September 15, 2006
VIA EDGAR AND FACSIMILE
Adam Phippen
United States Securities Exchange Commission
Washington, D.C. 20549
Re: Conn's, Inc.
Item 4.02, Form 8-K
Filed September 8, 2006
File No. 0-50421
Dear Mr. Phippen:
We are writing this letter as a follow-up to our telephone conversation
yesterday. As we discussed yesterday, we filed earlier today our Quarterly
Report on Form 10-Q for the quarter ended July 31, 2006 (the "Form 10-Q"), as
well as a Form 10-K/A (the "10-K/A") amending our Form 10-K for the year ended
January 31, 2006 and a Form 10-Q/A (the "10-Q/A") amending our Form 10-Q for the
quarter ended April 30, 2006. The Form 10-K/A and 10-Q/A were filed as a result
of our need to restate our financial statements for the purposes disclosed in
Item 4.02 of the Form 8-K referenced above (the "Form 8-K"). In connection with
the filings of our Form 10-K/A and 10-Q/A, we disclosed the following in the
Explanatory Note concerning the restatement our financial statements and our
accounting for our interests in securitized assets under SFAS 140:(1)
"We are amending our Annual Report on Form 10-K (the "Original
Filing") for the year ended January 31, 2006, to restate our
consolidated financial statements for the years ended January 31, 2006,
2005 and 2004 and the related disclosures. This Form 10-K/A also
includes the restatement of selected financial data as of and for the
years ended January 31, 2006, 2005, 2004, 2003, and July 31, 2001, the
six months ended January 31, 2002 and the twelve months ended January
31, 2002, included in Item 6, and certain of the financial information
presented in Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations. See Note 13 to the consolidated
financial statements for a summary of the restated amounts.
- -----------------------
(1) Appropriate changes were made in the 10-Q/A to reflect the report being a
quarterly report.
On September 8, 2006, we concluded that our consolidated
financial statements for the years ended January 31, 2006, 2005 and
2004 as well as the selected financial data for the years ended January
31, 2006, 2005, 2004, 2003, and July 31, 2001, the six months ended
January 31, 2002 and the twelve months ended January 31, 2002, should
be restated to correct for errors in recording interests in securitized
assets, securitization income and related income tax impacts that were
incorrectly accounted for under U.S. generally accepted accounting
principles, specifically covered by Statement of Financial Accounting
Standards ("SFAS") No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities and Emerging Issues
Task Force ("EITF") No. 99-20, Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interest in Securitized
Financial Assets. Our decision to restate our consolidated financial
statements and certain related and selected financial information for
the stated years and periods was based on the results of an internal
review of our accounting for the fair value of our retained interest
asset performed under the direction of the Audit Committee of the Board
of Directors.
During the preparation of our consolidated financial
statements for the quarter ended July 31, 2006, we identified an issue
related to the recording of securitization income. Based on our
discovery and the results of discussions with our independent
accountants and the Audit Committee of the Board of Directors, it was
determined that a review of our accounting under SFAS No. 140 should be
completed before the statements for the quarter ended July 31, 2006
were issued. The internal review revealed that we had incorrectly
reduced securitization income and the value of our interests in
securitized assets by the amount of future expected loan losses
recorded on the books of the qualifying special purpose entity that
owns the receivables."
We also added note 13, note 9 and note 8, to our financial statements in the
10-K/A, 10-Q/A and 10-Q, respectively, further explaining the restatement.
If you have any questions or comments regarding the accounting for our
interests in securitized assets or the restatement, or believe we should file an
amendment to the Form 8-K, please do not hesitate to contact me at (409)
832-1696, extension.
Sincerely,
/s/ David Rogers
-----------------------------------
David Rogers
cc: Thomas W. Hughes (via facsimile (214) 855-8200)