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Conns (NASDAQ:CONN)

Q4 2013 Earnings Call

April 03, 2013 11:00 am ET

Executives

Theodore M. Wright - Chairman, Chief Executive Officer and President

Michael J. Poppe - Chief Operating Officer and Executive Vice President

Brian E. Taylor - Chief Financial Officer and Vice President

Analysts

Peter J. Keith - Piper Jaffray Companies, Research Division

N. Richard Nelson - Stephens Inc., Research Division

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division

R. Scott Tilghman - B. Riley Caris, Research Division

Laura A. Champine - Canaccord Genuity, Research Division

Jordon Neil Hymowitz - Philadelphia Financial Management of San Francisco, LLC

Ian Dominguez

Evan Tindell

Gary Ribe

Daniel T. Binder - Jefferies & Company, Inc., Research Division

Operator

Good morning, and thank you for holding. Welcome to the Conn's Inc. Conference Call to discuss earnings for the fourth quarter ended January 31, 2013. My name is Shannon, and I will be your operator today. [Operator Instructions] As a reminder, this conference call is being recorded.

The company's earnings release dated April 3, 2012, distributed before the market opened this morning and slides that will be referenced during today's conference call can be accessed via the company's Investor Relations website at ir.conns.com.

I must remind you that some statements made in this call are forward-looking statements within the meaning of Securities and Exchange Act of 1934. These forward-looking statements represent the company's present expectations or beliefs concerning future events.

The company cautions that such statements are necessarily based on certain assumptions, which are subject to risks and uncertainties, which could cause actual results to differ materially from those indicated today.

Your speakers today are Theo Wright, the company's CEO; Mike Poppe, the company's COO; Brian Taylor, the company's CFO; and David Trahan, President of Retail.

I will now like to turn the conference over to Mr. Wright. Please go ahead, sir.

Theodore M. Wright

Good morning, and welcome to Conn's fourth quarter and fiscal 2013 earnings conference call. I'll start the call with an overview focused on our retail segment, then Mike will discuss our credit segment and Brian will finish our prepared comments.

Our strategy of providing a valuable credit offering to all customers is working. Slide 1 shows the percentage of sales from each of our consumer credit alternatives. Same-store sales for the fourth quarter by category are on Slide 2. Sales strength in appliances, furniture and mattresses and home office more than offset weakness in electronics. On Slide 3, you can see gross margins by product category for the fourth quarter. Product gross margin percentage is improved in all major categories along with average selling prices. Total gross margin percentage for the quarter was 36.9%, an increase of 720 basis points over the prior year.

Furniture and mattresses kept momentum benefiting sales and margins. The 1,100-basis-point increase in furniture and mattress gross margin percentages from the period a year ago is the benefit of higher average selling prices and better sourcing.

The company previously established a longer-term goal of 35% retail segment gross margins and exceeded that goal in the third and fourth quarters of fiscal 2013. Our margin goal is being revised to 40%. Pricing remains competitive in every major category except home office. We recently documented pricing comparisons for our highest volume appliance and electronics SKUs. Our pricing absolutely remains competitive, SKU to SKU, and we provide lowest price alternatives for our customers everyday.

Higher advertising spend in the holiday period didn't create the traffic we anticipated, and sales in the fourth quarter didn't meet our internal expectations. Because of this disappointment, we reevaluated our advertising spend in the first quarter. We concentrated even more of our spending on credit-based messages to consumers. The result has been a slightly lower spending rate, more traffic and higher quality traffic.

Preliminary February-March same-store sales were up approximately 15%. Same-store sales in all major categories except television were up by double digits. Furniture and mattresses increased about 50%. Appliance same-store sales were up about 10%. Electronics were down low-single digits and home office was up strongly. Higher traffic in February and March is the main reason for our increased guidance for same-store sales in fiscal 2014.

On the products side, sales of laptops with Windows 8 operating systems and tablets using Android are increasing. We now have availability of an assortment of touchscreen laptops to help show consumers the value of Windows 8. Smart television is becoming a more compelling product offering. LG's Google TV and Toshiba's new Cloud TV are just 2 examples of products that are demonstrating value in higher-featured, higher-priced television.

Manufacturers' UPP or unilateral pricing programs are helping us maintain margins in television. More vendors are moving to this pricing approach with more products. Electronic sales trends are definitely improving. Total electronics sales were positive in February and March, and same-store sales of electronics were up 1% in March. Total television units were positive in March as well.

Appliance trends are favorable. Combined same-store refrigeration and laundry sales in units have been positive since January. Our updated guidance for fiscal 2014 is for overall same-store sales increases of 3% to 8%.

Turning to Slide 4, sales floor execution is still getting better. Sales associate productivity improved to 60,000 per sales associate. Turnover was 58% in the quarter compared to 56% in the prior year quarter, but about half of the turnover in the current year fiscal 2013 was directed by the company as we worked to improve the productivity of our sales associates. Lower turnover and higher production is making Conn's a preferred employer for proven sales associates. We can competitively recruit experienced productive retail sales personnel. The earnings opportunity for productive associates at Conn's is our recruiting message as we enter new markets.

On Slide 5, you can see a 3-year trend in furniture and mattress sales. Furniture and mattress sales as a percentage of total sales are still increasing at a rapid pace. For the fourth quarter of fiscal 2013, furniture and mattress sales represented 21% of revenues and 31% of product gross margin dollars. Furniture and mattresses were our #1 category for gross margin contribution. March sales of furniture and mattresses presented over 25% of total product sales, and furniture and mattresses is now quite clearly our #1 category.

We continue to add to our assortment and have a number of SKUs yet to reach the floor that we expect to be highly productive. We recently added some new furniture alternatives. We added availability of lamps, rugs and occasional tables. Over the next several quarters, we'll add special order and other alternatives for customers seeking specific colors, more power motion furniture, an assortment of leather furniture and leather special order alternatives, additional youth bedroom alternatives and a more competitive assortment of recliners and other chairs. The mattress assortment and presentation has also been enhanced, and our associates have better tools for matching customers with the right mattress. Mattress sales continue to increase steadily with mattress sales alone up 43% in February and March.

We should be able to provide our customers competitive selection and pricing in addition to our credit alternatives. As we add to our assortment, we can complete more sales and satisfy more customers. Conn's delivery and distribution operations have risen to the challenges of furniture sales as well. We consistently offer next day delivery everyday. Next day delivery and in-stock availability are competitive advantages for Conn's in addition to our credit advantages.

