Explanatory Note: Per the request of the Financial Industry Regulatory Authority, or FINRA, we are revising our previously filed prospectus supplement to include additional information in the Plan of Distribution about fees and expenses paid to each of Robert W. Baird & Co. Inc. and Stephens Inc.

 

Filed Pursuant to Rule 424(b)(5)
Registration No. 333-157390

Prospectus Supplement

(To Prospectus Dated April 28, 2009)

 

 

CONN’S, INC.

 

Up to Approximately 9,259,390 Shares of Common Stock

Issuable Upon Exercise of Outstanding Subscription Rights

 

If you were a holder of our common stock as of 5:00 p.m., Eastern Time, on November 1, 2010, we allocated to you one transferable subscription right for each share of common stock owned by you at that time. Each subscription right represents the right to purchase shares of our common stock at a subscription price of $2.70 per share and consists of a basic subscription privilege and an oversubscription privilege. The basic subscription privilege entitles holders of subscription rights to purchase 0.41155 shares of our common stock at the subscription price for each subscription right held. The oversubscription privilege entitles holders of subscription rights who exercise their basic subscription privilege in full to purchase, at the subscription price, any shares that our other subscription rights holders do not purchase under their basic subscription privileges. You will be able to exercise your subscription rights until 5:00 p.m., Eastern Time, on November 23, 2010, unless we extend the expiration date or cancel this rights offering. We will not issue fractional shares of our common stock in this rights offering and fractional shares will be rounded up to the nearest whole share with the subscription payment price adjusted accordingly.

 

The subscription rights have been admitted for trading and currently trade on the Nasdaq Global Select Market under the symbol “CONNR.” Shares of our common stock are listed on the Nasdaq Global Select Market under the symbol “CONN,” and the shares of common stock issued pursuant to this rights offering will also be listed on the Nasdaq Global Select Market under the same symbol. On November 5, 2010, the last reported sale price of our common stock was $4.00 per share.

 

We plan to restructure our debt and our receivables financing concurrently with this rights offering. To that end, we have entered into commitment letters with lenders to (i) amend and restate our syndicated asset-based revolving credit facility to, among other things, increase the commitments available to us from $210.0 million to an aggregate amount of $375.0 million, subject to our borrowing base, and extend the maturity date of the facility from 2011 to 2013 and (ii) obtain a term loan in the aggregate amount of $100.0 million with a maturity date of 2014. We generally refer to the amended and restated asset-based revolving credit facility as our restated ABL facility and refer to the term loan as the new term loan. See “The Restated ABL Facility” and “The Term Loan” of this prospectus supplement, respectively, for more information.

 

With the proceeds of this rights offering and borrowings from the new credit facilities, we plan to redeem all of our outstanding asset-backed medium-term and variable funding notes, which are our 2006 Series A notes and our 2002 Series A notes, respectively, or, collectively, our Asset-Backed Notes, issued in connection with our asset-backed securitization facility at the stated principal amount plus accrued and unpaid interest. See “Use of Proceeds” in this prospectus supplement for more information.

 

We may cancel this rights offering at any time prior to the expiration date for any reason. If this rights offering is cancelled, all subscription payments received by the subscription agent will be returned, without interest or deduction, as soon as practicable.

 

This is not an underwritten offering. The shares of our common stock offered hereby are being directly offered by us without the services of a dealer manager, underwriter or selling agent. Stephens Inc., or Stephens, has agreed to act as our financial advisor in connection with the Transactions (as defined herein). Robert W. Baird & Co. Incorporated, or Baird, has been engaged by a committee of our board of directors formed in connection with this rights offering to provide independent financial advisory services in connection with this rights offering. See “Plan of Distribution” for more information regarding Stephens.

 

We are not entering into any standby purchase agreement or similar agreement with respect to the purchase of any shares of our common stock subscribed for through the basic subscription privilege or the oversubscription privilege. Therefore, there is no certainty that any shares will be purchased pursuant to the rights offering and there is no minimum purchase requirement as a condition to our accepting subscriptions.

 

You should carefully consider whether or not to exercise, sell or let lapse your subscription rights and in doing so you should consider all of the information about us and this rights offering contained or incorporated by reference in this prospectus supplement. Our board of directors is not making any recommendation as to whether or not you should exercise, sell or let lapse your subscription rights.

 

Investing in our common stock involves risks. See “Risk Factors” beginning on page S-13 of this prospectus supplement to read about certain factors you should consider before deciding whether to exercise your subscription rights for shares of our common stock.

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement. Any representation to the contrary is a criminal offense.

