Conn’s, Inc. Announces Results for the Quarter Ended April 30, 2012

  Conn’s, Inc. Announces Results for the Quarter Ended April 30, 2012

Business Wire

BEAUMONT, Texas -- June 04, 2012

Conn’s, Inc. (NASDAQ: CONN), a specialty retailer of home appliances,
furniture, mattresses, consumer electronics, computers and lawn and garden
products, today announced its results for the quarter ended April 30, 2012.

Significant items for the first quarter of fiscal 2013 include:

  *Diluted earnings per share rose to $0.35 for the three months ended April
    30, 2012, from $0.14 in the previous year;
  *Same store sales increased 17.8% over the same period in 2011;
  *Total revenues were $200.9 million, a year-over-year increase of $8.9
    million, or 4.6%, with reported growth tempered by the closing of 11
    stores in fiscal 2012;
  *Retail segment gross margin rose 320 basis points to 33.7%;
  *Retail segment operating income increased to $10.8million, compared to
    $4.9million for the same quarter in the prior fiscal year;
  *Credit segment operating income increased to $11.1 million, compared to
    $9.9million for the prior-year period; and
  *The Company raised earnings guidance for fiscal year 2013 to adjusted
    diluted earnings per share of $1.30 to $1.40.

“Our current quarter results demonstrate the value we deliver to our customers
with a broad range of high-quality products and a better shopping experience,”
stated Theodore M. Wright, Chairman and CEO. “We have seen a significant
benefit from recently remodeled stores, as sales growth at those stores
outpaced the double digit growth seen overall.”

Retail Segment Results

The increase in net sales during the quarter was driven by higher average
selling prices in the major product categories, improved and expanded product
selection in the furniture and mattress category and retention of a portion of
the unit volume from stores closed in the prior year. The reported increase in
sales was partially offset by the impact of the closure of 11 stores in fiscal

Retail gross margin increased to 33.7% in the current-year quarter, from 30.5%
in the same quarter of the prior year. The increase in the retail gross margin
was driven by a favorable shift in product mix. The majority of the margin
expansion was reported in the furniture and mattress category, which
contributed approximately 30% of our product gross profit in the first quarter
of fiscal 2013.

Credit Segment Results

The credit segment’s results, compared to the same quarter in the prior year,
were impacted by:

  *Lower servicing costs and reduced provision for bad debts, with the
    continued improvement in overall credit quality of the portfolio;
  *Lower borrowing cost, with a reduction in the effective interest rate on
    outstanding borrowings and a decline in outstanding debt;
  *Reduction in average portfolio balance from the prior-year period; and
  *A decline in portfolio interest and fee yield to 18.0%, due to a higher
    relative amount of short-term promotional receivables and increased net
    charge-off levels.

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.

The Company recorded a pre-tax charge of $0.8 million, or $0.02 per diluted
share, during the prior-year quarter associated with employee severance costs.

Capital and Liquidity

The Company issued $103.7 million of amortizing, fixed-rate notes on April 30,
2012. The notes bear interest at 4.0% and were sold at a discount to deliver a
5.21% yield, before considering transaction costs. While the final maturity
for the notes is in April 2016, the Company currently expects to repay any
outstanding note balance in April 2013. Net proceeds from the offering were
used to repay borrowings under the Company’s revolving credit facility. As a
result, there was $186.8 million outstanding, excluding $4.3 million of
letters of credit, under the asset-based loan facility as of April 30, 2012.
Additionally, as of April 30, 2012, the Company had $145.4 million of
immediately available borrowing capacity, and an additional $113.5million
that could become available upon increases in eligible inventory and customer
receivable balances under the borrowing base.

Outlook and Guidance

The Company increased earnings guidance for the fiscal year ending January 31,
2013, to diluted earnings per share of $1.30 to $1.40. The following
expectations were considered in developing the guidance:

  *Same stores sales up mid- to high-single digits;
  *New store openings between five and seven;
  *Retail gross margin between 32.0% and 34.0%;
  *An increase in the credit portfolio balance;
  *Provision for bad debts between 5.5% and 6.5% of the average portfolio
    balance outstanding;
  *Selling, general and administrative expense, as a percent of revenues,
    between 28.5% and 29.5% of total revenues; and
  *Interest expense to increase approximately $2.2 million over the remainder
    of fiscal 2013 as a result of the issuance of the fixed-rate notes
    discussed above on April30, 2012.

