Conn's, Inc. Reports Record Earnings for the Quarter and Nine Months Ended October 31, 2005.BEAUMONT, Texas Beaumont is a city and county seat of Jefferson County, Texas and is within the Beaumont-Port Arthur metropolitan area. As of the 2000 U.S. Census, the city had a population of 113,866. -- Conn's, Inc. (NASDAQ/NM:CONN CONN Connecticut (old style) CONN Connection CONN Connector CONN Connotation ), a specialty retailer of home appliances, consumer electronics, computers, mattresses and lawn and garden products, today announced record results for the third quarter and nine months ended October 31, 2005. E[acute accent acute accent n. A mark (´) indicating: a. that a vowel is close or tense, as é in French été. b. that a vowel or syllable has a high or rising pitch, as in Chinese or Ancient Greek. c. ]Net income for the third quarter increased 44.6% to $9.1 million compared to $6.3 million for the third quarter of last year. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of were $0.38 compared with $0.27 for the third quarter of last year. Total revenues for the quarter ended October 31, 2005 increased 30.4% to $173.3 million compared with $132.9 million for the quarter ended October 31, 2004. This increase in revenue included net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight increases of $37.9 million or 33.0% and increases from "Finance charges and other" of $2.5 million or 13.8%. Same store sales Same Store Sales A statistic used in retail industry analysis. It compares sales of stores that have been open for a year or more. Notes: This statistic allows investors to determine what portion of new sales has come from sales growth and what portion from the opening of (revenues earned in stores operated for the entirety of both periods) increased 23.3% for the third quarter ended October 31, 2005. The strong same store sales performance was achieved through improved execution, attention to detail, effective sales promotions and the post-storm impact of Hurricanes Katrina and Rita. E[acute accent]Expenses incurred relative to Hurricane Rita Hurricane Rita was the fourth-most intense Atlantic hurricane ever recorded and the most intense tropical cyclone ever observed in the Gulf of Mexico. Rita caused $11.3 billion in damage on the U.S. Gulf Coast in September 2005. for the quarter totaled approximately $822,000. These expenses included costs of repairs to facilities, loss of damaged merchandise and costs associated with temporarily relocating and operating corporate functions away from the storm-affected area, net of estimated probable insurance reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. of $1.1 million. Due to evacuation evacuation /evac·u·a·tion/ (e-vak?u-a´shun) 1. an emptying. 2. catharsis; emptying of the bowels. e·vac·u·a·tion n. orders prior to the storm in the Houston market and actual loss of essential services in the storm-affected area in Southeast Texas Southeast Texas is a subregion of East Texas located in the southeast corner of the U.S. state of Texas. The subregion is geographically centered around the Houston–Sugar Land–Baytown and Beaumont–Port Arthur metropolitan areas. and Southwest Louisiana after the storm, several stores were closed resulting in 134 lost store days during the quarter or approximately 2.7% of the available store days. While the results for the quarter include loss of revenue due to the closed stores, it also includes the positive impact of increased sales due to replacement of storm-damaged appliances and electronics. The overall net positive impact to third quarter sales due to the storm is estimated at approximately 700 to 900 basis points of the same store sales increase. E[acute accent]Also impacted by the storm were collections on outstanding customer receivables which has resulted in an increase in delinquencies greater than sixty days of approximately 140 basis points. Such an increase in delinquencies could ultimately result in higher charge-offs in the next fiscal year. The Company and its QSPE QSPE Qualifying Special Purpose Entity also temporarily experienced higher levels of bankruptcy filings in the quarter in response primarily to a recent bankruptcy law change. In providing for expected future charge-offs due to these events, pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. for the quarter was reduced by $1.0 million. E[acute accent]Net income for the nine months ended October 31, 2005 increased 35.3% to $28.3 million compared to $20.9 million for the nine months ended October 31, 2004. Diluted earnings per share were $1.17 compared with $0.88 for the first nine months of last