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Conns, Inc. (NASDAQ:CONN)

F4Q07 Earnings Call

March 27, 2008 11:00 am ET

Executives

Thomas Frank – Chairman, Chief Executive Officer

William Nylin – Executive Vice Chairman

Timothy Frank – President, Chief Operating Officer

David Trahan – Executive Vice President of Retail

Michael Poppe – Chief Financial Officer, Assistant Treasurer, Controller

Analysts

Eric [Hollowatty] for Rick Nelson – Stephens Inc.

Laura Champine – Morgan, Keegan & Company, Inc.

David Magee – Suntrust Robinson Humphrey

Anthony Lebiedzinski – Sidoti & Company

Bryan Delaney – InTrust

[Bob Kaneil –Renaissance Capital]

Jeff Matthews – Rand Partners

Operator

Good morning and welcome to the Conns, Inc. conference call to discuss earnings for the fourth quarter ended January 31, 2008. My name is Audra and I will be your operator today. (Operator Instructions)

As a reminder, this conference is being recorded.

Your speakers today are Mr. Timothy L. Frank the Company’s President, COO, and Mr. Michael J. Poppe the Company's Chief Financial Officer. Additionally, joining them for the call is Mr. Thomas J. Frank, Sr., Chairman of the Board at Conns and its CEO. I would now like to turn the conference over to Mr. Poppe please go ahead Sir.

Tim Poppe

Thank you Audra, good morning everyone and thank you for joining us. I am speaking to you today from Conns corporate offices in Beaumont, Texas. You should have received a copy of our earnings release dated March 27, 2008, distributed before the market opened this morning, which describes our earnings and other financial information for the quarter ended January 31, 2008.

If for some reason, you did not receive a copy of the release, you can download it from our website at conns.com.

I must remind you that some of the statements made in this call are forward-looking statements within the meaning of the 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.

I would now like to turn the call over to today’s host, Tim Frank, Conns President and COO, Tim.

Tim Frank

Thank you Mike, good morning and thank you for joining us today. Mike and I are going to speak to our sales and financial performance and the current status of our credit operations as well as our outlook for fiscal 2009.

Net sales for the quarter were up by 6% while same-store sales increased by 1.9%. Consumer electronics continue to fuel growth in our business while opportunities still exist in appliances. Many of the internal changes we have made to address the decrease in the appliance are beginning to result in improved performance.

In February, our appliance business was positive. February showed net sales up 12% and same store sales increase by 6%. In our appliance business, LCD Unit sales were up by 80% and retail sales for this category were up 117% over the prior year.

We continue to see positive trends in a majority of our categories. We expect these trends to continue; we remain very price competitive in the market, in large part due to our national buying group NATO, which controls approximately $3.8 billion in buying power.

Historically, when economic slow downs occur, Conns has been able to grow our business. We as a Company in the past 50 years have done extremely well during down turns in the economy due to our flexible credit programs and customer loyalty.

In our opinion, the economies of the Gulf Coast, including Texas, Louisiana and Oklahoma are not in a recession period. Controlling processing and energy in general continue to expand in these markets and indication of the health of these economies is the challenging environment in which to hire qualified applicants.

In addition, in the Associated Press as released today, Texas was named as having four of the top ten growing U.S. Cities in the country with Dallas/Ft. Worth being number one in the country, Houston, Austin and San Antonio, which if you take into account approximately 80% of our stores reside.

In addition, as gasoline prices rise, many of our customers will choose to spend their discretionary funds on TVs, kitchen appliances and furniture as opposed to eating out and travel, therefore investing in their homes and home entertainment.

Furniture for the year was very positive but tapered off in performance in the last quarter. We are improving the mix of brands by expanding offerings by Lane, Broyhill and Franklin. In addition, our buys in furniture from China and Taiwan are doing very well especially in case goods.

The bedding business is beginning to show improvements as we have moved from a one brand store to a multiple brand format, which includes Simmons, Serta, Spring Air and Comfor-Pedic. We expect this brand selection to continue to improve sales results.

In the fourth quarter, we added four new stores and one store relocation bringing the total count to 69. Six of the seven new stores that were open this past year were opened in the last six months allowing us to have the benefit of these stores for a longer period of this year.

During this quarter, we made Company history by moving into our third state, Oklahoma. We are very pleased with this new store’s first full month of operations and see Oklahoma as an exciting new market for us. The Company plans to open seven to ten stores by end of fiscal 2009 with several of them being in Oklahoma and three being relocations.

