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 2012. 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 ir.Conns.com. 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: http://www.media-server.com/m/p/4567d4wf. 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 ir.Conns.com. 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 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; *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 policies; *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 markets; *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 covenants; *changes in covenant requirements in future debt and other credit arrangements; *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 arrangements; *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. CONN'S, INC. AND SUBSIDIARIES CONDENSED, CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) (in thousands, except per share amounts) Three Months Ended April 30, 2012 2011 Revenues 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 CONN'S, INC. AND SUBSIDIARIES CONDENSED RETAIL SEGMENT FINANCIAL INFORMATION (unaudited) (dollars in thousands) Three Months Ended April 30, 2012 2011 Revenues 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 CONN'S, INC. AND SUBSIDIARIES CONDENSED CREDIT SEGMENT FINANCIAL INFORMATION (unaudited) (in thousands) Three Months Ended April 30, 2012 2011 Revenues 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 % MANAGED PORTFOLIO STATISTICS (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 balances 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 option: 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 % CONDENSED, CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands) April 30, January 31, 2012 2012 Assets 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-F Contact: Conn’s, Inc., Beaumont Chief Operating Officer Mike Poppe, 409-832-1696 Ext. 3294 or Investors: S.M. Berger & Company Andrew Berger, 216-464-6400
Conn’s, Inc. Announces Results for the Quarter Ended April 30, 2012
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