Conference Call and Investor Conference Information

Conn’s, Inc. will host a conference call and audio webcast on Monday, June 4,
2012, at 10:00A.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 Participants can join the call by dialing 877-754-5302 or
678-894-3020. Additionally, the Company has posted an updated investor
presentation to its investor relations web page.

Conn’s management will also be presenting at the Piper Jaffray Consumer
Conference in New York on Tuesday, June 5, 2012 at 4:35 P.M. ET. The
presentation will be webcast and can be accessed via the following link: Additionally, the presentation will
be available for replay for 90 days following the live presentation and will
be accessible via the above link or through

About Conn’s, Inc.

The Company is a specialty retailer currently operating 64 retail locations in
Texas, Louisiana and Oklahoma: with 22 stores in the Houston area, 14 in the
Dallas/Fort Worth Metroplex, seven in San Antonio, three in Austin, five in
Southeast Texas, one in Corpus Christi, four in South Texas, six in Louisiana
and two in Oklahoma. The Company’s primary product categories include:

  *Home appliance, including refrigerators, freezers, washers, dryers,
    dishwashers and ranges;
  *Furniture and mattress, including furniture for the living room, dining
    room, bedroom and related accessories and mattresses;
  *Consumer electronic, including LCD, LED, 3-D, plasma and DLP televisions,
    camcorders, digital cameras, Blu-ray and DVD players, video game
    equipment, portable audio, MP3 players 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. In the last three years, the Company financed, on average,
approximately 61%, including down payments, of its retail sales under its
in-house financing plan.

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, relocate or expand existing stores;
  *the effect of closing or reducing the hours of operation of existing
  *the Company's estimated capital expenditures and costs related to the
    opening of new stores or the update, relocation or expansion of existing
  *the Company's ability to introduce additional product categories;
  *sales trends in the home appliance, consumer electronic and furniture and
    mattress industries and the Company's ability to respond to those trends;
  *changes in product sales or gross margin trends;
  *the pricing actions and promotional activities of competitors;
  *relationships with the Company's key suppliers;
  *changes in outstanding balance, delinquency and loss trends in the
    receivables portfolio;
  *the Company’s ability to offer flexible financing programs;
  *changes in the interest and fee yield earned on the receivables portfolio;
  *changes in the Company’s underwriting and collection practices and
  *changes in the costs to collect the receivables portfolio;
  *the Company’s ability to amend, renew or replace its existing debt or
    other credit arrangements before the maturity dates of such arrangements;
  *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
  *the ability of the Company to obtain additional funding for the purpose of
    funding the receivables generated by the Company;
  *the ability of the Company to maintain compliance with the covenants in
    its debt and other credit arrangements or obtain amendments or waivers of
    the covenants to avoid violations or potential violations of the
  *changes in covenant requirements in future debt and other credit
  *reduced availability under the Company’s credit facilities as a result of
    borrowing base requirements and the impact on the borrowing base
    calculation of changes in the performance or eligibility of the customer
    receivables financed by that facility;
  *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 debt or other credit
  *interest rates;
  *general economic and financial market conditions, including conditions in
    the capital markets;
  *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 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 April 12, 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, 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.

(in thousands, except per share amounts)
                                                       Three Months Ended
                                                       April 30,
                                                       2012          2011
Total net sales                                        $ 166,937     $ 157,070
Finance charges and other                               33,914      34,912
Total revenues                                           200,851       191,982
Cost and expenses
Cost of goods sold, including warehousing and            108,443       106,453
occupancy costs
Cost of parts sold, including warehousing and            1,550         1,730
occupancy costs
Selling, general and administrative expense              59,656        59,445
Provision for bad debts                                  9,185         9,564
Store closing costs                                     163         -
Total cost and expenses                                 178,997     177,192
Operating income                                         21,854        14,790
Interest expense                                         3,759         7,556
Other (income) expense, net                             (96     )    52
Income before income taxes                               18,191        7,182
Provision for income taxes                              6,635       2,781
Net income                                             $ 11,556     $ 4,401
Earnings per share:
Basic                                                  $ 0.36        $ 0.14
Diluted                                                $ 0.35        $ 0.14
Average common shares outstanding:
Basic                                                    32,195        31,768
Diluted                                                  32,904        31,772

