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Conn's Faces Credit Crunch, Posts $15M Q3 Loss

11/25/2009 10:57:27 AM Eastern

Beaumont, Texas - Conn's said there is "a
reasonable likelihood" that it will violate its loan covenants beginning Jan.
31 as a result of its weak third-quarter operating results.

The CE, appliance and
furniture chain reported a net loss of $15.3 million for the fiscal quarter,
ended Oct. 31, which it attributed to recent economic declines within its
trading areas, a $9.6 million impairment charge, and a $4.1 million increase in
its litigation reserves to cover yesterday's settlement with the Texas attorney
general over allegedly deceptive trade practices.

The company said it is in discussions with its lenders to amend
its credit line covenants and is reviewing options to pay down debt to avoid
triggering loan violations.

Net sales declined 7.2 percent to $161.4 million for the
three-month period and same-store sales decreased 9.3 percent. Total revenues
decreased 0.5 percent to $182.8 million, and finance charges from the company's
in-house credit operation and "other" decreased 1.5 percent to $25.2 million.
The annualized net charge-off rate for it consumer credit portfolio was 4.3
percent.

"Our third-quarter
results were disappointing, but we are focused on improving credit portfolio
performance and expense control and are taking the actions necessary to address
the debt covenant compliance concerns," president/CEO Tim Frank said in a
statement.

Conn's increased its credit line to
$52.1 million as of Oct. 31 by paying down debt, and said it expects to be
"solidly profitable" during its current fiscal quarter. The company believes
its market share in CE, major appliances and furniture grew during the current
calendar-year quarter based on Census Bureau sales data and a 26.5 percent
increase in unit sales of TVs.

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