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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, 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 August 30, 2007, the Company issued a press release announcing its
earnings for the quarter ended July 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 August 30, 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: August 30, 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 August 30, 2007, July 31, 2007
Earnings
4
EXHIBIT 99.1
Conn's, Inc. Reports Earnings for the Quarter Ended July 31, 2007
BEAUMONT, Texas--(BUSINESS WIRE)--Aug. 30, 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 six
months ended July 31, 2007.
Net income for the second fiscal quarter increased 13.0% to $9.7
million, compared with $8.5 million for the second quarter of last
year. Diluted earnings per share grew 14.3% to $0.40, compared with
$0.35 for the second quarter of last year. Total revenues for the
quarter ended July 31, 2007, increased 11.7% to $203.5 million
compared with $182.2 million for the quarter ended July 31, 2006. This
increase in revenues included increases in net sales of $15.4 million,
or 9.4%, and an increase in "Finance charges and other" of $5.9
million, or 32.1%. Same store sales (revenues earned in stores
operated for the entirety of both periods) increased 5.0% for the
second quarter of fiscal 2008.
Credit portfolio performance continued to improve as the credit
loss rate declined for the fourth consecutive quarter, and was
significantly lower than the second quarter of the prior year. The
percentage of receivables over 60-days past due increased slightly.
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. During
the second quarter of fiscal 2008, "Finance charges and other"
decreased $0.5 million due to the fair value mark-to-market
adjustment, which was negatively impacted by higher projected
borrowing costs and a slightly faster portfolio turnover rate,
partially offset by the benefit of the growth in the portfolio, 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.
During the quarter ended July 31, 2007, the Company completed a
legal entity reorganization that resulted in the reversal of
previously accrued Texas margin taxes. The net effect was a one-time
reduction in the provision for income taxes of $0.9 million. In July
2007, the Company began accruing the Texas margin tax again and
expects its effective tax rate to be between 36.0% and 37.0% in future
quarters. Income before income taxes for the second quarter in the
prior year benefited from a $0.7 million gain recognized on the sale
of property.
Net income for the six months ended July 31, 2007, increased 10.3%
to $22.6 million compared with $20.5 million for the prior year.
Diluted earnings per share for the six months ended July 31, 2007,
were $0.94 compared with $0.84 in the prior year period. Total
revenues for the six months ended July 31, 2007, increased 9.2% to
$408.8 million compared with $374.4 million for the six months ended
July 31, 2006. This increase in revenues included net sales increases
of $25.0 million, or 7.5%, and increases in "Finance charges and
other" of $9.4 million, or 24.1%. Same store sales (revenues earned in
stores operated for the entirety of both periods) increased 2.1% for
the first six months of fiscal 2008.
"We are pleased with our strong sales results and continued solid
credit portfolio performance this quarter," said Thomas J. Frank, Sr.,
the Company's Chairman and CEO. "We delivered excellent earnings
growth in a challenging retail atmosphere, further proving the
strength of our model."
As part of the previously announced stock repurchase plan, the
company repurchased 153,085 shares of common stock during the three
months ended July 31, 2007, and an additional 250,900 shares through
August 28, 2007. The Company has repurchased 749,985 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.
The Company currently has 63 stores in operation with development
activities underway in new and existing markets. Due to the impact of
the high level of rainfall during recent months in the Company's
markets and construction scheduling issues, construction of planned
new stores has been delayed. Over the next 12 months, the Company
expects to open a total of 10 to 12 stores, with a total of 15 to 18
stores opened by January 31, 2009. It is expected that two of the
stores to be opened in fiscal year 2009 will be replacement locations.
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,
August 30, 2007, at 10:00 AM, CDT, to discuss financial results for
the quarter ended July 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 866-290-0916 or 913-312-1226.
About Conn's, Inc.
The Company is a specialty retailer currently operating 63 retail
locations in Texas and Louisiana: 21 stores in the Houston area, 14 in
the Dallas/Fort Worth Metroplex, 10 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 micro-display projection, plasma and
LCD flat-panel televisions, camcorders, digital cameras, 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 (QSPE) in exchange for cash and subordinated
securities. The QSPE funds its purchases of the receivables through
the issuance of asset-backed and variable funding notes issued to
third parties and subordinated securities to the Company.
