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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)
March 29, 2007
----------------------------
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 March 29, 2007, the Company issued a press release announcing its
earnings for the quarter and fiscal year ended January 31, 2007. 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 March 29, 2007
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: March 29, 2007 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 March 29, 2007, January 31, 2007
Earnings
4
EXHIBIT 99.1
Conn's, Inc. Reports Earnings for the Quarter and Year Ended January 31, 2007
BEAUMONT, Texas--(BUSINESS WIRE)--March 29, 2007--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 year ended January 31, 2007.
Net income for the fourth fiscal quarter decreased 1.0% to $12.7 million
compared with $12.8 million for the fourth quarter of last year. Diluted
earnings per share available for common stockholders were $0.52 compared with
$0.52 for the fourth quarter of last year. Total revenues for the quarter ended
January 31, 2007 increased 3.2% to $212.6 million compared with $206.1 million
for the quarter ended January 31, 2006. This increase in revenue included
increases in "Finance charges and other" of $2.2 million, or 10.3%, and an
increase in net sales of $4.3 million, or 2.3%. Same store sales (revenues
earned in stores operated for the entirety of both periods) decreased 2.2% for
the fourth quarter of fiscal 2007. As previously disclosed, the same store sales
increase for the quarter ending January 31, 2006 of 22.6% was positively
impacted 700 to 900 basis points by hurricanes Katrina and Rita.
Net income for the year ended January 31, 2007 decreased 1.9% to $40.3
million compared with $41.1 million for the prior year. Diluted earnings per
share available for common stockholders for the year ended January 31, 2007 were
$1.66 compared with $1.71 for last year. Total revenues for the year ended
January 31, 2007 increased 8.5% to $760.7 million compared with $701.1 million
for the year ended January 31, 2006. This increase in revenue included net sales
increases of $56.2 million, or 9.1%, and increases in "Finance charges and
other" of $3.3 million, or 4.1%. Same store sales (revenues earned in stores
operated for the entirety of both periods) increased 3.6% for fiscal 2007.
Credit portfolio performance improved as delinquencies and credit loss
rates were lower as compared to the third quarter of this year and continued to
show improvement in the first month of fiscal 2008. Delinquencies also improved
relative to year over year results. The credit loss rate was consistent for the
quarter and higher for the year when compared to corresponding periods of the
prior year. 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-K which will be filed
later today.
"Considering the tough comps and the challenge to our credit operations,
both of which were brought on by the effects of the storms in 2005, we really
had a good year," said Thomas J. Frank, Sr., the Company's Chairman and CEO.
"The storms affected overall operating results last year positively and this
year negatively. If you averaged the performance of the two years together, you
get same store sales growth of over 10% a year and earnings growth of over 15% a
year. And we finished the year strong."
As part of the previously announced stock repurchase plan, the company
repurchased 168,000 shares of common stock during the year ended January 31,
2007 and an additional 101,000 shares through March 26, 2007. The Company
intends to continue repurchasing shares up to the authorized limit of $50
million dependent upon market conditions and share price.
During the fiscal year ended January 31, 2007, the Company opened six new
stores, three in its Houston market, one in San Antonio and two in the
Dallas/Fort Worth market, bringing the total store count to 62. The Company
expects to open 6 to 8 new stores in the coming year.
EPS Guidance
Today, the Company announced its guidance for its fiscal year 2008 (the
year ending January 31, 2008) of earnings per diluted share in a range of $1.75
to $1.85.
Conference Call Information
Conn's, Inc. will host a conference call and audio webcast today, March 29,
2007, at 10:00 AM, CDT, to discuss financial results for the quarter and year
ended January 31, 2007. The webcast will be available live at www.conns.com and
will be archived for one year. Participants can join the call by dialing
800-811-8824 or 913-981-4903.
About Conn's, Inc.
