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 7, 2017
Conn's, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 001-34956 | 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, former address and former fiscal year, 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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company | o | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
Item 2.02. Results of Operations and Financial Condition.
On December 7, 2017, Conn's, Inc. (the "Company") issued a press release reporting its third quarter fiscal year 2018 financial results. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
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. Furthermore, this report will not be deemed an admission as to the materiality of any information in the report that is required to be disclosed solely by Regulation FD.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
99.1* |
* Filed herewith
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 7, 2017 | By: | /s/ Lee A. Wright |
Name: | Lee A. Wright | ||
Title: | Executive Vice President and Chief Financial Officer | ||
Exhibit 99.1
Conn's, Inc. Reports Third Quarter Fiscal Year 2018 Financial Results
Second Consecutive Quarter of Profitability
Record Yield Drives Highest Spread in 11 Quarters
Direct Loan Program Successfully Implemented in Two Additional States
60+ Delinquency Rate Declined 110 Basis Points Year-Over-Year; First Year-Over-Year Decline in Four Years
Retail Platform Well Positioned for Planned New Store Growth in Fiscal Year 2019
THE WOODLANDS, Texas, December 7, 2017 - Conn's, Inc. (NASDAQ: CONN), a specialty retailer of furniture and mattresses, home appliances, consumer electronics and home office products, and provider of consumer credit, today announced its financial results for the third quarter ended October 31, 2017.
“Our third quarter results demonstrate the continued success of Conn’s transformation, as we benefited from a record net yield, a widening credit spread, and strong retail gross margins, despite the impact Hurricane Harvey had on many of our communities,” stated Norm Miller, Conn’s Chairman and Chief Executive Officer.
Conn’s achieved a record net yield of 19.8%, and our credit spread increased to 460 basis points in the third quarter of fiscal year 2018, which was the highest level in the past 11 quarters. During the third quarter, new direct loan programs were successfully implemented in Oklahoma and Tennessee. As a result, approximately 90% of current originations are now at higher rates and the average APR on total originations for the month of October was 27.9%, compared to 21.4% in July of last fiscal year.
During the third quarter of fiscal year 2018, the company’s 60+ delinquency rate fell year-over-year for the first time in four years. This represents a significant milestone, and based on the performance of originations since June of last fiscal year, we anticipate credit segment profitability will continue to improve as newer accounts become a larger percentage of the portfolio.
“Retail performance remains solid and Conn’s achieved record third quarter retail gross margins, which helped produce another quarter of strong retail operating income. With improving credit trends, we are increasingly confident that the investments we have made in the credit platform can support profitable growth. For fiscal year 2019 we are planning to open five to nine new stores, all in existing states which will allow us to leverage our current infrastructure. I am encouraged by the successful transformation underway at Conn’s, and the long-term opportunities to create sustainable growth and profitability,” concluded Mr. Miller.
1
Third Quarter Results
Net income for the third quarter of fiscal year 2018 was $1.6 million, or $0.05 per diluted share, compared to a net loss for the third quarter of fiscal year 2017 of $3.8 million, or $0.12 per diluted share. On a non-GAAP basis, adjusted net income for the third quarter of fiscal year 2018 was $5.6 million, or $0.18 per diluted share, which excludes a loss from the write-off of previously capitalized costs for a software project that was abandoned during the third quarter of fiscal year 2018 related to the implementation of a new point of sale system that began in fiscal year 2013 and a loss from extinguishment of debt related to the early redemption of our 2016-A Notes. This compares to adjusted net loss for the third quarter of fiscal year 2017 of $2.5 million, or $0.08 per diluted share, which excludes costs associated with store and facility closures, impairments from disposals, legal and professional fees related to our securities-related litigation and severance costs due to changes in the executive management team. The impairments from disposals included the write-off of leasehold improvements for one store we relocated prior to the end of the useful life of the leasehold improvements and incurred costs for a terminated store project prior to starting construction.
Retail Segment Third Quarter Results
Total retail revenues were $291.9 million for the third quarter of fiscal year 2018 compared to $308.4 million for the third quarter of fiscal year 2017, a decrease of 5.3%. The decrease in retail revenue was primarily driven by a decrease in same store sales of 7.0%, partially offset by new store growth. Sales for the three months ended October 31, 2017 were impacted negatively by general softness in consumer spending. For the third quarter of fiscal year 2018, retail segment operating income was $29.6 million and, on a non-GAAP basis, adjusted retail segment operating income was $35.4 million, which excludes a loss from the write-off of previously capitalized costs for a software project that was abandoned during the third quarter of fiscal year 2018 related to the implementation of a new point of sale system that began in fiscal year 2013.
