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): December 3, 2012
Conn’s, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 000-50421 | 06-1672840 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 4055 Technology Forest Blvd., Suite 210 The Woodlands, Texas |
77381 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (936) 230-5899
Not applicable
(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 Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02 | Results of Operations. |
On December 3, 2012, Conn’s, Inc. (the “Company”) issued a press release announcing its earnings for the fiscal quarter ended October 31, 2012. A copy of the press release is furnished herewith as Exhibit 99.l and is incorporated herein by reference.
| Item 8.01 | Other Events. |
On December 3, 2012, the Company issued a press release announcing the commencement of a public offering of 3,590,000 shares of common stock by certain selling stockholders and 1,410,000 shares of common stock by the Company. In addition, the Company intends to grant the underwriters a 30-day option to purchase up to approximately 750,000 shares of common stock from the Company to cover over-allotments, if any. A copy of the press release is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit |
Description | |
| 99.1 | Press release, dated December 3, 2012, announcing earnings for the fiscal quarter ended October 31, 2012. | |
| 99.2 | Press release, dated December 3, 2012, announcing commencement of public offering. | |
None of the information contained in Item 2.02 or Exhibit 99.1 of this Form 8-K shall be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and none of it shall be incorporated by reference in any filing under the Securities Act of 1933, as amended.
SIGNATURE
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: December 3, 2012 | By: | /s/ Brian E. Taylor | ||||
| Brian E. Taylor | ||||||
| Vice President and Chief Financial Officer | ||||||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press release, dated December 3, 2012, announcing earnings for the fiscal quarter ended October 31, 2012. | |
| 99.2 | Press release, dated December 3, 2012, announcing commencement of public offering. | |
Exhibit 99.1
FOR IMMEDIATE RELEASE:
CONN’S, INC. ANNOUNCES RECORD THIRD QUARTER NET INCOME
Adjusted diluted earnings per share of $0.38 for the quarter
Fiscal year 2014 earnings guidance initiated at $2.05 to $2.15 per diluted share
THE WOODLANDS, TEXAS (December 3, 2012) – Conn’s, Inc. (NASDAQ:CONN), a specialty retailer of home appliances, furniture, mattresses, consumer electronics and provider of consumer credit, today announced its results for the quarter ended October 31, 2012.
Significant items for the third quarter of fiscal 2013 include:
| • | Same store sales rose 12.6% over the prior quarter, on top of same store sales growth of 18.9% a year ago; |
| • | Total revenues increased 10.6% to $206.4 million; |
| • | Retail gross margin was 35.5%; |
| • | Adjusted retail segment operating income was $12.9 million, up $13.8 million on an adjusted basis over the prior-year quarter; |
| • | Credit segment operating income totaled $11.6 million, compared to adjusted operating income of $5.6 million for the prior-year period; |
| • | Diluted earnings per share of $0.35 on a reported basis, versus loss of $0.40 per share last year; and |
| • | Fiscal year 2013 earnings guidance was raised to diluted earnings per share of $1.55 to $1.60 on an adjusted basis. |
“Our Conn’s HomePlus store in Albuquerque has performed well since opening in November. This month we will open stores in Fort Worth, Tucson and El Paso,” stated Theodore M. Wright, Chairman and CEO. “We continue to see sales growth in our existing store base. November same store sales rose 6% on top of same store growth of 10% last year.”
Retail Segment Results
Revenues were $167.7 million for the quarter, up $12.6 million, or 8.2% over last year. This growth was driven by a 31.7% increase in furniture and mattress sales and, to a lesser extent, higher customer demand for home office equipment and appliances. Reported net sales during the current quarter also reflects the benefit of the opening of a Conn’s HomePlusTM store in Waco, Texas in mid-June and the completion of 15 store remodels over the past year. The reported revenue growth was partially offset by the impact of previous store closures.
Retail gross margin was 35.5% in the current-year quarter compared to 25.3% in the prior-year. During the three months ended October 31, 2011, the Company adjusted its inventory valuation reserve – reducing retail gross margin for the prior-year period, which benefited the reported margin expansion in the current-year period by 300 basis points. Margin expansion was reported within each of the major product categories. The margin improvement across all categories was driven by the focus on higher price-point, higher-margin products and sourcing opportunities. Growth in higher-margin furniture and mattress sales outpaced the overall increase realized in the other product categories, also favorably impacting retail gross margin.
