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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)
June 1, 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 June 1, 2006, the Company issued a press release announcing its earnings
for the quarter ended April 30, 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 June 1, 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: June 1, 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 June 1, 2006
4
Exhibit 99.1
Conn's, Inc. Reports Earnings for Quarter Ending April 30, 2006
BEAUMONT, Texas--(BUSINESS WIRE)--June 1, 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 ended April 30, 2006.
Net income available for common stockholders for the first fiscal quarter
increased 18.8% to $11.4 million compared to $9.6 million for the first quarter
of last year. Diluted earnings per share available for common stockholders were
$0.47 compared with $0.40 for the first quarter of last year after adjusting for
adoption of FAS 123R. Total revenues for the quarter ended April 30, 2006
increased 21.5% to $192.1 million compared with $158.2 million for the quarter
ended April 30, 2005. This increase in revenue included net sales increases of
$32.8 million, or 23.6%, and increases from "Finance charges and other" of $1.2
million, or 6.1%. Same store sales (revenues earned in stores operated for the
entirety of both periods) increased 16.1% for the first quarter of fiscal 2007.
As previously disclosed, during the third quarter of fiscal 2006 two
significant hurricanes impacted a portion of our market area. This has resulted
in increased sales, but also negatively impacted our credit portfolios. Same
store sales, excluding the storm-impacted markets of Southeast Texas and
Louisiana, increased 11.6%. The markets excluding the Southeast Texas and
Louisiana markets accounted for 78.7% of same store Product sales and Service
maintenance agreement commissions during the quarter ended April 30, 2006.
"We continue to enjoy strong sales growth with comp store increases in the
mid-teens as well as the benefit of new store sales," said Thomas J. Frank,
Conn's Chairman and Chief Executive Officer. "We expect to open five to six
stores during this fiscal year, with one opened during the first quarter and
another just opened in late May. Both of these stores were opened in our Houston
market. Product margin remained constant while overall margin was down due in
part to the previously reported effects of loan losses caused by the disruption
in our credit collection activities during our Hurricane Rita evacuation."
Overall margin decreased approximately 170 basis points with 70 basis
points of the reduction due to slower growth in securitization income, which was
impacted by higher loan losses, primarily as a result of the impact of Hurricane
Rita on our credit operations, and increased program costs, 70 basis points
coming from reduced penetration on the sales of service maintenance agreements
and credit insurance and 30 basis points due to various other factors. Partially
offsetting the margin shortfall was a decrease in SG&A expense as a percentage
of revenue of approximately 90 basis points.
During the first quarter, the Company opened a new store in Baytown, Texas.
In May 2006, the Company opened another new store in the Houston market to bring
the total store count to 58. By the end of January 2007, the Company expects to
operate approximately 61 to 62 stores.
EPS Guidance
The Company reaffirmed its guidance for fiscal year 2007 (the year ending
January 31, 2007) of earnings per diluted share of approximately $1.85 to $1.90.
The earnings guidance does give effect for changes resulting from the required
adoption of Statement of Financial Accounting Standards No. 123R, Share-Based
Payment, on February 1, 2006. The effect on earnings as a result of FAS 123R was
described in a previous press release. Comparable store sales increases are
projected in the mid to high single digit range for the year including
consideration for the impact of the prior year storms.
Conference Call Information
Conn's, Inc. will host a conference call and audio webcast today, June 1,
2006, at 10:00 AM, CST, to discuss financial results for the quarter ended April
30, 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) 822-4794.
About Conn's, Inc.
