For the quarterly period ended October 31, 2010 | Commission File Number 000-50421 |
A Delaware Corporation | 06-1672840 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Large accelerated filer [ ] | Accelerated filer [ x ] | Non-accelerated filer [ ] | smaller reporting company [ ] |
(Do not check if a smaller reporting company) |
Class | Outstanding |
Common stock, $.01 par value per share | 31,758,211 |
PART I.
|
FINANCIAL INFORMATION
|
Page No.
|
|||
Financial Statements
|
1 | ||||
Consolidated Balance Sheets as of January 31, 2010 and October 31, 2010
|
1 | ||||
Consolidated Statements of Operations for the three and nine months ended
|
|||||
October 31, 2009 and 2010
|
2 | ||||
Consolidated Statement of Stockholders’ Equity for the nine months ended
|
|||||
October 31, 2010
|
3 | ||||
Consolidated Statements of Cash Flows for the nine months ended
|
|||||
October 31, 2009 and 2010
|
4 | ||||
Notes to Consolidated Financial Statements
|
5 | ||||
Management's Discussion and Analysis of Financial Condition
|
|||||
and Results of Operations
|
19 | ||||
Quantitative and Qualitative Disclosures About Market Risk
|
43 | ||||
Controls and Procedures
|
44 | ||||
PART II.
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OTHER INFORMATION
|
||||
Legal Proceedings
|
44 | ||||
Risk Factors
|
44 | ||||
Unregistered Sales of Equity Securities and Use of Proceeds
|
58 | ||||
Other Information
|
58 | ||||
Exhibits
|
58 | ||||
SIGNATURE
|
|
59 |
CONSOLIDATED BALANCE SHEETS
|
||||||||
(in thousands, except share data)
|
||||||||
Assets
|
January 31,
2010
|
October 31,
2010
|
||||||
(unaudited)
|
||||||||
Cash and cash equivalents
|
$ | 12,247 | $ | 12,422 | ||||
(includes balances of VIE of $104 and $2,575, respectively)
|
||||||||
Customer accounts receivable, net of allowance of $19,204 and $18,542 respectively
|
368,304 | 344,482 | ||||||
(includes balances of VIE of $279,948 and $236,151, respectively)
|
||||||||
Other accounts receivable, net of allowance of $50 and $60, respectively
|
23,254 | 26,025 | ||||||
Inventories
|
63,499 | 83,729 | ||||||
Deferred income taxes
|
15,237 | 13,508 | ||||||
Federal income taxes recoverable
|
8,178 | 4,467 | ||||||
Prepaid expenses and other assets
|
8,020 | 9,577 | ||||||
Total current assets
|
498,739 | 494,210 | ||||||
Long-term portion of customer accounts receivable, net of
|
||||||||
allowance of $16,598 and $15,542, respectively
|
318,341 | 288,738 | ||||||
(includes balances of VIE of $241,971 and $197,937, respectively)
|
||||||||
Property and equipment
|
||||||||
Land
|
7,682 | 7,264 | ||||||
Buildings
|
10,480 | 10,314 | ||||||
Equipment and fixtures
|
25,592 | 26,642 | ||||||
Leasehold improvements
|
91,299 | 91,770 | ||||||
Subtotal
|
135,053 | 135,990 | ||||||
Less accumulated depreciation
|
(75,350 | ) | (84,375 | ) | ||||
Total property and equipment, net
|
59,703 | 51,615 | ||||||
Non-current deferred income tax asset
|
5,485 | 6,685 | ||||||
Other assets, net (includes balances of VIE of $7,106 and $13,793, respectively)
|
10,198 | 22,101 | ||||||
Total assets
|
$ | 892,466 | $ | 863,349 | ||||
Liabilities and Stockholders' Equity
|
||||||||
Current liabilities
|
||||||||
Current portion of long-term debt
|
$ | 64,055 | $ | 7,665 | ||||
(includes balances of VIE of $63,900 and $7,500, respectively)
|
||||||||
Accounts payable
|
39,944 | 39,997 | ||||||
Accrued compensation and related expenses
|
5,697 | 4,896 | ||||||
Accrued expenses
|
31,685 | 27,779 | ||||||
Income taxes payable
|
2,640 | 1,482 | ||||||
Deferred revenues and allowances
|
14,596 | 12,703 | ||||||
Total current liabilities
|
158,617 | 94,522 | ||||||
Long-term debt
|
388,249 | 419,932 | ||||||
(includes balances of VIE of $282,500 and $292,700, respectively)
|
||||||||
Other long-term liabilities
|
5,195 | 4,594 | ||||||
Fair value of interest rate swaps
|
337 | 185 | ||||||
Deferred gains on sales of property
|
905 | 898 | ||||||
Stockholders' equity
|
||||||||
Preferred stock ($0.01 par value, 1,000,000 shares authorized; none issued or outstanding)
|
- | - | ||||||
Common stock ($0.01 par value, 40,000,000 shares authorized;
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||||||||
24,194,555 and 24,222,025 shares issued at January 31, 2010 and October 31, 2010, respectively)
|
242 | 242 | ||||||
Additional paid-in capital
|
106,226 | 108,045 | ||||||
Accumulated other comprehensive loss
|
(218 | ) | (120 | ) | ||||
Retained earnings
|
269,984 | 272,122 | ||||||
Treasury stock, at cost, 1,723,205 shares
|
(37,071 | ) | (37,071 | ) | ||||
Total stockholders' equity
|
339,163 | 343,218 | ||||||
Total liabilities and stockholders' equity
|
$ | 892,466 | $ | 863,349 | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
(in thousands, except earnings per share)
|
||||||||||||||||
Three Months Ended
October 31,
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Nine Months Ended
October 31,
|
|||||||||||||||
2009
|
2010
|
2009
|
2010
|
|||||||||||||
(As adjusted
|
(As adjusted
|
|||||||||||||||
Revenues
|
see Note 1)
|
see Note 1)
|
||||||||||||||
Product sales
|
$ | 148,463 | $ | 127,035 | $ | 508,669 | $ | 443,778 | ||||||||
Repair service agreement commissions, net
|
7,320 | 6,035 | 25,968 | 22,293 | ||||||||||||
Service revenues
|
5,599 | 3,769 | 17,195 | 12,709 | ||||||||||||
Total net sales
|
161,382 | 136,839 | 551,832 | 478,780 | ||||||||||||
Finance charges and other
|
36,116 | 33,019 | 115,945 | 102,262 | ||||||||||||
Total revenues
|
197,498 | 169,858 | 667,777 | 581,042 | ||||||||||||
Cost and expenses
|
||||||||||||||||
Cost of goods sold, including warehousing
|
||||||||||||||||
and occupancy costs
|
120,963 | 99,546 | 407,594 | 343,979 | ||||||||||||
Cost of parts sold, including warehousing
|
||||||||||||||||
and occupancy costs
|
2,672 | 1,642 | 8,056 | 6,134 | ||||||||||||
Selling, general and administrative expense
|
65,307 | 56,507 | 192,326 | 178,876 | ||||||||||||
Goodwill impairment
|
9,617 | - | 9,617 | - | ||||||||||||
Costs related to financing transactions not completed
|
- | 2,896 | - | 2,896 | ||||||||||||
Provision for bad debts
|
12,651 | 9,372 | 26,321 | 24,694 | ||||||||||||
Total cost and expenses
|
211,210 | 169,963 | 643,914 | 556,579 | ||||||||||||
Operating income (loss)
|
(13,712 | ) | (105 | ) | 23,863 | 24,463 | ||||||||||
Interest expense, net
|
5,649 | 7,722 | 16,692 | 20,234 | ||||||||||||
Other (income) expense, net
|
(34 | ) | (17 | ) | (54 | ) | 166 | |||||||||
Income (loss) before income taxes
|
(19,327 | ) | (7,810 | ) | 7,225 | 4,063 | ||||||||||
Provision (benefit) for income taxes
|
(4,955 | ) | (2,716 | ) | 5,017 | 1,925 | ||||||||||
Net income (loss)
|
$ | (14,372 | ) | $ | (5,094 | ) | $ | 2,208 | $ | 2,138 | ||||||
Earnings (loss) per share
|
||||||||||||||||
Basic
|
$ | (0.64 | ) | $ | (0.23 | ) | $ | 0.10 | $ | 0.10 | ||||||
Diluted
|
$ | (0.64 | ) | $ | (0.23 | ) | $ | 0.10 | $ | 0.10 | ||||||
Average common shares outstanding
|
||||||||||||||||
Basic
|
22,459 | 22,493 | 22,453 | 22,484 | ||||||||||||
Diluted
|
22,459 | 22,493 | 22,658 | 22,487 | ||||||||||||
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
|
||||||||||||||||||||||||||||
Nine Months Ended October 31, 2010
|
||||||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||||||
(in thousands, except descriptive shares)
|
||||||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||||||
Additional
|
Compre-
|
|||||||||||||||||||||||||||
Common Stock
|
Paid-in
|
hensive
|
Retained
|
Treasury
|
||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Loss
|
Earnings
|
Stock
|
Total
|
||||||||||||||||||||||
Balance January 31, 2010
|
24,194 | $ | 242 | $ | 106,226 | $ | (218 | ) | $ | 269,984 | $ | (37,071 | ) | $ | 339,163 | |||||||||||||
Issuance of shares of common
|
||||||||||||||||||||||||||||
stock under Employee
|
||||||||||||||||||||||||||||
Stock Purchase Plan
|
28 | - | 129 | 129 | ||||||||||||||||||||||||
Stock-based compensation
|
1,690 | 1,690 | ||||||||||||||||||||||||||
Net income
|
2,138 | 2,138 | ||||||||||||||||||||||||||
Adjustment of fair value of
|
||||||||||||||||||||||||||||
interest rate swaps
|
||||||||||||||||||||||||||||
net of tax of $53
|
98 | 98 | ||||||||||||||||||||||||||
Other comprehensive income
|
98 | 98 | ||||||||||||||||||||||||||
Total comprehensive income
|
2,236 | |||||||||||||||||||||||||||
Balance October 31, 2010
|
24,222 | $ | 242 | $ | 108,045 | $ | (120 | ) | $ | 272,122 | $ | (37,071 | ) | $ | 343,218 | |||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(unaudited) (in thousands)
|
||||||||
Nine Months Ended
October 31,
|
||||||||
2009
|
2010
|
|||||||
(As adjusted
|
||||||||
Cash flows from operating activities
|
see Note 1)
|
|||||||
Net income
|
$ | 2,208 | $ | 2,138 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation
|
10,062 | 9,776 | ||||||
Amortization, net
|
369 | 2,026 | ||||||
Costs related to financing transactions not completed
|
- | 2,896 | ||||||
Provision for bad debts
|
26,321 | 24,694 | ||||||
Stock-based compensation
|
1,869 | 1,690 | ||||||
Goodwill impairment
|
9,617 | - | ||||||
Discounts and accretion on promotional credit
|
(926 | ) | (1,570 | ) | ||||
Provision for deferred income taxes
|
(3,948 | ) | 822 | |||||
(Gains) losses on sales of property and equipment
|
(79 | ) | 176 | |||||
Changes in operating assets and liabilities:
|
||||||||
Customer accounts receivable
|
(4,551 | ) | 30,317 | |||||
Other accounts receivable
|
11,148 | (2,771 | ) | |||||
Inventory
|
24,273 | (20,230 | ) | |||||
Prepaid expenses and other assets
|
(1,287 | ) | (1,558 | ) | ||||
Accounts payable
|
(15,150 | ) | 53 | |||||
Accrued expenses
|
5,673 | (6,173 | ) | |||||
Income taxes payable
|
(11,224 | ) | 2,207 | |||||
Deferred revenue and allowances
|
571 | (1,893 | ) | |||||
Net cash provided by operating activities
|
54,946 | 42,600 | ||||||
Cash flows from investing activities
|
||||||||
Purchases of property and equipment
|
(8,627 | ) | (2,340 | ) | ||||
Proceeds from sales of property
|
57 | 601 | ||||||
Increase in restricted cash
|
- | (6,532 | ) | |||||
Net cash used in investing activities
|
(8,570 | ) | (8,271 | ) | ||||
Cash flows from financing activities
|
||||||||
Proceeds from stock issued under employee benefit plans
|
165 | 129 | ||||||
Borrowings under lines of credit
|
239,931 | 200,171 | ||||||
Payments on lines of credit
|
(282,331 | ) | (224,769 | ) | ||||
Increase in deferred financing costs
|
(437 | ) | (9,576 | ) | ||||
Payment of promissory notes
|
(26 | ) | (109 | ) | ||||
Net cash used in financing activities
|
(42,698 | ) | (34,154 | ) | ||||
Net change in cash
|
3,678 | 175 | ||||||
Cash and cash equivalents
|
||||||||
Beginning of the year
|
11,909 | 12,247 | ||||||
End of period
|
$ | 15,587 | $ | 12,422 | ||||
-
|
A transfer of financial assets;
|
-
|
The effects of a transfer on its financial position, financial performance, and cash flows; and
|
-
|
A transferor’s continuing involvement, if any, in transferred financial assets;
|
-
|
Improvements in financial reporting by companies involved with variable interest entities to provide more relevant and reliable information to users of financial statements by requiring an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has both of the following characteristics:
|
a)
|
The power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and
|
b)
|
The obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity.
|
-
|
The Company directs the activities that generate the customer receivables that are transferred to the VIE;
|
-
|
The Company directs the servicing activities related to the collection of the customer receivables transferred to the VIE;
|
-
|
The Company absorbs all losses incurred by the VIE to the extent of its residual interest in the customer receivables held by the VIE before any other investors incur losses; and
|
-
|
The Company has the rights to receive all benefits generated by the VIE after paying the contractual amounts due to the other investors.
|
-
|
For the three and nine months ended October 31, 2009, Income before income taxes was increased by approximately $1.4 million and $1.6 million, respectively;
|
-
|
For the three and nine months ended October 31, 2009, Net income was increased by approximately $0.9 million and $1.0 million, respectively;
|
-
|
For the three and nine months ended October 31, 2009, Basic and diluted earnings per share were increased by $0.04 and $0.05, respectively;
|
-
|
For the nine months ended October 31, 2009, Cash flows from operating activities was increased by approximately $109.4 million; and
|
-
|
For the nine months ended October 31, 2009, Cash flows from financing activities was reduced by approximately $104.5 million.
