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Conn’s, Inc. Announces Results For The Quarter Ended April 30, 2012

Stocks in this article: CONN

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 $113.5 million that could become available upon increases in eligible inventory and customer receivable balances under the borrowing base.

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