Credit Segment Results
Revenues for the three-months ended October 31, 2012 were $38.7 million, an increase of $7.1 million, or 22.6%, over the same quarter last year. The majority of the year-over-year growth was driven by increases in both the portfolio interest and fee yield and the average portfolio balance outstanding. The portfolio interest and fee income yield was 19.3% in the third quarter of fiscal 2013 versus 18.0% reported in the prior-year period. Adoption of accounting guidance related to troubled debt restructuring reduced interest and fee income by $1.0 million and the reported yield by 70 basis points in the third quarter of fiscal 2012. The average portfolio balance was $674.5 million, up 11.7% over the prior-period average due to the growth in net sales over the past 12 months.
Provision for bad debts was $13.2 million in the current quarter, an increase of $0.1 million from the prior period after excluding a charge of $13.1 million in the year-ago period related to the adoption of the troubled debt restructuring accounting guidance.
Additional information on the credit portfolio and its performance may be found in the table included within this press release and in the Company’s Form 10-Q to be filed with the Securities and Exchange Commission.
For the three months ended October 31, 2012, the Company reported net income of $0.35 per diluted share, which includes pre-tax charges of $0.8 million associated with the extension and expansion of the Company’s revolving credit facility and $0.6 million associated with the relocation of the Company’s corporate office to The Woodlands, Texas.
The Company’s reported net loss was $0.40 per diluted share in the third quarter of fiscal 2012, and includes a pretax charge of $14.1 million, net of previously provided reserves, related to the required adoption of accounting guidance related to troubled debt restructuring, a pretax charge of $4.7 million for inventory reserves related to aged product and a charge of $0.4 million related to store closures.
Capital and Liquidity
As of October 31, 2012, the Company had $272.2 million, excluding $4.3 million of letters of credit, outstanding under its asset-based loan facility. Additionally, as of October 31, 2012, the Company had $157.5 million of immediately available borrowing capacity, and an additional $91.0 million that could become available upon increases in eligible inventory and customer receivable balances under the borrowing base.
On November 27, 2012, the Company added an additional lender to its asset-based loan facility. As a result, total commitments under the facility increased by $20.0 million to $545.0 million.
Outlook and Guidance
The Company increased earnings guidance for the fiscal year ending January 31, 2013, to diluted earnings per share of $1.55 to $1.60 on an adjusted basis. The following expectations were considered in developing the guidance for the full year:
| • | Same stores sales up 13% to 16%; |
| • | New store openings of five; |
| • | Retail gross margin between 34.5% and 35.0%; |
| • | An increase in the credit portfolio balance; |
| • | Selling, general and administrative expense, as a percent of revenues, between 29.0% and 29.5% of total revenues; and |
| • | No significant change in the number of shares outstanding. |
The Company also initiated earnings guidance of diluted earnings per share of $2.05 to $2.15 for the fiscal year ending January 31, 2014. The following expectations were considered in developing the guidance:
| • | Same stores sales up 0% to 5%; |
| • | New store openings of between 10 and 12; |
| • | Retail gross margin between 34.5% and 35.5%; |
| • | An increase in the credit portfolio balance; |
| • | Selling, general and administrative expense, as a percent of revenues, between 28.0% and 29.0% of total revenues; and |
| • | No significant change in the number of shares outstanding. |
Management Departure
After 14 years of valuable service, Rey de la Fuente, President – Credit Division, is leaving the Company to pursue other opportunities. He is staying through January 31, 2013, to complete the transition of his duties, which began early this year. Mr. de la Fuente, who reports to the Company’s Chief Operating Officer, has been with the Company since 1998 and has focused his attention in recent quarters on credit underwriting.
“We appreciate Rey’s many years of service and contributions to the company,” stated Mike Poppe, Chief Operating Officer. “We wish Rey well in his future endeavors.”
Conference Call Information
Conn’s, Inc. will host a conference call and audio webcast on Monday, December 3, 2012, at 10:00 A.M. CT, to discuss its earnings and operating performance for the quarter. A link to the live webcast, which will be archived for one year, and slides to be referred to during the call will be available at ir.Conns.com. Participants can join the call by dialing 877-754-5302 or 678-894-3020.