|
Three Months Ended
|
||||||||
October 31,
|
||||||||
2009
|
2010
|
|||||||
Common stock outstanding, net of treasury stock, beginning of period
|
22,457,486 | 22,489,638 | ||||||
Weighted average common stock issued to employee stock purchase plan
|
1,767 | 3,194 | ||||||
Shares used in computing basic earnings per share
|
22,459,253 | 22,492,832 | ||||||
Dilutive effect of stock options, net of assumed repurchase of treasury stock
|
- | - | ||||||
Shares used in computing diluted earnings per share
|
22,459,253 | 22,492,832 |
Nine Months Ended
|
||||||||
October 31,
|
||||||||
2009
|
2010
|
|||||||
Common stock outstanding, net of treasury stock, beginning of period
|
22,444,240 | 22,471,350 | ||||||
Weighted average common stock issued to employee stock purchase plan
|
9,189 | 12,549 | ||||||
Shares used in computing basic earnings per share
|
22,453,429 | 22,483,899 | ||||||
Dilutive effect of stock options, net of assumed repurchase of treasury stock
|
204,729 | 2,606 | ||||||
Shares used in computing diluted earnings per share
|
22,658,158 | 22,486,505 | ||||||
Three Months Ended
|
Nine Months
|
|||||||||||
October 31,
|
ended
|
|||||||||||
2009
|
2010
|
October 31, 2009
|
||||||||||
Net income (loss)
|
$ | (14,372 | ) | $ | (5,094 | ) | $ | 2,208 | ||||
Adjustment of fair value of interest rate swaps,
|
||||||||||||
net of tax of $34, $19 and $116
|
(63 | ) | 36 | (213 | ) | |||||||
Total comprehensive income (loss)
|
$ | (14,435 | ) | $ | (5,058 | ) | $ | 1,995 |
Selling, general, and administrative
|
Interest Expense
|
|||||||||||||||||||||||
As Presented
|
Reclass
|
As Adjusted
|
As Presented
|
Reclass
|
As Adjusted
|
|||||||||||||||||||
FY 2009
|
||||||||||||||||||||||||
Quarter ending 4/30/2008
|
$ | 60,436 | $ | (84 | ) | $ | 60,352 | $ | 5,486 | $ | 84 | $ | 5,570 | |||||||||||
Quarter ending 7/31/2008
|
62,968 | (91 | ) | 62,877 | 5,130 | 91 | 5,221 | |||||||||||||||||
Quarter ending 10/31/2008
|
62,472 | (507 | ) | 61,965 | 6,783 | 507 | 7,290 | |||||||||||||||||
Quarter ending 1/31/2009
|
68,296 | (340 | ) | 67,956 | 6,198 | 340 | 6,538 | |||||||||||||||||
Total Fiscal Year 2009
|
$ | 254,172 | $ | (1,022 | ) | $ | 253,150 | $ | 23,597 | $ | 1,022 | $ | 24,619 | |||||||||||
FY 2010
|
||||||||||||||||||||||||
Quarter ending 4/30/2009
|
$ | 62,738 | $ | (350 | ) | $ | 62,388 | $ | 5,004 | $ | 350 | $ | 5,354 | |||||||||||
Quarter ending 7/31/2009
|
64,979 | (348 | ) | 64,631 | 5,341 | 348 | 5,689 | |||||||||||||||||
Quarter ending 10/31/2009
|
65,661 | (353 | ) | 65,308 | 5,295 | 353 | 5,648 | |||||||||||||||||
Quarter ending 1/31/2010
|
62,564 | (363 | ) | 62,201 | 4,931 | 363 | 5,294 | |||||||||||||||||
Total Fiscal Year 2010
|
$ | 255,942 | $ | (1,414 | ) | $ | 254,528 | $ | 20,571 | $ | 1,414 | $ | 21,985 | |||||||||||
FY 2011
|
||||||||||||||||||||||||
Quarter ending 4/30/2010
|
$ | 60,743 | $ | (998 | ) | $ | 59,745 | $ | 4,785 | $ | 998 | $ | 5,783 | |||||||||||
Quarter ending 7/31/2010
|
63,478 | (854 | ) | 62,624 | 5,875 | 854 | 6,729 | |||||||||||||||||
Quarter ending 10/31/2010
|
56,507 | - | 56,507 | 7,722 | - | 7,722 | ||||||||||||||||||
Year to Date Fiscal Year 2011
|
$ | 180,728 | $ | (1,852 | ) | $ | 178,876 | $ | 18,382 | $ | 1,852 | $ | 20,234 |
Three Months ended
|
Nine Months ended
|
|||||||||||||||
October 31
|
October 31
|
|||||||||||||||
2009
|
2010
|
2009
|
2010
|
|||||||||||||
Interest income and fees on customer receivables
|
$ | 32,765 | $ | 29,279 | $ | 102,736 | $ | 89,908 | ||||||||
Insurance commissions
|
3,253 | 3,525 | 12,864 | 11,673 | ||||||||||||
Other
|
98 | 215 | 345 | 681 | ||||||||||||
Finance charges and other
|
$ | 36,116 | $ | 33,019 | $ | 115,945 | $ | 102,262 |
Total Outstanding Balance
|
||||||||||||||||||||||||
of Customer Receivables
|
60 Days Past Due (1)
|
Reaged (1)
|
||||||||||||||||||||||
January 31,
|
October 31,
|
January 31,
|
October 31,
|
January 31,
|
October 31,
|
|||||||||||||||||||
2010
|
2010
|
2010
|
2010
|
2010
|
2010
|
|||||||||||||||||||
Primary portfolio:
|
||||||||||||||||||||||||
Installment
|
$ | 555,573 | $ | 528,981 | $ | 46,758 | $ | 43,057 | $ | 93,219 | $ | 85,199 | ||||||||||||
Revolving
|
41,787 | 27,935 | 2,017 | 1,815 | 1,819 | 1,529 | ||||||||||||||||||
Subtotal
|
597,360 | 556,916 | 48,775 | 44,872 | 95,038 | 86,728 | ||||||||||||||||||
Secondary portfolio:
|
||||||||||||||||||||||||
Installment
|
138,681 | 120,078 | 24,616 | 20,062 | 49,135 | 39,537 | ||||||||||||||||||
Total receivables managed
|
736,041 | 676,994 | $ | 73,391 | $ | 64,934 | $ | 144,173 | $ | 126,265 | ||||||||||||||
Allowance for uncollectible accounts
|
(35,802 | ) | (34,084 | ) | ||||||||||||||||||||
Allowances for promotional credit programs
|
(13,594 | ) | (9,689 | ) | ||||||||||||||||||||
Current portion of customer accounts
|
||||||||||||||||||||||||
receivable, net
|
368,304 | 344,482 | ||||||||||||||||||||||
Long-term customer accounts
|
||||||||||||||||||||||||
receivable, net
|
$ | 318,341 | $ | 288,739 | ||||||||||||||||||||
Receivables transferred to the VIE
|
$ | 521,919 | $ | 434,089 | $ | 59,840 | $ | 47,594 | $ | 122,521 | $ | 96,754 | ||||||||||||
Receivables not transferred to the VIE
|
214,122 | 242,905 | 13,551 | 17,340 | 21,652 | 29,511 | ||||||||||||||||||
Total receivables managed
|
$ | 736,041 | $ | 676,994 | $ | 73,391 | $ | 64,934 | $ | 144,173 | $ | 126,265 |
(1)
|
Amounts are based on end of period balances and accounts could be represented in both the past due and reaged columns shown above.
|
Net Credit
|
Net Credit
|
|||||||||||||||||||||||||||||||
Average Balances
|
Charge-offs (2)
|
Average Balances
|
Charge-offs (2)
|
|||||||||||||||||||||||||||||
Three Months Ended
|
Three Months Ended
|
Nine Months Ended
|
Nine Months Ended
|
|||||||||||||||||||||||||||||
October 31,
|
October 31,
|
October 31,
|
October 31,
|
|||||||||||||||||||||||||||||
2009
|
2010
|
2009
|
2010
|
2009
|
2010
|
2009
|
2010
|
|||||||||||||||||||||||||
Primary portfolio:
|
||||||||||||||||||||||||||||||||
Installment
|
$ | 562,511 | $ | 538,799 | $ | 555,885 | $ | 539,903 | ||||||||||||||||||||||||
Revolving
|
33,405 | 30,159 | 33,674 | 34,470 | ||||||||||||||||||||||||||||
Subtotal
|
595,916 | 568,958 | $ | 5,860 | $ | 6,967 | 589,559 | 574,373 | $ | 14,261 | $ | 19,344 | ||||||||||||||||||||
Secondary portfolio:
|
||||||||||||||||||||||||||||||||
Installment
|
149,614 | 126,370 | 2,236 | 2,512 | 154,456 | 130,449 | 5,840 | 6,628 | ||||||||||||||||||||||||
Total receivables managed
|
$ | 745,530 | $ | 695,328 | $ | 8,096 | $ | 9,479 | $ | 744,015 | $ | 704,822 | $ | 20,101 | $ | 25,972 | ||||||||||||||||
Receivables transferred to
|
||||||||||||||||||||||||||||||||
the VIE
|
$ | 524,136 | $ | 458,253 | $ | 6,978 | $ | 6,630 | $ | 570,136 | $ | 481,199 | $ | 18,069 | $ | 18,635 | ||||||||||||||||
Receivables not transferred to
|
||||||||||||||||||||||||||||||||
the VIE
|
221,394 | 237,075 | 1,118 | 2,849 | 173,879 | 223,623 | 2,032 | 7,337 | ||||||||||||||||||||||||
Total receivables managed
|
$ | 745,530 | $ | 695,328 | $ | 8,096 | $ | 9,479 | $ | 744,015 | $ | 704,822 | $ | 20,101 | $ | 25,972 |
(2)
|
Amounts represent total credit charge-offs, net of recoveries, on total customer receivables.
|
January 31,
|
October 31,
|
|||||||
2010
|
2010
|
|||||||
Asset-based revolving credit facility
|
$ | 105,498 | $ | 127,100 | ||||
2002 Series A Variable Funding Note
|
196,400 | 165,200 | ||||||
2006 Series A Notes
|
150,000 | 135,000 | ||||||
Unsecured revolving line of credit for $10 million; matured in September 2010
|
- | - | ||||||
Other long-term debt
|
406 | 297 | ||||||
Total debt
|
452,304 | 427,597 | ||||||
Less current portion of debt
|
64,055 | 7,665 | ||||||
Long-term debt
|
$ | 388,249 | $ | 419,932 |
-
|
50 basis points on May 1, 2010;
|
-
|
100 basis points on August 1, 2010;
|
-
|
110 basis points on November 1, 2010;
|
-
|
115 basis points on February 1, 2011;
|
-
|
115 basis point on May 1, 2011; and
|
-
|
123 basis points on August 1, 2011.