Real Estate is becoming more readily available at reasonable rates in some of the markets we operate. Gross margin was down 80 basis points from 37.5 to 36.7% primarily due to a very competitive retail market. This is especially true for consumer electronics. We are optimistic that margins are beginning to stabilize; however, adjustments may continue based on competition.

Our inventory is in very good condition. At year-end, we have reduced inventory by $5.6 million year over year with the opening of seven new stores.

Some of the gross margin decline has been offset by 50 basis point reduction in SG&A expense. The cost control initiative that drove this reduction continues to be very active in our Company. This includes reductions in personnel based on attrition and performance and the review of all costs within our Company essentially separating what’s nice from what is necessary. We expect to see continued benefits in cost control without sacrificing performance as most of these cost-cutting measures were put into place in the fourth quarter. Costs have been taken out of our structure and we are operating more efficiently than we have in the past.

During the fourth quarter, we repurchased 682,020 shares and spent $12.0 million. Altogether, we have repurchased 1.7 million shares and spent $37 million under the original $50 million authority. At this time, we do not expect to purchase any more stock in the near future. This decision is based on our conservative cash management philosophy.

As reported earlier, we are very pleased that our revolving bank facility has been increased from $50 million to $100 million. As we looked at our credit performance, there was a net write off of 3.2% for the quarter. This continues to be very close to our stated goal of 3% in write offs for the year. We are under the 3% goal at 2.9%. We expect to achieve another year of net write offs at or below 3%.

For the first quarter, write offs should be consistent with third and fourth quarter results and should level off below 3% for the remainder of the year.

The San Antonio call center now has over 100 people at the site. We have seen improved productivity from the San Antonio collection center that is having a direct impact on improved delinquencies and write offs. It is fair to say that the San Antonio facility has proven to be even more productive that we had hoped. Our expectation is so see continued improvement due to San Antonio.

The credit portfolio continues to perform extremely well. In fact, during the month of February, 60 day plus delinquencies decreased by 80 basis points to 6.8% through the period that we are not being impacted by sub prime issues that may be affecting other retailers. In fact, only 27% of our total portfolio has an active mortgage. While only 22% have an active mortgage in our secondary portfolio.

I am now going to turn the program over to Mike Poppe so that he can share some additional financial information with you, Mike.

Mike Poppe

Thank you Tim, after a challenging third quarter, we were very happy to get back on track with 9.6% growth in diluted earnings per share for the fourth quarter.

Additionally, in spite of the highly competitive retail environment, we delivered full year results, excluding fair value accounting, in the middle of the range we communicated at the beginning of the year. Our ability to deliver these earnings per share performance in the fourth quarter was due to our ability to control expenses and deliver a 50 basis point decrease in SG&A as a percent of revenue and the benefit of our stock buy back program during the year.

We are very excited to announce today that we completed an expansion of our syndicated bank credit facility increasing the total borrowing capacity from $50 million to $100 million. We believe this indicates a strong vote of confidence by our banking partners in our Company and our future growth prospects.

With the exception of $2.4 million of letters of credit there are currently no amounts outstanding under this facility or our $8 million unsecured revolving credit facility giving us $105.6 million of borrowing capacity today.

Before I begin my detailed discussion of our results for the quarter, I would like to point out that we made a change to our accounting for advertising expense to be more consistent with our peer group. Historically, we included advertising expense in cost of goods sold. We have reclassified those amounts to selling, general and administrative expense for all periods and have provided a reconciliation of the change to our financial statements for the past five years on our website under recent documents on the Investor Relations homepage.

This change has the impact of increasing our reported product and total gross margins and SG&A as a percentage of revenues. Additionally, the adjusted quarterly amounts for the past two fiscal years are included in our 10K that will be filed later today.

Total revenues were up 6.3% to $225.9 million made up of an increase in net sales of 6% and an increase in finance charges and other of 8.5%.

As Tim mentioned, net sales growth is driven by strong sales in consumer electronics including LCD televisions, video game equipment and lap top computers.

Finance charges and other increased on continued growth in the credit portfolio net of a $400,000 reduction in the fair value of our interest and securitized assets. The net credit charge off rate was 3.2% for the quarter and was 2.9% for the full fiscal year, down from 3.3% for the prior fiscal year. Also, the 60 day delinquency rate was down seasonally to 7.7% at October 31, 2007 to 7.6%. The percent of the portfolio REIT-aged in January 31, dropped to 16.8% as compared to 18.1% last year.