About Conn’s, Inc.
Conn’s is a specialty retailer and currently operates 66 retail locations, with 57 in Texas, six in Louisiana, two in Oklahoma and one in New Mexico. The Company’s primary product categories include:
| • | Home appliance, including refrigerators, freezers, washers, dryers, dishwashers, ranges and room air conditioners; |
| • | Furniture and mattress, including furniture for the living room, dining room, bedroom and related accessories and mattresses; |
| • | Consumer electronic, including LCD, LED, 3-D and plasma televisions, camcorders, digital cameras, Blu-ray players, video game equipment, portable audio and home theater products; and |
| • | Home office, including desktop and notebook computers, tablets, printers and computer accessories. |
Additionally, the Company offers a variety of products on a seasonal basis, including lawn and garden equipment, 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 addition to third-party financing programs and third-party rent-to-own payment plans.
This press release contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements include information concerning our future financial performance, business strategy, plans, goals and objectives. Statements containing the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should,” or the negative of such terms or other similar expressions are generally forward-looking in nature and not historical facts. Although we believe that the expectations, opinions, projections, and comments reflected in these forward-looking statements are reasonable, we can give no assurance that such statements will prove to be correct. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by our forward-looking statements including, but not limited to: general economic conditions impacting our customers or potential customers; our ability to continue existing or offer new customer financing programs; changes in the delinquency status of our credit portfolio; higher than anticipated net charge-offs in the credit portfolio; the success of our planned opening of new stores and the updating of existing stores; technological and market developments and sales trends for our major product offerings; our ability to fund our operations, capital expenditures, debt repayment and expansion from cash flows from operations, borrowings from our revolving credit facility, and proceeds from accessing debt or equity markets; and the other risks detailed from time-to-time in our SEC reports, including but not limited to, our Annual Report on Form 10-K for our fiscal year ended January 31, 2012 and our quarterly report on Form 10-Q for the quarter ended October 31, 2012. 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, we are not obligated to publicly release any revisions to these forward-looking statements to reflect 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)
(in thousands, except per share amounts)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| October 31, | October 31, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenues |
||||||||||||||||
| Total net sales |
$ | 167,323 | $ | 154,956 | $ | 505,915 | $ | 464,013 | ||||||||
| Finance charges and other |
39,078 | 31,667 | 108,773 | 101,618 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
206,401 | 186,623 | 614,688 | 565,631 | ||||||||||||
| Cost and expenses |
||||||||||||||||
| Cost of goods sold, including warehousing and occupancy costs |
105,688 | 112,844 | 325,041 | 324,774 | ||||||||||||
| Cost of parts sold, including warehousing and occupancy costs |
1,522 | 1,647 | 4,513 | 4,973 | ||||||||||||
| Selling, general and administrative expense |
61,210 | 59,801 | 180,247 | 175,420 | ||||||||||||
| Provision for bad debts |
13,449 | 26,400 | 34,838 | 43,115 | ||||||||||||
| Charges and credits |
641 | 375 | 1,150 | 4,033 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total cost and expenses |
182,510 | 201,067 | 545,789 | 552,315 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income (loss) |
23,891 | (14,444 | ) | 68,899 | 13,316 | |||||||||||
| Interest expense |
4,526 | 3,919 | 13,159 | 18,479 | ||||||||||||
| Loss on early extinguishment of debt |
818 | — | 818 | 11,056 | ||||||||||||
| Other (income) expense, net |
(3 | ) | (5 | ) | (105 | ) | 81 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income (loss) before income taxes |
18,550 | (18,358 | ) | 55,027 | (16,300 | ) | ||||||||||
