fiscal 2006 a
significant hurricane impacted a portion of the Company's retail market area and
its credit collection operations. This resulted in higher delinquencies for
receivables in the credit portfolio serviced by the Company. Those delinquencies
continue at higher than expected levels and have produced loan losses greater
than had been expected before the year began. The losses affect securitization
income received from the credit subsidiary of the company and is reflected in
the line "Finance charges and other" on the Statement of Operations. Loan
losses, which were lower than in the second quarter, are in line with estimates
made at the end of the second quarter when the Company recorded an impairment
charge for estimated future loan losses and therefore the Company did not find
it necessary to record an additional impairment this quarter. More information
on the credit portfolio and its performance may be found in a 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.
During the fiscal year to date, the Company has opened four new stores, two
in its Houston market, one in San Antonio and one in the Dallas/Fort Worth
market, bringing the total store count to 60. By the end of January 2007, the
Company expects to operate approximately 61 to 62 stores.
EPS Guidance
Today, the Company lowered its guidance for its fiscal year 2007 (the year
ending January 31, 2007) of earnings per diluted share to a range of $1.55 to
$1.65 from a range of $1.60 to $1.75.
Conference Call Information
Conn's, Inc. will host a conference call and audio webcast today, November
30, 2006, at 10:00 AM, CST, to discuss financial results for the quarter and
nine months ended October 31, 2006. The webcast will be available live at
www.conns.com and will be archived for one year. Participants can join the call
by dialing (800) 289-0572 or (913) 981-5543.
About Conn's, Inc.
The Company is a specialty retailer currently operating 60 retail locations
in Texas and Louisiana: twenty stores in the Houston area, thirteen in the
Dallas/Fort Worth Metroplex, nine 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, 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. Historically, it has financed, on average,
approximately 57% 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
for credit 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 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 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; delinquency and loss trends
in the sold receivables portfolio; 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 amended annual report on Form
10-K/A filed September 15, 2006. 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 Nine Months Ended
October 31, October 31,
----------------------- -----------------------
2005 2006 2005 2006
----------- ----------- ----------- -----------
Revenues As Restated As Restated
Total net sales $153,068 $152,390 $435,851 $487,732
Finance charges and
other 19,521 21,303 59,217 60,353
----------- ----------- ----------- -----------
Total revenues 172,589 173,693 495,068 548,085
Cost and expenses
Cost of goods sold,
including
warehousing and
occupancy costs 110,024 110,627 314,520 356,112
Cost of parts sold,
including
warehousing and
occupancy costs 1,334 1,834 3,795 4,788
Selling, general and
administrative
expense 47,152 49,701 131,841 144,790
Provision for bad
debts 331 526 662 959
----------- ----------- ----------- -----------
Total cost and
expenses 158,841 162,688 450,818 506,649
----------- ----------- ----------- -----------
Operating income 13,748 11,005 44,250 41,436
Interest (income)
expense, net 74 (141) 488 (512)
Other (income) expense,
net (27) (19) 7 (773)
----------- ----------- ----------- -----------
Income before income
taxes 13,701 11,165 43,755 42,721
Total provision for
income taxes 4,846 4,011 15,439 15,074
----------- ----------- ----------- -----------
Net income $8,855 $7,154 $28,316 $27,647
=========== =========== =========== ===========
Earnings per share
Basic $0.38 $0.30 $1.21 $1.17
Diluted $0.36 $0.30 $1.18 $1.14
Average common shares
outstanding
Basic 23,458 23,698 23,378 23,658
Diluted 24,265 24,165 24,020 24,318