The company previously established a longer-term goal of 30% of sales from furniture and mattresses. This goal is within sight and we're exceeding this goal at a number of our locations. With additional square footage, new store openings and remodels, our goal is being revised to 35% of total sales for furniture and mattresses.

Turning to Slide 6, retail segment SG&A was not as well controlled in the fourth quarter as we would like. Retail SG&A increased 200 basis points to 27.6% of revenue. There were 2 main causes of higher expenses in the quarter. One was the cost for opening 4 stores in a month's time. We're comparing against the period a year ago with no store openings. The second cause of higher expense was missing our internal forecast for electronic sales in the holiday period from Black Friday to Christmas. This caused a number of elevated expenses in Q4, particularly advertising expenses. Despite the increase in retail SG&A expenses as a percentage of sales, SG&A as a percentage of gross profit declined and retail operating margins for the fourth quarter increased from a year ago.

Sales since Christmas met forecasts and advertising expenses are in line since that time. The higher rate of sales in the first quarter to date will also provide additional operating leverage. Preopening costs will be low in the first quarter, but they will increase in the second and later quarters as the store opening pace accelerates.

On Slide 7 is information about stores opened in fiscal 2013. Since January, the first full month with all stores open, and the new stores have sales of $1.5 million per month and 1.6x the sales of our average store, and 36% of sales for furniture and mattresses. Monthly new store sales for January through March are not as high compared to our mature store basis in January alone. We did remove grand opening support beginning in February. Keep in mind also that the 15% same-store increase during February and March that are mature store based affects this comparison as well. The new stores remain on or ahead of plan and are contributing to profitability when opened. New store sales conversion or closing rates are about 12% below the company average. There are opportunities to sell more products in these stores as our sales force and management staff gains experience. Conn's business model is dependent on repeat purchases by customers with roughly 70% of sales to existing customers. New locations should grow as we build the base of customers that understand and appreciate the unique value of Conn's credit offering.

Past experience is that sales declined from initial brand opening and then are stable for several quarters. Sales then increase slowly as the customer base develops. We plan to add 10 to 12 stores in the current fiscal year. As of today, we have executed 10 lease or repurchase agreements. Our expectations for store openings by quarter are 2 stores late in Q1, 4 stores in Q2, 4 stores in Q3 and the remainder in Q4.

New stores on average have more square footage than stores today. Combined with our continued remodeling and relocation projects, we expect sales square footage to grow by approximately 25% in fiscal 2014. The company, we believe, has the infrastructure to support this growth pace. Store management personnel are already in place to support our fiscal 2014 plan. Work is well underway on our fiscal store opening 2015 plan.

Our longer-term goal has been to deliver returns on equity of 17%. Updated guidance for this year implies a return on equity of about 17%. We are raising the return on equity goal to 20%. As we execute our strategies in furniture over the next several years, we should be able to achieve our goal of 40% gross margins. Gross margin expansion, without significant additional investments, supports achievement of our return on equity goal.

Now I'll turn the call over to Mike. Mike?

Michael J. Poppe

Thanks, Theo. Operating profits increased on portfolio growth and stabilizing performance. We expect to see continued growth in the first quarter driven primarily by portfolio growth on strong sales performance. The changes in our portfolio management over the past couple of years are delivering the improved results we expected, but drove significant volatility in our performance during that timeframe.

We now believe the effects of the policy changes made during the last half of fiscal 2012 are largely behind us. And since our portfolio management practices have been more consistent in recent quarters, we believe we are on track to deliver stable and predictable profitability from the credit operation.

The improved performance in delinquency and the percent of the portfolio re-aged, as well as recent charge-off trends, are shown on Slides 8 and 9. Also, a larger portion of the current portfolio balance is from recent originations as shown on Slide 10. It shows the percentage of balances in the portfolio that were originated more than 36 months ago. The proportion of these balances declined rapidly over the past few years, and at the end of January, only $6.7 million of the portfolio balance was originated more than 3 years ago.

The delay in tax refund processing this year impacted the timing of cash received but did not have a meaningful impact on portfolio performance. The average payment rate for the first 2 months of the new fiscal year have exceeded the rate for the same time last year by 1 basis point after 5 consecutive quarters of year-over-year declines. This also suggests that the change in payroll taxes hasn't had a significant effect on our customers' ability to make their monthly payments. We believe the payment rate is benefiting from the shorter contract terms we put in place in 2011 and the addition during late February of the ability to make credit payments on the web.

Now our customers can make their monthly payments through the mail, on the web, on the phone and in our stores. The 60-plus day delinquency rate declined to 6.5% at March 31, down 60 basis points from year end and 100 basis points from the same time last year. This is our lowest 60-day delinquency rate in the last 20 months.

Consistent with our prior guidance, the charge-off rate declined sequentially and year-over-year on the fourth quarter. The preliminary charge-off rates for the first 2 months of fiscal 2014 was approximately 6.2%, down 120 basis points from the fourth quarter and 230 basis points year-over-year. Based on current trends, we still expect the full year charge-off rate to be between 5% and 6% for fiscal 2014.

The improved portfolio performance is reflected in the weighted average credit score of the portfolio and the weighted average credit score of originations shown on Slide 11. Both of these measures have been relatively consistent over the past 2 years. This has resulted in the weighted average credit score for the portfolio of 600 at January 31, up from 585 4 years ago despite a significant reduction in the proportion of balances with a credit score of over 650, which are now financed largely through our program with GE Capital.

Between fiscal 2010 and 2012, we arbitrarily raised the minimum credit score we would underwrite to quickly control underwriting risks and reduce credit sales volumes. But the standard credit score's not a reliable predictor of credit performance at lower scores given our installment lending structure for purchased home necessities. In February, we made refinements to our decision process that resulted in declining higher risk accounts with credit scores above 525, and began underwriting applications with credit scores between 500 and 525. Looking at our February, March results, the impact of these changes was to increase the percent of applications approved by approximately 3% to 4%.

We expect the weighted average origination score to approximate 605 going forward, down slightly from 611 during the fourth quarter. Even though the average score underwritten is declining slightly, based on analysis of our portfolio performance, we do not expect these changes to increase the credit risk in the portfolio. Continued portfolio performance improvement and proof of our ability to maintain current retail gross margins may give us the ability to profitably increase credit risk in the future, generating additional sales from existing store traffic.

