Conn’s, Inc. Announces Record Revenues and Net Income

  Conn’s, Inc. Announces Record Revenues and Net Income

         Adjusted diluted earnings per share of $0.71 for the quarter
 Fiscal 2015 earnings guidance initiated at $3.80 to $4.00 per diluted share
            Same store sales increased 35% over prior-year period

Business Wire

THE WOODLANDS, Texas -- December 5, 2013

Conn’s, Inc. (NASDAQ:CONN), a specialty retailer of home appliances,
furniture, mattresses, consumer electronics and provider of consumer credit,
today announced record financial results for the quarter ended October 31,
2013.

Significant items for the third quarter of fiscal 2014 include:

  *Consolidated revenues increased 50.6% over last year to $310.9million;
  *Retail gross margin expanded 460 basis points from the same period last
    year to 40.1%,
  *Adjusted retail segment operating income rose 163.3% over the prior-year
    quarter to $34.1million;
  *Credit segment operating income was $10.4 million, a 9.8% decrease from
    the prior-year quarter;
  *Credit segment provision for bad debts on an annualized basis was 10.1% of
    the average outstanding portfolio balance this quarter;
  *Diluted earnings per share of $0.66 on a reported basis, versus $0.35 per
    share last year; and
  *Fiscal 2014 earnings guidance raised to $2.75 to $2.80 per diluted share
    on an adjusted basis.

“We achieved the highest quarterly revenue and net income in Conn’s history,”
stated Theodore M. Wright, the Company's Chairman and CEO. “This sales trend
continued into November with retail sales expanding 49%. November same store
sales rose 32%.”

Mr. Wright continued, “Two new Conn’s HomePlus stores opened in November. All
of our new stores are performing well. We expect to open five more stores by
January 31, 2014 and add 15 to 20 new locations next fiscal year.”

Retail Segment Results

Revenues were $257.5 million for the quarter ended October 31, 2013, an
increase of $89.8million, or 53.6%, over the prior-year period. Significant
sales growth was reported across all major product categories. On a sequential
quarter basis, third quarter retail sales reflect the benefit of two stores
opened in July 2013 and two additional stores opened during the quarter. The
impact of new store openings was partially offset by the closure of two
underperforming locations during the current quarter. With new store openings
and the remodeling and relocation of existing stores, 40 stores were operating
in the Conn’s HomePlus format at October 31, 2013.

The following table presents net sales by category and changes in net sales
for the current and prior-year quarter:

                                                                         
              Three Months Ended October 31,                                  Same
                                                                              store
              2013     % of     2012     % of      Change     %          %
                        Total               Total                Change       change
              (dollars in millions)
Home          $ 66.5    25.9  %   $ 48.5    29.0  %   $ 18.0     37.1     %   22.4    %
appliance
Furniture
and             63.2    24.6        32.3    19.3        30.9     95.7         55.1
mattress
Consumer        68.4    26.6        47.1    28.1        21.3     45.2         25.8
electronic
Home office     28.6    11.1        16.2    9.7         12.4     76.5         56.6
Other          7.5     2.9       7.6     4.5        (0.1 )   (1.3   )     (10.8 )
Product         234.2   91.1        151.7   90.6        82.5     54.4         32.7
sales
                                                                                      
Repair
service         19.6    7.6         12.2    7.3         7.4      60.7         55.4
agreement
commissions
Service        3.3     1.3       3.4     2.1        (0.1 )   (2.9   )
revenues
Total net     $ 257.1   100.0 %   $ 167.3   100.0 %   $ 89.8    53.7     %   35.1    %
sales
                                                                                      

The following provides a summary of items influencing the Company’s major
product category performance during the quarter, compared to the prior-year
period:

  *Home appliance unit volume increased 20%. Laundry sales increased 41%,
    refrigeration sales were up 38%, cooking sales rose 37% and air
    conditioner sales declined 20%;
  *Furniture unit sales increased 95% and the average selling price increased
    5%;
  *Mattress unit volume increased 40% and average selling price was up 19%;
  *Television sales rose 37%, with same store growth in units and average
    selling price; and
  *Computer sales were up 78% and tablet sales increased 70%.