As has been previously indicated, we have seen good reductions in delinquencies subsequent to year-end and expect our collection operations to continue this strong performance.

Our total gross margin declined by 80 basis points primarily due to a 130 basis point decline in product gross margin. The drop in our product gross margin versus the prior year period was due primarily to the highly competitive retail market we operated in during the quarter.

As I mentioned previously, SG&A expenses decreased as a percentage of revenue by 50 basis points. This decrease is driven primarily by lower payroll and payroll related expenses as a percent of revenues.

Net income for the quarter increased $398,000 to $13.1 million and earnings per diluted share increased to $0.57 to $0.52 in the prior year. The fair value adjustment in the quarter reduced net income by $260,000 and diluted earnings per share by $0.01.

Turning to our performance for the full year, total revenue increased 8.3% to $824.1 million on a same store sales increase of 3.2%. Net sales increased 8% and finance charges and other increased 11.2%. For the fiscal year 2008, finance charges and other were reduced by $4.8 million non-cash fair value adjustment.

Net income, which includes a fair value adjustment of $3.1 million net of tax decreased to $39.7 million from $40.3 million. Earnings per share increased $0.02 to $1.68 and were reduced by $0.13 for the fair value adjustment reported during the year.

As a reminder, the fair value adjustments are non-cash and were not a result of changes in the underlying economics or expected cash flow of the securitization program.

Turning to our liquidity and cash flow, we used $5.6 million of cash flow in operations for the year ended January 31, 2008, compared with cash provided of $28.9 million in the prior year period. Both periods were negatively impacted by the timing of payments on accounts payable and accrued expenses.

The current year period was impacted heavily by the timing of receipts of inventory and increased investment in accounts receivable. The increased investment in accounts receivable was driven by an increase in our retained interest in sold receivables as a result of an increase in the portfolio balance and a decrease in the affective funding rate. The affective funding rate declined due to the impact of the pay down of the 2002 series of bonds, the increase in the balance of the variable note and other collateral requirements. The lower funding rate negatively impacted operating cash flows by approximately $37.6 million. We expect this funding rate to improve and a portion of this negative cash flow impact to reverse after the 2002 series of bonds are paid off.

The increased investment in inventory, net of accounts payable in the current year, was due to the timing of receipts of inventory as we reduced our inventory level as compared to the prior year-end.

The prior year payables were impacted by the repayment of amounts that had been deferred as a result of the hurricanes in late 2005 and the prior year period was positively impacted by the completion of a bond offering in August 2006, which resulted in significant cash in flows.

Cash used in investing activities totaled $10 million in the current year period as proceeds of $8.8 million from sales of properties partially offset amounts spent on investments in property and equipment. This compared to $16.1 million used a year ago, which primarily represented investments in property and equipment.

Financing activities used $29.9 million in the current year, principally for purchases of $33.3 million treasury stock compared with cash used of $1.3 million in the prior year primarily for purchase of treasury stock of $3.8 million and net of proceeds from issuances of stock under employee benefit plans.

We have no bank debt on our balance sheet and after completing the expansion of our syndicated credit facility, we have $105.6 million net of lows of credit available under our revolving lines of credit to be drawn for working capital or capital expenditure needs.

We are reviewing available options for financing our receivables portfolio and are continuing to prepare to market a new series of fixed rate term bonds. Given the ongoing upheaval in the credit markets, we are not certain as to when the contemplated transaction can be completed; however, we believe the QSPE and the Company have sufficient combined liquidity to maintain consistent operations for at least 12 months.

The sources of this liquidity at January 31, 2008, included $172 million of available capacity under the QSPE existing variable funding note, $6.4 million of invested cash available to the Company, $105.6 million available under the Company's revolving credit facility, $15 million due to excess collateral on the 2002 series of bonds that will be recaptured as they are paid off over the next four months. The current balance outstanding on the bonds is $40 million. This total $299 million in funding capacity before considering the $40 million pay down required on the 2002 series of bonds.

At a 15% growth rate, we would use approximately $100 million of our funding capacity to fund growth in the portfolio over the next 12 months before considering the $40 million pay down.

In addition to future cash flow from operations, among other sources, we have flexible inventory payment terms and the ability to modify certain capital investment programs to provide additional cash flow though we do not expect that these actions will be necessary.