Conn's, Inc.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(in thousands)
January 31, October 31,
2006 2006
----------- -----------
Assets As Restated
Current assets
Cash and cash equivalents $45,176 $44,127
Interests in securitized assets and accounts
receivable, net 162,824 153,674
Inventories 73,987 77,224
Prepaid expenses and other assets 4,004 5,626
----------- -----------
Total current assets 285,991 280,651
Non-current deferred income tax asset 1,561 2,016
Total property and equipment, net 54,826 59,716
Goodwill and other assets, net 9,877 9,838
----------- -----------
Total assets $352,255 $352,221
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $- $-
Current portion of long-term debt 136 83
Accounts payable 40,920 32,286
Accrued compensation and related expenses 18,847 7,519
Accrued expenses 17,380 20,316
Other current liabilities 18,635 9,999
----------- -----------
Total current liabilities 95,918 70,203
Long-term debt - 116
Deferred gain on sale of property 476 351
Total stockholders' equity 255,861 281,551
----------- -----------
Total liabilities and stockholders'
equity $352,255 $352,221
=========== ===========
Conn's, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
October 31,
-----------------------
2005 2006
----------- -----------
As Restated
Net cash provided by operating activities $51,829 $11,090
Cash flows from investing activities
Purchase of property and equipment (14,107) (15,681)
Proceeds from sale of property 22 2,272
----------- -----------
Net cash used in investing activities (14,085) (13,409)
Cash flows from financing activities
Net borrowings (payments) under bank credit
facilities (10,500) -
Purchase of treasury stock - (684)
Proceeds from stock issued under employee
benefit plans 2,022 1,695
Excess tax benefits from stock-based
compensation 23 196
Increase in debt issuance costs (130) -
Borrowings on promissory notes - 208
Payment of promissory notes (21) (145)
----------- -----------
Net cash provided by (used in) financing
activities (8,606) 1,270
----------- -----------
Net change in cash 29,138 (1,049)
Cash and cash equivalents
Beginning of the year 7,027 45,176
----------- -----------
End of period $36,165 $44,127
=========== ===========
CALCULATION OF GROSS MARGIN PERCENTAGE
(dollars in thousands)
Three Months Ended Nine Months Ended
October 31, October 31,
------------------- -------------------
2005 2006 2005 2006
--------- --------- --------- ---------
A Product sales $140,405 $139,594 $398,547 $448,750
B Service maintenance
agreement commissions, net 7,506 6,845 22,238 21,875
C Service revenues 5,157 5,951 15,066 17,107
--------- --------- --------- ---------
D Total net sales 153,068 152,390 435,851 487,732
E Finance charges and other 19,521 21,303 59,217 60,353
--------- --------- --------- ---------
F Total revenues 172,589 173,693 495,068 548,085
G Cost of goods sold,
including warehousing and
occupancy cost (110,024) (110,627) (314,520) (356,112)
H Cost of parts sold,
including warehousing and
occupancy cost (1,334) (1,834) (3,795) (4,788)
--------- --------- --------- ---------
I Gross margin dollars
(F+G+H) $61,231 $61,232 $176,753 $187,185
========= ========= ========= =========
Gross margin percentage
(I/F) 35.5% 35.3% 35.7% 34.2%
J Product margin dollars (A+G) $30,381 $28,967 $84,027 $92,638
K Product margin percentage
(J/A) 21.6% 20.8% 21.1% 20.6%
PORTFOLIO STATISTICS
For the periods ended January 31, 2004, 2005 and 2006
and October 31, 2005 and 2006
(dollars in thousands, except average outstanding balance per account)
January 31, October 31,
----------------------------- -------------------
2004 2005 2006 2005 2006
--------- --------- --------- --------- ---------
Total accounts 299,717 350,251 415,338 396,506 433,719
Total outstanding
balance $349,470 $428,700 $519,721 $490,597 $535,688
Average outstanding
balance per account $1,166 $1,224 $1,251 $1,237 $1,235
60 day delinquency $18,267 $23,143 $35,537 $33,399 $37,800
Percent delinquency 5.2% 5.4% 6.8% 6.8% 7.1%
Charge-off ratio,
annualized 2.9% 2.4% 2.6% 2.4% 3.4%
CONTACT: Conn's, Inc., Beaumont
Thomas J. Frank, 409-832-1696 Ext. 3218
Chairman and CEO