The Company is a specialty retailer currently operating 58 retail locations
in Texas and Louisiana: twenty stores in the Houston area, twelve in the
Dallas/Fort Worth Metroplex, eight 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; 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 30, 2006 and the 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
April 30,
-------------------
2005 2006
--------- ---------
Revenues
Total net sales $138,934 $171,705
Finance charges and other 19,229 20,410
--------- ---------
Total revenues 158,163 192,115
Cost and expenses
Cost of goods sold, including warehousing and
occupancy costs 100,917 125,729
Cost of parts sold, including warehousing and
occupancy costs 1,225 1,565
Selling, general and administrative expense 39,745 46,411
Provision for bad debts 1,152 1,070
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Total cost and expenses 143,039 174,775
--------- ---------
Operating income 15,124 17,340
Interest (income) expense, net 355 (184)
--------- ---------
Income before income taxes 14,769 17,524
Total provision for income taxes 5,188 6,146
--------- ---------
Net income $9,581 $11,378
========= =========
Earnings per share
Basic $0.41 $0.48
Diluted $0.40 $0.47
Average common shares outstanding
Basic 23,307 23,596
Diluted 23,856 24,448
Conn's, Inc.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(in thousands)
January 31, April 30,
2006 2006
----------- -----------
Assets
Current assets
Cash and cash equivalents $45,176 $30,924
Interests in securitized assets and accounts
receivable, net 146,991 148,938
Inventories 73,987 80,527
Deferred income taxes 4,971 3,518
Prepaid expenses and other assets 4,004 4,510
----------- -----------
Total current assets 275,129 268,417
Non-current deferred income tax asset 2,464 2,881
Total property and equipment, net 54,826 58,828
Goodwill and other assets, net 9,877 9,885
----------- -----------
Total assets $342,296 $340,011
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $- $-
Current portion of long-term debt 136 -
Accounts payable 40,920 36,884
Accrued compensation and related expenses 18,847 10,645
Accrued expenses 17,380 16,842
Fair value of derivatives - -
Other current liabilities 18,049 15,278
----------- -----------
Total current liabilities 95,332 79,649
Long-term debt - -
Non-current deferred income tax liability 903 960
Deferred gain on sale of property 476 435
Total stockholders' equity 245,585 258,967
----------- -----------
Total liabilities and stockholders'
equity $342,296 $340,011
=========== ===========
Conn's, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
April 30,
------------------
2005 2006
-------- --------
Net cash provided by (used in) operating activities $11,656 $(8,384)
Cash flows from investing activities
Purchase of property and equipment (3,273) (7,023)
Proceeds from sale of property 11 48
-------- --------
Net cash used in investing activities (3,262) (6,975)
Cash flows from financing activities
Net borrowings (payments) under bank credit
facilities (10,500) -
Proceeds from stock issued under employee benefit
plans 755 1,132
Excess tax benefits from stock-based compensation - 133
Increase in debt issuance costs - (22)
Payment of promissory notes (7) (136)
-------- --------
Net cash provided by (used in) financing activities (9,752) 1,107
-------- --------
Net change in cash (1,358) (14,252)
Cash and cash equivalents
Beginning of the year 7,027 45,176
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End of period $5,669 $30,924
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CALCULATION OF GROSS MARGIN PERCENTAGE
(dollars in thousands)
Three Months Ended
April 30,
-------------------
2005 2006
--------- ---------
A Product sales $127,275 $158,509
B Service maintenance agreement commissions, net 6,884 7,967
C Service revenues 4,775 5,229
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D Total net sales 138,934 171,705
E Finance charges and other 19,229 20,410
--------- ---------
F Total revenues 158,163 192,115
G Cost of goods sold, including warehousing and
occupancy cost (100,917) (125,729)
H Cost of parts sold, including warehousing and
occupancy cost (1,225) (1,565)
--------- ---------
I Gross margin dollars (F+G+H) $56,021 $64,821
========= =========
Gross margin percentage (I/F) 35.4% 33.7%
J Product margin dollars (A+G) 26,358 32,780
K Product margin percentage (J/A) 20.7% 20.7%
PORTFOLIO STATISTICS
For the periods ended January 31, 2004, 2005 and 2006
and April 30, 2005 and 2006
(dollars in thousands, except average outstanding balance per account)
January 31, April 30,
----------------------------- -------------------
2004 2005 2006 2005 2006
--------- --------- --------- --------- ---------
Total accounts 299,717 350,251 415,338 358,291 415,094
Total outstanding
balance $349,470 $428,700 $519,721 $444,498 $521,532
Average outstanding
balance per account $1,166 $1,224 $1,251 $1,241 $1,256
60 day delinquency $18,267 $23,143 $35,537 $18,491 $30,890
Percent delinquency 5.2% 5.4% 6.8% 4.2% 5.9%
Loan loss ratio 3.4% 2.9% 2.5% 2.9% 2.6%
CONTACT: Conn's, Inc.
Thomas J. Frank, 409-832-1696 Ext. 3218