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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 30, 2004
____________________________
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))
2
Item 2.02 Results of Operations and Financial Condition.
On August 30, 2004, the Company issued a press release announcing earnings
for the quarter ended July 31, 2004. 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 30, 2004
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: August 30, 2004 By: /s/ C. William Frank
-----------------------------------------
C. William Frank
Executive Vice President and Chief
Financial Officer
3
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
99.1 Press Release, dated August 30, 2004
4
Exhibit 99.1
Conn's, Inc. Reports Record Second Quarter 2005 Earnings
BEAUMONT, Texas--(BUSINESS WIRE)--Aug. 30, 2004--Conn's, Inc.
(Nasdaq/NM:CONN), a specialty retailer of home appliances, consumer electronics,
home office products, bedding and lawn and garden products, today announced
record results for the quarter and six months ended July 31, 2004.
Net income available for common stockholders for the second quarter
increased 37.6% to $6.8 million compared to $4.9 million for the second quarter
of last year. Diluted earnings per share available for common stockholders
decreased 3.3% to $0.29 from $0.30 in the prior year. On a pro forma basis, as
though all shares issued in the initial public offering were outstanding in both
periods for the full period and IPO proceeds were used to pay-off existing
balance sheet debt, diluted earnings per share increased 16.0% to $0.29 for the
quarter ended July 31, 2004 from $0.25 for the quarter ended July 31, 2003. Net
revenues for the quarter ended July 31, 2004 increased 16.6% to $136.6 million
compared with $117.1 million for the quarter ended July 31, 2003. This increase
in revenue included net sales increases of $16.1 million, or 15.7%, and
increases from "Finance charges and other" of $3.4 million, or 23.5%. Same store
sales (revenues earned in stores operated for the entirety of both periods)
increased 7.2% for the second quarter of fiscal 2005. One of the factors that
contributed to success in sales increases and profitability in the current
quarter was the expansion of credit promotion programs in excess of one year;
the corresponding offset to these operational improvements included a higher use
of cash to absorb receivable growth that does not qualify for funding under the
asset-backed securitization program.
Net revenues for the six months ended July 31, 2004 increased 14.1% to
$271.5 million compared with $237.9 million for the six months ended July 31,
2003. This increase in revenue included net sales increases of $28.0 million, or
13.4%, and increases from "Finance charges and other" of $5.6 million, or 19.7%.
Same store sales increased 5.3% for the first six months of fiscal 2004. Net
income available for common stockholders for the six months ended July 31, 2004
increased 54.4% to $14.6 million compared to $9.4 million for the first six
months of last year. Diluted earnings per share available for the common
stockholder increased 8.9% to $0.61 from $0.56 in the prior year. On a pro forma
basis, as though all shares issued in the initial public offering were
outstanding in both periods for the full period and IPO proceeds were used to
pay-off existing balance sheet debt, diluted earnings per share increased 24.5%
to $0.61 for the six months ended July 31, 2004 from $0.49 for the six months
ended July 31, 2003.
"We continue to be pleased with our progress since becoming a public
company," said Thomas J. Frank, Conn's chairman and chief executive officer. "We
feel that the same store sales performance for the quarter and the year
indicates that we kept our commitment to potential investors to execute at an
exceptional level. We believe the additional capital expenditures that we have
recently made remodeling our stores has already had a positive impact on our
operations and will continue to generate an appropriate return on our
investment. The continuation of our efforts to push our primary business in
appliances and electronics and the emphasis that we have placed on track sales,
bedding and lawn and garden categories seems to be providing positive results,
both at the top and bottom lines."
EPS Guidance
The Company also issued guidance for the third quarter ended Oct. 31, 2004
of earnings per diluted share of approximately $0.25 to $0.27. Guidance issued
for the entire year continues to include earnings per diluted share of
approximately $1.24 to $1.26, with comparable store sales increase in the mid
single digit range.