We have initiated our EPS guidance for fiscal year 2009 at a range of $1.85 to $1.95 per diluted share excluding fair value adjustment. While the Texas economic conditions remain solid, given the uncertainty in the national economy and volatility in the financial markets, we are maintaining a cautious outlook for the upcoming fiscal year. We expect to continue to see a very competitive retail market place; but are optimistic about achieving continued improvement in the performance of our credit operation. As a result, we see the most difficult earnings comparisons in the beginning of the year, specially in the first quarter and then easing in the third quarter.

All of this analysis and much more is available in our form 10K for the year ended January 31, 2008, to be filed with the Securities and Exchange Commission later today.

Tim that concludes our prepared remarks, if you are ready, we will open up the lines for questions.

Tim Frank

Certainly, let’s open up the lines.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions)

Your first call is from the line of David Magee at Suntrust Robinson.

Tim Frank

Good morning David.

David Magee – Suntrust Robinson

Good morning and congratulations, can you talk a little about how the Conns progressed during the quarter and the momentum going into the first quarter here and at the same time comment on the furniture business?

Tim Frank

Sure David, this is Tim. November was a very strong month for us as far as accounts go; December was within expectations; January was a tough month. We rebounded very well in February, as I reported the comps in my talk, we are seeing a very good rebound in February and then March is within our expectations as well. The only challenge in March is that Easter last year was in April, we are closed for Easter. Easter was in April last year and is in March this year; but we do expect to see positive comps in March.

David Magee – Suntrust Robinson

On a relative basis, what do you see in terms of promotional environment? I know it’s tight; is it stable within that framework? Is it getting any better or worse?

Tim Frank

I think it is starting to stable out in a very competitive market; I don’t think it is getting any more competitive. As it stands, it is extremely competitive right now.

David Magee – Suntrust Robinson

Okay, thank you.

Operator

Your next call is from the line of Laura Champine with Morgan, Keegan.

Laura Champine – Morgan, Keegan

Good morning, I know that your accounts payable balance was low; can you comment on what took it down to that extent?

Mike Poppe

Yes, it was just an effect of timing of inventory as we had our inventory well situated for the year-end selling season. Then just due to payment terms, we had already paid for a large piece of that inventory before we got to January 31. We had a big month in February and began to rebuild the inventory. We saw the payables go back up to our normal 40 to 50% of the inventory balance.

Laura Champine – Morgan, Keegan

Has there been any change in your payment terms from your vendors?

Mike Poppe

Absolutely not.

Laura Champine – Morgan, Keegan

Okay, thank you.

Operator

Your next call is from the line of Anthony Levbiedzinski of Sidoti & Company.

Anthony Levbiedzinski - Sidoti & Company

Good morning, could you give us what the total same store sales now are quarter to date?

Tim Frank

Quarter to date 6.45 overall and same stores is flat right now. But, I would like to reemphasize, Sunday is really a day and a half in our business as far as what the average volume is. In taking that and moving it, I expect us to pick that back up next month, which is in the same quarter.

Mike Poppe

That was for the month, Anthony, so far the quarter we were 6% in February and we are basically flat in March, so far. We are up that is roughly 3% for the quarter to date.

Anthony Levbiedzinski - Sidoti & Company

Then, when you get into April, do you face more difficult comps or how do the comps look like when you look at them from last April?

Tim Frank

April is actually should be a much easier month for us. March last year was our fourth biggest month; February was our third biggest month. Really, February and March are our toughest months to comp and as Mike pointed out if you average them, we are over 3% in comps and really in April since we are gaining, we will gain a day and a half, essentially, so I would expect it to be very good.

Anthony Levbiedzinski - Sidoti & Company

I was wondering if you could comment a little further about your EPS guide and what are the factors behind the guidance as far as how your same store sales assumptions, product margin assumptions and anything you can help us with that would be helpful.

Mike Poppe

As far as revenue assumptions, we expect to stay in the long-term guidance that we always talk to you about same stores in the low to mid single digits with total revenue increase somewhere in the high singles to low double digit increase. In margins, we continue to expect them to be similar to what we have seen here in the third and fourth quarter; but, as Tim indicated, depending on competitive pressures that could continue to be pressure; but right now, we continue to be positive on how the Texas economy is performing.

Tim Frank

One thing I would like to add is that the stores that we added, again, this past year, six of the seven stores were added in the last six months and we get the benefit of that really going forward for the first couple of quarters.

