Conn's, Inc. Reports Record Second Quarter 2005 Earnings.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, home office products, bedding and lawn and garden products, today announced record results for the quarter and six months ended July July: see month. 31, 2004. Net income available for common stockholders for the second quarter increased 37.6% to $6.8 million compared to $4.9 million for the second 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 available for common stockholders decreased 3.3% to $0.29 from $0.30 in the prior year. On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, as though all shares issued in the initial public offering were outstanding in both periods for the full period and IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. proceeds were used to pay-off existing balance sheet debt, diluted earnings per share increased 16.0% to $0.29 for the quarter ended July 31, 2004 from $0.25 for the quarter ended July 31, 2003. Net revenues for the quarter ended July 31, 2004 increased 16.6% to $136.6 million compared with $117.1 million for the quarter ended July 31, 2003. 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 $16.1 million, or 15.7%, and increases from "Finance charges and other" of $3.4 million, or 23.5%. 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 The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. of both periods) increased 7.2% for the second quarter of fiscal 2005. One of the factors that contributed to success in sales increases and profitability in the current quarter was the expansion of credit promotion programs in excess of one year; the corresponding offset to these operational improvements included a higher use of cash to absorb absorb To offset sell orders or a new security offering with buy orders. receivable growth that does not qualify for funding under the 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. program. Net revenues for the six months ended July 31, 2004 increased 14.1% to $271.5 million compared with $237.9 million for the six months ended July 31, 2003. This increase in revenue included net sales increases of $28.0 million, or 13.4%, and increases from "Finance charges and other" of $5.6 million, or 19.7%. Same store sales increased 5.3% for the first six months of fiscal 2004. Net income available for common stockholders for the six months ended July 31, 2004 increased 54.4% to $14.6 million compared to $9.4 million for the first six months of last year. Diluted earnings per share available for the common stockholder increased 8.9% to $0.61 from $0.56 in the prior year. On a pro forma basis, as though all shares issued in the initial public offering were outstanding in both periods for the full period and IPO proceeds were used to pay-off existing balance sheet debt, diluted earnings per share increased 24.5% to $0.61 for the six months ended July 31, 2004 from $0.49 for the six months ended July 31, 2003. "We continue to be pleased with our progress since becoming a public company," said Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs J. Frank, Conn's chairman and chief executive officer. "We feel that the same store sales performance for the quarter and the year indicates that we kept our commitment to potential investors to execute at an exceptional level. We believe the additional capital expenditures that we have recently made remodeling remodeling /re·mod·el·ing/ (re-mod´el-ing) reorganization or renovation of an old structure. bone remodeling our stores has already had a positive impact on our operations and will continue to generate an appropriate return on our investment. The continuation of our efforts to push our primary business in appliances and electronics and the emphasis that we have placed on track sales, bedding and lawn and garden categories seems to be providing positive results, both at the top and bottom lines." 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 The Company also issued guidance for the third quarter ended Oct. 31, 2004 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 of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $0.25 to $0.27. Guidance issued for the entire year continues to include earnings per diluted share of approximately $1.24 to $1.26, with comparable store sales increase in the mid single digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1. digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. range. Conference Call Information Conn's, Inc. will host a conference call and audio webcast today, Aug. 30, 2004 at 10:00 a.m., CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. , to discuss financial results for the quarter ended July 31, 2004. The webcast will be available at www.conns.com and will be archived for one year. The webcast is also being distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at www.fulldisclosure.com. Institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. can access the call via CCBN's password A secret word or code used to serve as a security measure against unauthorized access to data. It is normally managed by the operating system or DBMS. However, the computer can only verify the legitimacy of the password, not the legitimacy of the user. See NCSC. protected event management site at www.streetevents.com. About Conn's, Inc. The Company is a specialty retailer currently operating 47 retail locations in Texas and Louisiana Louisiana (ləwē'zēăn`ə, l  ē'–), state in the S central United States. It is bounded by Mississippi, with the Mississippi R. . It sells major home appliances,
including refrigerators, freezers, washers, dryers and ranges, and a
variety of consumer electronics, including projection projection, in psychology: see defense mechanism. See rear-projection TV, front-projection TV and LCD panel. (theory) projection - In domain theory, a function, f, which is (a) idempotent, i.e. , plasma 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, VCRs, 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. 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 home office equipment, lawn and garden products and bedding, and continues to introduce additional product categories for the home to help increase same store sales and to respond to our customers' product needs. Unlike many of its competitors, the Company provides in-house In-house In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. credit options for its customers. Historically, it has financed over 56% of retail sales. Customer receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed are financed substantially through an asset-backed securitization 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, or the issuer, in exchange for cash and subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. securities represented by asset-backed and variable funding notes issued to third parties. 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 for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. 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 Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan and expansion; growth trends and projected sales in the home appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software 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 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 16, 2004. 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. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