The following table presents net sales and changes in net sales by category:
Three Months Ended October 31, | % | Same store | |||||||||||||||||||||
(dollars in thousands) | 2017 | % of Total | 2016 | % of Total | Change | Change | % change | ||||||||||||||||
Furniture and mattress | $ | 97,146 | 33.3 | % | $ | 98,898 | 32.1 | % | $ | (1,752 | ) | (1.8 | )% | (6.1 | )% | ||||||||
Home appliance | 83,837 | 28.7 | $ | 85,785 | 27.8 | $ | (1,948 | ) | (2.3 | ) | (3.3 | ) | |||||||||||
Consumer electronics | 58,062 | 19.9 | 65,670 | 21.3 | (7,608 | ) | (11.6 | ) | (10.7 | ) | |||||||||||||
Home office | 20,295 | 7.0 | 22,747 | 7.5 | (2,452 | ) | (10.8 | ) | (8.1 | ) | |||||||||||||
Other | 4,446 | 1.5 | 4,956 | 1.6 | (510 | ) | (10.3 | ) | (11.1 | ) | |||||||||||||
Product sales | 263,786 | 90.4 | 278,056 | 90.3 | (14,270 | ) | (5.1 | ) | (6.6 | ) | |||||||||||||
Repair service agreement commissions | 24,488 | 8.4 | 26,354 | 8.5 | (1,866 | ) | (7.1 | ) | (10.1 | ) | |||||||||||||
Service revenues | 3,534 | 1.2 | 3,623 | 1.2 | (89 | ) | (2.5 | ) | |||||||||||||||
Total net sales | 291,808 | 100.0 | % | 308,033 | 100.0 | % | (16,225 | ) | (5.3 | ) | (7.0 | )% | |||||||||||
The following provides a summary of items impacting the performance of our product categories during the third quarter of fiscal year 2018 compared to the third quarter of fiscal year 2017:
•Furniture unit volume decreased 12.5%, partially offset by a 9.3% increase in average selling price;
• | Mattress unit volume decreased 15.1%, partially offset by a 4.5% increase in average selling price; |
• | Home appliance unit volume decreased 5.0%, partially offset by a 1.8% increase in average selling price; |
• | Consumer electronic unit volume decreased 11.9%, partially offset by a 1.5% increase in average sales price; and |
• | Home office unit volume decreased 20.4%, partially offset by a 15.5% increase in average selling price. |
Credit Segment Third Quarter Results
Credit revenues were $81.3 million for the third quarter of fiscal year 2018 compared to $68.4 million for the third quarter of fiscal year 2017, an increase of 18.8%. The increase in credit revenue was primarily the result of increased originations of our higher-yielding direct loan product, which contributed to the increase in the portfolio yield rate to 19.8% from 15.0%, partially offset by the impact of a 3.7% decline in the average balance of the customer receivables portfolio. Credit revenues for the third quarter of fiscal year 2018 also reflect a decline in insurance income primarily due to a decrease in retrospective commissions as a result of higher claim volumes related to Hurricane Harvey. The total customer portfolio balance was $1.49 billion at October 31, 2017 compared to $1.53 billion at October 31, 2016, a decrease of 3.0%.
2
Provision for bad debts was $56.3 million for the third quarter of fiscal year 2018 compared to $51.3 million for the third quarter of fiscal year 2017, an increase of $5.0 million. The most significant reasons for the increase in the provision for bad debts for the three months ended October 31, 2017 compared to the three months ended October 31, 2016 were:
i. | growth in the customer receivables portfolio in the three months ended October 31, 2017 compared to a decline in the three months ended October 31, 2016; |
ii. | higher net-charge offs in the three months ended October 31, 2017 compared to the three months ended October 31, 2016; and |
iii. | an increase in the qualitative reserve related to Hurricane Harvey of $1.1 million; partially offset by |
iv. | a decrease in our estimated TDR loss rate as a result of improvements in TDR delinquency rates. |
Additional information on the credit portfolio and its performance may be found in the Customer Receivable Portfolio Statistics table included within this press release and in the Company's Form 10-Q for the quarter ended October 31, 2017, to be filed with the Securities and Exchange Commission.