Anthony Levbiedzinski - Sidoti & Company

Could you tell us what the weighted average credit score was for your customer as of Q4?

Anthony Levbiedzinski - Sidoti & Company

Mike Poppe

The most recent scoring if we look at the origination scores of the balances outstanding in our portfolio excluding bankruptcy accounts was running right about six ten, Anthony.

Anthony Levbiedzinski - Sidoti & Company

That is as of Q4?

Mike Poppe

Yes. That is the latest average origination score for all the receivables.

Anthony Levbiedzinski - Sidoti & Company

Also, what was the discount rate assumptions that you use in the fourth quarter?

Mike Poppe

It ended up being very similar to the discount rate at the end of the third quarter. We did increase the risk premium again but that was offset by roughly 200 basis point decline in the treasure rate, the risk free rate portion of that calculation.

Anthony Levbiedzinski - Sidoti & Company

If I adjust the discount rate assumption, was it the same as Q3?

Mike Poppe

Yes.

Anthony Levbiedzinski - Sidoti & Company

That’s all I had, thanks.

Operator

Your next call is from the line of Rick Nelson at Stephens, Inc.

Eric Hollowwatty for Rick Nelson – Stephens, Inc.

Hi, this is Eric Hollowwatty on Rick Nelson’s behalf who is on the road.

Good morning, we understand that 250 million of your QSPE revolver is coming due in July of 2008, could you just provide an update on the status of that and what you plan to do when that funding becomes due?

Mike Poppe

That is correct; July is the renewal date. At this point, we expect to renew it.

Eric Hollowwatty for Rick Nelson – Stephens, Inc.

Okay, now the rollover for similar term as the existing facility?

Mike Poppe

That is what we would expect right now that it would be another 364-day facility. It is very customary way to finance that kind of portfolio that transaction.

Eric Hollowwatty for Rick Nelson – Stephens, Inc.

Great and going back to the issue of guidance for this year, is there any additional color you can provide on the store-opening schedule for the new stores?

Tim Frank

Certainly, as we look at the seven to ten stores, they really start kicking off in April and are spread evenly, more evenly than last year. We have three stores slated for Oklahoma and I would tell you it has been very exciting what we have seen of this first store in Oklahoma. It has exceeded our expectations.

Eric Hollowwatty for Rick Nelson – Stephens, Inc.

Great, thank you very much.

Operator

Your next call is from the line of Jeff Matthews at Rand Partners.

Jeff Matthews – Rand Partners

Thank you, I was wondering what your experience is, if any, with stores outside the energy belt. Are they seeing the same strength or are you in any areas where they are actually valley weakness?

Tim Frank

What we call the valley, the borders, Mexico; those are really our strongest stores. We are not seeing weakness in any regionalized areas; we are not seeing any of the prime mortgage impact in the states or metropolitan areas that we operate within, at this point in time. As I stated, when you look at our actual credit portfolio 27% overall have active mortgages that doesn’t mean that we don’t know how many are delinquent, we don’t track that information as of this point.

But, in our secondary portfolio, there is only 22% and I am involved in looking at those bureaus on a regular basis and I am really not seeing any significant change in what is inside the bureaus in reference to mortgage delinquency.

Jeff Matthews – Rand Partners

You may have mentioned this; but I didn’t hear it. Does the expansion of your furniture offering have a significant impact on your comps or sales?

Tim Frank

Certainly, furniture has been an important part of our business; it’s also helped to offset any declining margins that might be occurring from some of the other categories. Furniture is a good business for us; we need to expand and we are expanding the brand offerings very similar to what we did in bedding. We like it because it requires a commission trained sales person to explain it. It generally requires that it’s housed in a distribution facility and it is delivered. It plays well to our credit portfolio; we are pleased with that business.

Jeff Matthews – Rand Partners

Okay, thank you.

Operator

(Operator Instructions)

We have a follow up from Rick Nelson at Stephens, Inc.

Eric Hollowatty for Rick Nelson – Stephens, Inc.

I forgot to ask and forgive me if I missed this; but you said the net write off percentage for the fourth quarter, not the annualized number but the fourth quarter number was, I think, 3.2%, if you could just confirm my understanding of that. Do you know or can you tell us the fourth quarter year ago quarterly number?

Mike Poppe

Yes, Eric you are correct; it was 3.2% for the quarter this year and it was 2.8% for the fourth quarter last year.