|
Fair Values of Derivative Instruments
|
||||||||||
Liability Derivatives
|
||||||||||
January 31, 2010
|
October 31, 2010
|
|||||||||
Balance
|
Balance
|
|||||||||
Sheet
|
Fair
|
Sheet
|
Fair
|
|||||||
Location
|
Value
|
Location
|
Value
|
|||||||
Derivatives designated as
|
||||||||||
hedging instruments under
|
||||||||||
Interest rate contracts
|
Other liabilities
|
$ | 337 |
Other liabilities
|
$ | 185 | ||||
Total derivatives designated
|
||||||||||
as hedging instruments
|
$ | 337 | $ | 185 |
Amount of
|
||||||||||||||||||||||||||
Gain or (Loss)
|
||||||||||||||||||||||||||
Amount of
|
Recognized in
|
|||||||||||||||||||||||||
Gain or (Loss)
|
Location of
|
Income on
|
||||||||||||||||||||||||
Amount of
|
Reclassified
|
Gain or (Loss)
|
Derivative
|
|||||||||||||||||||||||
Gain or (Loss)
|
Location of
|
from
|
Recognized in
|
(Ineffective
|
||||||||||||||||||||||
Recognized
|
Gain or (Loss)
|
Accumulated
|
Income on
|
Portion
|
||||||||||||||||||||||
in OCI on
|
Reclassified
|
OCI into
|
Derivative
|
and Amount
|
||||||||||||||||||||||
Derivative
|
from
|
Income
|
(Ineffective
|
Excluded from
|
||||||||||||||||||||||
(Effective
|
Accumulated
|
(Effective
|
Portion
|
Effectiveness
|
||||||||||||||||||||||
Derivatives in
|
Portion)
|
OCI into
|
Portion)
|
and Amount
|
Testing)
|
|||||||||||||||||||||
Cash Flow
|
Three Months Ended
|
Income
|
Three Months Ended
|
Excluded from
|
Three Months Ended
|
|||||||||||||||||||||
Hedging
|
October 31,
|
October 31,
|
(Effective
|
October 31,
|
October 31,
|
Effectiveness
|
October 31,
|
October 31,
|
||||||||||||||||||
Relationships
|
2009
|
2010
|
Portion)
|
2009
|
2010
|
Testing)
|
2009
|
2010
|
||||||||||||||||||
Interest Rate
|
Interest income/
|
Interest income/
|
||||||||||||||||||||||||
Contracts
|
$ | (63 | ) | $ | (36 | ) |
(expense)
|
$ | (107 | ) | $ | (75 | ) |
(expense)
|
$ | - | $ | - | ||||||||
Total
|
$ | (63 | ) | $ | (36 | ) | $ | (107 | ) | $ | (75 | ) | $ | - | $ | - | ||||||||||
Amount of
|
||||||||||||||||||||||||||
Gain or (Loss)
|
||||||||||||||||||||||||||
Amount of
|
Recognized in
|
|||||||||||||||||||||||||
Gain or (Loss)
|
Location of
|
Income on
|
||||||||||||||||||||||||
Amount of
|
Reclassified
|
Gain or (Loss)
|
Derivative
|
|||||||||||||||||||||||
Gain or (Loss)
|
Location of
|
from
|
Recognized in
|
(Ineffective
|
||||||||||||||||||||||
Recognized
|
Gain or (Loss)
|
Accumulated
|
Income on
|
Portion
|
||||||||||||||||||||||
in OCI on
|
Reclassified
|
OCI into
|
Derivative
|
and Amount
|
||||||||||||||||||||||
Derivative
|
from
|
Income
|
(Ineffective
|
Excluded from
|
||||||||||||||||||||||
(Effective
|
Accumulated
|
(Effective
|
Portion
|
Effectiveness
|
||||||||||||||||||||||
Derivatives in
|
Portion)
|
OCI into
|
Portion)
|
and Amount
|
Testing)
|
|||||||||||||||||||||
Cash Flow
|
Nine Months Ended
|
Income
|
Nine Months Ended
|
Excluded from
|
Nine Months Ended
|
|||||||||||||||||||||
Hedging
|
October 31,
|
October 31,
|
(Effective
|
October 31,
|
October 31,
|
Effectiveness
|
October 31,
|
October 31,
|
||||||||||||||||||
Relationships
|
2009
|
2010
|
Portion)
|
2009
|
2010
|
Testing)
|
2009
|
2010
|
||||||||||||||||||
Interest Rate
|
Interest income/
|
Interest income/
|
||||||||||||||||||||||||
Contracts
|
$ | (213 | ) | $ | (98 | ) |
(expense)
|
$ | (199 | ) | $ | (245 | ) |
(expense)
|
$ | - | $ | - | ||||||||
Total
|
$ | (213 | ) | $ | (98 | ) | $ | (199 | ) | $ | (245 | ) | $ | - | $ | - | ||||||||||
Reconciliation of deferred revenues on repair service agreements
|
||||||||
Nine Months Ended
|
||||||||
October 31,
|
||||||||
2009
|
2010
|
|||||||
Balance in deferred revenues at beginning of period
|
$ | 7,213 | $ | 7,268 | ||||
Revenues earned during the period
|
(5,267 | ) | (5,289 | ) | ||||
Revenues deferred on sales of new agreements
|
5,342 | 4,577 | ||||||
Balance in deferred revenues at end of period
|
$ | 7,288 | $ | 6,556 | ||||
Total claims incurred during the period, excludes selling expenses
|
$ | 2,596 | $ | 2,967 |
Three Months Ended October 31,
|
||||||||||||||||||||||||
2009
|
2010
|
|||||||||||||||||||||||
Retail
|
Credit
|
Total
|
Retail
|
Credit
|
Total
|
|||||||||||||||||||
Revenues
|
||||||||||||||||||||||||
Product sales
|
$ | 148,463 | $ | - | $ | 148,463 | $ | 127,035 | $ | - | $ | 127,035 | ||||||||||||
Repair service agreement commissions (net) (a)
|
10,166 | (2,846 | ) | 7,320 | 9,514 | (3,479 | ) | 6,035 | ||||||||||||||||
Service revenues
|
5,599 | - | 5,599 | 3,769 | - | 3,769 | ||||||||||||||||||
Total net sales
|
164,228 | (2,846 | ) | 161,382 | 140,318 | (3,479 | ) | 136,839 | ||||||||||||||||
Finance charges and other
|
98 | 36,018 | 36,116 | 215 | 32,804 | 33,019 | ||||||||||||||||||
Total revenues
|
164,326 | 33,172 | 197,498 | 140,533 | 29,325 | 169,858 | ||||||||||||||||||
Cost and expenses
|
||||||||||||||||||||||||
Cost of goods and parts sold, including
|
||||||||||||||||||||||||
warehousing and occupancy costs
|
123,635 | - | 123,635 | 101,188 | - | 101,188 | ||||||||||||||||||
Selling, general and
|
||||||||||||||||||||||||
administrative expense (b) (c)
|
50,360 | 14,947 | 65,307 | 41,379 | 15,128 | 56,507 | ||||||||||||||||||
Goodwill Impairment
|
9,617 | - | 9,617 | - | - | - | ||||||||||||||||||
Costs related to financing
|
||||||||||||||||||||||||
transactions not completed
|
- | - | - | - | 2,896 | 2,896 | ||||||||||||||||||
Provision for bad debts
|
(22 | ) | 12,673 | 12,651 | 174 | 9,198 | 9,372 | |||||||||||||||||
Total cost and expenses
|
183,590 | 27,620 | 211,210 | 142,741 | 27,222 | 169,963 | ||||||||||||||||||
Operating income (loss)
|
(19,264 | ) | 5,552 | (13,712 | ) | (2,208 | ) | 2,103 | (105 | ) | ||||||||||||||
Interest expense, net (e)
|
- | 5,649 | 5,649 | - | 7,722 | 7,722 | ||||||||||||||||||
Other (income) expense, net
|
(34 | ) | - | (34 | ) | (17 | ) | - | (17 | ) | ||||||||||||||
Segment income (loss)
|
||||||||||||||||||||||||
before income taxes
|
$ | (19,230 | ) | $ | (97 | ) | $ | (19,327 | ) | $ | (2,191 | ) | $ | (5,619 | ) | $ | (7,810 | ) |
Nine Months Ended October 31,
|
||||||||||||||||||||||||
2009
|
2010
|
|||||||||||||||||||||||
Retail
|
Credit
|
Total
|
Retail
|
Credit
|
Total
|
|||||||||||||||||||
Revenues
|
||||||||||||||||||||||||
Product sales
|
$ | 508,669 | $ | - | $ | 508,669 | $ | 443,778 | $ | - | $ | 443,778 | ||||||||||||
Repair service agreement commissions (net) (a)
|
33,685 | (7,717 | ) | 25,968 | 31,972 | (9,679 | ) | 22,293 | ||||||||||||||||
Service revenues
|
17,195 | - | 17,195 | 12,709 | - | 12,709 | ||||||||||||||||||
Total net sales
|
559,549 | (7,717 | ) | 551,832 | 488,459 | (9,679 | ) | 478,780 | ||||||||||||||||
Finance charges and other
|
345 | 115,600 | 115,945 | 681 | 101,581 | 102,262 | ||||||||||||||||||
Total revenues
|
559,894 | 107,883 | 667,777 | 489,140 | 91,902 | 581,042 | ||||||||||||||||||
Cost and expenses
|
||||||||||||||||||||||||
Cost of goods and parts sold, including
|
||||||||||||||||||||||||
warehousing and occupancy costs
|
415,650 | - | 415,650 | 350,113 | - | 350,113 | ||||||||||||||||||
Selling, general and
|
||||||||||||||||||||||||
administrative expense (b) (d)
|
146,569 | 45,757 | 192,326 | 130,984 | 47,892 | 178,876 | ||||||||||||||||||
Goodwill impairment
|
9,617 | - | 9,617 | - | - | - | ||||||||||||||||||
Costs related to financing
|
||||||||||||||||||||||||
transactions not completed
|
- | - | - | - | 2,896 | 2,896 | ||||||||||||||||||
Provision for bad debts
|
43 | 26,278 | 26,321 | 467 | 24,227 | 24,694 | ||||||||||||||||||
Total cost and expenses
|
571,879 | 72,035 | 643,914 | 481,564 | 75,015 | 556,579 | ||||||||||||||||||
Operating income (loss)
|
(11,985 | ) | 35,848 | 23,863 | 7,576 | 16,887 | 24,463 | |||||||||||||||||
Interest expense, net (f)
|
- | 16,692 | 16,692 | - | 20,234 | 20,234 | ||||||||||||||||||
Other (income) expense, net
|
(54 | ) | - | (54 | ) | 166 | - | 166 | ||||||||||||||||
Segment income (loss) before income taxes
|
$ | (11,931 | ) | $ | 19,156 | $ | 7,225 | $ | 7,410 | $ | (3,347 | ) | $ | 4,063 | ||||||||||
Total assets
|
$ | 202,243 | $ | 706,253 | $ | 908,496 | $ | 209,528 | $ | 653,821 | $ | 863,349 |
|
·
|
Our ability to obtain capital to fund expansion of our credit portfolio;
|
|
·
|
Our ability to obtain capital for required capital expenditures and costs related to the opening of new stores or to update, relocate or expand existing stores;
|
|
·
|
Our ability to fund our operations, capital expenditures, debt repayment and expansion from cash flows from operations, borrowings from our revolving line of credit, and proceeds from securitizations or accessing other debt or equity markets;
|
|
·
|
Our ability to renew or replace our existing borrowing facilities on or before the maturity dates of the facilities;
|
|
·
|
The cost or terms of any amended, renewed or replacement credit facilities;
|
|
·
|
Our ability to obtain additional funding for the purpose of funding the customer receivables generated by us;
|
|
·
|
Our ability to maintain compliance with debt covenant requirements, including taking the actions necessary to maintain compliance with the covenants, such as obtaining amendments to the borrowing facilities that modify the covenant requirements, which could result in higher borrowing costs;
|
|
·
|
Reduced availability under our asset-based revolving credit facility as a result of borrowing base requirements and the impact on the borrowing base calculation of changes in the performance or eligibility of the customer receivables financed by that facility;
|
|
·
|
The success of our growth strategy and plans regarding opening new stores and entering adjacent and new markets, including our plans to continue expanding into existing markets;
|
|
·
|
Our ability to open and profitably operate new stores in existing, adjacent and new geographic markets;
|
|
·
|
Our ability to profitably expand our credit operations;
|
|
·
|
Our intention to update or expand existing stores;
|
|
·
|
The potential to incur expenses and non-cash write-offs related to decisions to close store locations and settling our remaining lease obligations and our initial investment in fixed assets and related store costs;
|
|
·
|
Our ability to introduce additional product categories;
|
|
·
|
The ability of the financial institutions providing lending facilities to us to fund their commitments;
|
|
·
|
The effect of any downgrades by rating agencies of our lenders on borrowing costs;
|
|
·
|
The effect on our borrowing cost of changes in laws and regulations affecting the providers of debt financing;
|
|
·
|
The effect of rising interest rates or borrowing spreads that could increase our cost of borrowing;
|
|
·
|
The effect of rising interest rates or other economic conditions that could impair our customers’ ability to make payments on outstanding credit accounts;
|
|
·
|
Our inability to continue to offer existing customer financing programs or make new programs available that allow consumers to purchase products at levels that can support our growth;
|
|
·
|
The potential for deterioration in the delinquency status of our credit portfolio or higher than historical net charge-offs in the portfolio that could adversely impact earnings;
|
|
·
|
Technological and market developments, growth trends and projected sales in the home appliance and consumer electronics industry, including, with respect to digital products like Blu-ray players, HDTV, LED and 3-D televisions, GPS devices, home networking devices and other new products, and our ability to capitalize on such growth;
|
|
·
|
The potential for price erosion or lower unit sales points that could result in declines in revenues;
|
|
·
|
The effect of changes in oil and gas prices that could adversely affect our customers’ shopping decisions and patterns, as well as the cost of our delivery and service operations and our cost of products, if vendors pass on their additional fuel costs through increased pricing for products;
|
|
·
|
The ability to attract and retain qualified personnel;
|
|
·
|
Both the short-term and long-term impact of adverse weather conditions (e.g. hurricanes) that could result in volatility in our revenues and increased expenses and casualty losses;
|
|
·
|
Changes in laws and regulations and/or interest, premium and commission rates allowed by regulators on our credit, credit insurance and repair service agreements as allowed by those laws and regulations;
|
|
·
|
Our relationships with key suppliers and their ability to provide products at competitive prices and support sales of their products through their rebate and discount programs;
|
|
·
|
The adequacy of our distribution and information systems and management experience to support our expansion plans;
|
|
·
|
The accuracy of our expectations regarding competition and our competitive advantages;
|
|
·
|
Changes in our stock price or the number of shares we have outstanding;
|
|
·
|
The potential for market share erosion that could result in reduced revenues;
|
|
·
|
The accuracy of our expectations regarding the similarity or dissimilarity of our existing markets as compared to new markets we enter;
|
|
·
|
The use of third parties to complete certain of our distribution, delivery and home repair services;
|
|
·
|
General economic conditions in the regions in which we operate; and
|
|
·
|
The outcome of litigation or government investigations affecting our business.