July 31, July 31,
------------------- -------------------
2003 2004 2003 2004
--------- --------- --------- ---------
Revenues
Total net sales $102,754 $118,851 $209,441 $237,393
Finance charges and other 14,372 17,750 28,476 34,085
--------- --------- --------- ---------
Total revenues 117,126 136,601 237,917 271,478
Cost and Expenses
Cost of goods sold,
including warehousing and
occupancy costs 72,682 85,704 149,674 170,479
Cost of parts sold,
including warehousing and
occupancy costs 1,007 1,092 2,250 2,195
Selling, general and
administrative expense 32,399 37,521 64,154 72,383
Provision for bad debts 820 1,227 2,189 2,649
--------- --------- --------- ---------
Total cost and expenses 106,908 125,544 218,267 247,706
--------- --------- --------- ---------
Operating income 10,218 11,057 19,650 23,772
Interest expense 1,670 567 3,215 1,149
--------- --------- --------- ---------
Income before minority
interest and income taxes 8,548 10,490 16,435 22,623
Minority interest in limited
partnership 131 246
--------- --------- --------- ---------
Income before income taxes 8,548 10,359 16,435 22,377
Total provision for income
taxes 3,025 3,569 5,827 7,814
--------- --------- --------- ---------
Net income 5,523 6,790 10,608 14,563
Less preferred dividends (586) (1,173)
--------- --------- --------- ---------
Net income available for
common stockholders $4,937 $6,790 $9,435 $14,563
========= ========= ========= =========
Earnings per share:
Basic $0.30 $0.29 $0.56 $0.63
Diluted $0.30 $0.29 $0.56 $0.61
Average common shares
outstanding:
Basic 16,720 23,179 16,720 23,163
Diluted 16,720 23,801 16,720 23,769
CONN'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
January 31, July 31,
2004 2004
------------ ------------
Assets (Unaudited)
Current Assets
Cash and cash equivalents $12,942 $6,328
Interest in securitized assets and accounts
receivable, net 93,940 113,027
Inventories 53,742 57,827
Deferred income taxes 4,148 4,526
Prepaid expenses and other assets 3,031 2,125
------------ ------------
Total current assets 167,803 183,833
Non-current deferred tax assets 3,945 4,610
Total property and equipment, net 54,825 59,899
Goodwill and other 8,187 8,282
------------ ------------
Total assets $234,760 $256,343
============ ============
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $- $1,205
Current portion of long-term debt 338 318
Accounts payable 26,412 32,819
Fair value of derivatives 1,121 702
Other current liabilities 22,866 20,958
------------ ------------
Total current liabilities 50,737 56,002
Long-term debt 14,174 14,005
Non-current deferred tax liability and other 1,288 1,320
Minority interest 1,769 1,960
Fair value of derivatives 202 -
Total stockholders' equity,net 166,590 183,056
------------ ------------
Total liabilities and stockholders'
equity $234,760 $256,343
============ ============
CONN'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months
Ended July 31,
-------------------------
2003 2004
------------ ------------
Net cash provided by operating activities $11,003 $786
Cash flows from investing activities
Purchase of property and equipment (2,364) (9,047)
Proceeds from sale of property 189 15
------------ ------------
Net cash used by investing activities (2,175) (9,032)
Cash flows from financing activities
Net borrowings (payments) under bank credit
facilities (7,637) 1,049
Net proceeds from exercise of stock options - 687
Debt issuance costs (429) (70)
Payment of promissory notes (976) (34)
------------ ------------
Net cash provided (used) by financing
activities (9,042) 1,632
------------ ------------
Net change in cash (214) (6,614)
Cash and cash equivalents
Beginning of the year 2,448 12,942
------------ ------------
End of the year $2,234 $6,328
============ ============
CONN'S, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
PRO FORMA EARNINGS PER SHARE
(in thousands, except earnings per share)
Three Months Ended Six Months Ended
July 31, July 31,
------------------- --------------------
2003 2004 2003 2004
--------- --------- --------- ----------
Net income available for
common stockholders $4,937 $6,790 $9,435 $14,563
Add interest savings, net of
tax, due to debt payoff 342 684
Add preferred dividends 586 - 1,173 -
--------- --------- --------- ----------
Pro forma net income $5,865 $6,790 $11,292 $14,563
========= ========= ========= ==========
Total shares outstanding
pre-IPO 16,720 16,720 16,720 16,720
Shares issued in IPO,
including over-allotment 4,622 4,622 4,622 4,622
Conversion of preferred stock
into common 1,712 1,712 1,712 1,712
Weighted exercise of options - 126 - 109
Dilution due to outstanding
options 621 606
--------- --------- --------- ----------
Pro forma shares outstanding 23,054 23,801 23,054 23,769
========= ========= ========= ==========
Pro forma diluted earnings per
share $0.25 $0.29 $0.49 $0.61
========= ========= ========= ==========
Reconciliation of pro forma
shares outstanding to
according to presentation
according to GAAP:
Pro forma shares
outstanding 23,054 23,801 23,054 23,769
Adjustment since shares
were not outstanding for
the full year (6,334) - (6,334) -
--------- --------- --------- ----------
Weighted diluted
outstanding shares
according to GAAP 16,720 23,801 16,720 23,769
========= ========= ========= ==========
The use of pro forma information is considered necessary to provide
the reader with more comparable earnings per share information year
over year. As a result of the IPO transaction, the additional shares
issued were significant relative to the shares outstanding in the
prior year, the retirement of debt substantially reduced interest
expense, and preferred dividends are no longer accrued or paid.
Consequently, the shares outstanding have been adjusted to reflect the
IPO transaction as though it took place on Feb. 1, 2003, interest
expense associated with the debt that would have been paid-off has
been reduced, and preferred dividends have been eliminated in all
periods in order to compute earnings per share on a more comparable
basis.
CALCULATION OF GROSS MARGIN PERCENTAGE
(dollars in thousands)
Three Months Ended Six Months Ended
July 31, July 31,
------------------- --------------------
2003 2004 2003 2004
--------- --------- --------- ----------
Total revenues $117,126 $136,601 $237,917 $271,479
Less cost of goods and parts
sold, including warehousing
and occupancy cost (73,689) (86,795) (151,924) (172,674)
--------- --------- --------- ----------
Gross margin dollars $43,437 $49,806 $85,993 $98,805
========= ========= ========= ==========
Gross margin percentage 37.1% 36.5% 36.1% 36.4%
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