Our ability to improve credit profitability will be driven by improving portfolio quality, portfolio growth driven by same-store sales growth and new store openings, portfolio yield expansion from improved portfolio quality and ability to charge higher interest rates as we enter new markets such as New Mexico and Arizona, where we're earning 26% on interest-bearing accounts today. Operating leverage as a result of portfolio growth, yield expansion and improved performance, and the ability to fund much of the portfolio growth from company earnings. As such, we expect to see a much improved profit contribution from the credit operation over the coming year.

Now I'll turn the call over to Brian Taylor. Brian?

Brian E. Taylor

Thank you, Mike, and good morning, everyone. We're pleased to report record fourth quarter and full year results. Net income for the fourth quarter was $18.9 million or $0.54 per diluted share after excluding charges. This compares to net income of $11 million or $0.35 per share on an adjusted basis last year. Reported net income was $0.50 per share this quarter versus $0.24 a year ago. Results for the current quarter include pretax charges of $2 million associated primarily with previous store closures and employee severance. For the full year, net income was $55.2 million or $1.63 per diluted share after excluding charges. This is above the top end of our EPS guidance we reaffirmed on December 12 after issuing approximately 2.2 million shares in the follow-on offering.

Retail segment revenues totaled $209 million, rising 10% over the prior year quarter. If you exclude consumer electronic revenues, which declined 6%, product sales increased 22% from last year. Furniture and mattress sales rose 54%, dropping the majority of the increase in product revenues year-over-year. Sales of furniture and mattresses this quarter were over twice the level seen in the fourth quarter of fiscal 2011. We saw double-digit revenue growth in the appliance and home office categories. The partial quarter contribution of our 4 stores opened this past quarter more than offset the impact of stores previously closed.

With the sales growth and expansion in retail gross margin, adjusted operating income for our retail operations more than doubled this quarter to $19.8 million or almost 10% of revenues. Credit segment revenues rose $5.3 million over the fourth quarter of fiscal 2012, driven by 13-plus percent increase in the average portfolio balance. Portfolio yield was comparable year-over-year, but down slightly from last quarter due to an increase in short-term, no-interest financing. SG&A expenses increased approximately 10% year-over-year due to portfolio growth and planned increases in staffing levels. As a percentage of revenues, servicing costs were 37% this quarter, down 140 basis points from last year.

Bad debt provision rose $2.4 million over the prior year quarter driven by the substantial increase in the receivable portfolio seen in the fourth quarter of this year. As a percentage of credit portfolio, the annualized provision rate for bad debts was approximately 7%, down sequentially and year-over-year. We expect the provision rate to average between 6% and 6.5% of the average portfolio balance on a full year basis in fiscal 2014.

The provision rate is expected to exceed the charge-off rates because of the projected portfolio growth. Credit segment operating income improved year-over-year and sequentially to $13.6 million on an adjusted basis or approximately 40% of the consolidated total. Interest expense was down slightly from the prior year. The impact of the decline in borrowing rates under our revolver in the current period was partially offset by the issuance of ABS notes in April 2012. With the planned repayment of the ABS notes later this month and further reduction in borrowing rates under our revolver, we currently expect our overall effective interest rate for fiscal 2014 to decline modestly from the fourth quarter level.

Turning now to the balance sheet and liquidity. Inventory turns in the fourth quarter improved to almost 7 compared to 6 turns last year. At year end, 94% of our 74 million in inventory was financed without any accounts payable. We continue to move closer to our goal of funding 100% of our inventory through accounts payable.

Turning now to Slide 12, our customer receivable portfolio balance equaled $742 million at year end, up $98 million from last year. Borrowings declined $27 million during the year and equaled $295 million at January 31. Outstanding debt stands at approximately 40% of the customer receivable balance, continuing the multi-year deleveraging trend.

Moving now to Slide 13, since our last call, we have taken a number of actions which provide us with additional liquidity to support our longer-term growth plans. In December, we issued 2.2 million shares of our common stock and received net proceeds of $56 million. In January, we received net proceeds of $22 million in connection with the sale on leaseback of all previously owned properties. Funds from these transactions were used to reduce outstanding debt.

Finally, last week, rendered commitments under our revolving credit facility were raised $40 million to $585 million. The significant increase in the profitability of our operations allowed us to internally fund the majority of the increase in our receivable portfolio this past year. Our debt to equity ratio declined significantly during the year, standing at 0.6x at year end. This improvement reflects both our profitable growth and capital transactions completed during the most recent quarter.

As of March 31, we had immediately available borrowing capacity of $205 million under our revolving credit facility. And an additional $106 million can become available with the growth in receivables and inventory.

Given our current capital position and growth plans for next year, we do not believe additional capital will be required to fund the business for at least the next 12 months. We, however, continue to evaluate debt financing alternatives to support our longer-term needs.

Turning now to Slide 14, we increased our annual earnings guidance by $0.40 to $2.40 to $2.50 per share for fiscal 2014. For full year expectations, we considered into developing our guidance include same-store sales growth of 3% to 8%; the planned opening of 10 to 12 new stores; retail gross margin ranging between 35.5% and 36.5%; sales driven growth in the credit portfolio balance; provision for bad debts ranging between 6% and 6.5% of the average portfolio balance; SG&A expense of between 28% and 29% of total revenues; and average diluted shares of approximately 36.5 million shares. Much of this analysis and more will be available on our Form 10-K to be filed with the SEC.

We have historically publicly announced retail sales shortly after the close of each quarter and typically discuss our own sales results on each of our conference calls. Beginning in the first quarter of fiscal 2014, we will cease separately reporting retail sales and margins. Information previously included on our sales release will be included in our future quarterly earnings announcements.

This completes our prepared remarks. Shannon, please begin the question-and-answer portion of the call.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Peter Keith of Piper Jaffray.

Peter J. Keith - Piper Jaffray Companies, Research Division

I want to ask about the SG&A opportunity this coming year. As we had a little bit of deleverage in Q4, it looks like you would be guiding for some slight leverage this coming year. Just as we walk through the year, would we think about sort of ongoing deleverage in the first half and then maybe leveraging in the second half? Or just kind of directionally, how should that SG&A rate flow year-on-year as we go forward?