|
Primary Portfolio (1)
|
||||||||||||||||
Nine Months Ended
|
||||||||||||||||
1/31/2009
|
10/31/2009
|
1/31/2010
|
10/31/2010
|
|||||||||||||
Total outstanding balance (period end)
|
$ | 589,922 | $ | 593,088 | $ | 597,360 | $ | 556,916 | ||||||||
Average outstanding customer balance
|
$ | 1,403 | $ | 1,360 | $ | 1,339 | $ | 1,306 | ||||||||
Number of active accounts (period end)
|
420,585 | 435,976 | 446,203 | 426,439 | ||||||||||||
Account balances over 60 days past due (period end) (2)
|
$ | 35,153 | $ | 44,777 | $ | 48,775 | $ | 44,872 | ||||||||
Percent of balances over 60 days past due to
|
||||||||||||||||
total outstanding balance (period end)
|
6.0 | % | 7.5 | % | 8.2 | % | 8.1 | % | ||||||||
Total account balances reaged (period end) (2)
|
90,560 | 90,064 | 95,038 | 86,728 | ||||||||||||
Percent of reaged balances to
|
||||||||||||||||
total outstanding balance (period end)
|
15.4 | % | 15.2 | % | 15.9 | % | 15.6 | % | ||||||||
Account balances reaged more than six months (period end)
|
$ | 36,452 | $ | 35,586 | $ | 35,448 | $ | 33,137 | ||||||||
Weighted average credit score of outstanding balances
|
603 | 603 | 600 | 601 | ||||||||||||
Total applications processed (3)
|
652,213 | 596,343 | 599,206 | 541,485 | ||||||||||||
Percent of retail sales financed
|
51.4 | % | 51.3 | % | 54.2 | % | 52.6 | % | ||||||||
Weighted average origination credit score of sales financed
|
633 | 632 | 631 | 632 | ||||||||||||
Total applications approved
|
50.1 | % | 50.5 | % | 52.8 | % | 50.9 | % | ||||||||
Average down payment
|
5.6 | % | 5.4 | % | 4.4 | % | 3.7 | % | ||||||||
Average total outstanding balance
|
$ | 556,189 | $ | 589,559 | $ | 594,726 | $ | 574,373 | ||||||||
Bad debt charge-offs (net of recoveries)
|
$ | 11,482 | $ | 14,261 | $ | 16,861 | $ | 19,345 | ||||||||
Percent of bad debt charge-offs (net of
|
||||||||||||||||
recoveries) to average outstanding balance, annualized
|
2.8 | % | 3.2 | % | 3.8 | % | 4.5 | % | ||||||||
Estimated percent of reage balances collected (4)
|
89.2 | % | 87.1 | % | 87.7 | % | 81.8 | % |
Secondary Portfolio (1)
|
||||||||||||||||
Nine Months Ended
|
||||||||||||||||
1/31/2009
|
10/31/2009
|
1/31/2010
|
10/31/2010
|
|||||||||||||
Total outstanding balance (period end)
|
$ | 163,591 | $ | 145,109 | $ | 138,681 | $ | 120,078 | ||||||||
Average outstanding customer balance
|
$ | 1,394 | $ | 1,341 | $ | 1,319 | $ | 1,266 | ||||||||
Number of active accounts (period end)
|
117,372 | 108,220 | 105,109 | 94,877 | ||||||||||||
Account balances over 60 days past due (period end) (2)
|
$ | 19,988 | $ | 23,735 | $ | 24,616 | $ | 20,062 | ||||||||
Percent of balances over 60 days past due to
|
||||||||||||||||
total outstanding balance (period end)
|
12.2 | % | 16.4 | % | 17.8 | % | 16.7 | % | ||||||||
Total account balances reaged (period end) (2)
|
$ | 50,602 | $ | 49,073 | $ | 49,135 | $ | 39,537 | ||||||||
Percent of reaged balances to
|
||||||||||||||||
total outstanding balance (period end)
|
30.9 | % | 33.8 | % | 35.4 | % | 32.9 | % | ||||||||
Account balances reaged more than six months (period end)
|
$ | 19,860 | $ | 22,074 | $ | 21,920 | $ | 18,722 | ||||||||
Weighted average credit score of outstanding balances
|
521 | 526 | 526 | 536 | ||||||||||||
Total applications processed (3)
|
292,607 | 261,998 | 255,170 | 236,360 | ||||||||||||
Percent of retail sales financed
|
9.7 | % | 6.0 | % | 6.1 | % | 6.4 | % | ||||||||
Weighted average origination credit score of sales financed
|
535 | 548 | 547 | 563 | ||||||||||||
Total applications approved
|
27.1 | % | 20.5 | % | 21.6 | % | 20.0 | % | ||||||||
Average down payment
|
19.4 | % | 21.1 | % | 20.6 | % | 15.9 | % | ||||||||
Average total outstanding balance
|
$ | 151,121 | $ | 154,456 | $ | 148,596 | $ | 130,449 | ||||||||
Bad debt charge-offs (net of recoveries)
|
$ | 5,543 | $ | 5,840 | $ | 6,476 | $ | 6,627 | ||||||||
Percent of bad debt charge-offs (net of
|
||||||||||||||||
recoveries) to average outstanding balance, annualized
|
4.9 | % | 5.0 | % | 5.8 | % | 6.8 | % | ||||||||
Estimated percent of reage balances collected (4)
|
89.6 | % | 89.4 | % | 90.7 | % | 85.3 | % |
Combined Portfolio (1)
|
||||||||||||||||
Nine Months Ended
|
||||||||||||||||
1/31/2009
|
10/31/2009
|
1/31/2010
|
10/31/2010
|
|||||||||||||
Total outstanding balance (period end)
|
$ | 753,513 | $ | 738,197 | $ | 736,041 | $ | 676,994 | ||||||||
Average outstanding customer balance
|
$ | 1,401 | $ | 1,356 | $ | 1,335 | $ | 1,299 | ||||||||
Number of active accounts (period end)
|
537,957 | 544,196 | 551,312 | 521,316 | ||||||||||||
Account balances over 60 days past due (period end) (2)
|
$ | 55,141 | $ | 68,512 | $ | 73,391 | $ | 64,934 | ||||||||
Percent of balances over 60 days past due to
|
||||||||||||||||
total outstanding balance (period end)
|
7.3 | % | 9.3 | % | 10.0 | % | 9.6 | % | ||||||||
Total account balances reaged (period end) (2)
|
$ | 141,162 | $ | 139,137 | $ | 144,173 | $ | 126,265 | ||||||||
Percent of reaged balances to
|
||||||||||||||||
total outstanding balance (period end)
|
18.7 | % | 18.8 | % | 19.6 | % | 18.7 | % | ||||||||
Account balances reaged more than six months (period end)
|
$ | 56,312 | $ | 57,660 | $ | 57,368 | $ | 51,859 | ||||||||
Weighted average credit score of outstanding balances
|
585 | 588 | 586 | 590 | ||||||||||||
Total applications processed (3)
|
944,820 | 858,341 | 854,376 | 777,845 | ||||||||||||
Percent of retail sales financed
|
61.1 | % | 57.3 | % | 60.3 | % | 59.0 | % | ||||||||
Weighted average origination credit score of sales financed
|
614 | 620 | 619 | 623 | ||||||||||||
Total applications approved
|
42.9 | % | 41.3 | % | 43.5 | % | 41.5 | % | ||||||||
Average down payment
|
7.6 | % | 7.2 | % | 6.2 | % | 5.2 | % | ||||||||
Average total outstanding balance
|
$ | 707,310 | $ | 744,015 | $ | 743,322 | $ | 704,822 | ||||||||
Weighted average monthly payment rate
|
5.3 | % | 5.3 | % | 5.0 | % | 5.4 | % | ||||||||
Bad debt charge-offs (net of recoveries)
|
$ | 17,025 | $ | 20,101 | $ | 23,337 | $ | 25,972 | ||||||||
Percent of bad debt charge-offs (net of
|
||||||||||||||||
recoveries) to average outstanding balance, annualized
|
3.2 | % | 3.6 | % | 4.2 | % | 4.9 | % | ||||||||
Estimated percent of reage balances collected (4)
|
89.6 | % | 88.0 | % | 88.7 | % | 83.0 | % | ||||||||
Percent of managed portfolio
|
||||||||||||||||
represented by promotional receivables
|
16.4 | % | 16.4 | % | 15.3 | % | 13.6 | % |
(1)
|
The Portfolios consist of owned and transferred receivables.
|
(2)
|
Accounts that become delinquent after being reaged are included in both the delinquency and reaged amounts.
|
(3)
|
Unapproved and not declined credit applications in the primary portfolio are referred to the secondary portfolio.
|
(4)
|
Is calculated as 1 minus the percent of actual bad debt charge-offs (net of recoveries) of reage balances as a percent of average reage balances. The reage bad debt charge-offs are included as a component of Percent of bad debt charge-offs (net of recoveries) to average outstanding balance.
|
·
|
For the three months ended October 31, 2010, compared to the same period last year, Total net sales decreased 15.2% and Finance charges and other decreased 8.6%. Total revenues decreased 14.0% while same store sales decreased 16.3% for the quarter ended October 31, 2010. The sales decline was impacted by:
|
|
·
|
Continued challenging economic conditions in our markets;
|
|
·
|
The limitations imposed by the Company’s capital structure, prior to the recently completed refinancing, and the resulting impact on its ability to extend credit;
|
|
·
|
The Company’s decision to tighten credit underwriting standards to protect the quality of the credit portfolio; and
|
|
·
|
Management’s emphasis on improving retail gross margin through maintaining price discipline on the sales floor, which increased from 22.4% to 25.2% for the three months ended October 31, 2009, and 2010, respectively, while maintaining price competitiveness.
|
|
·
|
For the nine months ended October 31, 2010, compared to the same period last year, Total net sales decreased 13.2% and Finance charges and other decreased 11.8%. Total revenues decreased 13.0% while same store sales decreased 14.1% for the nine months ended October 31, 2010. The sales decline was primarily driven by the same reasons discussed above for the quarter.
|
·
|
Finance charges and other decreased 8.6% and 11.8% for the three and nine months ended October 31, 2010, when compared to the same period last year, primarily due to a decrease in interest income and fees as the average interest income and fee yield earned on the portfolio fell from 17.6% and 18.4% for the three and nine months ended October 31, 2009, to 16.8% and 17.0%, for the three and nine months ended October 31, 2010, and the average balance of customer accounts receivable outstanding during the nine months ended October 31, 2010 fell 5.3%, as compared to the prior year period. The interest income and fee yield fell as a result of the higher level of charge-offs experienced, resulting in an increase in the reversal of accrued interest and increased reserves for uncollectible interest, and the reduced amount of new credit accounts originated in the three and nine month periods ended October 31, 2010, as compared to the same periods in the prior fiscal year. The reduction in new credit accounts originated negatively impacts the yield since interest income is recognized using the Rule of 78’s, which accelerates the recognition of interest earnings.
|
·
|
Our total gross margin (Total revenues less Cost of goods sold) increased from 37.4% to 40.4% for the three months ended October 31, 2010, when compared to the same period in the prior year. The increase resulted primarily from:
|
|
·
|
An increase in retail gross margins (includes gross profit from product sales and repair service agreement commissions) from 22.4% for the three months ended October 31, 2009, to 25.2% for the three months ended October 31, 2010, respectively, which improved the total gross margin by 220 basis points. The increase was driven largely by a 310 basis point increase in product gross margins to 21.6% for the three months ended October 31, 2010, as we focused on improving pricing discipline on the sales floor while maintaining price competitiveness in the marketplace; and
|
|
·
|
A change in the revenue mix in the three months ended October 31, 2010, such that higher gross margin finance charge and other revenues contributed a higher percentage of total revenues, resulted in an increase in the total gross margin of approximately 80 basis points.
|
|
·
|
Our gross margin increased from 37.8% to 39.7% for the nine months ended October 31, 2010, when compared to the same period in the prior year. The increase was a result primarily of an improved retail gross margin, similar to the trend discussed for the three months ended October 31, 2010.
|
·
|
During the three months ended October 31, 2010, Selling, general and administrative (SG&A) expense was reduced by $8.8 million, though it increased as a percent of revenues to 33.3% from 33.1% in the prior year period, due to the deleveraging effect of the decline in total revenues. The litigation reserve accrual recorded in the prior year period accounted for $4.1 million of the change in SG&A expense. The remainder of the reduction in SG&A expense was driven primarily by lower compensation and related expense and reduced depreciation expense. These decreases were partially offset by increased expense from the increased use of third-party finance providers and increased use of contract delivery and installation services. SG&A expense for the nine month period decreased $13.5 million, though it increased as a percent of revenues to 30.8% from 28.8% in the prior year period, due to the deleveraging effect of the decline in total revenues;
|
·
|
During the quarter ended October 31, 2009, we determined, as a result of the sustained decline in our market capitalization, the increasingly challenging economic environment and its impact on our comparable store sales, credit portfolio performance and operating results, that an interim goodwill impairment test was necessary. A two-step method was utilized for determining goodwill impairment. Our valuation was performed utilizing the services of outside valuation consultants using both an income approach utilizing our discounted debt-free cash flows and comparable valuation multiples. Upon completion of the impairment test, we concluded that the carrying value of our recorded goodwill was impaired. As a result, we recorded a goodwill impairment charge of $9.6 million to write-off the carrying value of our goodwill during the three month period ended October 31, 2009;
|
·
|
During the past year we have explored multiple opportunities in the capital markets to allow us to refinance our borrowing facilities. As a result, we incurred expenses related to working with bankers, lawyers, accountants and other professional service providers to review and pursue the various alternatives presented. Given our decision to pursue the financing transactions recently completed, we concluded as of October 31, 2010, that it was appropriate to write-off the $2.9 million of expenses incurred related to the other financing alternatives considered;
|
·
|
The Provision for bad debts decreased to $9.4 million for the three months ended October 31, 2010. Our total net charge-offs of customer and non-customer accounts receivable increased by $1.6 million for the three months ended October 31, 2010, as compared to the same periods in the prior fiscal year. Based on our current expectations about future credit portfolio performance we decreased the allowance for bad debts $0.4 million during the three months ended October 31, 2010, as compared to an increase of $4.5 million in the prior year period. The Provision for bad debts decreased to $24.7 million for the nine months ended October 31, 2010. Our total net charge-offs of customer and non-customer accounts receivable increased by $6.3 million for the nine months ended October 31, 2010, as compared to the same periods in the prior fiscal year, while the allowance for bad debts decreased $2.1 million during the nine months ended October 31, 2010, as compared to an increase of $5.8 million in the prior year period;
|
·
|
Net interest expense increased in the three months and nine months ended October 31, 2010, due primarily to a $1.7 million fee paid during the three months ended, and $2.6 million in total fees paid during the nine months ended October 31, 2010, respectively, to the lenders providing the variable funding note under the securitization facility and increased deferred financing cost amortization; and
|
·
|
The income tax benefit for the three months ended October 31, 2010, was impacted primarily by the change in pre-tax income. The prior year effective tax benefit rate of 25.9% was lower than the 34.6% tax benefit rate in the current year period, primarily due to the fact that we did not record a tax benefit in the prior year period related to the litigation reserve accrual.
|
|
·
|
A 40 basis point reduction in the 60+ day delinquency percentage from 10.0% at January 31, 2010, to 9.6% at October 31, 2010, as compared to a 200 basis point increase in the same percentage from 7.3% at January 31, 2009, to 9.3% at October 31, 2009;
|
|
·
|
A 90 basis point, or $17.9 million, reduction in the percent and balance, respectively, of the credit portfolio that has been reaged, to 18.7%, or $126.3 million, as of October 31, 2010, as compared to January 31, 2010; and
|
|
·
|
The payment rate percentage, the amount collected on credit accounts during a month as a percentage of the portfolio balance at the beginning of the month, increased in each of the nine months of the current fiscal year as compared to the same months in the prior fiscal year.
