BEAUMONT, Texas, Aug 26, 2010 (BUSINESS WIRE) -- Conn's, Inc. (NASDAQ/NM: CONN), a specialty retailer of consumer electronics, home appliances, furniture, mattresses, computers and lawn and garden products today announced its operating results for the quarter ended July 31, 2010.

Significant items for the quarter include:

• Total revenues were $213.7 million, down 7.3% from the same period in the prior fiscal year;
• Retail gross margin increased to 25.4% for the quarter, as compared to 23.6% for the same period in the prior fiscal year;
• Retail segment income before income taxes increased $3.2 million for the quarter, as compared to the same quarter in the prior fiscal year, to $3.3 million;
• Credit portfolio annualized net charge-off rate increased to 4.7%, as compared to 3.4% for the same period in the prior fiscal year, which combined with reduced interest earnings and higher expenses resulted in a $0.4 million loss before income taxes for the credit segment; and
• Diluted earnings per share was $0.07 for the second quarter of fiscal 2011, as compared to $0.23 for the same period in the prior fiscal year.

The change in total revenues was comprised of a total net sales decline of 6.0% to $178.9 million, and a decrease in finance charges and other of 13.4% to $34.8 million, as compared to the same quarter in the prior fiscal year. Same store sales (revenues earned in stores operated for the entirety of both periods) decreased 6.4% during the second quarter of fiscal 2011, as compared to the 5.2% decrease in the same quarter in the prior fiscal year. This represents the second consecutive quarter of a decrease in the same store sales decline, after declines of 31.7% in the fourth quarter of the prior fiscal year and 19.7% in the first quarter of the current fiscal year. Additionally, same store sales were positive in the month of July 2010. The sales results were impacted primarily by:

• more challenging economic conditions in the Company's markets during the quarter, as compared to the same quarter in the prior year; and
• management's emphasis on improving retail gross margin while maintaining price competitiveness.

The key credit portfolio performance metrics reported for the quarter included:

• the net amount charged-off for the second quarter of fiscal 2011 was consistent with the amount charged-off during the first quarter of the current fiscal year. The annualized net charge-off rate was 4.7% for the three months ended July 31, 2010, as compared to 4.6% for the quarter ended April 30, 2010, as the average portfolio balance was reduced by $13.2 million during the recently completed quarter;
• a 40 basis point increase in the 60+ day delinquency rate, which was 8.6% at April 30, 2010, to 9.0% at July 31, 2010. The 60+ day delinquency rate was 7.6% at July 31, 2009, after increasing 70 basis points during the second quarter of fiscal 2010;
• a 70 basis point improvement in the percentage of the portfolio reaged to 18.4% at July 31, 2010, from 19.1% at April 30, 2010. The percentage of the portfolio reaged at July 31, 2009 was 18.9%; and
• the payment rate (amount collected from customers as a percentage of the portfolio balance) increased for the second consecutive quarter, increasing to 5.20% for the quarter ended July 31, 2010, from 5.09% for the quarter ended July 31, 2009.

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.

The Company reported Net income of $1.7 million, or diluted earnings per share of $0.07, for the second quarter of fiscal 2011, compared to Net income of $5.2 million, or diluted earnings per share of $0.23, for the second quarter of fiscal 2010. The decline in net income was driven by reduced income before income taxes from the Company's credit segment. The decline in earnings from the credit segment was due to the reduction in the credit portfolio balance and increased delinquencies. The portfolio balance decline and increase in delinquencies resulted in lower interest income and fees, increased selling, general and administrative expenses and a higher provision for bad debts.

Retail segment income before income taxes increased $3.2 million to $3.3 million, due primarily to expense reductions, as an increase in the gross margin percentage offset the decline in sales.

During the quarter ended July 31, 2010, the Company increased its debt balances by $9.9 million to fund growth in the credit portfolio and support the improved sales trends. The total amount immediately available for borrowing under all of the Company's borrowing agreements at July 31, 2010, was $67.1 million.

Conference Call Information

Conn's, Inc. will host a conference call and audio webcast today, August 26, 2010, at 10:00 AM, CDT, to discuss its financial results for the quarter ended July 31, 2010. The webcast will be available live at www.conns.com and will be archived for one year. Participants can join the call by dialing 877-754-5302 or 678-894-3020.

About Conn's, Inc.

The Company is a specialty retailer currently operating 76 retail locations in Texas, Louisiana and Oklahoma: with 23 stores in the Houston area, 20 in the Dallas/Fort Worth Metroplex, nine in San Antonio, five in Austin, five in Southeast Texas, one in Corpus Christi, four in South Texas, six in Louisiana and three in Oklahoma. It sells home appliances, including refrigerators, freezers, washers, dryers, dishwashers and ranges, and a variety of consumer electronics, including LCD, LED, 3-D, plasma and DLP televisions, camcorders, digital cameras, computers and computer accessories, Blu-ray and DVD players, video game equipment, portable audio, MP3 players, GPS devices 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 financed, on average, approximately 61% of its retail sales.

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 ability to fund operations, debt repayment and expansion from cash flow from operations, borrowings on its revolving lines of credit and proceeds from securitizations and from accessing debt or equity markets;
• the Company's ability to amend, renew or replace its existing credit facilities;
• the ability of the Company to obtain additional funding for the purpose of funding the receivables generated by the Company, including limitations on its ability under it securitization program to obtain financing through its commercial paper-based funding sources and its ability to maintain the current credit ratings of its securities;
• the ability of the Company to maintain compliance with the covenants in its financing facilities or obtain amendments or waivers of the covenants to avoid violations or potential violations of the covenants;
• delinquency and loss trends in the receivables portfolio;
• the Company's ability to offer flexible financing programs;
• the Company's growth strategy and plans regarding opening new stores and entering new markets;
• the Company's intention to update, relocate or expand existing stores;
• the Company's estimated capital expenditures and costs related to the opening of new stores or the update, relocation or expansion of existing stores;
• the Company's ability to introduce additional product categories;
• the ability of the financial institutions providing lending facilities to the Company to fund their commitments;
• the effect on borrowing costs of downgrades by rating agencies or changes in laws or regulations on the Company's financing providers;
• the cost of any amended, renewed or replacement credit facilities;
• growth trends and projected sales in the home appliance, consumer electronics and furniture and mattresses industries and the Company's ability to capitalize on such growth;
• the pricing actions and promotional activities of competitors;
• relationships with the Company's key suppliers;
• interest rates;
• general economic conditions;
• weather conditions in the Company's markets;
• the outcome of litigation or government investigations;
• changes in the Company's stock price; and
• the actual number of shares of common stock outstanding.

Further information on these risks is included in the Company's filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K/A filed on April 12, 2010 and the Company's quarterly report on Form 10-Q/A filed on July 7, 2010. 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-F

SOURCE: Conn's, Inc.

Conn's, Inc., Beaumont
Chief Financial Officer
Michael J. Poppe, (409) 832-1696 Ext. 3294

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