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
ability to introduce additional product categories; 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 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 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 Six Months Ended
July 31, July 31,
------------------- -------------------
2006 2007 2006 2007
--------- --------- --------- ---------
Revenues
Total net sales $163,637 $179,001 $335,342 $360,366
Finance charges and other 18,567 24,526 39,050 48,471
--------- --------- --------- ---------
Total revenues 182,204 203,527 374,392 408,837
Cost and expenses
Cost of goods sold,
including warehousing and
occupancy costs 119,756 132,677 245,485 264,648
Cost of parts sold,
including warehousing and
occupancy costs 1,389 2,123 2,954 3,989
Selling, general and
administrative expense 48,425 54,733 95,089 106,369
Provision for bad debts 390 348 433 908
--------- --------- --------- ---------
Total cost and expenses 169,960 189,881 343,961 375,914
--------- --------- --------- ---------
Operating income 12,244 13,646 30,431 32,923
Interest income, net (187) (251) (371) (491)
Other income, net (721) (55) (754) (886)
--------- --------- --------- ---------
Income before income taxes 13,152 13,952 31,556 34,300
Provision for income taxes 4,608 4,295 11,063 11,697
--------- --------- --------- ---------
Net income $ 8,544 $ 9,657 $ 20,493 $ 22,603
========= ========= ========= =========
Earnings per share
Basic $ 0.36 $ 0.41 $ 0.87 $ 0.96
Diluted $ 0.35 $ 0.40 $ 0.84 $ 0.94
Average common shares
outstanding
Basic 23,676 23,489 23,637 23,527
Diluted 24,344 24,058 24,355 24,089
Conn's, Inc.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(in thousands)
January 31, July 31,
2007 2007
----------- -----------
Assets (unaudited)
Current assets
Cash and cash equivalents $ 56,570 $ 43,599
Interests in securitized assets and accounts
receivable, net 168,296 193,681
Inventories 87,098 84,870
Deferred income taxes 551 1,660
Prepaid expenses and other assets 5,247 5,343
----------- -----------
Total current assets 317,762 329,153
Non-current deferred income tax asset 2,920 -
Total property and equipment, net 59,440 54,625
Goodwill and other assets, net 9,825 9,798
----------- -----------
Total assets $ 389,947 $ 393,576
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $ - $ -
Current portion of long-term debt 110 118
Accounts payable 54,045 38,895
Accrued compensation and related expenses 9,234 8,704
Accrued expenses 20,424 22,229
Other current liabilities 13,209 12,898
----------- -----------
Total current liabilities 97,022 82,844
Long-term debt 88 58
Non-current deferred income tax liability - 499
Deferred gains on sales of property 309 1,406
Total stockholders' equity 292,528 308,769
----------- -----------
Total liabilities and stockholders'
equity $ 389,947 $ 393,576
=========== ===========
Conn's, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)
Six Months Ended
July 31,
-------------------
2006 2007
--------- ---------
Net cash used in operating activities $(14,009) $ (6,841)
Cash flows from investing activities
Purchase of property and equipment (11,858) (8,203)
Proceeds from sale of property 2,250 8,860
--------- ---------
Net cash provided by (used in) investing
activities (9,608) 657
Cash flows from financing activities
Purchase of treasury stock - (8,707)
Proceeds from stock issued under employee
benefit plans 1,471 1,963
Excess tax benefits from stock-based
compensation 135 2
Increase in debt issuance costs (107) -
Payment of promissory notes (136) (45)
--------- ---------
Net cash (used in) provided by financing
activities 1,363 (6,787)
--------- ---------
Net change in cash (22,254) (12,971)
Cash and cash equivalents
Beginning of the year 45,176 56,570
--------- ---------
End of period $ 22,922 $ 43,599
========= =========
CALCULATION OF GROSS MARGIN PERCENTAGE
(dollars in thousands)
Three Months Ended Six Months Ended
July 31, July 31,
--------------------- ---------------------
2006 2007 2006 2007
---------- ---------- ---------- ----------
A Product sales $ 150,647 $ 163,793 $ 309,156 $ 330,432
B Service maintenance
agreement commissions,
net 7,063 9,071 15,030 18,352
C Service revenues 5,927 6,137 11,156 11,582
---------- ---------- ---------- ----------
D Total net sales 163,637 179,001 335,342 360,366
E Finance charges and
other 18,567 24,526 39,050 48,471
---------- ---------- ---------- ----------
F Total revenues 182,204 203,527 374,392 408,837
G Cost of goods sold,
including warehousing
and occupancy cost (119,756) (132,677) (245,485) (264,648)
H Cost of parts sold,
including warehousing
and occupancy cost (1,389) (2,123) (2,954) (3,989)
---------- ---------- ---------- ----------
I Gross margin dollars
(F+G+H) $ 61,059 $ 68,727 $ 125,953 $ 140,200
========== ========== ========== ==========
Gross margin percentage
(I/F) 33.5% 33.8% 33.6% 34.3%
J Product margin dollars
(A+G) $ 30,891 $ 31,116 $ 63,671 $ 65,784
K Product margin
percentage (J/A) 20.5% 19.0% 20.6% 19.9%
PORTFOLIO STATISTICS
For the periods ended January 31, 2005, 2006 and 2007 and July 31,
2006 and 2007
(dollars in thousands, except average outstanding balance per account)
January 31, July 31,
----------------------------- -------------------
2005 2006 2007 2006 2007
--------- --------- --------- --------- ---------
Total accounts 350,251 415,338 459,065 425,738 479,952
Total outstanding
balance $428,700 $519,721 $569,551 $530,672 $606,161
Average outstanding
balance per account $ 1,224 $ 1,251 $ 1,241 $ 1,246 $ 1,263
60 day delinquency $ 23,143 $ 35,537 $ 37,662 $ 30,779 $ 39,211
Percent delinquency 5.4% 6.8% 6.6% 5.8% 6.5%
Charge-off ratio
(year-to-date,
annualized) 2.4% 2.5% 3.3% 3.7% 2.5%
CONTACT: Conn's, Inc., Beaumont
Chairman and CEO
Thomas J. Frank, 409-832-1696 Ext. 3218