|
Three Months Ended
October 31,
|
Nine Months Ended
October 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenues: | ||||||||||||||||
Product sales
|
74.8 | % | 75.2 | % | 76.4 | % | 76.1 | % | ||||||||
Repair service agreement commissions (net)
|
3.6 | 3.7 | 3.8 | 3.9 | ||||||||||||
Service revenues
|
2.2 | 2.8 | 2.2 | 2.6 | ||||||||||||
Total net sales
|
80.6 | 81.7 | 82.4 | 82.6 | ||||||||||||
Finance charges and other
|
19.4 | 18.3 | 17.6 | 17.4 | ||||||||||||
Total revenues
|
100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of goods sold, including warehousing and occupancy cost
|
58.6 | 61.2 | 59.2 | 61.0 | ||||||||||||
Cost of parts sold, including warehousing and occupancy cost
|
1.0 | 1.4 | 1.1 | 1.2 | ||||||||||||
Selling, general and administrative expense
|
33.3 | 33.1 | 30.8 | 28.8 | ||||||||||||
Goodwill Impairment
|
0.0 | 4.8 | 0.0 | 1.5 | ||||||||||||
Write-off of deferred financing costs
|
1.7 | 0.0 | 0.5 | 0.0 | ||||||||||||
Provision for bad debts
|
5.5 | 6.4 | 4.2 | 3.9 | ||||||||||||
Total costs and expenses
|
100.1 | 106.9 | 95.8 | 96.4 | ||||||||||||
Operating income (loss)
|
(0.1 | ) | (6.9 | ) | 4.2 | 3.6 | ||||||||||
Interest expense, net
|
4.5 | 2.9 | 3.5 | 2.5 | ||||||||||||
Other (income) / expense, net
|
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Income (loss) before income taxes
|
(4.6 | ) | (9.8 | ) | 0.7 | 1.1 | ||||||||||
Provision (benefit) for income taxes
|
(1.6 | ) | (2.5 | ) | 0.3 | 0.8 | ||||||||||
Net income (loss)
|
(3.0 | )% | (7.3 | )% | 0.4 | % | 0.3 | % |
Total consolidated
|
Three months ended
|
2010 vs. 2009
|
Nine months ended
|
2010 vs. 2009
|
||||||||||||||||||||||||||||
October 31,
|
Incr/(Decr)
|
October 31,
|
Incr/(Decr)
|
|||||||||||||||||||||||||||||
(in thousands except percentages)
|
2010
|
2009
|
Amount
|
Pct
|
2010
|
2009
|
Amount
|
Pct
|
||||||||||||||||||||||||
Revenues
|
||||||||||||||||||||||||||||||||
Product sales
|
$ | 127,035 | $ | 148,463 | $ | (21,428 | ) | (14.4 | )% | $ | 443,778 | $ | 508,669 | $ | (64,891 | ) | (12.8 | )% | ||||||||||||||
Repair service agreement
|
||||||||||||||||||||||||||||||||
commissions (net)
|
6,035 | 7,320 | (1,285 | ) | (17.6 | ) | 22,293 | 25,968 | (3,675 | ) | (14.2 | ) | ||||||||||||||||||||
Service revenues
|
3,769 | 5,599 | (1,830 | ) | (32.7 | ) | 12,709 | 17,195 | (4,486 | ) | (26.1 | ) | ||||||||||||||||||||
Total net sales
|
136,839 | 161,382 | (24,543 | ) | (15.2 | ) | 478,780 | $ | 551,832 | (73,052 | ) | (13.2 | ) | |||||||||||||||||||
Finance charges and other
|
33,019 | 36,116 | (3,097 | ) | (8.6 | ) | 102,262 | 115,945 | (13,683 | ) | (11.8 | ) | ||||||||||||||||||||
Total revenues
|
169,858 | 197,498 | (27,640 | ) | (14.0 | ) | 581,042 | 667,777 | (86,735 | ) | (13.0 | ) | ||||||||||||||||||||
Cost and expenses
|
||||||||||||||||||||||||||||||||
Cost of goods and parts sold
|
101,188 | 123,635 | (22,447 | ) | (18.2 | ) | 350,113 | 415,650 | (65,537 | ) | (15.8 | ) | ||||||||||||||||||||
Gross Profit
|
68,671 | 73,863 | (5,192 | ) | (7.0 | ) | 230,930 | 252,127 | (21,197 | ) | (8.4 | ) | ||||||||||||||||||||
Gross Margin
|
40.4 | % | 37.4 | % | 39.7 | % | 37.8 | % | ||||||||||||||||||||||||
Selling, general and
|
||||||||||||||||||||||||||||||||
administrative expense
|
56,507 | 65,307 | (8,800 | ) | (13.5 | ) | 178,876 | 192,326 | (13,450 | ) | (7.0 | ) | ||||||||||||||||||||
Costs related to financing
|
||||||||||||||||||||||||||||||||
transactions not completed
|
2,896 | - | 2,896 | 2,896 | - | 2,896 | ||||||||||||||||||||||||||
Goowill Impairment
|
- | 9,617 | (9,617 | ) | (100.0 | ) | - | 9,617 | (9,617 | ) | (100.0 | ) | ||||||||||||||||||||
Provision for bad debts
|
9,372 | 12,651 | (3,279 | ) | (25.9 | ) | 24,694 | 26,321 | (1,627 | ) | (6.2 | ) | ||||||||||||||||||||
Total costs and expenses
|
169,963 | 211,210 | (41,247 | ) | 556,579 | 643,914 | (87,335 | ) | ||||||||||||||||||||||||
Operating income (loss)
|
(105 | ) | (13,712 | ) | 13,607 | (99.2 | ) | 24,463 | 23,863 | 600 | 2.5 | |||||||||||||||||||||
Operating Margin
|
-0.1 | % | -6.9 | % | 4.2 | % | 3.6 | % | ||||||||||||||||||||||||
Interest expense
|
7,722 | 5,649 | 2,073 | 36.7 | 20,234 | 16,692 | 3,542 | 21.2 | ||||||||||||||||||||||||
Other (income) expense
|
(17 | ) | (34 | ) | 17 | (50.0 | ) | 166 | (54 | ) | 220 | (407.4 | ) | |||||||||||||||||||
Income (loss) before income taxes
|
(7,810 | ) | (19,327 | ) | 11,517 | (59.6 | ) | 4,063 | 7,225 | (3,162 | ) | (43.8 | ) | |||||||||||||||||||
Provision (benefit) for income taxes
|
(2,716 | ) | (4,955 | ) | 2,239 | (45.2 | ) | 1,925 | 5,017 | (3,092 | ) | (61.6 | ) | |||||||||||||||||||
Net income (loss)
|
$ | (5,094 | ) | $ | (14,372 | ) | $ | 9,278 | (64.6 | ) | 2,138 | $ | 2,208 | $ | (70 | ) | (3.2 | ) |
Retail segment
|
Three months ended
|
2010 vs. 2009
|
Nine months ended
|
2010 vs. 2009
|
||||||||||||||||||||||||||||
October 31,
|
Incr/(Decr)
|
October 31,
|
Incr/(Decr)
|
|||||||||||||||||||||||||||||
(in thousands except percentages)
|
2010
|
2009
|
Amount
|
Pct
|
2010
|
2009
|
Amount
|
Pct
|
||||||||||||||||||||||||
Revenues
|
||||||||||||||||||||||||||||||||
Product sales
|
$ | 127,035 | $ | 148,463 | $ | (21,428 | ) | (14.4 | )% | $ | 443,778 | $ | 508,669 | $ | (64,891 | ) | (12.8 | )% | ||||||||||||||
Repair service agreement
|
||||||||||||||||||||||||||||||||
commissions (net) (a)
|
9,514 | 10,166 | (652 | ) | (6.4 | ) | 31,973 | 33,685 | (1,712 | ) | (5.1 | ) | ||||||||||||||||||||
Service revenues
|
3,769 | 5,599 | (1,830 | ) | (32.7 | ) | 12,709 | 17,195 | (4,486 | ) | (26.1 | ) | ||||||||||||||||||||
Total net sales
|
140,318 | 164,228 | (23,910 | ) | (14.6 | ) | 488,460 | 559,549 | (71,089 | ) | (12.7 | ) | ||||||||||||||||||||
Finance charges and other
|
215 | 98 | 117 | 119.4 | 681 | 345 | 336 | 97.4 | ||||||||||||||||||||||||
Total revenues
|
140,533 | 164,326 | (23,793 | ) | (14.5 | ) | 489,141 | 559,894 | (70,753 | ) | (12.6 | ) | ||||||||||||||||||||
Cost and expenses
|
||||||||||||||||||||||||||||||||
Cost of goods and parts sold
|
101,188 | 123,635 | (22,447 | ) | (18.2 | ) | 350,113 | 415,650 | (65,537 | ) | (15.8 | ) | ||||||||||||||||||||
Gross Profit
|
39,345 | 40,691 | (1,346 | ) | (3.3 | ) | 139,028 | 144,244 | (5,216 | ) | (3.6 | ) | ||||||||||||||||||||
Gross Margin
|
28.0 | % | 24.8 | % | 28.4 | % | 25.8 | % | ||||||||||||||||||||||||
Selling, general and
|
||||||||||||||||||||||||||||||||
administrative expense (b)
|
41,379 | 50,360 | (8,981 | ) | (17.8 | ) | 130,984 | 146,569 | (15,585 | ) | (10.6 | ) | ||||||||||||||||||||
Goodwill impairment
|
- | 9,617 | (9,617 | ) | (100.0 | ) | 9,617 | (9,617 | ) | (100.0 | ) | |||||||||||||||||||||
Provision for bad debts
|
174 | (22 | ) | 196 | (890.9 | ) | 467 | 43 | 424 | 989.1 | ||||||||||||||||||||||
Total costs and expenses
|
142,741 | 183,590 | (40,849 | ) | (22.3 | ) | 481,564 | 571,879 | (90,315 | ) | (15.8 | ) | ||||||||||||||||||||
Operating income (loss)
|
(2,208 | ) | (19,264 | ) | 17,056 | (88.5 | ) | 7,577 | (11,985 | ) | 19,562 | (163.2 | ) | |||||||||||||||||||
Operating Margin
|
-1.6 | % | -11.7 | % | 1.5 | % | -2.1 | % | ||||||||||||||||||||||||
Other (income) expense
|
(17 | ) | (34 | ) | 17 | (50.0 | ) | 166 | (54 | ) | 220 | (407.4 | ) | |||||||||||||||||||
Segment income (loss) before
|
||||||||||||||||||||||||||||||||
income taxes
|
$ | (2,191 | ) | $ | (19,230 | ) | $ | 17,039 | (88.6 | ) | $ | 7,411 | $ | (11,931 | ) | $ | 19,342 | (162.1 | ) |
Credit segment
|
Three months ended
|
2010 vs. 2009
|
Nine months ended
|
2010 vs. 2009
|
||||||||||||||||||||||||||||
October 31,
|
Incr/(Decr)
|
October 31,
|
Incr/(Decr)
|
|||||||||||||||||||||||||||||
(in thousands except percentages)
|
2010
|
2009
|
Amount
|
Pct
|
2010
|
2009
|
Amount
|
Pct
|
||||||||||||||||||||||||
Revenues
|
||||||||||||||||||||||||||||||||
Product sales
|
$ | 0 | $ | 0 | $ | 0 | N/A | $ | 0 | $ | 0 | $ | 0 | N/A | ||||||||||||||||||
Repair service agreement
|
||||||||||||||||||||||||||||||||
commissions (net) (a)
|
(3,479 | ) | (2,846 | ) | (633 | ) | 22.2 | (9,679 | ) | (7,717 | ) | (1,962 | ) | 25.4 | ||||||||||||||||||
Total net sales
|
(3,479 | ) | (2,846 | ) | (633 | ) | 22.2 | (9,679 | ) | (7,717 | ) | (1,962 | ) | 25.4 | ||||||||||||||||||
Finance charges and other
|
32,804 | 36,018 | (3,214 | ) | (8.9 | ) | 101,581 | 115,600 | (14,019 | ) | (12.1 | ) | ||||||||||||||||||||
Total revenues
|
29,325 | 33,172 | (3,847 | ) | (11.6 | ) | 91,902 | 107,883 | (15,981 | ) | (14.8 | ) | ||||||||||||||||||||
Cost and expenses
|
||||||||||||||||||||||||||||||||
Selling, general and
|
||||||||||||||||||||||||||||||||
administrative expense (b)
|
15,128 | 14,947 | 181 | 1.2 | 47,892 | 45,757 | 2,135 | 4.7 | ||||||||||||||||||||||||
Costs related to financing
|
||||||||||||||||||||||||||||||||
transactions not completed
|
2,896 | - | 2,896 | 2,896 | - | 2,896 | ||||||||||||||||||||||||||
Provision for bad debts
|
9,198 | 12,673 | (3,475 | ) | (27.4 | ) | 24,227 | 26,278 | (2,051 | ) | (7.8 | ) | ||||||||||||||||||||
Total costs and expenses
|
27,222 | 27,620 | (398 | ) | (1.4 | ) | 75,015 | 72,035 | 2,980 | 4.1 | ||||||||||||||||||||||
Operating income
|
2,103 | 5,552 | (3,449 | ) | (62.1 | ) | 16,887 | 35,848 | (18,961 | ) | (52.9 | ) | ||||||||||||||||||||
Operating Margin
|
7.2 | % | 16.7 | % | 18.4 | % | 33.2 | % | ||||||||||||||||||||||||
Interest expense
|
7,722 | 5,649 | 2,073 | 36.7 | 20,234 | 16,692 | 3,542 | 21.2 | ||||||||||||||||||||||||
Segment Income (loss)
|
||||||||||||||||||||||||||||||||
before income taxes
|
$ | (5,619 | ) | $ | (97 | ) | $ | (5,522 | ) | 5692.8 | $ | (3,347 | ) | $ | 19,156 | $ | (22,503 | ) | (117.5 | ) |
|
(a)
|
Retail repair service agreement commissions exclude repair service agreement cancellations that are the result of consumer credit account charge-offs. These amounts are reflected in repair service agreement commissions for the credit segment.
|
|
(b)
|
Selling, general and administrative expenses include the direct expenses of the retail and credit operations, allocated overhead expenses and a charge to the credit segment to reimburse the retail segment for expenses it incurs related to occupancy, personnel, advertising and other direct costs of the retail segment which benefit the credit operations by sourcing credit customers and collecting payments. The reimbursement received by the retail segment from the credit segment is estimated using an annual rate of 2.5% times the average portfolio balance for each applicable period. The amount of overhead allocated to each segment was approximately $1.6 million and $1.6 million for the three months ended October 31, 2010 and 2009, respectively. The amount of overhead allocated to each segment was approximately $5.0 million and $4.7 million for the nine months ended October 31, 2010 and 2009, respectively. The amount of the reimbursement made to the retail segment by the credit segment was approximately $4.4 million and $4.7 million for the three months ended October 31, 2010 and 2009, respectively. The amount of the reimbursement made to the retail segment by the credit segment was approximately $13.2 million and $13.9 million for the nine months ended October 31, 2010 and 2009, respectively.
|
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Net sales
|
$ | 136.9 | $ | 161.4 | (24.5 | ) | (15.2 | ) | ||||||||
Finance charges and other
|
33.0 | 36.1 | (3.1 | ) | (8.6 | ) | ||||||||||
Total Revenues
|
$ | 169.9 | $ | 197.5 | (27.6 | ) | (14.0 | ) |
|
·
|
A $25.5 million same store sales decrease of 16.3%;
|
|
·
|
A $1.4 million net increase generated by three retail locations that were not open for the three months in each period. Two new locations were opened subsequent to August 1, 2009 and one of our clearance centers was closed subsequent to August 1, 2009;
|
|
·
|
A $1.4 million increase resulted from a decrease in discounts on extended-term non-interest bearing credit sales (those with terms longer than 12 months); and
|
|
·
|
A $1.8 million decrease in service revenues.
|
|
·
|
Approximately $2.1 million increase attributable to increases in total unit sales, due primarily to increased unit sales in track and furniture and mattresses, partially offset by decreases in appliances and consumer electronics, and
|
|
·
|
Approximately $23.5 million decrease attributable to an overall decrease in the average unit price. The decrease was due primarily to a decrease in price points in the electronics and track categories.
|
|
·
|
A $0.7 million decrease in the retail segment’s repair service agreement commissions due primarily to a decline in product sales, although there was increased penetration on the sale of repair service agreements;
|
|
·
|
A $0.6 million decrease in the credit segment’s repair service agreement commissions due to the higher level of credit charge-offs experienced; and
|
|
·
|
A $1.8 million decrease in the retail segment’s service revenues due primarily to increased use of third-party servicers to provide timely product repairs for our customers.
