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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)
May 31, 2007
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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 May 31, 2007, the Company issued a press release announcing its earnings
for the quarter ended April 30, 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 May 31, 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: May 31, 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 May 31, 2007, April 30, 2007
Earnings
4
Exhibit 99.1
Conn's, Inc. Reports Earnings for the Quarter Ended April 30, 2007
BEAUMONT, Texas--(BUSINESS WIRE)--May 31, 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 ended April
30, 2007.
Net income for the first fiscal quarter increased 8.3% to $12.9
million compared with $11.9 million for the first quarter of last
year. Diluted earnings per share grew 10.2% to $0.54 compared with
$0.49 for the first quarter of last year. Total revenues for the
quarter ended April 30, 2007, increased 6.8% to $205.3 million
compared with $192.2 million for the quarter ended April 30, 2006.
This increase in revenue included increases in net sales of $9.7
million, or 5.6%, and an increase in "Finance charges and other" of
$3.5 million, or 16.9%. Same store sales (revenues earned in stores
operated for the entirety of both periods) decreased 0.3% for the
first quarter of fiscal 2008. As previously disclosed, the same store
sales increase for the quarter ending April 30, 2006, of 16.1%, was
positively impacted by hurricanes Katrina and Rita.
Credit portfolio performance continued to improve as delinquencies
were sequentially lower over the past three quarters and credit loss
rates were sequentially lower over the past four quarters.
Additionally, the credit loss rate was significantly lower than the
first quarter of the prior year. The credit portfolio grew at an
annualized rate of 10% during the first quarter of fiscal 2008,
benefited by growth in promotional credit balances. Promotional credit
(same as cash and deferred interest programs) is reserved for our
highest credit quality customers, thereby reducing the overall risk in
the portfolio, and is used primarily to finance sales of our highest
margin products. The current volume of promotional credit relative to
product sales is consistent with our use of this type of credit
product before the hurricanes in late 2005, which positively impacted
our sales for several quarters and reduced the need to use promotional
credit during that time period. 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.
During the first quarter of fiscal 2008 the Company adopted
several new accounting pronouncements related to the accounting for
its "Interests in securitized assets." These pronouncements resulted
in the Company electing to account for its interests in securitized
assets at fair value, with all changes in the fair value included in
"Finance charges and other." This change in accounting was adopted
effective February 1, 2007, and prior periods are not adjusted.
"Finance charges and other" increased $0.1 million due to the fair
value mark-to-market adjustment, which was driven by the increase in
the sold portfolio balance and other changes impacting the valuation
assumptions. More information on these changes may be found in the
Company's filing with the Securities and Exchange Commission on Form
10-Q which will be filed later today.
"We are off to a solid start and on track to achieve our goals for
the year," said Thomas J. Frank, Sr., the Company's Chairman and CEO.
"We were still feeling the effects of the storm at this time last year
and performed well this quarter against a very strong quarter last
year. I am encouraged by the performance of our credit operation and
look forward to improved results after a difficult year."
As part of the previously announced stock repurchase plan, the
company repurchased 178,000 shares of common stock during the three
months ended April 30, 2007 and an additional 79,500 shares through
May 30, 2007. The Company has repurchased 425,500 shares since the
inception of the plan and intends to continue repurchasing shares up
to the authorized limit of $50 million dependent upon market
conditions and share price.
During the quarter ended April 30, 2007, the Company received $8.7
million from the sales of two store locations. The Company entered
into leases on all or a portion of both locations and, as such, the
transactions qualified for sale-leaseback accounting. As a result, the
Company recorded $0.8 million of gains on the sales in "Other income,
net" and deferred $1.3 million of gains, which will reduce lease
expense over the terms of the leases.
The Company currently has 62 stores in operation with development
activities underway in new and existing markets. The Company expects
to open 7 to 10 new stores in the current year, primarily in the last
half of the year.