Store Update
During fiscal year 2018, the Company has opened three new Conn's HomePlus® stores, two of which were opened during the first quarter of fiscal year 2018 in North Carolina, and one of which was opened during the second quarter of fiscal year 2018 in Virginia, bringing the total store count to 116 in 14 states. The Company does not intend to open any additional stores in fiscal year 2018. The Company currently plans to open between five and nine stores in fiscal year 2019, all in existing states to leverage current infrastructure.
Liquidity and Capital Resources
As of October 31, 2017, the Company had $110.5 million of immediately available borrowing capacity under its $750.0 million revolving credit facility, with an additional $284.8 million that may become available under the Company's revolving credit facility if the Company grows the balance of eligible customer receivables and eligible inventory balances under the borrowing base. The Company also had $12.7 million of unrestricted cash available for use.
Outlook and Guidance
The following are the Company's expectations for the business for the fourth quarter of fiscal year 2018:
• | Change in same store sales down mid single digits; |
• | Retail gross margin between 39.0% and 39.5% of total retail net sales; |
• | Selling, general and administrative expenses between 27.0% and 29.0% of total revenues; |
• | Provision for bad debts between $55.0 million and $59.5 million; |
• | Finance charges and other revenues between $86.0 million and $90.0 million; and |
• | Interest expense between $19.0 million and $20.5 million. |
Conference Call Information
The Company will host a conference call on December 7, 2017 at 10 a.m. CT / 11 a.m. ET to discuss its third quarter fiscal 2018 financial results. Participants can join the call by dialing 877-754-5302 or 678-894-3020. The conference call will also be broadcast simultaneously via webcast on a listen-only basis. A link to the earnings release, webcast and third quarter fiscal 2018 conference call presentation will be available at ir.conns.com.
Replay of the telephonic call can be accessed through December 14, 2017 by dialing 855-859-2056 or 404-537-3406 and Conference ID: 5182279. A link to the earnings release and webcast will be available at ir.conns.com.
About Conn's, Inc.
Conn's is a specialty retailer currently operating 116 retail locations in Alabama, Arizona, Colorado, Georgia, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia. The Company's primary product categories include:
• | Furniture and mattress, including furniture and related accessories for the living room, dining room and bedroom, as well as both traditional and specialty mattresses; |
• | Home appliance, including refrigerators, freezers, washers, dryers, dishwashers and ranges; |
3
• | Consumer electronics, including LED, OLED, Ultra HD, and internet-ready televisions, Blu-ray players, home theater and portable audio equipment; and |
• | Home office, including computers, printers and accessories. |
Additionally, Conn's offers a variety of products on a seasonal basis. Unlike many of its competitors, Conn's provides flexible in-house credit options for its customers in addition to third-party financing programs and third-party lease-to-own payment plans.
This press release contains forward-looking statements within the meaning of the federal securities laws, including but not limited to, the Private Securities Litigation Reform Act of 1995, 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," “predict,” “will,” “potential,” or the negative of such terms or other similar expressions are generally forward-looking in nature and not historical facts. Such forward-looking statements are based on our current expectations. We can give no assurance that such statements will prove to be correct, and actual results may differ materially. 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 execute periodic securitizations of future originated customer loans on favorable terms; our ability to continue existing customer financing programs or to offer new customer financing programs; changes in the delinquency status of our credit portfolio; unfavorable developments in ongoing litigation; increased regulatory oversight; higher than anticipated net charge-offs in the credit portfolio; the success of our planned opening of new stores; technological and market developments and sales trends for our major product offerings; our ability to manage effectively the selection of our major product offerings; our ability to protect against cyber-attacks or data security breaches and to protect the integrity and security of individually identifiable data of our customers and employees; 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 other risks detailed in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended January 31, 2017 and other reports filed with the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of such a development changes), or should our underlying assumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We disclaim any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise, or to provide periodic updates or guidance. All forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.