year. Total revenues for the nine months ended October 31, 2005 increased 22.6% to $495.8 million compared with $404.4 million for the nine months ended October 31, 2004. This increase in revenue included net sales increases of $83.3 million, or 23.6%, and increases from "Finance charges and other" of $8.1 million, or 15.6%. Same store sales (revenues earned in stores operated for the entirety of both periods) increased 14.4% for the nine months ended October 31, 2005. E[acute accent]During the third quarter, the Company continued its expansion into the Dallas/Fort Worth Metroplex The Dallas–Fort Worth–Arlington metropolitan area, a title designated by the U.S. Census as of 2003, encompasses 12 counties within the U.S. state of Texas. The metropolitan area is further divided into two metropolitan divisions: Dallas–Plano–Irving with the opening of a clearance center in Mesquite, Texas Mesquite is a suburb of Dallas located in Dallas County and Kaufman County, Texas (USA). The city had a total population of 124,523 in the 2000 census which increased to 129,902 in the 2005 census estimate. , bringing the store count in this market to twelve as of October, 2005. A new store opened in Harlingen, Texas Harlingen is a city in Cameron County in the heart of the Rio Grande Valley of south Texas, United States. The city covers more than 34 mi² (88 km²) and is the second largest city in Cameron County and the third largest in the Rio Grande Valley after Brownsville and McAllen. , the first week of August 2005, along with a store opened in San Antonio San Antonio (săn ăntō`nēō, əntōn`), city (1990 pop. 935,933), seat of Bexar co., S central Tex., at the source of the San Antonio River; inc. 1837. in November, bring the Company's total store count to 56. In early September, the Company began distributing product in the Dallas/Fort Worth market from its new 150,000 square foot distribution center located between Dallas and Fort Worth in Carrollton, Texas Carrollton is a city in Texas, partially in Dallas County, partially in Denton County, and partially in Collin County. As of 2005, census estimates the city's total population to be 122,699.[1] Carrollton is a suburb of Dallas. , and is expanding its existing service center in the area to better serve this growing market. E[acute accent]Thomas J. Frank, Conn's Chairman and Chief Executive Officer, said, "This quarter presented us with numerous challenges, but our people met them with uncommon dedication and determination to succeed. The results are a testament to an extraordinary ability to execute and a passion to win. Due to the nature of the events of this quarter, it was necessary to record certain special charges, but we still had a very good quarter." E[acute accent]EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. Guidance E[acute accent]As a result of its performance for the first nine months, the Company is increasing its guidance for the year ending January 31, 2006 of earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share from approximately $1.50 to $1.55 to approximately $1.60 to $1.65. Same store sales increases for the year are projected to be in the range of 12% to 15%. The estimate of earnings per diluted share is calculated in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with current accounting principles, generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . E[acute accent]Conference Call Information E[acute accent]Conn's, Inc. will host a conference call and audio webcast today, December 1, 2005 at 10:00 AM, CDT CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT , to discuss financial results for the quarter and nine months ended October 31, 2005. The webcast will be available live at www.conns.com and will be archived for one year. Participants can join the call by dialing (800) 819-9193. E[acute accent]About Conn's, Inc. E[acute accent]The Company is a specialty retailer currently operating 56 retail locations in Texas and Louisiana: eighteen stores in the Houston area, twelve in the Dallas/Fort Worth Metroplex, eight in San Antonio, five in Austin, four in Southeast Texas, one in Corpus Christi Corpus Christi, in Christianity Corpus Christi [Lat.,=body of Christ], feast of the Western Church, observed on the Thursday after Trinity Sunday (or on the following Sunday). , two in South Texas and six stores in Louisiana. It sells major home appliances, including refrigerators, freezers, washers, dryers and ranges, and a variety of consumer electronics, including projection, plasma, DLP (Digital Light Processing) A data projection technology from TI that produces clear, readable images on