Retail gross margin was 40.1% for the quarter ended October 31, 2013, up from
35.5% in the prior-year quarter. Margins expanded in all major product
categories. Product margin on furniture and mattress sales rose 500 basis
points from the prior-year period to 50.3% of sales. Furniture and mattress
sales contributed 27.0% of the total product revenue in the current period and
generated 38.7% of the total product gross profit.

Credit Segment Results

Revenues totaled $53.4 million in the current period, an increase of 37.8%
over the prior-year quarter. The revenue growth was attributable to the
increase in the average receivable portfolio balance outstanding. The customer
portfolio balance equaled $944.8 million at October 31, 2013, rising
$261.1million from a year ago. The portfolio interest and fee income yield
was 17.8% for the quarter ended October31, 2013, down 150 basis points from
the prior-year period as a result of increased short-term, no-interest
financing.

Provision for bad debts was $22.5 million for the quarter ended October 31,
2013, rising $9.3million from the prior-year period. The annualized provision
rate was 10.1% for the quarter and 9.4% year-to-date. The percentage of the
customer portfolio balance greater than 60 days delinquent was 8.5% as of
October 31, 2013, which compares to 7.0% a year ago and 8.2% as of July 31,
2013.

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 for the quarter ended October 31, 2013 to be filed with the
Securities and Exchange Commission.

For the quarter ended October 31, 2013, the Company reported net income of
$0.66 per diluted share, which includes pre-tax charges of $2.8 million
associated with facility closures and lease terminations. The Company’s
reported net income was $0.35 per diluted share in the third quarter of fiscal
2013, and includes pre-tax costs of $1.5 million related to extinguishment of
debt and the relocation of the Company’s corporate office to The Woodlands,
Texas.

Capital and Liquidity

As of October 31, 2013, the Company had $421.3 million of borrowings
outstanding under its asset-based loan facility. On November 25, 2013, the
Company completed an expansion and extension of its asset-based loan facility
with a syndicate of banks. Under the amended terms, the revolving facility
commitment increased $265 million to $850 million and the maturity date was
extended to November 2017. Borrowing costs under the facility were also
reduced by 25 basis points per annum.

After giving effect to the amendment, the Company would have had
$231.1million of immediately available borrowing capacity as of October31,
2013, and an additional $196.3million that could become available upon
increases in eligible inventory and customer receivable balances under the
borrowing base.

Outlook and Guidance

The Company raised its earnings guidance for the fiscal year ending January
31, 2014 to diluted earnings per share of $2.75 to $2.80 on an adjusted basis.
The following expectations were considered in developing the current guidance
for the full year:

  *Same stores sales up 22% to 25%;
  *New store openings of 13;
  *Retail gross margin between 39.3% and 39.8%;
  *An increase in the credit portfolio balance;
  *Credit portfolio interest and fee yield of between 17.8% and 18.1%,
    reflecting a higher proportion of the portfolio balance represented by
    no-interest credit programs than in fiscal 2013;
  *Credit segment provision for bad debts of between 9.4% and 9.7% of the
    average portfolio balance outstanding based on the same store sales
    expectations presented above;
  *Selling, general and administrative expense of between 28.5% and 29.0% of
    total revenues; and
  *Diluted shares outstanding of approximately 37.0 million.

The Company also initiated earnings guidance of diluted earnings per share of
$3.80 to $4.00 for the fiscal year ending January 31, 2015. The following
expectations were considered in developing the guidance:

  *Same stores sales up 7% to 12%;
  *New store openings of 15 to 20;
  *Retail gross margin between 39.0% and 40.0%;
  *An increase in the credit portfolio balance;
  *Credit portfolio interest and fee yield of approximately 18.0%;
  *Credit segment provision for bad debts of between 8.0% to 9.0% of the
    average portfolio balance outstanding based on the same store sales and
    new store opening expectations presented above;
  *Selling, general and administrative expense of between 28.0% and 29.0% of
    total revenues; and
  *Diluted shares outstanding of approximately 37.1 million.

Conference Call Information

Conn’s, Inc. will host a conference call and audio webcast on Thursday,
December 5, 2013, 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.