 

 

 

 

 

 

 

Prospectus Supplement dated November 8, 2010

 

Table of Contents

 

Prospectus Supplement

 

 

Prospectus

 

 

This prospectus supplement and accompanying prospectus is part of a universal shelf registration statement on Form S-3 that we filed with the Securities and Exchange Commission, or the SEC. Under the shelf registration statement, we may sell any combination of common stock, preferred stock, debt securities, warrants or guarantees of debt securities in one or more offerings from time to time. This prospectus supplement describes the specific details regarding the sale of common stock pursuant to this rights offering, including the price, the aggregate number of shares of common stock that may be purchased by exercise of the rights and the risks of investing in our common stock. This prospectus supplement and the documents incorporated by reference herein and therein include important information about us, the subscription rights and our common stock and other information you should know before exercising your subscription rights.

 

Any statement made in this prospectus supplement, the accompanying prospectus or in a document incorporated or deemed to be incorporated by reference in this prospectus supplement or the accompanying prospectus will be deemed to be modified or superseded for purposes of this prospectus supplement to the extent that a statement contained in this prospectus supplement, the accompanying prospectus or in any other subsequently filed document that is also incorporated or deemed to be incorporated by reference in this prospectus supplement or the accompanying prospectus modifies or supersedes that statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement or the accompanying prospectus. See “Incorporation of Certain Information by Reference” of this prospectus supplement for more information.

 

We have not authorized any dealer, salesman or other person to give any information or to make any representation other than those contained or incorporated by reference into this prospectus supplement and the accompanying prospectus, or in any free writing prospectus that has been filed or will be filed by us or on our behalf with the SEC. You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus, or in any free writing prospectus that has been filed or will be filed by us or on our behalf with the SEC. We have not authorized anyone to provide you with additional or different information. If anyone provides you with additional, different, or inconsistent information, you should not rely on it. We are not making an offer to sell securities in any jurisdiction in which the offer or sale is not permitted. You should assume that the information in this prospectus supplement is accurate only as of the date on the front cover of this prospectus supplement, and any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference, in each case, regardless of the time of delivery of this prospectus supplement, the accompanying prospectus, the certificates representing the subscription rights or any exercise of those subscription rights. Our business, financial condition, results of operations, and prospects may have changed since that date.

 

Conn’s, Inc. is a Delaware corporation. Our principal executive offices are located at 3295 College Street, Beaumont, Texas 77701 and our telephone number at that address is (409) 832-1696. Our website is located at http://www.conns.com. Our website and the information contained on our website is not part of this prospectus supplement, and you should rely only on the information contained or incorporated by reference in this prospectus supplement when making a decision as to whether or not to exercise, sell or let lapse your subscription rights.

 

Unless the context otherwise requires or as otherwise expressly stated, references in this prospectus supplement or the accompanying prospectus to the “Company,” “Conn’s,” “we,” “us” and “our” and similar terms refer to Conn’s, Inc. and its direct and indirect subsidiaries on a consolidated basis. References to our “common stock” refer to the common stock of Conn’s, Inc. References in this prospectus supplement and the accompanying prospectus to our board of directors refer to our board of directors and its committees.

 

This prospectus supplement, the accompanying prospectus and the documents incorporated by reference into this prospectus supplement may contain statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results, and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “estimates,” “seeks,” “projects,” “intends,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements represent management’s current reasonable expectations and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors, risks, and uncertainties include but are not limited to the factors described under “Forward-Looking Statements” and “Risk Factors” in our most recent Annual Report on Form 10-K/A and any subsequently filed Quarterly Reports on Form 10-Q, including all amendments thereto, and the following:

 

 

 

These factors should not be construed as exhaustive and should be read with the other cautionary statements in this prospectus supplement, the accompanying prospectus and in any document incorporated or deemed to be incorporated by reference in this prospectus supplement and the accompanying prospectus.

 

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus supplement, the accompanying prospectus and in any document incorporated or deemed to be incorporated by reference in this prospectus supplement and the accompanying prospectus. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent

with the forward-looking statements contained in this prospectus supplement and the accompany prospectus, those results or developments may not be indicative of results or developments in subsequent periods.

 

Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements which we make in this prospectus supplement, the accompanying prospectus and in any document incorporated or deemed to be incorporated by reference in this prospectus supplement or the accompanying prospectus speak only as of the date of such statement, and we do not undertake, and specifically decline, any obligation to update such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

 

What is a rights offering and what is being offered in this rights offering?