|
Three Months Ended October 31,
|
||||||||||||||||||||||||
2010
|
2009
|
Percent
|
||||||||||||||||||||||
Category
|
Amount
|
Percent
|
Amount
|
Percent
|
Change
|
|||||||||||||||||||
Consumer electronics
|
$ | 42,306 | 30.9 | % | $ | 56,216 | 34.8 | % | (24.7 | )% | (1 | ) | ||||||||||||
Home appliances
|
41,605 | 30.4 | 47,842 | 29.6 | (13.0 | ) | (2 | ) | ||||||||||||||||
Track
|
20,702 | 15.1 | 21,297 | 13.2 | (2.8 | ) | (3 | ) | ||||||||||||||||
Furniture and mattresses
|
16,355 | 12.0 | 15,906 | 9.8 | 2.8 | (4 | ) | |||||||||||||||||
Other
|
6,067 | 4.4 | 7,202 | 4.5 | (15.8 | ) | (5 | ) | ||||||||||||||||
Total product sales
|
127,035 | 92.8 | 148,463 | 91.8 | (14.4 | ) | ||||||||||||||||||
Repair service agreement
|
||||||||||||||||||||||||
commissions
|
6,035 | 4.4 | 7,620 | 4.7 | (20.8 | ) | (6 | ) | ||||||||||||||||
Service revenues
|
3,769 | 2.8 | 5,599 | 3.5 | (32.7 | ) | (7 | ) | ||||||||||||||||
Total net sales
|
$ | 136,839 | 100.0 | % | $ | 161,682 | 100.0 | % | (15.5 | )% |
|
(1)
|
Consumer electronics category sales declined as a result of a 13.0% drop in the average selling price of flat-panel televisions and a 14.4% decrease in unit sales as lower LCD unit sales offset increased sales of LED and plasma televisions;
|
|
(2)
|
Home appliance category sales declined during the quarter on lower unit sales and a decline in the average selling price, though room air conditioning sales increased during the quarter;
|
|
(3)
|
Track sales declined slightly as increased sales of accessories, MP3 players and compact stereos were offset primarily by declines in the sales of camcorders, digital cameras, GPS devices, computer equipment and video game hardware;
|
|
(4)
|
The growth in furniture and mattresses sales was driven by the addition of in-store specialists focused on this category, improved in-store displays and expanded product selection;
|
|
(5)
|
The decrease in other product sales resulted largely from declines in lawn and garden sales and delivery revenues;
|
|
(6)
|
The decline in repair service agreement commissions was driven largely by the decline in product sales and increased cancellations of these agreements as a result of higher credit charge-offs;
|
|
(7)
|
Service revenues decreased as the Company increased its use of third-party servicers during the quarter to provide timely product repairs for its customers; and
|
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Interest income and fees
|
$ | 29.3 | $ | 32.8 | (3.5 | ) | (10.7 | ) | ||||||||
Insurance commissions
|
3.5 | 3.3 | 0.2 | 6.1 | ||||||||||||
Other income
|
0.2 | - | 0.2 | - | ||||||||||||
Finance charges and other
|
$ | 33.0 | $ | 36.1 | (3.1 | ) | (8.6 | ) |
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
Interest income and fees (a)
|
$ | 29,279 | $ | 32,765 | ||||
Net charge-offs (b)
|
(9,479 | ) | (8,096 | ) | ||||
Borrowing costs (c)
|
(7,722 | ) | (5,649 | ) | ||||
Net portfolio yield
|
$ | 12,078 | $ | 19,020 | ||||
Average portfolio balance
|
$ | 695,328 | $ | 745,530 | ||||
Interest income and fee yield % (annualized)
|
16.8 | % | 17.6 | % | ||||
Net charge-off % (annualized)
|
5.5 | % | 4.3 | % |
|
(a)
|
Included in Finance charges and other.
|
|
(b)
|
Included in Provision for bad debts.
|
|
(c)
|
Included in Interest expense.
|
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Cost of goods sold
|
$ | 99.5 | $ | 121.0 | (21.5 | ) | (17.8 | ) | ||||||||
Product gross margin percentage
|
21.7 | % | 18.5 | % | 3.2 | % |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Cost of service parts sold
|
$ | 1.6 | $ | 2.7 | (1.1 | ) | (40.7 | ) | ||||||||
As a percent of service revenues
|
42.5 | % | 48.2 | % | -5.7 | % |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Selling, general and administrative expense - Retail
|
$ | 41.4 | $ | 50.4 | (9.0 | ) | (17.9 | ) | ||||||||
Selling, general and administrative expense - Credit
|
15.1 | 14.9 | 0.2 | 1.3 | ||||||||||||
Selling, general and administrative expense - Total
|
$ | 56.5 | $ | 65.3 | (8.8 | ) | (13.5 | ) | ||||||||
As a percent of total revenues
|
33.3 | % | 33.1 | % | 0.2 | % |
|
·
|
Bank and credit card fees increased by approximately $0.9 million from the 2009 period, primarily due to the use of the third-party finance providers for certain of our interest-free programs;
|
|
·
|
Total compensation costs and related expenses decreased approximately $6.8 million from the 2009 period, primarily due to reduced commissions payable as a result of lower sales and reduced delivery and transportation operation staffing as we increased our use of third-parties to provide these services;
|
|
·
|
Contract delivery, transportation and installation costs increased approximately $0.7 million from the 2009 period as we increased our use of third-parties to provide these services; and
|
|
·
|
SG&A in the 2009 period included a $4.1 million charge to the litigation reserve.
|
|
·
|
Total compensation costs and related expenses increased approximately $0.5 million from the 2009 period as staffing was increased to address increased levels of delinquencies in the challenging economic environment;
|
|
·
|
Occupancy expenses increased approximately $0.1 million from the 2009 period primarily related to our call center operation in San Antonio; and
|
|
·
|
Form printing and purchases and related postage decreased approximately $0.2 million as collection efforts did not utilize letter mailings to the same extent as the prior period.
|
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Goodwill Impairment
|
$ | - | $ | 9.6 | (9.6 | ) | ||||||||||
As a percent of total revenues
|
0.0 | % | 4.9 | % | -4.9 | % |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Costs related to financing transactions not completed
|
$ | 2.9 | $ | - | 2.9 | |||||||||||
As a percent of total revenues
|
1.7 | % | 0.0 | % | 1.7 | % |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Provision for bad debts
|
$ | 9.4 | $ | 12.7 | (3.3 | ) | (26.0 | ) | ||||||||
As a percent of total revenues
|
5.5 | % | 6.4 | % | -0.9 | % |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Interest expense, net
|
$ | 7.7 | $ | 5.6 | 2.1 | 37.5 |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Benefit for income taxes
|
$ | (2.7 | ) | $ | (5.0 | ) | 2.3 | (46.0 | ) | |||||||
As a percent of loss before income taxes
|
34.6 | % | 25.9 | % | 8.7 | % |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Net sales
|
$ | 478.8 | $ | 551.9 | (73.1 | ) | (13.2 | ) | ||||||||
Finance charges and other
|
102.2 | 115.9 | (13.7 | ) | (11.8 | ) | ||||||||||
Total Revenues
|
$ | 581.0 | $ | 667.8 | (86.8 | ) | (13.0 | ) |
|
·
|
A $75.7 million same store sales decrease of 14.1%;
|
|
·
|
A $5.2 million net increase generated by four retail locations that were not open for the three months in each period. Two new locations were opened subsequent to February 1, 2009 and two of our clearance centers were closed subsequent to February 1, 2009;
|
|
·
|
A $1.9 million increase resulted from a decrease in discounts on extended-term non-interest bearing credit sales (those with terms longer than 12 months); and
|
|
·
|
A $4.5 million decrease in service revenues.
|
|
·
|
Approximately $85.3 million decrease attributable to an overall decrease in the average unit price. The decrease was due primarily to a decrease in price points in the electronics and track categories, partially offset by an increase in appliances, and
|
|
·
|
Approximately $20.4 million increase attributable to increases in total unit sales, due primarily to increased unit sales in track, lawn and garden and furniture and mattresses partially offset by decreases in consumer electronics and appliances.
|
|
·
|
A $1.7 million decrease in the retail segment’s repair service agreement commissions due primarily to the decline in product sales;
|
|
·
|
A $2.0 million decrease in the credit segment’s repair service agreement commissions due to the higher level of credit charge-offs experienced; and
|
|
·
|
A $4.5 million decrease in the retail segment’s service revenues due primarily to lower service labor revenues due to increased use of third-party servicers to provide timely product repairs for our customers.
|
Nine Months Ended October 31,
|
||||||||||||||||||||||||
2010
|
2009
|
Percent
|
||||||||||||||||||||||
Category
|
Amount
|
Percent
|
Amount
|
Percent
|
Change
|
|||||||||||||||||||
Consumer electronics
|
$ | 148,804 | 31.1 | % | $ | 195,131 | 35.4 | % | (23.7 | )% | (1 | ) | ||||||||||||
Home appliances
|
147,231 | 30.7 | 167,450 | 30.3 | (12.1 | ) | (2 | ) | ||||||||||||||||
Track
|
64,327 | 13.4 | 65,971 | 11.9 | (2.5 | ) | (3 | ) | ||||||||||||||||
Furniture and mattresses
|
56,476 | 11.8 | 53,291 | 9.7 | 6.0 | (4 | ) | |||||||||||||||||
Other
|
26,940 | 5.6 | 26,826 | 4.9 | 0.4 | (5 | ) | |||||||||||||||||
Total product sales
|
443,778 | 92.6 | 508,669 | 92.2 | (12.8 | ) | ||||||||||||||||||
Repair service agreement
|
||||||||||||||||||||||||
commissions
|
22,293 | 4.7 | 25,968 | 4.7 | (14.2 | ) | (6 | ) | ||||||||||||||||
Service revenues
|
12,709 | 2.7 | 17,195 | 3.1 | (26.1 | ) | (7 | ) | ||||||||||||||||
Total net sales
|
$ | 478,780 | 100.0 | % | $ | 551,832 | 100.0 | % | (13.3 | )% |
|
(1)
|
The consumer electronics category declined as the result of a 10.2% drop in unit sales of televisions and an approximately 15.0% decline in average selling prices, related primarily to LCD televisions.
|
|
(2)
|
The home appliance category sales declined during the period on lower unit sales in all appliance categories, though average selling prices increased.
|
|
(3)
|
The track sales (consisting largely of computers, computer peripherals, video game equipment, portable electronics and small appliances) declined slightly as increased sales of laptops and the introduction of netbooks, and higher digital camera and accessory sales were offset primarily by declines in sales of camcorders, GPS devices and video game hardware.
|
|
(4)
|
The growth in furniture and mattresses sales was driven by the addition of in-store specialists focused on this category, improved in-store displays and expanded product selection.
|
|
(5)
|
An increase in lawn and garden sales included in other product sales was largely responsible for the growth in this category.
|
|
(6)
|
The repair service agreement commissions decrease was driven largely by the decline in product sales. Additionally, increased cancellations of these agreements as a result of higher credit charge-offs reduced the repair service agreement commissions.
|
|
(7)
|
Service revenues decreased as the Company increased its use of third-party servicers to provide timely product repairs for its customers.
|
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Interest income and fees
|
$ | 89.9 | $ | 102.7 | (12.8 | ) | (12.5 | ) | ||||||||
Insurance commissions
|
11.6 | 12.9 | (1.3 | ) | (10.1 | ) | ||||||||||
Other income
|
0.7 | 0.3 | 0.4 | 133.3 | ||||||||||||
Finance charges and other
|
$ | 102.2 | $ | 115.9 | (13.7 | ) | (11.8 | ) |
2010
|
2009
|
|||||||
(Dollars in thousands)
|
||||||||
Interest income and fees (d)
|
$ | 89,908 | $ | 102,736 | ||||
Net charge-offs (e)
|
(25,972 | ) | (20,101 | ) | ||||
Borrowing costs (f)
|
(20,234 | ) | (16,692 | ) | ||||
Net portfolio yield
|
$ | 43,702 | $ | 65,943 | ||||
Average portfolio balance
|
$ | 704,822 | $ | 744,015 | ||||
Interest income and fee yield % (annualized)
|
17.0 | % | 18.4 | % | ||||
Net charge-off % (annualized)
|
4.9 | % | 3.6 | % |
|
(d)
|
Included in Finance charges and other.
|
|
(e)
|
Included in Provision for bad debts.
|
|
(f)
|
Included in Interest expense.
|
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Cost of goods sold
|
$ | 344.0 | $ | 407.6 | (63.6 | ) | (15.6 | ) | ||||||||
Product gross margin percentage
|
22.5 | % | 19.9 | % | 2.6 | % |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Cost of service parts sold
|
$ | 6.1 | $ | 8.1 | (1.9 | ) | (23.9 | ) | ||||||||
As a percent of service revenues
|
48.3 | % | 46.9 | % | 1.4 | % |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Selling, general and administrative expense - Retail
|
$ | 131.0 | $ | 146.6 | (15.6 | ) | (10.6 | ) | ||||||||
Selling, general and administrative expense - Credit
|
47.9 | 45.7 | 2.2 | 4.8 | ||||||||||||
Selling, general and administrative expense - Total
|
$ | 178.9 | $ | 192.3 | (13.4 | ) | (7.0 | ) | ||||||||
As a percent of total revenues
|
30.8 | % | 28.8 | % | 2.0 | % |
|
·
|
Net advertising expense decreased by approximately $1.5 million from the 2009 period through improved efficiencies in our advertising program;
|
|
·
|
Bank and credit card fees increased by approximately $3.2 million from the 2009 period, primarily due to the use of the third-party finance providers for certain of our interest-free programs;
|
|
·
|
Total compensation costs and related expenses decreased approximately $15.2 million from the 2009 period, primarily due to reduced commissions payable as a result of reduced sales and reduced delivery and transportation operation staffing as we increased our use of third-parties to provide these services;
|
|
·
|
Contract delivery and installation costs increased approximately $2.8 million from the 2009 period as we increased our use of third-parties to provide these services; and
|
|
·
|
Vehicle expenses decreased by approximately $0.8 million as we reduced the age and size of our vehicle fleet.
|
|
·
|
Total compensation costs and related expenses increased approximately $2.3 million from the 2009 period as staffing was increased to address increased levels of delinquencies in the challenging economic environment;
|
|
·
|
Bank and credit card fees increased approximately $0.3 million from the 2009 period as more customers made payments using credit cards; and
|
|
·
|
Form printing and purchases and related postage decreased approximately $0.3 million as collection efforts did not utilize letter mailings to the same extent as the prior period.