| Provision (benefit) for income taxes |
6,765 | (5,635 | ) | 20,080 | (4,876 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
$ | 11,785 | $ | (12,723 | ) | $ | 34,947 | $ | (11,424 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings (loss) per share: |
||||||||||||||||
| Basic |
$ | 0.36 | $ | (0.40 | ) | $ | 1.08 | $ | (0.36 | ) | ||||||
| Diluted |
$ | 0.35 | $ | (0.40 | ) | $ | 1.05 | $ | (0.36 | ) | ||||||
| Average common shares outstanding: |
||||||||||||||||
| Basic |
32,553 | 31,881 | 32,387 | 31,819 | ||||||||||||
| Diluted |
33,539 | 31,881 | 33,207 | 31,819 | ||||||||||||
CONN’S, INC. AND SUBSIDIARIES
CONDENSED RETAIL SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)
| Three Months
Ended October 31, |
Nine Months
Ended October 31, |
|||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenues |
||||||||||||||||
| Product sales |
$ | 151,663 | $ | 140,404 | $ | 459,804 | $ | 422,914 | ||||||||
| Repair service agreement commissions |
12,183 | 10,602 | 35,930 | 29,449 | ||||||||||||
| Service revenues |
3,477 | 3,950 | 10,181 | 11,650 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total net sales |
167,323 | 154,956 | 505,915 | 464,013 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Finance charges and other |
340 | 60 | 857 | 678 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
167,663 | 155,016 | 506,772 | 464,691 | ||||||||||||
| Cost and expenses |
||||||||||||||||
| Cost of goods sold, including warehousing and occupancy costs |
105,688 | 112,844 | 325,041 | 324,774 | ||||||||||||
| Cost of parts sold, including warehousing and occupancy costs |
1,522 | 1,647 | 4,513 | 4,973 | ||||||||||||
| Selling, general and administrative expense |
47,275 | 45,899 | 139,832 | 132,009 | ||||||||||||
| Provision for bad debts |
229 | 135 | 630 | 469 | ||||||||||||
| Charges and credits |
641 | 375 | 1,150 | 4,033 | ||||||||||||
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|
|
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|
|
|||||||||
| Total cost and expenses |
155,355 | 160,900 | 471,166 | 466,258 | ||||||||||||
|
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|
|
|
|
|
|
|||||||||
| Operating income (loss) |
12,308 | (5,884 | ) | 35,606 | (1,567 | ) | ||||||||||
| Other (income) expense, net |
(3 | ) | (5 | ) | (105 | ) | 81 | |||||||||
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|
|
|
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|
|
|||||||||
| Income (loss) before income taxes |
$ | 12,311 | $ | (5,879 | ) | $ | 35,711 | $ | (1,648 | ) | ||||||
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|
|
|||||||||
| Retail gross margin |
35.5 | % | 25.3 | % | 34.4 | % | 28.2 | % | ||||||||
| Selling, general and administrative expense as percent of revenues |
28.2 | % | 29.6 | % | 27.6 | % | 28.4 | % | ||||||||
| Operating margin |
7.3 | % | (3.8 | )% | 7.0 | % | (0.3 | )% | ||||||||
| Number of stores: |
||||||||||||||||
| Beginning of period |
65 | 75 | 65 | 76 | ||||||||||||
| Opened |
— | — | 1 | — | ||||||||||||
| Closed |
— | (4 | ) | (1 | ) | (5 | ) | |||||||||
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| End of period |
65 | 71 | 65 | 71 | ||||||||||||
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CONN’S, INC. AND SUBSIDIARIES
CONDENSED CREDIT SEGMENT FINANCIAL INFORMATION
(unaudited)
(in thousands)
| Three Months
Ended October 31, |
Nine Months
Ended October 31, |
|||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenues |
||||||||||||||||
| Finance charges and other |
$ | 38,738 | $ | 31,607 | $ | 107,916 | $ | 100,940 | ||||||||
| Cost and expenses |
||||||||||||||||
| Selling, general and administrative expense |
13,935 | 13,902 | 40,415 | 43,411 | ||||||||||||
| Provision for bad debts |
13,220 | 26,265 | 34,208 | 42,646 | ||||||||||||
|
|
|
|
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|
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|
|
|||||||||
| Total cost and expenses |
27,155 | 40,167 | 74,623 | 86,057 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income (loss) |
11,583 | (8,560 | ) | 33,293 | 14,883 | |||||||||||
| Interest expense |
4,526 | 3,919 | 13,159 | 18,479 | ||||||||||||
| Loss from early extinguishment of debt |
818 | — | 818 | 11,056 | ||||||||||||
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|
|
|
|
|
|
|||||||||
| Income (loss) before income taxes |