Theodore M. Wright

Okay, Peter, it's Theo. I believe what we'll see is actually some leveraging in the first quarter because advertising expenses, particularly, are better controlled than they were in the fourth quarter, and also because preopening costs are not significant in the first quarter of this year. But as the year progresses, the effect of leverage from additional sales volume will be somewhat offset by the effect of preopening costs associated with the store opening pace. So I think the trend should be actually leverage in the first quarter and part of the second quarter, offset to a certain extent by less leverage in the third and fourth quarters as we open more stores.

Peter J. Keith - Piper Jaffray Companies, Research Division

Okay, that's very helpful. And then just maybe for you, Theo, as well, the discussion around ASPs and your transaction trends. So ASP growth was still quite strong in the fourth quarter, but it sounds like some of your commentary year-to-date with traffic being a driver and units up in appliances in some of the other categories. Are you starting to see now a balance of both ASP growth and transaction growth as a contribution to your overall comp growth?

Theodore M. Wright

We are, Peter. The pace of ASP growth is decelerating, and unit growth is returning. And so we are seeing more of a balance as we go into the first quarter.

Peter J. Keith - Piper Jaffray Companies, Research Division

Okay, that's great. One last question for you. With the -- now that you have 20 stores remodeled, any chance we could get a sense of how those remodeled stores comped during the fourth quarter?

Theodore M. Wright

Peter, we'll have to get back to you with detail there. But generally speaking, the trend would be the same as we've seen in the past where those remodeled stores would comp somewhat better than the other stores. And that's being driven by furniture and mattress sales performance, not so much in the other categories.

Operator

Our next question is from Rick Nelson of Stephens.

N. Richard Nelson - Stephens Inc., Research Division

Theo, are you doing anything different from a credit standpoint when you open these new stores? And I'm curious what you're doing to also promote the furniture and mattress offering because its proportionate sales seem to be quite strong.

Theodore M. Wright

The first month or so when we opened the stores, we are doing some things different with credit. We're more inclined to approve customers for a brief period of time. And the example that I gave in my comments where I talked about grand opening support being removed beginning in February, that was true in credit as well. So if you look at the stores from February on, they don't have any benefit of different credit standards from that time forward. And as far as different promotion of furniture and mattresses in the new stores, the answer is no. The big difference there is our people just don't know that they can't. The assortment is the same. The square footage may be modestly higher, but not higher than some of our other existing stores. So the big difference is the attitude of the sales force and our customers who don't have an understanding of us as being an appliance and electronics retailer. We're new to both the sales people and the customer. So the salespeople are selling what's on the floor and the customers are buying it.

N. Richard Nelson - Stephens Inc., Research Division

In terms of the change in the credit offering, are you underwriting customers who you otherwise wouldn't with the new store openings? And if so, how much do you think that contributed to the sales that we've seen out of those new stores?

Brian E. Taylor

Yes, we did approve some customers that we would not approve today, but it was certainly not a significant piece of their business. It was incremental addition, somewhere, call it, single-digit percent of their sales would have come from those originations.

Theodore M. Wright

Yes, and I just have to cite again that, that was wasn't in place after the 1st of February. So -- and the information that we provided from February onwards, it's not a factor at all.

N. Richard Nelson - Stephens Inc., Research Division

And at the estimate for the provision for loan loss, looks like it's up somewhat from the prior guidance. I'm curious what goes into that.

Brian E. Taylor

I think the prior guidance was charge-off guidance of 5% to 6%, and then the provision guidance is slightly higher than the charge-off guidance. And that's because growth in the portfolio requires a higher provision rate than the underlying charge-off rate.

N. Richard Nelson - Stephens Inc., Research Division

Okay. And finally, if I could ask you about promotional credits or the 27% of the portfolio, of the receivables balance, that looks like it's doubled year-over-year. If you could talk about the strategy there? I'm curious how the -- some of that promotional credit is on your own book.

Theodore M. Wright

Short-term promotional credit is on our books, a significant percentage of that. And that's 6- and 12-month promotional credit. And the strategy there is to enable us to maximize the efficient use of our portfolio. If those customers will pay within the promotional credit term, then we get our cash back quicker and we can underwrite more sales. If they don't, then ultimately, we'll earn interest on those accounts at the same rate that we earn on our other accounts every day. So it's really a strategy driven around taking the investment in our portfolio and using that portfolio to maximize sales of retail products.

N. Richard Nelson - Stephens Inc., Research Division

Okay. One more, if I could. The furniture and mattress component had a new store opening that's pretty substantial given the gross margin that, that category generates, 46.7% in the latest quarter. Would seem that your gross margin, retail margin guidance would be -- seem to be conservative as you open more of these productive stores with a higher furniture component. If you can comment on your -- that fact?

Theodore M. Wright

Yes, absolutely. If we can achieve a higher sales rate in furniture and mattresses than we're achieving today, that will benefit gross margins and our gross margin forecast could prove to be conservative. And as we laid out in our longer-term goals, if we can achieve 35% of total sales from furniture and mattresses, we expect our gross margins overall to be in the 40% range.

N. Richard Nelson - Stephens Inc., Research Division

And how quick can you get there do you think, Theo?

Theodore M. Wright

Well, it's dependent on our execution, and we're proving in stores today that it can be done. The obstacles are not really in the marketplace, they're internal. So it's just a question of how quickly we can execute, how quickly can we get our sales force to fully embrace furniture and mattresses, how quickly can we get the complete assortment that our customers deserve on the floor. So it's really an issue of execution, and I think we're achieving it today in a number of stores. So to me, the only obstacle is ourselves.

N. Richard Nelson - Stephens Inc., Research Division

And my own back of the envelope would suggest that just maybe you'd get almost all the way there this year if the proportion stays the same given your opening plans?

Brian E. Taylor

I think we would be very disappointed if furniture and mattresses sales weren't trending at 30% or better by the end of this fiscal year.

Operator

Our next question is from Brad Thomas of KeyBanc Capital.

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

I wanted to first ask about the credit side of the business. Theo, this is something you and I have talked about in the past, but I just thought it might be helpful to ask you more directly. It's clear that you guys are reducing the number of low type of score customers that you approve, and it does seem like you're really tightened overall. But if you look at your comps, what do you think the net impact from the change in loosening -- or I should say, the change in tightening credit really was for the last year. And then what kind of an impact are you expecting right now for 2013?