|
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Goodwill Impairment
|
$ | - | $ | 9.6 | (9.6 | ) | ||||||||||
As a percent of total revenues
|
0.0 | % | 1.4 | % | -1.4 | % |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Costs related to abandoned financing transactions
|
$ | 2.9 | $ | - | 2.9 | |||||||||||
As a percent of total revenues
|
0.5 | % | 0.0 | % | 0.5 | % |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Provision for bad debts
|
$ | 24.7 | $ | 26.3 | (1.6 | ) | (6.1 | ) | ||||||||
As a percent of total revenues
|
4.3 | % | 3.9 | % | 0.3 | % |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Interest expense, net
|
$ | 20.2 | $ | 16.7 | 3.5 | 21.0 |
Change
|
||||||||||||||||
(Dollars in Millions)
|
2010
|
2009
|
$ | % | ||||||||||||
Provision for income taxes
|
$ | 1.9 | $ | 5.0 | (3.1 | ) | (62.0 | ) | ||||||||
As a percent of income before income taxes
|
46.8 | % | 69.2 | % | -22.4 | % |
·
|
A $375 million asset-based loan facility that matures in November 2013;
|
·
|
A $100 million second lien term loan that matures in November 2014; and
|
·
|
A $25 million subscription rights offering that resulted in the issuance of approximately 9.3 million shares of common stock.
|
Actual
|
Required
Minimum/
Maximum
|
|||||||
Fixed charge coverage ratio must exceed required minimum (1)
|
1.57 to 1.00
|
1.10 to 1.00
|
||||||
Total liabilities to tangible net worth ratio must be lower than required maximum (1)
|
1.52 to 1.00
|
2.00 to 1.00
|
||||||
Cash recovery percentage must exceed stated amount (1)
|
5.10% | 4.74% | ||||||
Capital expenditures, net must be lower than required maximum
|
$3.3 million
|
$22.0 million
|
||||||
Availability must be higher than the required minimum
|
$38.8 million
|
$25.0 million
|
|
·
|
Reduced demand or margins for our products;
|
|
·
|
More stringent vendor terms on our inventory purchases;
|
|
·
|
Loss of ability to acquire inventory on consignment;
|
|
·
|
Increases in product cost that we may not be able to pass on to our customers;
|
|
·
|
Reductions in product pricing due to competitor promotional activities;
|
|
·
|
Changes in inventory requirements based on longer delivery times of the manufacturers or other requirements which would negatively impact our delivery and distribution capabilities;
|
|
·
|
Reduced availability under our asset-based revolving credit facility as a result of borrowing base requirements and the impact on the borrowing base calculation of changes in the performance or eligibility of the customer receivables financed by that facility;
|
|
·
|
Reduced availability under our revolving credit facility or term loan as a result of non-compliance with the covenant requirements;
|
|
·
|
Reduced availability under our revolving credit facility as a result of the inability of any of the financial institutions providing those facilities to fund their commitment;
|
|
·
|
Reductions in the capacity or inability to expand the capacity available for financing our customer receivables portfolio under existing or replacement financing programs or a requirement that we retain a higher percentage of the credit portfolio under such programs;
|
|
·
|
Increases in borrowing costs (interest and administrative fees relative to our customer receivables portfolio associated with the funding of our customer receivables);
|
|
·
|
Increases in personnel costs or other costs for us to stay competitive in our markets; and
|
|
·
|
Inability to renew or replace all or a portion of our current credit facilities at their maturity dates.
|
|
·
|
Reducing capital expenditures for new store openings;
|
|
·
|
Reducing the size of our customer credit portfolio;
|
|
·
|
Taking advantage of longer payment terms and financing available for inventory purchases;
|
|
·
|
Utilizing other sources for providing financing to our customers;
|
|
·
|
Negotiating to expand the capacity available under existing credit facilities; and
|
|
·
|
Accessing equity or debt markets.
|
|
-
|
Cash used for the growth in inventory, other accounts receivable;
|
|
-
|
The benefit to cash flows from of operations in the nine months ended October 31, 2009, related to the non-cash goodwill impairment charge;
|
|
-
|
Partially offset by cash provided from decreases in the balance of customer accounts receivable, cash provided from growth in accounts payable and cash from income taxes, which was driven by a $9.5 million tax refund received during the period.
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·
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Conditions in the securities and finance markets generally;
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·
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Our credit rating or the credit rating of any securities we may issue;
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·
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Economic conditions;
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·
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Conditions in the markets for securitized instruments, or other debt or equity instruments;
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·
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The credit quality and performance of our customer receivables;
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·
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Our overall sales performance and profitability;
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·
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Our ability to obtain financial support for required credit enhancement;
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·
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Our ability to adequately service our financial instruments;
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·
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The absence of any material downgrading or withdrawal of ratings given to our securities previously issued in securitization;
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·
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Our ability to meet debt covenant requirements; and
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·
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Prevailing interest rates.
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·
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The availability of additional financial resources;
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·
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The availability of favorable sites in existing adjacent and new markets at price levels consistent with our business plan;
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·
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Competition in existing, adjacent and new markets;
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·
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Competitive conditions, consumer tastes and discretionary spending patterns in adjacent and new markets that are different from those in our existing markets;
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|
·
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A lack of consumer demand for our products or financing programs at levels that can support new store growth;
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·
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Inability to make customer financing programs available that allow consumer to purchase products at levels that can support new store growth;
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·
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Limitations created by covenants and conditions under our revolving credit facility and term loan;
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·
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The substantial outlay of financial resources required to open new stores and the possibility that we may recognize little or no related benefit;
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·
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The inability to identify suitable sites and to negotiate acceptable leases for these sites;
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·
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An inability or unwillingness of vendors to supply product on a timely basis at competitive prices;
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·
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The failure to open enough stores in new markets to achieve a sufficient market presence and realize the benefits of leveraging our advertising and our distribution system;
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·
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Unfamiliarity with local real estate markets and demographics in adjacent and new markets;
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·
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Problems in adapting our distribution and other operational and management systems to an expanded network of stores;
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·
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Difficulties associated with the hiring, training and retention of additional skilled personnel, including store managers; and
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·
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Higher costs for print, radio and television advertising.
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·
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Expansion by our existing competitors or entry by new competitors into markets where we currently operate;
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·
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Entering the television market as the decreased size of flat-panel televisions allows new entrants to display and sell these product more easily;
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·
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Lower pricing;
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·
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Aggressive advertising and marketing;
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·
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Extension of credit to customers on terms more favorable than we offer;
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·
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Larger store size, which may result in greater operational efficiencies, or innovative store formats; and
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·
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Adoption of improved retail sales methods.
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·
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Changes in competition, such as pricing pressure, and the opening of new stores by competitors in our markets;
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·
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General economic conditions;
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·
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New product introductions;
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·
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Consumer trends;
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·
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Changes in our merchandise mix;
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·
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Changes in the relative sales price points of our major product categories;
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·
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Ability to offer credit programs attractive to our customers;
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·
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The impact of any new stores on our existing stores, including potential decreases in existing stores’ sales as a result of opening new stores;
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·
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Weather conditions in our markets;
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·
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Timing of promotional events;
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·
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Timing, location and participants of major sporting events;
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·
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Reduction in new store openings;
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·
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The percentage of our stores that are mature stores;
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|
·
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The locations of our stores and the traffic drawn to those areas:
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·
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How often we update our stores; and
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·
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Our ability to execute our business strategy effectively.
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·
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Power loss, computer systems failures and Internet, telecommunications or data network failures;
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·
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Operator negligence or improper operation by, or supervision of, employees;
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·
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Physical and electronic loss of data or security breaches, misappropriation and similar events;
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·
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Computer viruses;
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·
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Intentional acts of vandalism and similar events; and
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·
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Hurricanes, fires, floods and other natural disasters.
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CONN’S, INC. | |||
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By:
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/s/ Michael J. Poppe | |
Michael J. Poppe | |||
Executive Vice President and Chief Financial Officer | |||
(Principal Financial Officer and duly authorized to sign this report on behalf of the registrant) | |||
Exhibit
Number
|
Description
|
2
|
Agreement and Plan of Merger dated January 15, 2003, by and among Conn's, Inc., Conn Appliances, Inc. and Conn's Merger Sub, Inc. (incorporated herein by reference to Exhibit 2 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).
|
3.1
|
Certificate of Incorporation of Conn's, Inc. (incorporated herein by reference to Exhibit 3.1 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).
|
3.1.1
|
Certificate of Amendment to the Certificate of Incorporation of Conn’s, Inc. dated June 3, 2004 (incorporated herein by reference to Exhibit 3.1.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended April 30, 2004 (File No. 000-50421) as filed with the Securities and Exchange Commission on June 7, 2004).
|
3.2
|
Amended and Restated Bylaws of Conn’s, Inc. effective as of June 3, 2008 (incorporated herein by reference to Exhibit 3.2.3 to Conn’s, Inc. Form 10-Q for the quarterly period ended April 30, 2008 (File No. 000-50421) as filed with the Securities and Exchange Commission on June 4, 2008).
|
4.1
|
Specimen of certificate for shares of Conn's, Inc.'s common stock (incorporated herein by reference to Exhibit 4.1 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on October 29, 2003).
|
10.1
|
Amended and Restated 2003 Incentive Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).t
|
10.1.1
|
Amendment to the Conn’s, Inc. Amended and Restated 2003 Incentive Stock Option Plan (incorporated herein by reference to Exhibit 10.1.1 to Conn’s Form 10-Q for the quarterly period ended April 30, 2004 (File No. 000-50421) as filed with the Securities and Exchange Commission on June 7, 2004).t
|
10.1.2
|
Form of Stock Option Agreement (incorporated herein by reference to Exhibit 10.1.2 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2005 (File No. 000-50421) as filed with the Securities and Exchange Commission on April 5, 2005).t
|
10.2
|
2003 Non-Employee Director Stock Option Plan (incorporated herein by reference to Exhibit 10.2 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046)as filed with the Securities and Exchange Commission on September 23, 2003).t
|
10.2.1
|
Form of Stock Option Agreement (incorporated herein by reference to Exhibit 10.2.1 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2005 (File No. 000-50421) as filed with the Securities and Exchange Commission on April 5, 2005).t
|
10.3
|
Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.3 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).t
|
10.4
|
Conn's 401(k) Retirement Savings Plan (incorporated herein by reference to Exhibit 10.4 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).t
|
10.5
|
Shopping Center Lease Agreement dated May 3, 2000, by and between Beaumont Development Group, L.P., f/k/a Fiesta Mart, Inc., as Lessor, and CAI, L.P., as Lessee, for the property located at 3295 College Street, Suite A, Beaumont, Texas (incorporated herein by reference to Exhibit 10.5 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).
|
10.5.1
|
First Amendment to Shopping Center Lease Agreement dated September 11, 2001, by and among Beaumont Development Group, L.P., f/k/a Fiesta Mart, Inc., as Lessor, and CAI, L.P., as Lessee, for the property located at 3295 College Street, Suite A, Beaumont, Texas (incorporated herein by reference to Exhibit 10.5.1 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).
|
10.6
|
Industrial Real Estate Lease dated June 16, 2000, by and between American National Insurance Company, as Lessor, and CAI, L.P., as Lessee, for the property located at 8550-A Market Street, Houston, Texas (incorporated herein by reference to Exhibit 10.6 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).
|
10.6.1
|
First Renewal of Lease dated November 24, 2004, by and between American National Insurance Company, as Lessor, and CAI, L.P., as Lessee, for the property located at 8550-A Market Street, Houston, Texas (incorporated herein by reference to Exhibit 10.6.1 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2005 (File No. 000-50421) as filed with the Securities and Exchange Commission on April 5, 2005).
|
10.7
|
Lease Agreement dated December 5, 2000, by and between Prologis Development Services, Inc., f/k/a The Northwestern Mutual Life Insurance Company, as Lessor, and CAI, L.P., as Lessee, for the property located at 4810 Eisenhauer Road, Suite 240, San Antonio, Texas (incorporated herein by reference to Exhibit 10.7 to Conn’s, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).
|
10.7.1
|
Lease Amendment No. 1 dated November 2, 2001, by and between Prologis Development Services, Inc., f/k/a The Northwestern Mutual Life Insurance Company, as Lessor, and CAI, L.P., as Lessee, for the property located at 4810 Eisenhauer Road, Suite 240, San Antonio, Texas (incorporated herein by reference to Exhibit 10.7.1 to Conn’s, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).
|
10.8
|
Lease Agreement dated June 24, 2005, by and between Cabot Properties, Inc. as Lessor, and CAI, L.P., as Lessee, for the property located at 1132 Valwood Parkway, Carrollton, Texas (incorporated herein by reference to Exhibit 99.1 to Conn’s, Inc. Current Report on Form 8-K (file no. 000-50421) as filed with the Securities and Exchange Commission on June 29, 2005).
|
10.9
|
Loan and Security Agreement dated August 14, 2008, by and among Conn’s, Inc. and the Borrowers thereunder, the Lenders party thereto, Bank of America, N.A, a national banking association, as Administrative Agent and Joint Book Runner for the Lenders, referred to as Agent, JPMorgan Chase Bank, National Association, as Syndication Agent and Joint Book Runner for the Lenders, and Capital One, N.A., as Co-Documentation Agent (incorporated herein by reference to Exhibit 99.1 to Conn’s Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 20,2008).
|
10.9.1
|
Intercreditor Agreement dated August 14, 2008, by and among Bank of America, N.A., as the ABL Agent, Wells Fargo Bank, National Association, as Securitization Trustee, Conn Appliances, Inc. as the Initial Servicer, Conn Credit Corporation, Inc., as a borrower, Conn Credit I, L.P., as a borrower and Bank of America, N.A., as Collateral Agent (incorporated herein by reference to Exhibit 99.5 to Conn’s Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 20,2008).
|
10.9.2
|
First Amendment to Loan and Security Agreement dated August 14, 2008, by and among Conn’s, Inc. and the Borrowers thereunder, the Lenders party thereto, Bank of America, N.A, a national banking association, as Administrative Agent and Joint Book Runner for the Lenders, referred to as Agent, JPMorgan Chase Bank, National Association, as Syndication Agent and Joint Book Runner for the Lenders, and Capital One, N.A., as Co-Documentation Agent (incorporated herein by reference to Exhibit 10.1 to Conn’s Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on February 12, 2010).
|
10.9.3
|
Second Amendment to Loan and Security Agreement dated August 14, 2008, by and among Conn’s, Inc. and the Borrowers thereunder, the Lenders party thereto, Bank of America, N.A, a national banking association, as Administrative Agent and Joint Book Runner for the Lenders, referred to as Agent, JPMorgan Chase Bank, National Association, as Syndication Agent and Joint Book Runner for the Lenders, and Capital One, N.A., as Co-Documentation Agent (incorporated herein by reference to Exhibit 10.1 to Conn’s Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on March 4, 2010).
|
10.9.4
|
Amended and Restated Loan and Security Agreement dated November 30, 2010, by and among Conn’s, Inc. and the Borrowers thereunder, the Lenders party thereto, Bank of America, N.A., a national banking association, as Administrative Agent and Collateral Agent for the Lenders, JPMorgan Chase Bank, National Association, as Co-Syndication Agent, Joint Book Runner and Co-Lead Arranger for the Lenders, Wells Fargo Preferred Capital, Inc., as Co-Syndication Agent for the Lenders, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Book Runner and Co-Lead Arranger for the Lenders, Capital One, N.A., as Co-Documentation Agent for the Lenders, and Regions Business Capital, a division of Regions Bank, as Co-Documentation Agent for the Lenders (filed herewith).