CONN-G
S.M. Berger & Company
Andrew Berger (216) 464-6400
4
CONN'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands, except per share amounts)
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | |||||||||||||||
Total net sales | $ | 291,808 | $ | 308,033 | $ | 857,506 | $ | 958,574 | |||||||
Finance charges and other revenues | 81,364 | 68,740 | 238,139 | 205,469 | |||||||||||
Total revenues | 373,172 | 376,773 | 1,095,645 | 1,164,043 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of goods sold | 175,591 | 192,374 | 519,847 | 605,709 | |||||||||||
Selling, general and administrative expenses | 114,355 | 114,457 | 332,524 | 347,550 | |||||||||||
Provision for bad debts | 56,512 | 51,564 | 161,891 | 169,978 | |||||||||||
Charges and credits | 5,861 | 1,987 | 11,156 | 5,408 | |||||||||||
Total costs and expenses | 352,319 | 360,382 | 1,025,418 | 1,128,645 | |||||||||||
Operating income | 20,853 | 16,391 | 70,227 | 35,398 | |||||||||||
Interest expense | 18,095 | 23,470 | 62,142 | 73,504 | |||||||||||
Loss on extinguishment of debt | 461 | — | 2,907 | — | |||||||||||
Income (loss) before income taxes | 2,297 | (7,079 | ) | 5,178 | (38,106 | ) | |||||||||
Provision (benefit) for income taxes | 728 | (3,264 | ) | 1,916 | (12,618 | ) | |||||||||
Net income (loss) | $ | 1,569 | $ | (3,815 | ) | $ | 3,262 | $ | (25,488 | ) | |||||
Income (loss) per share: | |||||||||||||||
Basic | $ | 0.05 | $ | (0.12 | ) | $ | 0.10 | $ | (0.83 | ) | |||||
Diluted | $ | 0.05 | $ | (0.12 | ) | $ | 0.10 | $ | (0.83 | ) | |||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 31,292,913 | 30,816,319 | 31,121,177 | 30,736,636 | |||||||||||
Diluted | 31,764,594 | 30,816,319 | 31,457,420 | 30,736,636 | |||||||||||
5
CONN'S, INC. AND SUBSIDIARIES
CONDENSED RETAIL SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | |||||||||||||||
Product sales | $ | 263,786 | $ | 278,056 | $ | 774,741 | $ | 864,269 | |||||||
Repair service agreement commissions | 24,488 | 26,354 | 72,703 | 82,849 | |||||||||||
Service revenues | 3,534 | 3,623 | 10,062 | 11,456 | |||||||||||
Total net sales | 291,808 | 308,033 | 857,506 | 958,574 | |||||||||||
Other revenues | 95 | 337 | 267 | 1,268 | |||||||||||
Total revenues | 291,903 | 308,370 | 857,773 | 959,842 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of goods sold | 175,591 | 192,374 | 519,847 | 605,709 | |||||||||||
Selling, general and administrative expenses | 80,676 | 79,777 | 233,290 | 244,598 | |||||||||||
Provision for bad debts | 189 | 286 | 584 | 811 | |||||||||||
Charges and credits | 5,861 | 1,987 | 11,156 | 5,408 | |||||||||||
Total costs and expenses | 262,317 | 274,424 | 764,877 | 856,526 | |||||||||||
Operating income | $ | 29,586 | $ | 33,946 | $ | 92,896 | $ | 103,316 | |||||||
Retail gross margin | 39.8 | % | 37.5 | % | 39.4 | % | 36.8 | % | |||||||
Selling, general and administrative expense as percent of revenues | 27.6 | % | 25.9 | % | 27.2 | % | 25.5 | % | |||||||
Operating margin | 10.1 | % | 11.0 | % | 10.8 | % | 10.8 | % | |||||||
Store count: | |||||||||||||||
Beginning of period | 116 | 112 | 113 | 103 | |||||||||||
Opened | — | 1 | 3 | 10 | |||||||||||
End of period | 116 | 113 | 116 | 113 | |||||||||||
6
CONN'S, INC. AND SUBSIDIARIES
CONDENSED CREDIT SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | |||||||||||||||
Finance charges and other revenues | $ | 81,269 | $ | 68,403 | $ | 237,872 | $ | 204,201 | |||||||
Costs and expenses: | |||||||||||||||
Selling, general and administrative expenses | 33,679 | 34,680 | 99,234 | 102,952 | |||||||||||
Provision for bad debts | 56,323 | 51,278 | 161,307 | 169,167 | |||||||||||
Total costs and expenses | 90,002 | 85,958 | 260,541 | 272,119 | |||||||||||
Operating loss | (8,733 | ) | (17,555 | ) | (22,669 | ) | (67,918 | ) | |||||||
Interest expense | 18,095 | 23,470 | 62,142 | 73,504 | |||||||||||
Loss on extinguishment of debt | 461 | — | 2,907 | — | |||||||||||
Loss before income taxes | $ | (27,289 | ) | $ | (41,025 | ) | $ | (87,718 | ) | $ | (141,422 | ) | |||
