Conn's, Inc. Announces Record Fourth-Quarter Fiscal 2013 Earnings
Apr 3rd 2013 7:20AM
Updated Apr 3rd 2013 7:26AM
Conn's, Inc. Announces Record Fourth-Quarter Fiscal 2013 Earnings
Adjusted diluted earnings per share of $0.54 for the quarter
Fiscal 2014 earnings guidance raised to $2.40 - $2.50 per diluted share
THE WOODLANDS, Texas--(BUSINESS WIRE)-- Conn's, Inc. (NAS: CONN) , a specialty retailer of home appliances, furniture, mattresses, consumer electronics and provider of consumer credit, today announced its results for the quarter ended January 31, 2013.
Significant items for the fourth quarter of fiscal 2013 include:
- Consolidated revenues grew 10.4% from the prior-year period to $250.3 million;
- Same store sales increased 7.0% year-over-year, on top of same store sales growth of 12.1% last year;
- Retail gross margin equaled 36.9% for the quarter;
- Retail segment operating income was $19.8 million on an adjusted basis, over double the level reported in the prior-year period;
- Adjusted credit segment operating income totaled $13.6 million, an increase of 12.2% from the prior-year quarter; and
- Diluted earnings per share was $0.50 on a reported basis, versus $0.24 per share last year.
"Continued revenue and profitability improvement in our retail and credit operations generated record fourth-quarter and full-year results," stated Theodore M. Wright, the Company's Chairman and CEO. "Our five new Conn's HomePlus stores are performing well and we plan to open 10 to 12 more over the balance of fiscal 2014. Average revenue for the new stores was 1.6 times the overall Company average for the three months ended March 31, 2013, with approximately 36% of those sales generated from furniture and mattresses. Same store sales for February and March rose 15% on a combined basis over last year despite a 3% decline in same store sales of consumer electronics."
Retail Segment Results
Revenues were $208.7 million for the three-month period ended January 31, 2013, an increase of $18.4 million, or 9.7%, over the prior-year period. Furniture and mattress sales rose 54.2% from the same quarter last year, accounting for the majority of the reported growth. Double-digit revenue growth was also reported for appliances and home office equipment. The year-over-year comparison also reflects the benefit of the five new Conn's HomePlusTM stores opened in fiscal 2013 - with January 2013 being the first full month all new stores were operating. Additionally, 20 existing stores were updated to the Conn's HomePlus format as of year-end, favorably influencing results. The closure of one store during the current quarter and seven stores in the previous four quarters tempered the reported growth.
For the quarter ended January 31, 2013, retail gross margin was 36.9%, an increase of 720 basis points over last year. Continued margin improvement was realized in each of the product categories - reflecting the benefit of the sale of higher price-point, higher-margin goods, and sourcing opportunities. The majority of the margin expansion was driven by the consumer electronic and appliance categories which accounted for almost two-thirds of product revenue for the current quarter. Product margin on furniture and mattress sales rose 11.1 percentage points from the prior-year period to 46.7% of sales, also favorably impacting retail gross margin. Furniture and mattress sales were 20.9% of total product revenue in the current period and accounted for 30.8% of the total product gross profit.
Credit Segment Results
Revenues were $41.6 million for the current quarter, up 14.5% from the prior-year period. The revenue increase was attributable primarily to a comparable year-over-year increase in the average receivable portfolio balance outstanding. The portfolio balance rose to $741.5 million at year-end, from $643.3 million as of January 31, 2012, due to higher retail sales volumes and credit penetration over the past year. The portfolio interest and fee income yield was 18.7% for the three months ended January 31, 2013, relatively consistent with the prior-year period but down 60 basis points sequentially as a result of increased short-term, no-interest financing.
Provision for bad debts rose $2.4 million over last year to $12.7 million for the quarter ended January 31, 2013. This additional provision was driven by the $57.8 million increase in the receivable portfolio during the current quarter - 53.5% above the growth experienced in the fourth quarter of fiscal 2012.
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-K to be filed with the Securities and Exchange Commission.
For the quarter ended January 31, 2013, the Company reported net income of $0.50 per diluted share, which includes pre-tax charges of $1.9 million associated with store closures and lease terminations, employee severance and the relocation of the Company's corporate office to The Woodlands, Texas. The Company's reported net income was $0.24 per diluted share in the fourth quarter of fiscal 2012, and includes pre-tax costs and impairment charges of $5.1 million related to store closures.
Capital and Liquidity
During the fourth quarter of fiscal 2013, the Company completed a common stock offering in which it sold approximately 2.2 million shares of common stock and received net proceeds of $56.0 million, after deducting underwriting discounts and commissions and other offering-related expenses. Additionally, the Company received net proceeds of $22.4 million in connection with the sale and lease back of four properties. The proceeds from these transactions were used to reduce outstanding debt balances.
As of January 31, 2013, the Company had $262.4 million outstanding under its asset-based loan facility, excluding $4.3 million of letters of credit. Additionally, as of January 31, 2013, the Company had $209.5 million of immediately available borrowing capacity, and an additional $68.8 million that could become available upon increases in eligible inventory and customer receivable balances under the borrowing base.
On March 27, 2013, the Company received an additional $40 million of lender commitments under its asset-based loan facility increasing total commitments to $585 million.
Outlook and Guidance
The Company increased earnings guidance for the fiscal year ending January 31, 2014, to diluted earnings per share of $2.40 to $2.50 on an adjusted basis. The following expectations were considered in developing the guidance for the full year:
- Same stores sales up 3% to 8%;
- New store openings of between 10 and 12;
- Retail gross margin between 35.5% and 36.5%;
- An increase in the credit portfolio balance;
- Provision for bad debts of between 6.0% and 6.5% of the average portfolio balance outstanding;
- Selling, general and administrative expense of between 28.0% and 29.0% of total revenues; and
- Diluted shares outstanding of approximately 36.5 million.
Conference Call Information
Conn's, Inc. will host a conference call and audio webcast on Wednesday, April 3, 2013, at 10:00 A.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 currently operating 68 retail locations in Texas, Louisiana, Oklahoma, New Mexico and Arizona. 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, including lawn and garden equipment, room air conditioners and outdoor furniture. 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 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; 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 from time-to-time 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 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 STATEMENT OF OPERATIONS|
|(in thousands, except per share amounts)|
|Three Months Ended January 31,||Year Ended January 31,|
|Total net sales||$||208,352||$||189,671||$||714,267||$||653,684|
|Finance charges and other||41,992||37,000||150,765||138,618|
|Cost and expenses|
|Cost of goods sold, including|
|warehousing and occupancy costs||129,641||130,719||454,682||455,493|
|Cost of parts sold, including|
|warehousing and occupancy costs||1,452||1,554||5,965||6,527|
|Selling, general and administrative expense||72,942||62,491||253,189||237,098|
|Provision for bad debts||12,821||10,440||47,659||53,555|
|Charges and credits||1,875||5,082||3,025||9,928|
|Total cost and expenses||218,731||210,286||764,520||762,601|
|Loss on early extinguishment of debt||79||-||897||11,056|
|Other (income) expense, net||(48||)||(11||)||(153||)||70|
|Income (loss) before income taxes||27,694||12,418||82,721||(3,882||)|
|Provision (benefit) for income taxes||10,029||4,717||30,109||(159||)|
|Net income (loss)||$||17,665||$||7,701||$||52,612||$||(3,723||)|
|Earnings (loss) per share:|
|Average common shares outstanding:|