$ | 6,239 | $ | (12,479 | ) | $ | 19,316 | $ | (14,652 | ) | ||||||
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|
|||||||||
| Selling, general and administrative expense as percent of revenues |
36.0 | % | 44.0 | % | 37.5 | % | 43.0 | % | ||||||||
| Operating margin |
29.9 | % | (27.1 | )% | 30.9 | % | 14.7 | % | ||||||||
MANAGED CUSTOMER RECEIVABLE PORTFOLIO STATISTICS
(dollars in thousands, except average outstanding balance per account)
| Three months ended October 31, | ||||||||
| 2012 | 2011 | |||||||
| Data for period ended: |
||||||||
| Total outstanding balance |
$ | 683,744 | $ | 605,650 | ||||
| Number of active accounts |
462,200 | 472,791 | ||||||
| Average outstanding balance per account |
$ | 1,479 | $ | 1,281 | ||||
| Balance 60+ days delinquent |
$ | 47,691 | $ | 47,653 | ||||
| Percent 60+ days delinquent |
7.0 | % | 7.9 | % | ||||
| Percent of portfolio re-aged |
11.4 | % | 16.0 | % | ||||
| Weighted average credit score of outstanding balances |
603 | 602 | ||||||
| Data for the three-month period: |
||||||||
| Weighted average origination credit score of sales financed |
616 | 619 | ||||||
| Weighted average monthly payment rate |
5.3 | % | 5.4 | % | ||||
| Interest and fee income yield, annualized |
19.3 | % | 18.0 | % | ||||
| Percent of bad debt charge-offs (net of recoveries) to average outstanding balance, annualized |
7.6 | % | 4.9 | % | ||||
| Percentage of sales generated by payment option: |
||||||||
| GE Capital |
14.5 | % | 14.1 | % | ||||
| Conn’s Credit (including down payment) |
72.3 | % | 62.1 | % | ||||
| RAC Acceptance (Rent-to-Own) |
3.7 | % | 3.8 | % | ||||
|
|
|
|
|
|||||
| Total |
90.5 | % | 80.0 | % | ||||
|
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|
|
|
|||||
CONN’S, INC. AND SUBSIDIARIES
CONDENSED, CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
| October 31, | January 31, | |||||||
| 2012 | 2012 | |||||||
| Assets |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 4,269 | $ | 6,265 | ||||
| Customer accounts receivable, net |
345,546 | 316,385 | ||||||
| Other accounts receivable, net |
34,573 | 38,715 | ||||||
| Inventories |
77,150 | 62,540 | ||||||
| Deferred income taxes |
14,068 | 17,111 | ||||||
| Prepaid expenses and other assets |
15,999 | 11,542 | ||||||
|
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|
|
|
|||||
| Total current assets |
491,605 | 452,558 | ||||||
| Long-term customer accounts receivable, net |
287,494 | 272,938 | ||||||
| Property and equipment, net |
52,794 | 38,484 | ||||||
| Deferred income taxes |
10,204 | 9,754 | ||||||
| Other assets, net |
10,767 | 9,564 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 852,864 | $ | 783,298 | ||||
|
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|
|
|
|||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current Liabilities |
||||||||
| Current portion of long-term debt |
$ | 51,589 | $ | 726 | ||||
| Accounts payable |
66,173 | 44,711 | ||||||
| Accrued compensation and related expenses |
8,451 | 7,213 | ||||||
| Accrued expenses |
21,156 | 24,030 | ||||||
| Other current liabilities |
16,393 | 17,994 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
163,762 | 94,674 | ||||||
| Long-term debt |
279,396 | 320,978 | ||||||
| Other long-term liabilities |
13,095 | 14,275 | ||||||
| Stockholders’ equity |
396,611 | 353,371 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 852,864 | $ | 783,298 | ||||
|
|
|
|
|
|||||
NON-GAAP RECONCILIATION OF NET INCOME, AS ADJUSTED
AND DILUTED EARNINGS PER SHARE, AS ADJUSTED
(unaudited)
(in thousands, except earnings per share)
| Three Months
Ended October 31, |
Nine Months
Ended October 31, |
|||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net income (loss), as reported |
$ | 11,785 | $(12,723) | $ | 34,947 | $ | (11,424) | |||||||||
| Adjustments: |
||||||||||||||||
| Costs related to office relocation |
641 | — | 987 | — | ||||||||||||
| Costs related to store closings |
— | (313 | ) | 163 | 3,345 | |||||||||||
| Loss from early extinguishment of debt |
818 | — | 818 | 11,056 | ||||||||||||
| Inventory reserve adjustment |
— | 4,669 | — | 4,669 | ||||||||||||
| Charge to record reserves required by the adoption of troubled debt restructuring accounting guidance |
— | 27,487 | — | 27,487 | ||||||||||||
| Reserves previously provided related to accounts considered restructured under the troubled debt restructuring accounting guidance |