Conference Call Information
Conn's, Inc. will host a conference call and audio webcast today, Aug. 30,
2004 at 10:00 a.m., CST, to discuss financial results for the quarter ended July
31, 2004. The webcast will be available at www.conns.com and will be archived
for one year. The webcast is also being distributed over CCBN's Investor
Distribution Network to both institutional and individual investors. Individual
investors can listen to the call through CCBN's individual investor center at
www.fulldisclosure.com. Institutional investors can access the call via CCBN's
password protected event management site at www.streetevents.com.
About Conn's, Inc.
The Company is a specialty retailer currently operating 47 retail locations
in Texas and Louisiana. It sells major home appliances, including refrigerators,
freezers, washers, dryers and ranges, and a variety of consumer electronics,
including projection, plasma and LCD televisions, camcorders, VCRs, DVD players
and home theater products. The Company also sells home office equipment, lawn
and garden products and bedding, and continues to introduce additional product
categories for the home to help increase same store sales and to respond to our
customers' product needs.
Unlike many of its competitors, the Company provides in-house credit
options for its customers. Historically, it has financed over 56% 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 from these assets. The Company transfers receivables, consisting
of retail installment contracts and revolving accounts extended to its
customers, to a qualifying special purpose entity, or the issuer, 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 have been 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 Form 10-K
filed on April 16, 2004. 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. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
July 31, July 31,
------------------- -------------------
2003 2004 2003 2004
--------- --------- --------- ---------
Revenues
Total net sales $102,754 $118,851 $209,441 $237,393
Finance charges and other 14,372 17,750 28,476 34,085
--------- --------- --------- ---------
Total revenues 117,126 136,601 237,917 271,478
Cost and Expenses
Cost of goods sold,
including warehousing and
occupancy costs 72,682 85,704 149,674 170,479
Cost of parts sold,
including warehousing and
occupancy costs 1,007 1,092 2,250 2,195
Selling, general and
administrative expense 32,399 37,521 64,154 72,383
Provision for bad debts 820 1,227 2,189 2,649
--------- --------- --------- ---------
Total cost and expenses 106,908 125,544 218,267 247,706
--------- --------- --------- ---------
Operating income 10,218 11,057 19,650 23,772
Interest expense 1,670 567 3,215 1,149
--------- --------- --------- ---------
Income before minority
interest and income taxes 8,548 10,490 16,435 22,623
Minority interest in limited
partnership 131 246
--------- --------- --------- ---------
Income before income taxes 8,548 10,359 16,435 22,377
Total provision for income
taxes 3,025 3,569 5,827 7,814
--------- --------- --------- ---------
Net income 5,523 6,790 10,608 14,563
Less preferred dividends (586) (1,173)
--------- --------- --------- ---------
Net income available for
common stockholders $4,937 $6,790 $9,435 $14,563
========= ========= ========= =========
Earnings per share:
Basic $0.30 $0.29 $0.56 $0.63
Diluted $0.30 $0.29 $0.56 $0.61
Average common shares
outstanding:
Basic 16,720 23,179 16,720 23,163
Diluted 16,720 23,801 16,720 23,769
CONN'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
January 31, July 31,
2004 2004
------------ ------------
Assets (Unaudited)
Current Assets
Cash and cash equivalents $12,942 $6,328
Interest in securitized assets and accounts
receivable, net 93,940 113,027
Inventories 53,742 57,827
Deferred income taxes 4,148 4,526
Prepaid expenses and other assets 3,031 2,125
------------ ------------
Total current assets 167,803 183,833
Non-current deferred tax assets 3,945 4,610
Total property and equipment, net 54,825 59,899
Goodwill and other 8,187 8,282
------------ ------------
Total assets $234,760 $256,343
============ ============
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $- $1,205
Current portion of long-term debt 338 318
Accounts payable 26,412 32,819