Selling, general and administrative expense as percent of revenues | 41.4 | % | 50.7 | % | 41.7 | % | 50.4 | % | |||||||
Selling, general and administrative expense as percent of average total customer portfolio balance (annualized) | 9.1 | % | 9.0 | % | 8.9 | % | 8.9 | % | |||||||
Operating margin | (10.7 | )% | (25.7 | )% | (9.5 | )% | (33.3 | )% | |||||||
7
CONN'S, INC. AND SUBSIDIARIES
CUSTOMER RECEIVABLE PORTFOLIO STATISTICS
(unaudited)
As of October 31, | |||||||
2017 | 2016 | ||||||
Weighted average credit score of outstanding balances (1) | 589 | 591 | |||||
Average outstanding customer balance | $ | 2,405 | $ | 2,354 | |||
Balances 60+ days past due as a percentage of total customer portfolio balance (2)(3) | 9.9 | % | 11.0 | % | |||
Re-aged balance as a percentage of total customer portfolio balance (2)(4) | 23.8 | % | 16.0 | % | |||
Account balances re-aged more than six months (in thousands) | $ | 80,516 | $ | 73,385 | |||
Allowance for bad debts as a percentage of total customer portfolio balance | 13.6 | % | 13.3 | % | |||
Percent of total customer portfolio balance represented by no-interest option receivables | 22.3 | % | 28.3 | % | |||
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Total applications processed | 321,373 | 326,131 | 909,287 | 975,363 | |||||||||||
Weighted average origination credit score of sales financed (1) | 611 | 610 | 609 | 610 | |||||||||||
Percent of total applications approved and utilized | 29.1 | % | 32.7 | % | 31.1 | % | 35.1 | % | |||||||
Average down payment | 2.9 | % | 3.1 | % | 3.2 | % | 3.4 | % | |||||||
Average income of credit customer at origination | $ | 43,500 | $ | 42,200 | $ | 42,700 | $ | 41,400 | |||||||
Percent of retail sales paid for by: | |||||||||||||||
In-house financing, including down payments received | 72.0 | % | 72.3 | % | 71.7 | % | 69.8 | % | |||||||
Third-party financing | 15.1 | % | 16.4 | % | 15.8 | % | 15.4 | % | |||||||
Third-party lease-to-own options | 5.7 | % | 5.2 | % | 5.7 | % | 5.1 | % | |||||||
92.8 | % | 93.9 | % | 93.2 | % | 90.3 | % | ||||||||
(1) | Credit scores exclude non-scored accounts. |
(2) | Accounts that become delinquent after being re-aged are included in both the delinquency and re-aged amounts. |
(3) | The balance of 60+ days past due as a percentage of total customer portfolio balance as of October 31, 2017 reflects the impact of first time re-ages related to customers within FEMA-designated Hurricane Harvey disaster areas. |
(4) | The re-aged balance as a percentage of total customer portfolio as of October 31, 2017 includes $71.8 million in first time re-ages related to customers within FEMA-designated Hurricane Harvey disaster areas. |
8
CONN'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
October 31, 2017 | January 31, 2017 | ||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 12,742 | $ | 23,566 | |||
Restricted cash | 71,099 | 110,698 | |||||
Customer accounts receivable, net of allowances | 635,700 | 702,162 | |||||
Other accounts receivable | 63,203 | 69,286 | |||||
Inventories | 235,479 | 164,856 | |||||
Income taxes recoverable | 1,194 | 2,150 | |||||
Prepaid expenses and other current assets | 14,721 | 14,955 | |||||
Total current assets | 1,034,138 | 1,087,673 | |||||
Long-term portion of customer accounts receivable, net of allowances | 616,665 | 615,904 | |||||
Property and equipment, net | 144,747 | 159,202 | |||||
Deferred income taxes | 72,554 | 71,442 | |||||
Other assets | 6,285 | 6,913 | |||||
Total assets | $ | 1,874,389 | $ | 1,941,134 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Current maturities of long-term debt and capital lease obligations | $ | 65,651 | $ | 849 | |||
Accounts payable | 109,738 | 101,612 | |||||
Accrued expenses | 62,403 | 39,781 | |||||
Other current liabilities | 24,531 | 25,139 | |||||
Total current liabilities | 262,323 | 167,381 | |||||
Deferred rent | 87,152 | 87,957 | |||||
Long-term debt and capital lease obligations | 973,278 | 1,144,393 | |||||
Other long-term liabilities | 22,245 | 23,613 | |||||