Michael J. Poppe

Part of what we expect going into fiscal 2014, we see the finance penetration being lifted by 3% to 4%, which will -- which should translate into comp benefit. As far as the impact of tightening and what that had, the impact it had in the past year...

Theodore M. Wright

Yes, I would say that the impact was less in the past year than in the past year compared to 2 or 3 years earlier. And the impact was probably somewhere in the 10% to 15% range. It's been a year or so since I really looked at that, so I'm going from memory, but the impact would have been about 10% or 15% from tightening overall. But that really didn't happen so much in the past year as in years prior.

Michael J. Poppe

Right. If you go back to fiscal '09, we were running mid-teens below a 550 FICO score and we ran 2% this year, so just like Theo said, that low mid-teens number would be the impact on sales.

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

Great. And then just to be clear here, your current guidance for '13, I know there are a lot of moving parts on the credit side, but on whole, it seems you are going to be pretty consistent with what the credit offering is, and there's not a significant loosening here that's modeled in, just to be clear.

Brian E. Taylor

Just what we talked about earlier, we are -- we did make some refinements and we are looking down to a 500 score now, but we are declining some scores, some credit we had been approving, as we have implemented the changes. So yes, 300 or 400-basis-point improvement, but otherwise fairly consistent.

Theodore M. Wright

And just to be crystal clear that we have it modeled into our guidance taking on additional risk in the credit portfolio that we may be able to take on in the future if we see the sustained gross margin performance that we're seeing today. So we have it modeled into our guidance, taking on additional portfolio risk. But that opportunity may be available to us. I think what we're waiting to see is stability of portfolio performance and collections execution and sustained gross margins. And if we get those things, we may have an opportunity to accept more risk. But we have not done so yet and we have not built that into our guidance.

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

Got you. And so if I could just follow up one last figure on this. Your comp guidance of 3% to 8% for the year, did you think about some of the major buckets here, like the remodels, like the mix shift of furniture? You're obviously no longer closing stores and getting that tailwind from recapture, but what do you view as maybe the big buckets here, in driving that 3% to 8%?

Theodore M. Wright

We're still cautious about television that we've got to positive for the first time in a long time in the month of March, but that market remains uncertain. So we're still thinking, possibly, flat to slightly negative there. Positive, modestly, in appliances and positive, pretty strongly, in furniture and mattresses. Really continuation of the type of trend that we saw in the fourth quarter.

Operator

Our next question is from John Baugh of Stifel, Nicolaus.

John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division

Quickly, on the store openings, could you tell us where they're going to be, I guess, by state? And what influence that will have on the credit yield? And then maybe a comment, Theo, much longer range, about stores, where they'll go in the same context of portfolio yield?

Theodore M. Wright

Of the -- if we opened 10, 2 of those would be in the state of Texas, with the remainder being in New Mexico and Arizona, and that would have a positive benefit to yield.

John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division

And then longer range?

Theodore M. Wright

And longer -- yes, longer term, we'll continue to fill in, in Texas and Louisiana, but our growth plans are focused on states that will allow us to earn a higher rate of interest on our installment on product.

John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division

Great. And then could you maybe highlight, in your mind, a 1.6 multiple on new stores and I'm sorry, did you exclude the grand opening from that? I think you said you did, but just clarify that. Was just curious what 2 or 3 things that are really driving that result, if you could elaborate.

Theodore M. Wright

Yes, that period excluded the first month of opening or the first and second and several phases, and then actually excluded all of the grand opening comp period for 1 of the 5 locations. So, by and large, the 1.6x excludes grand opening benefit. The real drivers of performance there relate to market area selection. We're putting the stores in locations that have a concentration of Conn's core customer, that customer with a relatively low disposable income and a FICO score between 500 and 650, really concentrated between 550 and 650, so a lot of it is mechanical. And if you look at our existing store base, you would see lots of stores with that same performance profile. It's just diluted by a number of stores that we still have that are in less-than-ideal locations. So I don't think there's anything unique about the new locations. As I've said, we have lots of stores in our mature base that are performing at or above that same level, it's really just -- it's just eliminating the errors. It's -- the new stores include no stores that are in locations with higher income demographic or other flaws that would lead to a lower sales rate.

John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division

Okay. Great. And then maybe just a point of clarification, so many credit statistics thrown out and FICO scores thrown out, I'm a little confused as to, say, what the strategy is for the next 12 months? Obviously you talked about some looser credit on the store opening, but then you stopped. Is the plan for the FICO scores for the -- as we get through the year, to be slightly lower than the prior year? If so, why? I think there was a comment made that even if we do that, the risk profile won't be any different. Just a little more color or clarification.

Michael J. Poppe

John, this is Mike. So we would expect the FICO score to be slightly lower than we finished this past year, as we are -- we took our minimum underwritten score down to 500 from 525 that are refinements to our model, we're also declining some higher-risk accounts that we have been approving this past year. So while we see the average underwritten score dropping slightly, we don't see the risk going up because we're also deselecting some customers that we would have approved in the past, that will offset -- and then the customers that we're writing down to 500 are being selected based on some additional criteria that we didn't use in the past. And then the stores -- the new stores go, we will, as we open new stores for the first 45 to 60 days, we will have a little more flexibility and underwriting there to get the grand opening message out and then they will fall right back in line with the underwriting criteria of all the other stores in the portfolio.

John A. Baugh - Stifel, Nicolaus & Co., Inc., Research Division

And, Mike, help us think about on the average higher balance, I believe it's up, what, to 1,535 versus 1,329. I guess everything being equal, that would imply a higher risk. Help us think about how you look at that and the collectibility of that.

Michael J. Poppe

You bet. I think there's a few things driving that. One, as the portfolio -- there's a lot more recent origination, you've got more recent balances, so you don't have a lot of older aged lower balances in the portfolio. And as we, over the last couple of years, worked hard to purge out a lot of that older higher-risk credit, it did have the impact of increasing the average balance. So we don't see that as increasing risk, the impact to think we decreased risk there. The second thing that's going on is that we changed our merchandising mix and we've eliminated a lot of lower price point SKUs, the average -- the starting ticket size is up, and you have fewer, the small tickets, being underwritten and built into finance portfolio. And then last, as the web has been a benefit to us in driving more new customers and new customers is helping with the first point, which is driving more new originations to new customers. And from a risk standpoint, we don't see the higher average balances being a -- having any meaningful impact to increasing risk in the portfolio.