screens in lit rooms. DLP is used in all types of projection devices, from data projectors that weigh only a few pounds to large rear-projection TVs to electronic and LCD (Liquid Crystal Display) A display technology that uses rod-shaped molecules (liquid crystals) that flow like liquid and bend light. Unenergized, the crystals direct light through two polarizing filters, allowing a natural background color to show. televisions, camcorders, computers and computer peripherals, DVD players A stand-alone device that plays DVDs. It contains a DVD drive and the electronics to decode the digital video. The device may play only manufactured DVDs, or it may be able to play DVD-R, DVD-RW and DVD+RW discs. DVD players are cabled to a TV or home theater system for display. , portable audio and home theater An audio/video entertainment center that has a large-screen TV and hi-fi system with three speakers in the front (left, right and center) and left and right speakers in the rear. Starting in the early 1990s, video inputs were added to stereo receivers and preamplifiers. products. The Company also sells lawn and garden products and mattresses, and continues to introduce additional product categories for the home to help increase same store sales and to respond to its customers' product needs. E[acute accent]Unlike many of its competitors, the Company provides flexible in-house credit options for its customers. Historically, it has financed, on average, approximately 56% of retail sales. Customer receivables are financed substantially through an asset-backed securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. facility, from which the Company derives servicing fee income and interest income from these assets. The Company transfers receivables, consisting of retail installment contracts installment contract n. an agreement in which payments of money, delivery of goods or performance of services are to be made in a series of payments, deliveries or performances, usually on specific dates or upon certain happenings. and revolving accounts A revolving account is a type of debt account where the outstanding balance does not have to be paid in full every month by the borrower to the lender. The borrower maybe required to make a minimum payment, based on the balance amount. extended to its customers, to a qualifying special purpose entity in exchange for cash and subordinated securities represented by asset-backed and variable funding notes issued to third parties. E[acute accent]This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 there·on adv. 1. On or upon this, that, or it. 2. Archaic Following that immediately; thereupon. Adv. 1. thereon - on that; "text and commentary thereon" on it, on that 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 have been 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 or expand existing stores; the Company's estimated capital expenditures and costs related to the opening of new stores or the update or expansion of existing stores; the Company's cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , borrowings from its revolving line of credit Revolving line of credit A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years. and proceeds from securitizations to fund operations, debt repayment and expansion; growth trends and projected sales in the home appliance and consumer electronics industry and the Company's ability to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. such growth; relationships with the Company's key suppliers; the results of the Company's litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; interest rates; weather conditions in the Company's markets; 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed on April 5, 2005 and current report on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. filed in connection with this press release. 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 ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to publicly release any revisions to these forward-looking statements to reflect the events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date of this press release or to reflect the occurrence of unanticipated events.
Conn's, Inc.
CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share)
Three Months Ended Nine Months Ended
October 31, October 31,
------------------- -------------------
2004 2005 2004 2005
--------- --------- --------- ---------
Revenues
Total net sales $115,121 $153,068 $352,514 $435,851
Finance charges and other 17,789 20,237 51,874 59,992
--------- --------- --------- ---------
Total revenues 132,910 173,305 404,388 495,843