About Conn’s, Inc.

Conn’s is a specialty retailer operating over 70 retail locations in Texas,
Louisiana, Arizona, Oklahoma and New Mexico. The Company’s primary product
categories include:

  *Home appliance, including refrigerators, freezers, washers, dryers,
    dishwashers and ranges;
  *Furniture and mattress, including furniture and related accessories for
    the living room, dining room and bedroom, as well as both traditional and
    specialty mattresses;
  *Consumer electronic, including LCD, LED, 3-D and plasma televisions,
    Blu-ray players, home theater and video game products, camcorders, digital
    cameras, and portable audio equipment; and
  *Home office, including computers, tablets, printers and accessories.

Additionally, the Company offers a variety of products on a seasonal basis.
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.

This press release contains forward-looking statements within the meaning of
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," or the
negative of such terms or other similar expressions are generally
forward-looking in nature and not historical facts. Although we believe that
the expectations, opinions, projections, and comments reflected in these
forward-looking statements are reasonable, we can give no assurance that such
statements will prove to be correct. 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 continue
existing or offer new customer financing programs; changes in the delinquency
status of our credit portfolio; increased regulatory oversight; higher than
anticipated net charge-offs in the credit portfolio; the success of our
planned opening of new stores and the updating of existing stores;
technological and market developments and sales trends for our major product
offerings; 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 the other risks detailed in our SEC reports, including but not limited to,
our Annual Report on Form 10-K. 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, we are not obligated to publicly
release any revisions or update to these forward-looking statements to reflect
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 STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
                                                                   
                           Three Months Ended        Nine Months Ended
                           October 31,               October 31,
                           2013        2012          2013          2012
Revenues
Total net sales            $ 257,046   $ 167,323     $ 690,206     $ 505,915
Finance charges and         53,830     39,078      142,422     108,773 
other
Total revenues               310,876    206,401      832,628      614,688
Cost and expenses
Cost of goods sold,
including warehousing        151,987     105,688       411,484       325,041
and occupancy costs
Cost of parts sold,
including warehousing        1,286       1,522         4,010         4,513
and occupancy costs
Selling, general and         90,341      61,210        242,353       180,247
administrative expense
Provision for bad debts      22,730      13,449        58,049        34,838
Charges and credits         2,834      641         2,834       1,150   
Total cost and expenses     269,178    182,510     718,730     545,789 
Operating income             41,698     23,891       113,898      68,899
Interest expense             3,714       4,526         10,720        13,159
Loss on early                -           818           -             818
extinguishment of debt
Other income, net           -          (3      )    (38     )    (105    )
Income before income         37,984      18,550        103,216       55,027
taxes
Provision for income        13,608     6,765       37,502      20,080  
taxes
Net income                 $ 24,376    $ 11,785     $ 65,714     $ 34,947  
                                                                   
Earnings per share:
Basic                      $ 0.68      $ 0.36        $ 1.84        $ 1.08
Diluted                    $ 0.66      $ 0.35        $ 1.79        $ 1.05
Average common shares
outstanding:
Basic                        35,955      32,553        35,686        32,387
Diluted                      36,965      33,539        36,795        33,207
                                                                   


CONN'S, INC. AND SUBSIDIARIES
CONDENSED RETAIL SEGMENT FINANCIAL INFORMATION
(unaudited)
(in thousands, except per share amounts)
                                                              
                         Three Months Ended          Nine Months Ended
                         October 31,                 October 31,
                         2013          2012          2013          2012
Revenues
Product sales            $ 234,159     $ 151,663     $ 628,482     $ 459,804
Repair service             19,601        12,183        52,756        35,930
agreement commissions
Service revenues          3,286       3,477       8,968       10,181  
Total net sales           257,046    167,323    690,206    505,915 
Finance charges and       438         340         1,067       857     
other
Total revenues             257,484      167,663      691,273      506,772
Cost and expenses
Cost of goods sold,
including warehousing      151,987       105,688       411,484       325,041
and occupancy costs
Cost of parts sold,
including warehousing      1,286         1,522         4,010         4,513
and occupancy costs
Selling, general and       69,920        47,275        188,340       139,832
administrative expense
Provision for bad          203           229           389           630
debts
Charges and credits       2,834       641         2,834       1,150   
Total cost and            226,230     155,355     607,057     471,166 
expenses
Operating income           31,254       12,308       84,216       35,606
Other income, net         -           (3      )    (38     )    (105    )
Income before income     $ 31,254    $ 12,311    $ 84,254    $ 35,711  
taxes
                                                                   