Total liabilities | 1,344,998 | 1,423,344 | |||||
Stockholders' equity | 529,391 | 517,790 | |||||
Total liabilities and stockholders' equity | $ | 1,874,389 | $ | 1,941,134 | |||
9
CONN'S, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS
(unaudited)
(dollars in thousands, except per share amounts)
RETAIL SEGMENT OPERATING INCOME, AS ADJUSTED
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Retail segment operating income, as reported | $ | 29,586 | $ | 33,946 | $ | 92,896 | $ | 103,316 | |||||||
Adjustments: | |||||||||||||||
Store and facility closure costs | — | 954 | 1,349 | 954 | |||||||||||
Impairments from disposals | — | 595 | — | 1,980 | |||||||||||
Legal and professional fees related to the exploration of strategic alternatives and securities-related litigation | — | 158 | 34 | 747 | |||||||||||
Employee severance | — | 280 | 1,317 | 1,493 | |||||||||||
Indirect tax audit reserve | — | — | 2,595 | — | |||||||||||
Write-off of capitalized software costs | 5,861 | — | 5,861 | — | |||||||||||
Executive management transition costs | — | — | — | 234 | |||||||||||
Retail segment operating income, as adjusted | $ | 35,447 | $ | 35,933 | $ | 104,052 | $ | 108,724 | |||||||
Retail segment total revenues | 291,903 | 308,370 | 857,773 | 959,842 | |||||||||||
Retail segment operating margin: | |||||||||||||||
As reported | 10.1 | % | 11.0 | % | 10.8 | % | 10.8 | % | |||||||
As adjusted | 12.1 | % | 11.7 | % | 12.1 | % | 11.3 | % | |||||||
NET INCOME (LOSS), AS ADJUSTED, AND DILUTED INCOME (LOSS) PER SHARE, AS ADJUSTED
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss), as reported | $ | 1,569 | $ | (3,815 | ) | $ | 3,262 | $ | (25,488 | ) | |||||
Adjustments: | |||||||||||||||
Changes in estimates | — | — | — | 13,168 | |||||||||||
Store and facility closure costs | — | 954 | 1,349 | 954 | |||||||||||
Impairments from disposals | — | 595 | — | 1,980 | |||||||||||
Legal and professional fees related to the exploration of strategic alternatives and securities-related litigation | — | 158 | 34 | 747 | |||||||||||
Employee severance | — | 280 | 1,317 | 1,493 | |||||||||||
Indirect tax audit reserve | — | — | 2,595 | — | |||||||||||
Write-off of capitalized software costs | 5,861 | — | 5,861 | — | |||||||||||
Executive management transition costs | — | — | — | 234 | |||||||||||
Loss on extinguishment of debt | 461 | — | 2,907 | — | |||||||||||
Tax impact of adjustments | (2,289 | ) | (719 | ) | (5,092 | ) | (6,159 | ) | |||||||
Net income (loss), as adjusted | $ | 5,602 | $ | (2,547 | ) | $ | 12,233 | $ | (13,071 | ) | |||||
Weighted average common shares outstanding - Diluted | 31,764,594 | 30,816,319 | 31,457,420 | 30,736,636 | |||||||||||
Income (loss) per share: | |||||||||||||||
As reported | $ | 0.05 | $ | (0.12 | ) | $ | 0.10 | $ | (0.83 | ) | |||||
As adjusted | $ | 0.18 | $ | (0.08 | ) | $ | 0.39 | $ | (0.43 | ) | |||||
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Basis for presentation of non-GAAP disclosures:
To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"), we provide the following non-GAAP financial measures: retail segment adjusted operating income, retail segment adjusted operating margin, adjusted net income (loss), and adjusted income (loss) per diluted share. These non-GAAP financial measures are not meant to be considered as a substitute for, or superior to, comparable GAAP measures and should be considered in addition to results presented in accordance with GAAP. They are intended to provide additional insight into our operations and the factors and trends affecting the business. Management believes these non-GAAP financial measures are useful to financial statement readers because (1) they allow for additional transparency with respect to key metrics we use in our financial and operational decision making and (2) they are used by some of our institutional investors and the analyst community to help them analyze our operating results.
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