EPS Guidance
Today, the Company is confirming 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,
May 31, 2007, at 10:00 AM, CDT, to discuss financial results for the
quarter ended April 30, 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. In the last three years,
the Company 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 was filed on
March 29, 2007. 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
April 30,
-------------------
2006 2007
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Revenues
Total net sales $171,705 $181,365
Finance charges and other 20,483 23,945
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Total revenues 192,188 205,310
Cost and expenses
Cost of goods sold, including warehousing and
occupancy costs 125,729 131,971
Cost of parts sold, including warehousing and
occupancy costs 1,565 1,866
Selling, general and administrative expense 46,664 51,636
Provision for bad debts 43 560
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Total cost and expenses 174,001 186,033
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Operating income 18,187 19,277
Interest income, net (184) (240)
Other income, net (33) (831)
--------- ---------
Income before income taxes 18,404 20,348
Provision for income taxes 6,455 7,402
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Net income $11,949 $12,946
========= =========
Earnings per share
Basic $0.51 $0.55
Diluted $0.49 $0.54
Average common shares outstanding
Basic 23,596 23,567
Diluted 24,448 24,121
Conn's, Inc.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(in thousands)
January 31, April 30,
2007 2007
----------- -----------
(unaudited)
Assets
Current assets
Cash and cash equivalents $56,570 $52,880
Interests in securitized assets and
accounts receivable, net 168,296 180,144
Inventories 87,098 81,255
Deferred income taxes 551 856
Prepaid expenses and other assets 5,247 7,368
----------- -----------
Total current assets 317,762 322,503
Non-current deferred income tax asset 2,920 -
Total property and equipment, net 59,440 52,329
Goodwill and other assets, net 9,825 9,812
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Total assets $389,947 $384,644
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Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $- $-
Current portion of long-term debt 110 104
Accounts payable 54,045 35,583
Accrued compensation and related expenses 9,234 7,921
Accrued expenses 20,424 20,320
Other current liabilities 13,209 16,358
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Total current liabilities 97,022 80,286
Long-term debt 88 59
Non-current deferred income tax liability - 1,503
Deferred gains on sales of property 309 1,500
Total stockholders' equity 292,528 301,296
----------- -----------
Total liabilities and stockholders'
equity $389,947 $384,644
=========== ===========
Conn's, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)
Three Months Ended
April 30,
-------------------
2006 2007
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Net cash used in operating activities $(8,384) $(5,612)
Cash flows from investing activities
Purchase of property and equipment (7,023) (2,748)
Proceeds from sale of property 48 8,727
--------- ---------
Net cash provided by (used in) investing
activities (6,975) 5,979
Cash flows from financing activities
Purchase of treasury stock - (4,554)
Proceeds from stock issued under employee
benefit plans 1,132 530
Excess tax benefits from stock-based
compensation 133 2
Increase in debt issuance costs (22) -
Payment of promissory notes (136) (35)
--------- ---------
Net cash (used in) provided by financing
activities 1,107 (4,057)
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Net change in cash (14,252) (3,690)
Cash and cash equivalents
Beginning of the year 45,176 56,570
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End of period $30,924 $52,880
========= =========
CALCULATION OF GROSS MARGIN PERCENTAGE
(dollars in thousands)
Three Months Ended
April 30,
-------------------
2006 2007
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A Product sales $158,509 $166,639
B Service maintenance agreement commissions, net 7,967 9,281
C Service revenues 5,229 5,445
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D Total net sales 171,705 181,365
E Finance charges and other 20,483 23,945
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F Total revenues 192,188 205,310
Cost of goods sold, including warehousing
G and occupancy cost (125,729) (131,971)
Cost of parts sold, including warehousing
H and occupancy cost (1,565) (1,866)
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I Gross margin dollars (F+G+H) $64,894 $71,473
========= =========
Gross margin percentage (I/F) 33.8% 34.8%
J Product margin dollars (A+G) $32,780 $34,668
K Product margin percentage (J/A) 20.7% 20.8%
PORTFOLIO STATISTICS
For the periods ended January 31, 2005, 2006 and 2007 and April 30,
2006 and 2007
(dollars in thousands, except average outstanding balance per account)
January 31, April 30,
----------------------------- -------------------
2005 2006 2007 2006 2007
--------- --------- --------- --------- ---------
Total accounts 350,251 415,338 459,065 412,392 463,259
Total outstanding
balance $428,700 $519,721 $569,551 $521,532 $584,162
Average outstanding
balance per account $1,224 $1,251 $1,241 $1,265 $1,261
60 day delinquency $23,143 $35,537 $37,662 $30,890 $35,185
Percent delinquency 5.4% 6.8% 6.6% 5.9% 6.0%
Charge-off ratio
(annual) 2.4% 2.5% 3.3% 3.6% 2.7%
CONTACT: Conn's, Inc., Beaumont
Chairman and CEO
Thomas J. Frank, 409-832-1696 Ext. 3218