The Company is a specialty retailer currently operating 62 retail locations
in Texas and Louisiana: twenty one stores in the Houston area, fourteen 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 (both standard and high definition), 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 58% 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 annual report on Form 10-K which
will be filed later today. 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 Year Ended
January 31, January 31,
------------------- -------------------
2006 2007 2006 2007
--------- --------- --------- ---------
Revenues
Total net sales $184,887 $189,205 $620,738 $676,937
Finance charges and other 21,193 23,367 80,410 83,720
--------- --------- --------- ---------
Total revenues 206,080 212,572 701,148 760,657
Cost and expenses
Cost of goods sold,
including warehousing and
occupancy costs 133,544 139,238 448,064 495,350
Cost of parts sold,
including warehousing and
occupancy costs 1,515 1,997 5,310 6,785
Selling, general and
administrative expense 50,887 51,118 182,728 195,908
Provision for bad debts 471 517 1,133 1,476
--------- --------- --------- ---------
Total cost and expenses 186,417 192,870 637,235 699,519
--------- --------- --------- ---------
Operating income 19,663 19,702 63,913 61,138
Interest (income) expense, net (88) (164) 400 (676)
Other (income) expense, net 62 1 69 (772)
--------- --------- --------- ---------
Income before income taxes 19,689 19,865 63,444 62,586
Total provision for income
taxes 6,902 7,201 22,341 22,275
--------- --------- --------- ---------
Net income $12,787 $12,664 $41,103 $40,311
========= ========= ========= =========
Earnings per share
Basic $0.54 $0.53 $1.76 $1.70
Diluted $0.52 $0.52 $1.71 $1.66
Average common shares
outstanding
Basic 23,523 23,680 23,412 23,663
Diluted 24,532 24,204 24,088 24,289
Conn's, Inc.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(in thousands)
January 31,
-----------------------
2006 2007
----------- -----------
Assets
Current assets
Cash and cash equivalents $45,176 $56,570
Interests in securitized assets and accounts
receivable, net 166,186 168,296
Inventories 73,987 87,098
Deferred income taxes - 551
Prepaid expenses and other assets 4,004 5,247
----------- -----------
Total current assets 289,353 317,762
Non-current deferred income tax asset 1,561 2,920
Total property and equipment, net 54,826 59,440
Goodwill and other assets, net 9,877 9,825
----------- -----------
Total assets $355,617 $389,947
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $- $-
Current portion of long-term debt 136 110
Accounts payable 44,282 54,045
Accrued compensation and related expenses 18,847 9,234
Accrued expenses 17,380 20,424
Other current liabilities 18,635 13,209
----------- -----------
Total current liabilities 99,280 97,022
Long-term debt - 88
Deferred gain on sale of property 476 309
Total stockholders' equity 255,861 292,528
----------- -----------
Total liabilities and stockholders' equity $355,617 $389,947
=========== ===========
Conn's, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
January 31,
-------------------
2006 2007
--------- ---------
Net cash provided by operating activities $64,184 $28,664
Cash flows from investing activities
Purchase of property and equipment (18,490) (18,425)
Proceeds from sale of property 34 2,278
--------- ---------
Net cash used in investing activities (18,456) (16,147)
Cash flows from financing activities
Net borrowings (payments) under bank credit
facilities (10,500) -
Purchase of treasury stock - (3,797)
Proceeds from stock issued under employee
benefit plans 2,813 2,617
Excess tax benefits from stock-based
compensation 134 210
Increase in debt issuance costs (130) -
Borrowings on promissory notes 136 -
Payment of promissory notes (32) (153)
--------- ---------
Net cash used in financing activities (7,579) (1,123)
--------- ---------
Net change in cash 38,149 11,394
Cash and cash equivalents
Beginning of the year 7,027 45,176
--------- ---------
End of period $45,176 $56,570
========= =========
CALCULATION OF GROSS MARGIN PERCENTAGE
(dollars in thousands)
Three Months Ended Year Ended
January 31, January 31,
------------------- -------------------
2006 2007 2006 2007
--------- --------- --------- ---------
A Product sales $171,330 $175,209 $569,877 $623,959
B Service maintenance
agreement commissions, net 8,345 8,692 30,583 30,567
C Service revenues 5,212 5,304 20,278 22,411
--------- --------- --------- ---------
D Total net sales 184,887 189,205 620,738 676,937
E Finance charges and other 21,193 23,367 80,410 83,720
--------- --------- --------- ---------
F Total revenues 206,080 212,572 701,148 760,657
Cost of goods sold,
G including warehousing and
occupancy cost (133,544) (139,238) (448,064) (495,350)
Cost of parts sold,
H including warehousing and
occupancy cost (1,515) (1,997) (5,310) (6,785)
--------- --------- --------- ---------
I Gross margin dollars
(F+G+H) $71,021 $71,337 $247,774 $258,522
========= ========= ========= =========
Gross margin percentage
(I/F) 34.5% 33.6% 35.3% 34.0%
J Product margin dollars (A+G) $37,786 $35,971 $121,813 $128,609
K Product margin percentage
(J/A) 22.1% 20.5% 21.4% 20.6%
PORTFOLIO STATISTICS
For the periods ended January 31, 2004, 2005, 2006 and 2007
(dollars in thousands, except average outstanding balance per account)
January 31,
---------------------------------------
2004 2005 2006 2007
--------- --------- --------- ---------
Total accounts 299,717 350,251 415,338 459,065
Total outstanding balance $349,470 $428,700 $519,721 $569,551
Average outstanding balance
per account $1,166 $1,224 $1,251 $1,241
60 day delinquency $18,267 $23,143 $35,537 $37,662
Percent delinquency 5.2% 5.4% 6.8% 6.6%
Charge-off ratio (annual) 2.9% 2.4% 2.5% 3.3%
CONTACT: Conn's, Inc., Beaumont
Thomas J. Frank, 409-832-1696 Ext. 3218
Chairman and CEO