Eric Hollowatty for Rick Nelson – Stephens, Inc.

As far as the management of the matrix including the charge off and the delinquency rate, you haven’t made any changes to your operations as far as those matrixes are concerned have you?

Mike Poppe

They are calculated consistently with how we reported them to you in the past.

Eric Hollowatty for Rick Nelson – Stephens, Inc.

Fantastic, thank you.

Operator

Your next call is from the line of Bryan Delaney at InTrust.

Bryan Delaney - InTrust

Good morning guys, how are you doing? Just to get back to two things, one – when you got in July of ’08 a renewal date, you said that we are going to renew it, do we have any expectations or what is the expectations of the funding cost associated with that embedded in the guidance? It means directionally, how are things going to compare to the old bonds?

Mike Poppe

As far as to the existing funding note facility?

Bryan Delaney - InTrust

Yes, so when the 250 million comes due in July and we renew it, just to understand the cost associated with it from a funding perspective.

Mike Poppe

We don’t have any hard numbers to give you right now; but, we certainly expect spreads to increase. Short-term rates, as you know, have continued to fall. How that plays out over the year is yet to be seen. We do expect the spread over the commercial paper rate to increase.

Bryan Delaney – InTrust

That is what is embedded in the EPS guide?

Mike Poppe

Yes, there is an estimate for that in there.

Bryan Delaney – InTrust

When you to the liquidity picture, you said there is 172 million available in the QSPE, mechanically, we look at the increase invested on the balance sheet within the interest and securitized assets that being up $45 million year on year versus the increase in the total receivable. How mechanically does it work in terms of what goes into the QSP versus what you need to retain on balance sheet. Just big picture, how should investors think about that?

Mike Poppe

All of the receivables go into the QSPE what is retained on our balance sheet is the portion that is not funded by the variable funding note and the bonds. The variable funding note has a lower funding rate or advanced rate than the bonds do and as I also mentioned, the 2002 bonds that we are paying down, maintain an excess collateral position until they are paid down and that is affecting our funding rate. When we pay those bonds off in April or May we are going to recapture some of that collateral and that ability to borrow under the QSPE.

Bryan Delaney – InTrust

Should we assume a similar type of growth rate on balance sheet in upcoming year that the investment is up another 25 plus percent?

Mike Poppe

In the 15 to 25% range, I think, is a reasonable estimate to start.

Bryan Delaney – InTrust

That is with the revenue growing to 10% is kind of the estimate for this year.

Mike Poppe

Twenty five percent, I think, would be a conservative estimate and assume that we do not get a bond transaction done.

Bryan Delaney – InTrust

Okay, thank you very much.

Operator

Your next call is from the line of Bob Kaneil at Renaissance Capital.

Bob Kaneil - Renaissance Capital

Hi, the question I had was pretty much answered. Could you go through the numbers again on the total liquidity that you gave, the 172 million available under the existing QSPE? I think there was 105 million under existing credit facilities, is there a couple of other items there that I missed?

Tim Frank

A couple of small items; but you got the gist of it. We have $6 million of cash invested on our balance sheet and then as I was just mentioning, there is about $15 million of excess collateral or liquidity locked up in the collateral in the 2002 bonds that we are paying down that we’ll recapture in April or May when then are paid off.

Bob Kaneil - Renaissance Capital

Okay, that’s it for me, thank you.

Operator

At this time, we have no further questions. I will turn the conference back over to management for any closing remarks.

Tim Frank

Tom, did you have anything that you wanted to add?

Tom Frank

Just would thank all of our investors for continuing to support us. We continue to feel like that our Company is improving daily, weekly and monthly in its operations as we committed to you that we would look at every opportunity to increase operating efficiencies.

We also feel like that in the categories that we had not performing as well as we wish, i.e. appliance that we have made significant strides in getting that turned around in the past month and we are bullish on that product category.

The additional brands that we are bringing in for our furniture should help us immensely.

Also, generally speaking when we open the replacement stores, three of the ten are replacement, we do get lifts in volume there and invest in the whole procedure. As I said in the press release, given the environment and given the conditions, people have turned our credit operation around. You have not seen the total results of it; we see ahead a very improving position. We don’t think we have a bad position now; we think that 3.2% is well within the range of 3% that we expect.

I am very pleased with what our people were able to produce for us and we are looking forward to another very successful year, thank you for your support.

Operator

That does conclude today’s conference call. Again, thank you for your participation.

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