(dollars in thousands)
                                                     Three Months Ended

                                                     April 30,
                                                     2012          2011
Product sales                                        $ 152,115     $ 144,279
Repair service agreement commissions                   11,392        8,902
Service revenues                                      3,430       3,889   
Total net sales                                       166,937     157,070 
Finance charges and other                             241         225     
Total revenues                                        167,178     157,295 
Cost and expenses
Cost of goods sold, including warehousing and          108,443       106,453
occupancy costs
Cost of parts sold, including warehousing and          1,550         1,730
occupancy costs
Selling, general and administrative expense            46,049        44,102
Provision for bad debts                                212           143
Store closing costs                                   163         -       
Total cost and expenses                               156,417     152,428 
Operating income                                       10,761        4,867
Other (income) expense, net                           (96     )    52      
Segment income before income taxes                   $ 10,857     $ 4,815   
Retail gross margin                                    33.7    %     30.5    %
Selling, general and administrative expense as         27.5    %     28.0    %
percent of revenues
Operating margin                                       6.4     %     3.1     %
Number of stores, end of period                        65            76

(in thousands)
                                                       Three Months Ended

                                                       April 30,
                                                       2012         2011
Finance charges and other                              $ 33,673    $ 34,687 
Cost and expenses
Selling, general and administrative expense              13,607       15,343
Provision for bad debts                                 8,973      9,421  
Total cost and expenses                                 22,580     24,764 
Operating income                                         11,093       9,923
Interest expense                                        3,759      7,556  
Segment income before income taxes                     $ 7,334     $ 2,367  
Selling, general and administrative expense as           40.4   %     44.2   %
percent of revenues
Operating margin                                         32.9   %     28.6   %

(dollars in thousands, except average outstanding balance per account)
                                                  Three months ended April 30,
                                                  2012             2011
Total accounts                                       458,493         491,441
Total outstanding balance                         $  635,233       $ 625,487
Average outstanding balance per account           $  1,385         $ 1,273
Weighted average origination credit score of         615             623
sales financed
Weighted average credit score of outstanding         601             589
Balance 60+ days delinquent                       $  46,438        $ 44,453
Percent 60+ days delinquent                          7.3      %      7.1     %
Percent 60-209 days delinquent                       7.3      %      5.5     %
Percent of portfolio re-aged                         11.6     %      19.4    %
Weighted average monthly payment rate (QTD)          6.1      %      6.4     %
Net charge-off ratio (YTD annualized)                8.5      %      6.8     %
Percentage of sales generated by payment
GE Capital                                           12.5     %      6.3     %
Conn's Credit (including down payment)               66.9     %      55.0    %
RAC Acceptance (Rent-to-Own)                         3.7      %      3.5     %
Total                                                83.1     %      64.8    %

(in thousands)
                                              April 30,   January 31,
                                              2012        2012
Current assets
Cash and cash equivalents                     $ 6,730     $  6,265
Customer accounts receivable, net               313,139      316,385
Other accounts receivable, net                  35,414       38,715
Inventories                                     68,890       62,540
Deferred income taxes                           16,007       17,111
Prepaid expenses and other assets              15,785      11,542
Total current assets                            455,965      452,558
Long-term customer accounts receivable, net     271,984      272,938
Property and equipment, net                     40,257       38,484
Non-current deferred income tax asset           9,570        9,754
Other assets, net                              10,856      9,564
Total assets                                  $ 788,632   $  783,298
Liabilities and Stockholders' Equity
Current Liabilities
Current portion of long-term debt             $ 103,690   $  726
Accounts payable                                60,812       44,711
Accrued compensation and related expenses       7,494        7,213
Accrued expenses                                22,314       24,030
Other current liabilities                      18,547      17,994
Total current liabilities                       212,857      94,674
Long-term debt                                  194,396      320,978
Other long-term liabilities                     12,894       14,275
Stockholders' equity                           368,485     353,371
Total liabilities and stockholders' equity    $ 788,632   $  783,298



Conn’s, Inc., Beaumont
Chief Operating Officer
Mike Poppe, 409-832-1696 Ext. 3294
S.M. Berger & Company
Andrew Berger, 216-464-6400
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