CONNS INC (CONN) SPO
|Company Name||CONNS INC|
|Company Address||4055 TECHNOLOGY FOREST BLVD, SUITE 210
THE WOODLANDS, TX 77381
|CEO||Theodore M. Wright|
|Employees (as of 1/31/2012)||2550|
|State of Inc||DE|
|Fiscal Year End||1/31|
|Exchange||Nasdaq National Market|
|Shares Over Alloted||0|
|Shareholder Shares Offered||3,591,621|
|Lockup Period (days)||180|
|Quiet Period Expiration||1/14/2013|
We will not receive any proceeds from the sale of shares of our common stock by any selling stockholder. We expect that the net proceeds of this offering to us will be approximately $37,100,000, after deducting underwriting discounts, commissions and our estimated offering expenses. Our estimate of the net proceeds is based on an assumed offering price of $28.09 per share, which was the closing price of our common stock on the NASDAQ Global Select Market on November 29, 2012, and assumes the number of shares we sell in this offering is the same as set forth on the cover page of this prospectus supplement. A $1.00 increase or decrease in the assumed public offering price would increase or decrease the estimated net proceeds we receive from this offering by approximately $1,400,000, assuming the number of shares we sell in this offering, as set forth on the cover of this prospectus supplement, remains the same and after deducting estimated underwriting discounts, commissions, and our estimated offering expenses. We currently intend to use the net proceeds from the sale of the securities under this prospectus supplement by us for the repayment of debt under our asset-based loan facility and paying the fees and expenses we will incur in connection with this offering. Our asset-based loan facility had an interest rate of 3.4% as of October 31, 2012 and matures in September 2016. Pending the application of the net proceeds, we may invest net proceeds in marketable securities and/or short-term investment grade and U.S. government securities.
The retail market for consumer electronics and furniture is highly fragmented and intensely competitive and the market for home appliances is concentrated among a few major dealers. We currently compete against a diverse group of retailers, including national mass merchants such as Sears, Wal-Mart, Target, Sam’s Club and Costco, specialized national retailers such as Best Buy and Rooms To Go, home improvement stores such as Lowe’s and Home Depot, and locally-owned regional or independent retail specialty stores that sell home appliances, consumer electronics, furniture, and mattresses similar, and often identical, to those items we sell. We also compete with retailers that market products through store catalogs and the internet. In addition, there are few barriers to entry into our current and contemplated markets, and new competitors may enter our current or future markets at any time. We may not be able to compete successfully against existing and future competitors. Some of our competitors have financial resources that are substantially greater than ours and may be able to purchase inventory at lower costs and better endure economic downturns. As a result, our sales may decline if we cannot offer competitive prices to our customers or we may be required to accept lower profit margins. Our competitors may respond more quickly to new or emerging technologies and may have greater resources to devote to promotion and sale of products and services. If two or more competitors consolidate their businesses or enter into strategic partnerships, they may be able to compete more effectively against us. Our existing competitors or new entrants into our industry may use a number of different strategies to compete against us, including: . Expansion by our existing competitors or entry by new competitors into markets where we currently operate; . Entering the television market as the decreased size of flat-panel televisions allows new entrants to display and sell these products more easily; . Lower pricing; . Aggressive advertising and marketing; . Extension of credit to customers on terms more favorable than we offer; . Larger store size, which may result in greater operational efficiencies, or innovative store formats; and . Adoption of improved retail sales methods. Competition from any of these sources could cause us to lose market share, sales and customers, increase expenditures or reduce prices, any of which could have a material adverse effect on our results of operations.