— | (13,350 | ) | — | (13,350 | ) | ||||||||||
| Impairment of long-lived assets |
— | 688 | — | 688 | ||||||||||||
| Severance costs |
— | — | — | 813 | ||||||||||||
| Tax impact of adjustments |
(514 | ) | (5,961 | ) | (693 | ) | (12,166 | ) | ||||||||
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| Net income, as adjusted |
$ | 12,730 | $ | 497 | $ | 36,222 | $ | 11,118 | ||||||||
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| Average common shares outstanding—Diluted |
33,539 | 31,881 | 33,207 | 31,819 | ||||||||||||
| Earnings (loss) per share — Diluted |
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| As reported |
$ | 0.35 | $ | (0.40 | ) | $ | 1.05 | $ | (0.36 | ) | ||||||
| As adjusted |
$ | 0.38 | $ | 0.02 | $ | 1.09 | $ | 0.35 | ||||||||
NON-GAAP RECONCILIATION OF RETAIL SEGMENT
OPERATING INCOME (LOSS), AS ADJUSTED
(unaudited)
(in thousands)
| Three Months
Ended October 31, |
Nine Months
Ended October 31, |
|||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Operating income (loss), as reported |
$ | 12,308 | $ | (5,884) | $ | 35,606 | $ | (1,567) | ||||||||
| Adjustments: |
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| Costs related to office relocation |
641 | — | 987 | — | ||||||||||||
| Inventory adjustment |
— | 4,669 | — | 4,669 | ||||||||||||
| Costs related to store closings |
— | (313 | ) | 163 | 3,345 | |||||||||||
| Impairment of long-lived assets |
— | 688 | — | 688 | ||||||||||||
| Severance costs |
— | — | — | 407 | ||||||||||||
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| Operating income (loss), as adjusted |
$ | 12,949 | $ | (840 | ) | $ | 36,756 | $ | 7,542 | |||||||
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| Retail segment revenues |
$ | 167,663 | $ | 155,016 | $ | 506,772 | $ | 464,691 | ||||||||
| Operating margin |
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| As reported |
7.3 | % | (3.8 | )% | 7.0 | % | (0.3 | )% | ||||||||
| As adjusted |
7.7 | % | (0.5 | )% | 7.3 | % | 1.6 | % | ||||||||
NON-GAAP RECONCILIATION OF CREDIT SEGMENT
OPERATING INCOME, AS ADJUSTED
(unaudited)
(in thousands)
| Three Months
Ended October 31, |
Nine Months
Ended October 31, |
|||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Operating income (loss), as reported |
$ | 11,583 | $ | (8,560 | ) | $ | 33,293 | $ | 14,883 | |||||||
| Adjustments: |
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| Charge to record reserves required by the adoption of troubled debt restructuring accounting guidance |
— | 27,487 | — | 27,487 | ||||||||||||
| Reserves previously provided related to accounts considered restructured under the troubled debt restructuring accounting guidance |
— | (13,350 | ) | — | (13,350 | ) | ||||||||||
| Severance costs |
— | — | — | 406 | ||||||||||||
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| Operating income, as adjusted |
$ | 11,583 | $ | 5,577 | $ | 33,293 | $ | 29,426 | ||||||||
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| Credit segment revenues |
$ | 38,738 | $ | 31,607 | $ | 107,916 | $ | 100,940 | ||||||||
| Operating margin |
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| As reported |
29.9 | % | (27.1 | )% | 30.9 | % | 14.7 | % | ||||||||
| As adjusted |
29.9 | % | 17.6 | % | 30.9 | % | 29.2 | % | ||||||||
Basis for presentation of non-GAAP disclosures:
To supplement the Company’s consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles (“GAAP”), the Company also provides the following information: adjusted net income and adjusted earnings per diluted share; adjusted retail segment operating income and adjusted operating margin; and adjusted credit segment operating income and operating margin. These non-GAAP financial measures are not meant to be considered as a substitute for comparable GAAP measures but should be considered in addition to results presented in accordance with GAAP, and are intended to provide additional insight into the Company’s operations and the factors and trends affecting the Company’s business. The Company’s management believes these non-GAAP financial measures are useful to financial statement readers because (1) they allow for greater transparency with respect to key metrics the Company uses in its financial and operational decision making and (2) they are used by some of its institutional investors and the analyst community to help them analyze the Company’s operating results.