Fair value of derivatives 1,121 702
Other current liabilities 22,866 20,958
------------ ------------
Total current liabilities 50,737 56,002
Long-term debt 14,174 14,005
Non-current deferred tax liability and other 1,288 1,320
Minority interest 1,769 1,960
Fair value of derivatives 202 -
Total stockholders' equity,net 166,590 183,056
------------ ------------
Total liabilities and stockholders'
equity $234,760 $256,343
============ ============
CONN'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months
Ended July 31,
-------------------------
2003 2004
------------ ------------
Net cash provided by operating activities $11,003 $786
Cash flows from investing activities
Purchase of property and equipment (2,364) (9,047)
Proceeds from sale of property 189 15
------------ ------------
Net cash used by investing activities (2,175) (9,032)
Cash flows from financing activities
Net borrowings (payments) under bank credit
facilities (7,637) 1,049
Net proceeds from exercise of stock options - 687
Debt issuance costs (429) (70)
Payment of promissory notes (976) (34)
------------ ------------
Net cash provided (used) by financing
activities (9,042) 1,632
------------ ------------
Net change in cash (214) (6,614)
Cash and cash equivalents
Beginning of the year 2,448 12,942
------------ ------------
End of the year $2,234 $6,328
============ ============
CONN'S, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
PRO FORMA EARNINGS PER SHARE
(in thousands, except earnings per share)
Three Months Ended Six Months Ended
July 31, July 31,
------------------- --------------------
2003 2004 2003 2004
--------- --------- --------- ----------
Net income available for
common stockholders $4,937 $6,790 $9,435 $14,563
Add interest savings, net of
tax, due to debt payoff 342 684
Add preferred dividends 586 - 1,173 -
--------- --------- --------- ----------
Pro forma net income $5,865 $6,790 $11,292 $14,563
========= ========= ========= ==========
Total shares outstanding
pre-IPO 16,720 16,720 16,720 16,720
Shares issued in IPO,
including over-allotment 4,622 4,622 4,622 4,622
Conversion of preferred stock
into common 1,712 1,712 1,712 1,712
Weighted exercise of options - 126 - 109
Dilution due to outstanding
options 621 606
--------- --------- --------- ----------
Pro forma shares outstanding 23,054 23,801 23,054 23,769
========= ========= ========= ==========
Pro forma diluted earnings per
share $0.25 $0.29 $0.49 $0.61
========= ========= ========= ==========
Reconciliation of pro forma
shares outstanding to
according to presentation
according to GAAP:
Pro forma shares
outstanding 23,054 23,801 23,054 23,769
Adjustment since shares
were not outstanding for
the full year (6,334) - (6,334) -
--------- --------- --------- ----------
Weighted diluted
outstanding shares
according to GAAP 16,720 23,801 16,720 23,769
========= ========= ========= ==========
The use of pro forma information is considered necessary to provide
the reader with more comparable earnings per share information year
over year. As a result of the IPO transaction, the additional shares
issued were significant relative to the shares outstanding in the
prior year, the retirement of debt substantially reduced interest
expense, and preferred dividends are no longer accrued or paid.
Consequently, the shares outstanding have been adjusted to reflect the
IPO transaction as though it took place on Feb. 1, 2003, interest
expense associated with the debt that would have been paid-off has
been reduced, and preferred dividends have been eliminated in all
periods in order to compute earnings per share on a more comparable
basis.
CALCULATION OF GROSS MARGIN PERCENTAGE
(dollars in thousands)
Three Months Ended Six Months Ended
July 31, July 31,
------------------- --------------------
2003 2004 2003 2004
--------- --------- --------- ----------
Total revenues $117,126 $136,601 $237,917 $271,479
Less cost of goods and parts
sold, including warehousing
and occupancy cost (73,689) (86,795) (151,924) (172,674)
--------- --------- --------- ----------
Gross margin dollars $43,437 $49,806 $85,993 $98,805
========= ========= ========= ==========
Gross margin percentage 37.1% 36.5% 36.1% 36.4%
CONTACT: Conn's, Inc.
Thomas J. Frank, 409-832-1696 Ext. 3218