|
10.9.5
|
Intercreditor Agreement by and between Bank of America, N.A. in its capacity as administrative agent and collateral agent under the ABL loan documents and GA Capital, LLC in its capacity as administrative agent and collateral agent under the Term Loan Documents and Conn’s, Inc. and Conn Credit I, LP as ABL Borrowers, and Conn Appliances, Inc., Conn Credit I, LP and Conn Credit Corporation, Inc. as Term Loan Borrowers (filed herewith).
|
10.9.6
|
Amended and Restated Security Agreement dated November 30, 2010, by and among Conn’s, Inc. and the Existing Grantors thereunder, and Bank of America, N.A., in its capacity as Agent for Lenders (filed herewith).
|
10.9.7
|
Amended and Restated Continuing Guaranty dated as of November 30, 20101, by Conn’s, Inc. and the Existing Guarantors thereunder, in favor of Bank of America, N.A., in its capacity as Agent for Lenders (filed herewith).
|
10.10
|
Receivables Purchase Agreement dated September 1, 2002, by and among Conn Funding II, L.P., as Purchaser, Conn Appliances, Inc. and CAI, L.P., collectively as Originator and Seller, and Conn Funding I, L.P., as Initial Seller (incorporated herein by reference to Exhibit 10.10 to Conn’s, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).
|
10.10.1
|
First Amendment to Receivables Purchase Agreement dated August 1, 2006, by and among Conn Funding II, L.P., as Purchaser, Conn Appliances, Inc. and CAI, L.P., collectively as Originator and Seller (incorporated herein by reference to Exhibit 10.10.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on September 15, 2006).
|
10.11
|
Base Indenture dated September 1, 2002, by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank Minnesota, National Association, as Trustee (incorporated herein by reference to Exhibit 10.11 to Conn’s, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).
|
10.11.1
|
First Supplemental Indenture dated October 29, 2004 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.1 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on November 4, 2004).
|
10.11.2
|
Second Supplemental Indenture dated August 1, 2006 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.1 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 23, 2006).
|
10.11.3
|
Fourth Supplemental Indenture dated August 14, 2008 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.4 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 20, 2008).
|
10.11.4
|
Sixth Supplemental Indenture dated November 30, 2010 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (filed herewith).
|
10.12
|
Amended and Restated Series 2002-A Supplement dated September 10, 2007, by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.2 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on September 11, 2007).
|
10.12.1
|
Supplement No. 1 to Amended and Restated Series 2002-A Supplement dated August 14, 2008, by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.2 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 20, 2008).
|
10.12.1.1
|
Supplement No. 2 to Amended and Restated Series 2002-A Supplement dated August 14, 2008, by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.2 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on March 16, 2010).
|
10.12.2
|
Amended and Restated Note Purchase Agreement dated September 10, 2007 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.3 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on September 11, 2007).
|
10.12.3
|
Second Amended and Restated Note Purchase Agreement dated August 14, 2008 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.3 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 20, 2008).
|
10.12.4
|
Amendment No. 1 to Second Amended and Restated Note Purchase Agreement dated August 28, 2008 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.12.4 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2008 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 28, 2008).
|
10.12.5
|
Amendment No. 2 to Second Amended and Restated Note Purchase Agreement dated August 10, 2009 by and between Conn Funding II. L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2009 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 27, 2009).
|
10.12.6
|
Amendment No. 3 to Second Amended and Restated Note Purchase Agreement dated August 10, 2009 by and between Conn Funding II. L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.2 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on February 12, 2010).
|
10.12.7
|
Amendment No. 4 to Second Amended and Restated Note Purchase Agreement dated August 10, 2009 by and between Conn Funding II. L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.2 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on March 4, 2010).
|
10.12.8
|
Amendment No. 5 to Second Amended and Restated Note Purchase Agreement dated August 10, 2009 by and between Conn Funding II. L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.1 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on March 12, 2010).
|
10.12.9
|
Amendment No. 6 to Second Amended and Restated Note Purchase Agreement dated August 10, 2009 by and between Conn Funding II. L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.1 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on March 16, 2010).
|
10.12.10
|
Amendment No. 7 to Second Amended and Restated Note Purchase Agreement dated August 9, 2010 by and among Conn Funding II. L.P., as Issuer, Conn Appliances, Inc., Three Pillars Funding, LLC, JPMorgan Chase Bank, N.A., Jupiter Securitization Company, LLC (as successor by merger to Park Avenue Receivables Company, LLC) and SunTrust Robinson Humphrey, Inc. (incorporated herein by reference to Exhibit 10.12.10 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2010 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 26, 2010).
|
10.13
|
Servicing Agreement dated September 1, 2002, by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank Minnesota, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).
|
10.13.1
|
First Amendment to Servicing Agreement dated June 24, 2005, by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2005 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 30, 2005).
|
10.13.2
|
Second Amendment to Servicing Agreement dated November 28, 2005, by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14.2 to Conn’s, Inc. Form 10-Q for the quarterly period ended October 31, 2005 (File No. 000-50421) as filed with the Securities and Exchange Commission on December 1, 2005).
|
10.13.3
|
Third Amendment to Servicing Agreement dated May 16, 2006, by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14.3 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on September 15, 2006).
|
10.13.4
|
Fourth Amendment to Servicing Agreement dated August 1, 2006, by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14.4 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on September 15, 2006).
|
10.13.5
|
Sixth Amendment to Servicing Agreement dated November 29, 2010 by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank, National Association, as Trustee (filed herewith).
|
10.14
|
Form of Executive Employment Agreement (incorporated herein by reference to Exhibit 10.15 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on October 29, 2003).t
|
10.14.1
|
First Amendment to Executive Employment Agreement between Conn’s, Inc. and Thomas J. Frank, Sr., Approved by the stockholders May 26, 2005 (incorporated herein by reference to Exhibit 10.15.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2005 (file No. 000-50421) as filed with the Securities and Exchange Commission on August 30, 2005).t
|
10.14.2
|
Executive Retirement Agreement between Conn’s, Inc. and Thomas J. Frank, Sr., approved by the Board of Directors June 2, 2009 (incorporated herein by reference to Exhibit 10.14.2 to Conn’s, Inc. Form 10-Q for the quarterly period ended April 30, 2009 (file No. 000-50421) as filed with the Securities and Exchange Commission on June 4, 2009).t.
|
10.14.3
|
Non-Executive Employment Agreement between Conn’s, Inc. and Thomas J. Frank, Sr., approved by the Board of Directors June 19, 2009 (incorporated herein by reference to Exhibit 10.14.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2009 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 27, 2009).t
|
10.15
|
Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.16 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).t
|
10.16
|
Description of Compensation Payable to Non-Employee Directors (incorporated herein by reference to Form 8-K (file no. 000-50421) filed with the Securities and Exchange Commission on June 2, 2005).t
|
10.17
|
Dealer Agreement between Conn Appliances, Inc. and Voyager Service Programs, Inc. effective as of January 1, 1998 (incorporated herein by reference to Exhibit 10.19 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).
|
10.17.1
|
Amendment #1 to Dealer Agreement by and among Conn Appliances, Inc., CAI, L.P., Federal Warranty Service Corporation and Voyager Service Programs, Inc. effective as of July 1, 2005 (incorporated herein by reference to Exhibit 10.19.1 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).
|
10.17.2
|
Amendment #2 to Dealer Agreement by and among Conn Appliances, Inc., CAI, L.P., Federal Warranty Service Corporation and Voyager Service Programs, Inc. effective as of July 1, 2005 (incorporated herein by reference to Exhibit 10.19.2 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).
|
10.17.3
|
Amendment #3 to Dealer Agreement by and among Conn Appliances, Inc., CAI, L.P., Federal Warranty Service Corporation and Voyager Service Programs, Inc. effective as of July 1, 2005 (incorporated herein by reference to Exhibit 10.19.3 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).
|
10.17.4
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Amendment #4 to Dealer Agreement by and among Conn Appliances, Inc., CAI, L.P., Federal Warranty Service Corporation and Voyager Service Programs, Inc. effective as of July 1, 2005 (incorporated herein by reference to Exhibit 10.19.4 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).
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10.17.5
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Amendment #5 to Dealer Agreement by and among Conn Appliances, Inc., CAI, L.P., Federal Warranty Service Corporation and Voyager Service Programs, Inc. effective as of April 7, 2007 (incorporated herein by reference to Exhibit 10.18.5 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2007 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 30, 2007).
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10.18
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Service Expense Reimbursement Agreement between Affiliates Insurance Agency, Inc. and American Bankers Life Assurance Company of Florida, American Bankers Insurance Company Ranchers & Farmers County Mutual Insurance Company, Voyager Life Insurance Company and Voyager Property and Casualty Insurance Company effective July 1, 1998 (incorporated herein by reference to Exhibit 10.20 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).
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10.18.1
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First Amendment to Service Expense Reimbursement Agreement by and among CAI, L.P., Affiliates Insurance Agency, Inc., American Bankers Life Assurance Company of Florida, Voyager Property & Casualty Insurance Company, American Bankers Life Assurance Company of Florida, American Bankers Insurance Company of Florida and American Bankers General Agency, Inc. effective July 1, 2005 (incorporated herein by reference to Exhibit 10.20.1 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).
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10.18.2
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Seventh Amendment to Service Expense Reimbursement Agreement by and among Conn Appliances, Inc., American Bankers Life Assurance Company of Florida, American Bankers Insurance Company of Florida, American Reliable Insurance Company and Reliable Lloyds Insurance Company effective May 1, 2009 (incorporated herein by reference to Exhibit 10.14.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2009 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 27, 2009).
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10.19
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Service Expense Reimbursement Agreement between CAI Credit Insurance Agency, Inc. and American Bankers Life Assurance Company of Florida, American Bankers Insurance Company Ranchers & Farmers County Mutual Insurance Company, Voyager Life Insurance Company and Voyager Property and Casualty Insurance Company effective July 1, 1998 (incorporated herein by reference to Exhibit 10.21 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).
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10.19.1
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First Amendment to Service Expense Reimbursement Agreement by and among CAI Credit Insurance Agency, Inc., American Bankers Life Assurance Company of Florida, Voyager Property & Casualty Insurance Company, American Bankers Life Assurance Company of Florida, American Bankers Insurance Company of Florida, American Reliable Insurance Company, and American Bankers General Agency, Inc. effective July 1, 2005 (incorporated herein by reference to Exhibit 10.21.1 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).
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10.19.2
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Fourth Amendment to Service Expense Reimbursement Agreement by and among CAI Credit Insurance Agency, Inc., American Bankers Life Assurance Company of Florida, American Bankers Insurance Company of Florida and American Reliable Insurance Company effective May 1, 2009 (incorporated herein by reference to Exhibit 10.14.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2009 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 27, 2009).
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10.20
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Consolidated Addendum and Amendment to Service Expense Reimbursement Agreements by and among Certain Member Companies of Assurant Solutions, CAI Credit Insurance Agency, Inc. and Affiliates Insurance Agency, Inc. effective April 1, 2004 (incorporated herein by reference to Exhibit 10.22 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).
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10.21
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Series 2006-A Supplement to Base Indenture, dated August 1, 2006, by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.23 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on September 15, 2006).
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10.22
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Retailer Program agreement by and between GE Money bank and Conn Appliances, Inc. effective April 16, 2009 (incorporated herein by reference to Exhibit 10.22 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2010 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 26, 2010).
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10.23
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Agreement by and between Conn Appliances, Inc. and The Rental Store, Inc. effective July 1, 2010 (incorporated herein by reference to Exhibit 10.23 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2010 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 26, 2010).
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10.24
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Term Loan and Security Agreement, dated November 30, 2010, among Conn’s, Inc., as parent and guarantor, Conn Appliances, Inc., Conn Credit I, LP, and Conn Credit Corporation, Inc., the financial institutions party to this Agreement from time to time as lenders, GA Capital, LLC, as Administrative Agent and Collateral Agent for the Lenders and Wells Fargo Credit, Inc., as Syndication Agent (filed herewith).
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10.25
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Continuing Guaranty dated November 30, 2010 executed by Conn’s, Inc., CAI Holding Co., CAI Credit Insurance Agency, Inc., Conn Lending, LLC, and CAIAIR, Inc., each a Guarantor in favor of GA Capital, LLC, in its capacity as agent (filed herewith).
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10.26
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Security Agreement dated November 30, 2010 entered into and executed by Conn’s, Inc., CAI Holding Co., CAI Credit Insurance Agency, Inc., Conn Lending, LLC, and CAIAIR, Inc., collectively, and GA Capital, LLC, in its capacity as Agent (filed herewith).
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10.27
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Receivables Purchase Agreement dated November 30, 2010 by and between Conn Funding, II, LP and Conn Credit I, LP (filed herewith).
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10.28
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Trustee Acknowledgement dated November 30, 2010 between Conn Funding II, LP, as Issuer, and Wells Fargo Bank, National Association, as Trustee (filed herewith).
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10.29
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Assignment dated November 30, 2010 between Conn Funding II, LP, as Seller, and Conn Credit I, LP, as Purchaser (filed herewith).
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11.1
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Statement re: computation of earnings per share is included under Note 1 to the financial statements.
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12.1
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Statement of computation of Ratio of Earnings to Fixed Charges (filed herewith).
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31.1
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Rule 13a-14(a)/15d-14(a) Certification (Chief Executive Officer) (filed herewith).
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31.2
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Rule 13a-14(a)/15d-14(a) Certification (Chief Financial Officer) (filed herewith).
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32.1
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Section 1350 Certification (Chief Executive Officer and Chief Financial Officer) (furnished herewith).
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99.1
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Subcertification by Chairman of the Board in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Executive Officer) (filed herewith).
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99.2
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Subcertification by President – Retail Division in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Executive Officer) (filed herewith).
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99.3
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Subcertification by President – Credit Division in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Executive Officer) (filed herewith).
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99.4
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Subcertification by Senior Vice President of Finance in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Financial Officer) (filed herewith).
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99.5
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Subcertification by Treasurer in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Financial Officer) (filed herewith).
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99.6
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Subcertification by Secretary in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Financial Officer) (filed herewith).
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99.7
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Subcertification of Chairman of the Board, Chief Operating Officer, Treasurer and Secretary in support of Section 1350 Certifications (Chief Executive Officer and Chief Financial Officer) (furnished herewith).
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t
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Management contract or compensatory plan or arrangement.
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