Retail gross margin        40.1    %     35.5    %     39.6    %     34.4    %
Selling, general and
administrative expense     27.2    %     28.2    %     27.2    %     27.6    %
as percent of revenues
Operating margin           12.1    %     7.3     %     12.2    %     7.0     %
                                                                   
Number of stores:
Beginning of period        72            65            68            65
Opened                     2             -             6             1
Closed                    (2      )    -           (2      )    (1      )
End of period             72          65          72          65      
                                                                   

                                                              
CONN'S, INC. AND SUBSIDIARIES
CONDENSED CREDIT SEGMENT FINANCIAL INFORMATION
(unaudited)
(in thousands)
                                                                   
                           Three Months Ended        Nine Months Ended
                           October 31,               October 31,
                           2013         2012         2013          2012
Revenues
Finance charges and        $ 53,392     $ 38,738     $ 141,355     $ 107,916
other
Cost and expenses
Selling, general and         20,421       13,935       54,013        40,415
administrative expense
Provision for bad debts     22,527    13,220    57,660     34,208  
Total cost and expenses     42,948    27,155    111,673    74,623  
Operating income             10,444      11,583      29,682       33,293
Interest expense             3,714        4,526        10,720        13,159
Loss from early             -          818        -           818     
extinguishment of debt
Income before income       $ 6,730     $ 6,239     $ 18,962     $ 19,316  
taxes
                                                                   
Selling, general and
administrative expense       38.2   %     36.0   %     38.2    %     37.5    %
as percent of revenues
Operating margin             19.6   %     29.9   %     21.0    %     30.9    %
                                                                   

                                                              
MANAGED CUSTOMER RECEIVABLE PORTFOLIO STATISTICS
(dollars in thousands, except average outstanding balance per account)
                                                                   
                                                     October 31,
                                                     2013          2012
Total outstanding balance                            $ 944,826     $ 683,744
Weighted average credit
score of outstanding                                   591           603
balances
Weighted average months
since origination of                                   8.6           9.7
outstanding balances
Number of active accounts                              563,753       462,200
Average outstanding                                  $ 1,676       $ 1,479
customer balance
Balance 60+ days                                     $ 80,505      $ 47,691
delinquent
Percent 60+ days                                       8.5     %     7.0     %
delinquent
Percent of portfolio                                   10.9    %     11.4    %
re-aged
                                                                   
                                                                   
                             Three Months Ended      Nine Months Ended
                             October 31,             October 31,
                             2013        2012        2013          2012
Data for the periods
ended:
Total applications           267,558     198,617       682,453       565,036
processed
Weighted average
origination credit score     599         616           601           615
of sales financed
Weighted average monthly     5.1     %   5.3     %     5.4     %     5.5     %
payment rate
Interest and fee income      17.8    %   19.3    %     17.9    %     18.6    %
yield, annualized
Percent of bad debt
charge-offs (net of
recoveries) to average       7.6     %   7.6     %     6.9     %     8.2     %
outstanding balance,
annualized
Percent of sales paid for
by payment option:
In-house financing,
including down payment       79.5    %   72.3    %     73.2    %     69.5    %
received
Third-party financing        11.5    %   14.5    %     11.7    %     14.3    %
Third-party rent-to-own      2.5     %   3.7     %    2.9     %    3.5     %
options
Total                        93.5    %   90.5    %    87.8    %    87.3    %
                                                                   

                                                         
CONN'S, INC. AND SUBSIDIARIES
CONDENSED, CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
                                                            