Operator

Our next question is from Scott Tilghman of B. Riley.

R. Scott Tilghman - B. Riley Caris, Research Division

I apologize I jumped in a little late, so forgive me if you touched on these. Wanted to ask about 2 items. First off, on the portfolio balance, historically, we've seen that taper off in the first quarter as people get their tax returns, pay down some of their balances, but you had a pretty healthy uptick in the fourth quarter. Wondering if you still see the same dynamic occurring this year? Second question really is on the credit G&A side. I know you touched on the retail, but we did see an uptick on the credit G&A in the fourth quarter. Wondering if we should look for that to be relatively flat, even as the balance -- the portfolio balance growth through fiscal '14, or if you expect there to be some additional spending there to support the growth?

Michael J. Poppe

As far as first quarter balance, actually, we do expect to see growth this year, and driven by the fact that, as you know, our finance penetration on Conn's credit is higher than in past years, and then you compound that with the fact that we've had 15% comp store sales growth and new stores opened in the fourth quarter. So the higher sales volume and the slightly higher finance penetration is resulting in portfolio growth despite the fact that we had really good payment rate and high liquidation from customers during February and March tax seasons. As far as credit G&A, it was up in the fourth quarter. We've talked about in the last call that we had some staffing needs to address and we did ramp up staffing, and as the growth continues to accelerate, I think we will be more inclined to get ahead of the curve and make sure we've got the staffing and people in place to support the portfolio growth.

R. Scott Tilghman - B. Riley Caris, Research Division

Do you feel comfortable with the staffing levels you have now for the current year? Do you think you'll still make some additions on that thinking of getting ahead of the curve?

Michael J. Poppe

I think we are -- with new store openings come here in the next few months, I think we will continue to grow the staff.

Theodore M. Wright

Basically, as the portfolio grows, we would expect staffing to grow. But the effective additional staff related to portfolio growth will be offset, first off, by the yield associated with that portfolio growth. And, secondly, by the impact of operating leverages, as our fixed infrastructure is not growing at the same pace as staffing would be associated with portfolio growth.

Operator

Our next question is from Laura Champine of Canaccord.

Laura A. Champine - Canaccord Genuity, Research Division

I've got a question about the credit portfolio. So I thought that it was -- that the comment about the average FICO moving down a little bit to 605, did that have something to do with using your outsourced credit provider for more of the higher credit scores? But then there was also a comment that you've reduced the minimum score a little bit. What exactly -- because I don't think you changed your credit standards that much, what exactly is driving that FICO down a bit? And then if you could use that as a chance to talk about how you're using your outsourced credit provider at the high end. And any tweaks you're making to the RAC program too?

Michael J. Poppe

Okay. This is Mike. So relative to the outsourced high end, there's not a big change -- there hasn't been any significant change in that program over the last several quarters. So relative to how it's impacting the FICO underwritten, while it's certainly impacted it over time, as we ramped up that program, we moved a lot of that high credit score business off to the third-party provider. Relative to the change from 611 in the fourth quarter, to what we're expecting to be about a 605 credit score this year, that is being driven largely by the fact that we've moved the minimum score down slightly from 525 to 500 and we'll pick up some incremental business there. And also -- and then we're declining some of the higher-score business above 550, that we have been underwriting as we've refined our underwriting strategy. And so the combination of adding a little bit between 500 and 525 and declining a little more above 550 will have the impact of pushing that average score down slightly.

Laura A. Champine - Canaccord Genuity, Research Division

Got it. And then any changes in the way you think about the RAC program?

Theodore M. Wright

No. It continues to be a benefit to us. We actually saw a year-over-year increase there, and it's been stable for a period of time, and I think it's a benefit to our business and our customers. So we're not anticipating any changes.

Michael J. Poppe

And just a follow-on. One additional comment about the credit score change down to that 605, is even though that's dropping a little bit, as we've stated earlier, we don't see that increasing -- there's -- we don't see incremental risk being added to the portfolio because of the changes we made.

Laura A. Champine - Canaccord Genuity, Research Division

If you could explain that to me a little bit, that would also be great.

Theodore M. Wright

Yes. This is Theo, I'll take a stab. The simplest explanation I can give to you go is at those lower scores, the FICO score, by itself, is not a reliable predictor of risk. So the fact that our FICO score there moved down slightly, really isn't telling us anything because the impact on risk within the portfolio, all factors considered, hasn't changed. And so it's really just a function of the fact that it lowered FICO scores, the predictive value of that data point, independently, isn't that meaningful. And we're not underwriting based on FICO, we never have underwritten based on FICO score solely, there are other factors that are more reliable indicators of risk. To use a very simple one, at -- a FICO 525 income level is a far better predictor of loss rate than FICO score. So if you have a higher income at a 525 FICO, you may have a much better quality credit than a lower income at 575. And that's just one example. So unfortunately, FICO is something that we can all point to and hang our head on, but it's really not a perfect or even close to a perfect indicator of risk.

Operator

Our next question is from Jordon Hymowitz of Philadelphia Financial.

Jordon Neil Hymowitz - Philadelphia Financial Management of San Francisco, LLC

First question is as you guys go from the 525 to the 500 minimum, I assume that business is coming out of business that won't go to the rent-to-own guys.

Theodore M. Wright

I think, potentially -- but you have to keep in mind that we're only approving about 30% of those customers, so it's really not a significant increase and -- or a decline in the opportunity for RAC Acceptance.

Jordon Neil Hymowitz - Philadelphia Financial Management of San Francisco, LLC

And my second question is on the same base, I mean, you guys have a 19.9%, and even in Arizona a 25% interest rate, that's very low compared to what the rent-to-own guys charge towards over 100%. And your same-store sales are off the charts, and their same-store sales are increasingly weak. Are you trying to think about more targeting their customers directly as you move into new markets or looking where those stores are located? Because I don't see why your customer wouldn't value your proposition much greater than theirs.