Conn’s is a leading specialty retailer that offers a broad selection of high-quality, branded durable consumer goods and related services in addition to a proprietary credit solution for its core credit constrained consumers. We operate a highly integrated and scalable business through our 66
retail stores and website. Our complementary product offerings include home appliances, furniture and mattresses, consumer electronics and home office products from leading global brands across a wide range of price points. Our credit offering provides financing solutions to a large, underserved population of credit constrained consumers who typically are unbanked and have credit scores between 550 and 650. We provide customers the opportunity to comparison shop across brands with confidence in our low prices as well as affordable monthly payment options, next day delivery and installation, and product repair service. We believe our large, attractively merchandised stores and credit solutions offer a distinctive shopping experience compared to other retailers that target our core customer demographic. Retail Segment. We began as a small plumbing and heating business in 1890 and started selling home appliances to the retail market in 1937 through one store located in Beaumont, Texas. As of December 3, 2012, we operated 66 retail stores located in four states: Texas (57), Louisiana (6), Oklahoma (2) and New Mexico (1). Our stores range in size from 18,000 to 50,000 square feet and are predominately located in areas densely populated by our core customer and are typically anchor stores in strip malls. We utilize a “good-better-best” merchandising strategy that offers approximately 2,100 branded products from approximately 200 manufacturers and distributors in a wide range of price points. These include, among others, Dell, Electrolux, Franklin, Frigidaire, General Electric, Hewlett-Packard, Jackson-Catnapper, LG, Samsung, Sealy, Serta, Sharp, Steve Silver, Sony, Toshiba, and Vaughn-Bassett. This wide selection allows us to offer products and price points that appeal to the majority of our core consumers. We offer a high level of customer service through our commissioned and trained sales force as well as next day delivery and installation, and product repair or replacement services for most items sold in our stores. Flexible payment alternatives offered through our proprietary in-house credit program and third-party financing alternatives enable our customers to finance their purchases. We believe our extensive brand and product selection, competitive pricing, financing alternatives and supporting services, combined with our customer service-focused store associates make us an attractive alternative to appliance and electronics superstores, department stores and other national, regional, local and internet retailers. Credit Segment. For over 45 years, we have offered consumer credit to our credit-worthy customers. We provide access to multiple financing options to address various customer needs including a proprietary in-house credit program, a third-party financing program and a third-party rent-to-own payment program. The majority of our credit customers use our in-house credit program and typically have a credit score of between 550 and 650, with an average score of applicants for the nine months ended October 31, 2012 of 615. For customers who do not qualify for our in-house program, we provide access to rent-to-own payment plans offered by RAC Acceptance. For customers with higher credit scores, we have partnered with GE Capital to offer long-term, no interest and revolving credit plans. GE Capital and RAC Acceptance manage their respective underwriting decisions and collection of their programs. For the nine months ended October 31, 2012, we financed approximately 70% of our retail sales, including down payments, under our in-house financing plan. Our retail business and credit business are operated independently from each other. The credit segment is dedicated to providing short and medium-term financing for our customers. The retail segment is not involved in credit approval decisions. Our decisions to extend consumer credit to our retail customers under our in-house program are made by our internal credit underwriting department. In addition to underwriting, we manage the collection process of our in-house consumer credit portfolio. Sales financed through our in-house credit program are secured by the products purchased, which we believe gives us a distinct advantage over other creditors when pursuing collections because the products we sell and finance are typically necessities for the home. We believe our consumer credit program differentiates us from our competitors that do not offer similar in-house consumer credit programs, and generates strong customer loyalty and repeat business. During the nine months ended October 31, 2012, approximately 70% of our credit customers were repeat customers, based on the number of credit invoices written, and, as of October 31, 2012, approximately 78% of balances due under our in-house credit program were from customers that have had previous credit accounts with us. ------ our principal executive offices is 4055 Technology Forest Blvd., Suite 210, The Woodlands, Texas 77381. Our telephone number is (936) 230-5899 and our website is www.conns.com.
|Auditor||Ernst & Young LLP|
|Company Counsel||Fulbright & Jaworski L.L.P|
|Company Counsel||Fulbright & Jaworski L.L.P. and McGlinchey Stafford PLLC|
|Lead Underwriter||Piper Jaffray & Co.|
|Lead Underwriter||Stephens Inc|
|Lead Underwriter||Stephens Inc.|
|Transfer Agent||Computershare Limited|
|Underwriter||Canaccord Genuity Inc|
|Underwriter||KeyBanc Capital Markets Inc|
|Underwriter||Stifel Nicolaus & Company, Incorporated|
|Underwriter Counsel||Faegre Baker Daniels LLP|
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