Cost and expenses
Cost of goods sold,
including warehousing
and occupancy costs 82,523 110,024 253,002 314,520
Cost of parts sold,
including warehousing
and occupancy costs 1,159 1,334 3,354 3,795
Selling, general and
administrative expense 37,738 46,881 110,121 131,063
Provision for bad debts 1,373 929 4,022 2,524
--------- --------- --------- ---------
Total cost and expenses 122,793 159,168 370,499 451,902
--------- --------- --------- ---------
Operating income 10,117 14,137 33,889 43,941
Interest expense, net 615 74 1,764 488
--------- --------- --------- ---------
Income before minority
interest and income taxes 9,502 14,063 32,125 43,453
Minority interest in limited
partnership (113) - (359) -
--------- --------- --------- ---------
Income before income taxes 9,389 14,063 31,766 43,453
Total provision for income
taxes 3,074 4,932 10,888 15,196
--------- --------- --------- ---------
Net income $6,315 $9,131 $20,878 $28,257
========= ========= ========= =========
Earnings per share
Basic $0.27 $0.39 $0.90 $1.21
Diluted $0.27 $0.38 $0.88 $1.17
Average common shares
outstanding
Basic 23,206 23,458 23,175 23,378
Diluted 23,681 24,286 23,716 24,088
Conn's, Inc.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(in thousands)
January 31, October 31,
2005 2005
------------ ------------
Assets
Current assets
Cash and cash equivalents $7,027 $36,165
Interests in securitized assets and
accounts receivable, net 131,294 142,186
Inventories 62,346 71,636
Deferred income taxes 4,901 6,941
Prepaid expenses and other assets 3,356 3,838
------------ ------------
Total current assets 208,924 260,766
Non-current deferred income tax asset 1,523 2,755
Total property and equipment, net 47,710 53,431
Goodwill and other assets, net 9,846 9,891
------------ ------------
Total assets $268,003 $326,843
============ ============
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $5,500 $-
Current portion of long-term debt 29 11
Accounts payable 26,912 52,931
Accrued expenses 19,883 32,469
Fair value of derivatives 177 -
Other current liabilities 8,349 8,742
------------ ------------
Total current liabilities 60,850 94,153
Long-term debt 5,003 -
Non-current deferred income tax liability 704 877
Deferred gain on sale of property 644 518
Total stockholders' equity 200,802 231,295
------------ ------------
Total liabilities and stockholders'
equity $268,003 $326,843
============ ============
Conn's, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Nine Months
Ended October 31,
----------------------
2004 2005
---------- ----------
Net cash provided by operating activities $597 $51,852
---------- ----------
Cash flows from investing activities
Purchase of property and equipment (14,957) (14,107)
Proceeds from sale of property 1,072 22
---------- ----------
Net cash used in investing activities (13,885) (14,085)
Cash flows from financing activities
Net borrowings (payments) under bank credit
facilities, debt costs 9,563 (10,630)
Net proceeds from stock issued under employee
benefit plans 925 2,022
Payment of promissory notes (52) (21)
---------- ----------
Net cash provided by (used in) financing
activities 10,436 (8,629)
---------- ----------
Impact on cash of consolidation of SRDS 284 -
---------- ----------
Net change in cash (2,568) 29,138
Cash and cash equivalents
Beginning of the year 12,942 7,027
---------- ----------
End of period $10,374 $36,165
========== ==========
CALCULATION OF GROSS MARGIN PERCENTAGE
(dollars in thousands)
Three Months Ended Nine Months Ended
October 31, October 31,
------------------- -------------------
2004 2005 2004 2005
--------- --------- --------- ---------
Total revenues $132,910 $173,305 $404,388 $495,843
Less cost of goods and parts
sold, including warehousing
and occupancy cost (83,682) (111,358) (256,356) (318,315)
--------- --------- --------- ---------
Gross margin dollars $49,228 $61,947 $148,032 $177,528
========= ========= ========= =========
Gross margin percentage 37.0% 35.7% 36.6% 35.8%
PORTFOLIO STATISTICS
For the periods ended January 31, 2003, 2004, 2005
and October 31, 2004 and 2005
(dollars in thousands, except average outstanding balance per account)
1/31/03 1/31/04 1/31/05 10/31/04 10/31/05
--------- --------- --------- --------- ---------
Total accounts 285,247 299,717 350,251 331,941 396,506
Total outstanding
balance $303,825 $349,470 $428,700 $400,499 $490,597
Average outstanding
balance per account $1,065 $1,166 $1,224 $1,207 $1,237
60 day delinquency $16,176 $18,267 $23,143 $21,507 $33,399
Percent delinquency 5.3% 5.2% 5.4% 5.4% 6.8%
Loan loss ratio 3.5% 3.4% 2.9% 3.4% 2.6%
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