Theodore M. Wright

Jordon, we certainly consider where their stores are located when we look at new locations. And over time, we'll continue to evaluate the opportunity to go more directly to that customer, potentially with different credit products or credit-like products. But we think that the value that we offer is compelling to a consumer that can qualify, who's currently a rent-to-own customer. And that's one of the things that we see when we go to new markets is customers who have previously been rent-to-own customers that are stunned when they see the -- and I mean stunned, when they see the payment that Conn's offers them monthly.

Jordon Neil Hymowitz - Philadelphia Financial Management of San Francisco, LLC

And is there any products that the rent-to-own guys are now offering that you guys are not offering that you're intrigued by?

Theodore M. Wright

Physical products, Jordan?

Jordon Neil Hymowitz - Philadelphia Financial Management of San Francisco, LLC

Yes.

Theodore M. Wright

No. Actually, Aaron's matches up product-to-product with us almost identically. So it's really the same product offering. I don't see anything that they offer -- there are rent-to-own alternatives for tires and a number of other things, and we really don't think that fits with our brand. And so we think the product mix we have today is right, and that we have so much opportunity with furniture and mattresses that we really don't need to add another product offering at this time.

Jordon Neil Hymowitz - Philadelphia Financial Management of San Francisco, LLC

The other side of it is not only from a rent-to-own point of view, but even people paying with a credit card you're lower than -- I mean, for your rates, I mean, it's a phenomenally better purchase alternative for most consumers that are not paying cash.

Theodore M. Wright

It is. And that's one of the things that we're working on from the marketing side, is if we can create better awareness on the customer's part of what our product offering is and what their payments are and the value that we provide, we think there's a lot of opportunity to get additional traffic. And so I think much of the opportunity you're pointing out is just being able to communicate better that opportunity to consumers, because if they understand the opportunity, they'll take advantage of it.

Operator

Our next question is from Ian Dominguez of Stillwater.

Ian Dominguez

I just want to revisit the promotional receivables real quick. Big picture, I guess, before I ask one more question, should we think about the promotional receivables growth kind of being driven by the new openings in stores?

Theodore M. Wright

No. The promotional receivables are being originated at all of our stores. And when we talk about promotional, it's not based on any kind of underwriting standards, it's just based on a -- some sort of a no-interest offering for a period of time.

Ian Dominguez

I understand. And in that case, should -- how should we think about promotional sales, I guess, relative to your actual sales of good as a percent of total? So in other words, do you see more sales, on the promotional side, coming -- just, I'm throwing out a guess, from furniture and mattress that this actually would happen on a normal financing basis. Is there a difference between those 2? And if so, where is the greatest difference?

Theodore M. Wright

We had promotional credit offerings for consumers in all of our categories. It's not simply associated with furniture and mattresses or more associated with furniture and mattresses. We offer promotional credit opportunities to customers in all of our categories.

Ian Dominguez

But do you see your customers taking advantage of those promotional receivables offerings more for some categories than others? And if so, what categories would those be?

Theodore M. Wright

It would follow our credit penetration. And so, broadly speaking, appliances would have the lowest credit penetration and the lowest rate of promotional credit origination. And then the other categories would all be higher and not a huge difference between those categories.

Ian Dominguez

Okay. And I guess last question, you made reference to a significant percent of the promotional -- the 6- to 12-month promotionals being on the book. Could you tell us what number that is?

Michael J. Poppe

As of January 31, 27% of the company's receivables were no-interest receivable, and then as Theo pointed out, a reasonable percentage of those customers will not meet the conditions of the no-interest offering and we will -- they will effectively be a full interest earning receivable from the day of origination.

Ian Dominguez

Okay. And I know that this will eventually come out in the Q, but just curious if you can just give it to us now, what the allowance for the promotional receivables will be for the fourth quarter.

Brian E. Taylor

We have to get that, don't have that in front of us.

Operator

[Operator Instructions] Our next question is from Evan Tindell of Ballentine.

Evan Tindell

I was wondering if you could repeat -- you said something at the end about no longer breaking out retail sales I think. Just wondering if you could repeat that. And then the second question, I was wondering if you would keep providing the static loss analysis that you used to provide on the website? Or if that would be in the Q?

Brian E. Taylor

Sorry what was the second question?

Evan Tindell

The second question was, on the website you used to post the static loss charts, the static loss analysis on the -- I didn't -- maybe I just missed it. Okay.

Brian E. Taylor

Yes. Under the credit portfolio data, the second page of that posting will have a static loss chart. It's not -- we'll check after the call, and if it's not there, we'll get it there. And then to your first question, because, really, nobody else in our group reports sales at the end of the quarter, and we talked -- here we are at the end of 2 months into the first quarter, we've already given a pretty good visibility on sales trends for the quarter, we're going to stop doing a separate sales release and we will release that data with our earnings release at the end of each quarter.

Operator

Our next question is from Gary Ribe of MACRO Consulting.

Gary Ribe

I just had a kind of a clarifying question, we're talking about credit scores here, you throw around FICO quite a bit. But I just want to make sure that when you state the average credit score in the portfolio you are talking about FICO scores. And then a quick follow-up to that, in the past you guys have had disclosures that excludes loans that you guys have made to customers that don't have FICO scores and is that still the case? And if so, could you ballpark what percentage of your customers that is?

Michael J. Poppe

Absolutely. So when we talk about credit scores just to be clear, everything is based on the FICO score we acquired through the credit bureau reporting, and the origination score obviously is the score of origination and then the score in the portfolio at the end of the period gives the most recent score we have as we refresh and update and track credit scores of our customers. So the current score is not -- the portfolio ending score is the most current score we have of the customer. From a standpoint of what percent, less than 2% of the portfolio balance is a 0 score or a no-score customer.

Theodore M. Wright

And generally speaking, once we originate a loan to that customer, those 0-score customers, move to having a score, and what you see in our portfolio statistics includes the fact that some -- many of those 0-score customers now have a score.

Gary Ribe

Okay. Great. And I guess just a question on the promotional financing. I noticed in the last K, and probably I guess will be in this one too, you guys have booked a discount to net present value based on the promotional financing. And that number had come down quite a bit over the last couple of years. Kind of what kind of discount rate and what kind of assumption is going to book in that discount? And if you could talk about that, that would be great.

Brian E. Taylor

So in the past, when we were discounting, it was because we were doing long-term greater than 12-month no-interest programs on our books, we no longer do the no -- the long-term no-interest program, everything we do is short term, 3 and 6 months. So the only adjustment we book is to adjust the interest income expected to be earned from those accounts, because some of them we will not earn any interest and some of them we expect to earn interest and so we adjust the interest earnings based on our expected realization of interest income.