CONN-F
Conn’s, Inc.
Chief Financial Officer
Brian Taylor (936) 230-5899
or
Investors:
S.M. Berger & Company
Andrew Berger (216) 464-6400
Exhibit 99.2
CONN’S, INC. ANNOUNCES PUBLIC OFFERING OF COMMON STOCK
THE WOODLANDS, TEXAS – (December 3, 2012) – Conn’s, Inc. (NASDAQ:CONN), a specialty retailer of home appliances, furniture, mattresses, consumer electronics and provider of consumer credit (“Conn’s” or the “Company”), today announced the commencement of a public offering of 3,591,621 shares of common stock by certain selling stockholders and 1,408,379 shares of common stock by the Company. In addition, Conn’s will grant the underwriters a 30-day option to purchase up to approximately 750,000 shares of common stock from the Company to cover over-allotments, if any. Piper Jaffray & Co. and Stephens Inc. are the joint book-running managers for the offering.
The securities described above are being offered pursuant to a shelf registration statement previously filed with and declared effective by the Securities and Exchange Commission (the “SEC”) on October 2, 2012. A preliminary prospectus supplement and the accompanying prospectus relating to these securities has been filed with the SEC and is available on the SEC’s website at http://www.sec.gov. Copies of the preliminary prospectus supplement, the final prospectus supplement (when available) and the accompanying prospectus relating to these securities may also be obtained from Piper Jaffray & Co., 800 Nicollet Mall, J12S03, Minneapolis, MN 55402, by e-mail request to prospectus@pjc.com, or by calling (800) 747-3924; or from Stephens Inc., 111 Center Street, Little Rock, AR 72201, by e-mail request to prospectus@stephens.com, or by calling (501) 377-2130.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy, these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. The offering may be made only by means of a prospectus and a related prospectus supplement, which have or will be filed with the SEC.
About Conn’s, Inc.
Conn’s is a specialty retailer and currently operates 66 retail locations, with 57 in Texas, six in Louisiana, two in Oklahoma and one in New Mexico. The Company’s primary product categories include:
| - | Home appliance, including refrigerators, freezers, washers, dryers, dishwashers, ranges and room air conditioners; |
| - | Furniture and mattress, including furniture for the living room, dining room, bedroom and related accessories and mattresses; |
| - | Consumer electronic, including LCD, LED, 3-D and plasma televisions, camcorders, digital cameras, Blu-ray players, video game equipment, portable audio and home theater products; and |
| - | Home office, including desktop and notebook computers, tablets, printers and computer accessories. |
Additionally, the Company offers a variety of products on a seasonal basis, including lawn and garden equipment, 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 addition to third-party financing programs and third-party rent-to-own payment plans.
This press release contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements include information concerning our future financial performance, business strategy, plans, goals and objectives. Statements containing the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should,” or the negative of such terms or other similar expressions are generally forward-looking in nature and not historical facts. Although we believe that the expectations, opinions, projections, and comments reflected in these forward-looking statements are reasonable, we can give no assurance that such statements will prove to be correct. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by our forward-looking statements including, but not limited to: stock market conditions generally or conditions relating to the Company’s securities specifically; entering into an underwriting agreement on terms acceptable to the Company and the underwriters and the other risks detailed from time-to-time in our SEC reports, including but not limited to, our Annual Report on Form 10-K for our fiscal year ended January 31, 2012 and our quarterly report on Form 10-Q for the quarter ended October 31, 2012. 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, we are not obligated to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.
CONN-G
Company Contact:
Conn’s, Inc.
Chief Financial Officer
Brian Taylor (936) 230-5899