                                                            
                                              October 31,   January 31,
                                              2013          2013
Assets
Current Assets
Cash and cash equivalents                     $ 3,701       $  3,849
Customer accounts receivable, net               473,795        378,050
Other accounts receivable, net                  44,648        45,759
Inventories                                     131,732        73,685
Deferred income taxes                           17,957         15,302
Prepaid expenses and other assets              7,209         11,599
Total current assets                            679,042       528,244
Long-term customer accounts receivable, net     400,606        313,011
Property and equipment, net                     75,435         46,994
Deferred income taxes                           11,298         11,579
Other assets, net                              7,983         10,029
Total Assets                                  $ 1,174,364  $  909,857
                                                            
Liabilities and Stockholders' Equity
Current Liabilities
Current portion of long-term debt             $ 527         $  32,526
Accounts payable                                106,422        69,608
Accrued expenses                                42,401         29,496
Other current liabilities                      18,035        19,533
Total current liabilities                       167,385       151,163
Long-term debt                                  422,161        262,531
Other long-term liabilities                     26,083         21,713
Stockholders' equity                           558,735       474,450
Total liabilities and stockholders' equity    $ 1,174,364  $  909,857
                                                            


NON-GAAP RECONCILIATION OF NET INCOME, AS ADJUSTED
AND DILUTED EARNINGS PER SHARE, AS ADJUSTED
(unaudited)
(in thousands, except earnings per share)
                                                               
                            Three Months Ended         Nine Months Ended
                            October 31,                October 31,
                            2013         2012          2013         2012
Net income, as reported     $ 24,376     $ 11,785      $ 65,714     $ 34,947
Adjustments:
Costs related to facility     2,834        -             2,834        163
closures
Costs related to office       -            641           -            987
relocations
Loss from early               -            818           -            818
extinguishment of debt
Tax impact of adjustments    (1,000 )    (514   )     (1,000 )    (693   )
Net income, as adjusted     $ 26,210    $ 12,730     $ 67,548    $ 36,222 
                                                                    
Average common shares         36,965       33,539        36,795       33,207
outstanding - Diluted
                                                                    
Earnings per share -
Diluted
As reported                 $ 0.66       $ 0.35        $ 1.79       $ 1.05
As adjusted                 $ 0.71       $ 0.38        $ 1.84       $ 1.09
                                                                             

NON-GAAP RECONCILIATION OF RETAIL SEGMENT
OPERATING INCOME, AS ADJUSTED
(unaudited)
(in thousands)
                                                             
                       Three Months Ended            Nine Months Ended
                       October 31,                   October 31,
                       2013          2012            2013          2012
Operating income, as   $ 31,254      $ 12,308        $ 84,216      $ 35,606
reported
Adjustments:
Costs related to         2,834         -               2,834         163
facility closures
Costs related to        -           641           -           987     
office relocation
Operating income, as   $ 34,088     $ 12,949       $ 87,050     $ 36,756  
adjusted
                                                                   
Retail segment         $ 257,484     $ 167,663       $ 691,273     $ 506,772
revenues
                                                                   
Operating margin
As reported              12.1    %     7.3     %       12.2    %     7.0     %
As adjusted              13.2    %     7.7     %       12.6    %     7.3     %
                                                                             

Basis for presentation of non-GAAP disclosures:

To supplement the Company’s condensed consolidated financial statements, which
are prepared and presented in accordance with generally accepted accounting
principles ("GAAP"), the Company also provides the following information:
adjusted net income and adjusted earnings per diluted share; and adjusted
retail segment operating income and adjusted operating margin. These non-GAAP
financial measures are not meant to be considered as a substitute for
comparable GAAP measures but should be considered in addition to results
presented in accordance with GAAP, and are intended to provide additional
insight into the Company’s operations and the factors and trends affecting the
Company’s business. The Company’s management believes these non-GAAP financial
measures are useful to financial statement readers because (1) they allow for
greater transparency with respect to key metrics the Company uses in its
financial and operational decision making and (2) they are used by some of its
institutional investors and the analyst community to help them analyze the
Company’s operating results.

CONN-F

Contact:

Conn’s, Inc.
Brian Taylor 936-230-5899
Chief Financial Officer and Treasurer
or
Investors:
S.M. Berger & Company
Andrew Berger, 216-464-6400
 
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