Operator

Our last question is from Dan Binder of Jefferies & Company.

Daniel T. Binder - Jefferies & Company, Inc., Research Division

With regard to the average account balance, looks like the accounts were down slightly, your average balance is up about 15.5%. I was just curious, with the FICO scores coming down slightly, not just in this quarter but going forward, should we expect that average balance to level off at this level such that credit growth really comes through new accounts versus average balances coming up? Or do we continue to see a trend where they continue to rise?

Michael J. Poppe

As we enter new markets and continue to add new customers, there's certainly the potential for there to continue to be some growth in the average, because our average origination for a new customer is closer to the $2,000 level. And so as -- again, as we add new customers and add new markets that average balance could continue to go up.

Daniel T. Binder - Jefferies & Company, Inc., Research Division

What about in existing markets? In other words, in existing markets, will your comp store sales be driven by further average balance increases or essentially lending more to existing customers versus adding new customers? Or would we start to see a bigger portion of that driven by new customers? Or new accounts?

Theodore M. Wright

I think the answer is kind of consistent with what we talked about from the retail side, which is we expect ASP growth to moderate. And then that ASP growth is -- had an influence on average balance size in all of our stores. And so as ASPs flatten out, then the average balance size, at origination, should flatten out. And therefore in a mature location, the average balance size should stabilize as well.

Daniel T. Binder - Jefferies & Company, Inc., Research Division

Okay. So to the extent that credit penetration goes up, you would expect it to be primarily, sort of, new customers in existing markets? Is that the right way to think about it?

Theodore M. Wright

No. I'm not sure that's what I'm saying. What I'm saying is that the average balance size has been driven up by more new customers and additional new markets and ASP increases and retail, and so as ASP ceases increasing, then the upward pressure on average balance size should decrease as well.

Michael J. Poppe

And so to your question on the penetration, the penetration is that we -- yes, we are underwriting more customers rather than -- this has not been driven by shift in our thinking around credit limit. It's been driven around the ASP and the depression as to the -- of the portfolio, the more recent originations and a lot of the old balances being pushed out of the portfolio is also part of the impact to driving higher average balance.

Daniel T. Binder - Jefferies & Company, Inc., Research Division

Okay. It was a good segue to traffic and ticket discussion around the comp. Yes, I heard what you have to say earlier, I was wondering if you could just maybe drill down a little bit more on what traffic versus ticket look like in -- within the composition of comp store sales for Q4, how it's looking in Q1 and kind of what you broadly expect that to look like over the course of the year?

Theodore M. Wright

Without repeating all the details that's in our previous announcements, the fourth quarter growth was largely driven by ticket. And so -- I think we've provided that detail.

Daniel T. Binder - Jefferies & Company, Inc., Research Division

Yes. I guess I was hoping maybe we could go into -- get a little better read on sort of the traffic trend. I get the general trend, I was just wondering if you could give a little bit more in terms of magnitude, kind of, how traffic looked in Q4 and how that's changed? It sounds like meaningfully in Q1.

Theodore M. Wright

Yes. We generally don't give traffic information because it's not perfectly reliable. But generally speaking, traffic, we believe, was down modestly in the fourth quarter, and that was offset by increases in average selling prices and strength in our furniture and mattress category. And that first quarter traffic has moved to clearly positive, and positive in a measurable way based on both our traffic counters and application volume. So we did see a change in trend from the fourth quarter to the first quarter. And based on application volume and traffic counters, we would say, in the fourth quarter, that traffic was modestly negative, maybe mid-single digits in the fourth quarter.

Michael J. Poppe

And then just to add to that, for the first quarter it's good applications and good traffic, but also, as Theo pointed out in his comments, we're also positive units in every category and now, especially, in March for sure for TV and then all furniture and mattress and appliance for all of the first quarter.

Daniel T. Binder - Jefferies & Company, Inc., Research Division

Okay. And I expect you'll probably put it in the K, but I was curious, do you have the credit insurance number and the growth rate that look like for Q4?

Brian E. Taylor

It trended generally in line with sales and credit penetration. It -- we didn't have the same kind of effect, fourth quarter, that we did in the third quarter when the prior year third quarter was depressed.

Daniel T. Binder - Jefferies & Company, Inc., Research Division

Okay. The warranty growth looks like it was fairly strong, outpacing sales growth. I was just curious what you're seeing there and what the opportunities is as a percentage of sales?

Michael J. Poppe

It's being driven largely by 2 things, Dan. One is as credit penetration goes up, customers are more likely to purchase the repair service agreement and finance it. But also, the merchandising mix and the price point in buying higher-end featured product, customers are more likely to purchase an RSA at the same time. So it's merchandise mix and finance -- being overall 90% finance penetration, when you count all 3 finance offerings.

Daniel T. Binder - Jefferies & Company, Inc., Research Division

So I always thought about warranty growth or warranty attachments making a lot of sense for things like appliances and TVs, but it seems like you're doing a pretty good job of attaching them in furniture and mattresses, and I'm just trying to understand what the perceived benefit is, by a customer, in applying a warranty to those types of products, versus the ones that we typically think about.

Theodore M. Wright

First off, the attachment rate is materially lower in furniture and mattresses. And the cost, in relation to the cost of the product, is much lower in furniture and mattresses than in the other categories. And the perceived value relates to the potential damage to the product from staining or breakage or tearing of upholstery. There are a number of ways that furniture, like other products, can be damaged. But again, the penetration rate is materially lower in those categories, and the cost is materially lower as well. And that cost -- there is a very similar relationship to the value, to the consumer.

Daniel T. Binder - Jefferies & Company, Inc., Research Division

I see. Okay. Any disclosure on down payment and rejection rates on applications?

Michael J. Poppe

Down payment rate in the fourth quarter was very similar to the third quarter, which -- third quarter was 2.8, fourth quarter was 2.6. We averaged about 3.2 for the year. So really no meaningful change over the last 9 months of the year. As far as approval or decline rates, decline rates stayed in that mid-30% range.

Operator

Thank you. I'm showing no further questions at this time. I would like to turn the conference back over to Theo Wright for closing remarks.

Theodore M. Wright

Thank you for your participation.

Operator

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day.

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