 

A rights offering is a distribution of subscription rights on a pro rata basis to all existing common stockholders of a company. We distributed to holders of our common stock as of 5:00 p.m., Eastern Time, on November 1, 2010, the “record date,” at no charge, subscription rights to purchase shares of our common stock. If you were a holder of our common stock on the record date, you received one subscription right for every share of common stock you owned at such time, and each subscription right, subject to adjustments to eliminate fractional rights, entitles the holder to purchase shares of our common stock. We will not issue fractional shares of common stock in this rights offering and fractional shares will be rounded up to the nearest whole share with the subscription payment price adjusted accordingly. The subscription rights will be evidenced by transferable subscription rights certificates.

 

Why are we conducting the rights offering and how will we use the proceeds?

 

We are conducting the rights offering to sell up to approximately $25.0 million in aggregate principal amount of our common stock. We anticipate we will receive approximately $23.5 million in proceeds from the rights offering, after deducting expenses and assuming the offering is fully subscribed. We plan to combine the proceeds of this offering with borrowings under our restated ABL facility and under our new term loan to redeem all of our Asset-Backed Notes at the stated principal amount plus accrued and unpaid interest. In addition, as a result of the Transactions, we expect to be better positioned to review our strategic business plan. See “Use of Proceeds” of this prospectus supplement for more information. By conducting this rights offering, we were able to obtain more favorable terms for our new term loan. Thus, we have agreed to a condition in the commitment letter of our new term loan that requires us to raise at least $25.0 million in this rights offering or another form of equity offering.

 

What is a subscription right?

 

Each subscription right gives the holder the opportunity to purchase shares of our common stock for $2.70 per share and carries with it a basic subscription privilege and an oversubscription privilege, as described below. The holders of the subscription rights were initially the holders of our common stock on the record date.

 

What is the basic subscription privilege?

 

Each subscription right has a basic subscription privilege to purchase from us 0.41155 shares of our common stock at the subscription price of $2.70 per share. You may exercise your basic subscription privilege in whole or in part, or you may choose not to exercise any subscription rights. In addition, you may sell or transfer some or all of your subscription rights as described below.

 

What is the oversubscription privilege?

 

If you exercise your basic subscription privilege in full with respect to all subscription rights you hold at the time of exercise, you will also be entitled to an oversubscription privilege to purchase any shares not purchased by other holders under their basic subscription privileges, subject to the limitations described below. If you have fully

exercised your basic subscription privilege as described in the preceding sentence, you will be eligible to exercise this oversubscription privilege whether you were issued rights because you were a holder of common stock on the record date or you subsequently acquired subscription rights during the subscription period. The subscription price per share that applies to the oversubscription privilege is the same subscription price per share that applies to the basic subscription privilege. Thus, you may purchase additional shares of our common stock by exercising the oversubscription privilege at a price of $2.70 per share so long as all of the basic subscription rights held by other holders of rights are not exercised in full.

 

If I exercise my basic subscription privilege, must I exercise my oversubscription privilege?

 

No. You may exercise your basic subscription privilege in full without exercising your oversubscription privilege. However, if you sell or transfer a subscription right you will be transferring both the basic subscription privilege and the oversubscription privilege associated with that right. The purchaser or transferee may exercise the oversubscription privilege if the purchaser or transferee exercises its basic subscription privilege associated with the subscription rights it purchased or received in full.

 

What are the limitations on the oversubscription privilege?

 

We will not be able to satisfy your exercise of your oversubscription privilege if all other holders of rights elect to purchase all of the shares offered under their basic subscription privileges. We will honor oversubscription requests in full to the extent sufficient shares are available following the exercise of rights under the basic subscription privileges. If oversubscription requests exceed shares available, we will allocate available shares pro rata to each oversubscribing holder based on the number of shares such holder purchased pursuant to the exercise of its basic subscription privilege in proportion to the total number of shares purchased by all oversubscribing holders pursuant to the exercise of their basic subscription privileges. For example, if Holder A purchased 100 shares pursuant to its basic subscription privilege and Holder B purchased 200 shares pursuant to its basic subscription privilege, and Holder A and Holder B both exercise their respective oversubscription privilege and elect to each purchase an additional 100 shares, but there were only 100 total shares available to fulfill all oversubscription requests, then Holder A would receive 33.33 (or when rounded up to the nearest whole share, 34) shares and Holder B would receive 66.66 (or when rounded up to the nearest whole share, 67) shares.

 

Each holder participating in the oversubscription must pay the full amount for all shares of common stock requested in the oversubscription no later than 5:00 p.m. Eastern Time on the expiration date (the same time such holder pays for the shares purchased by exercising its basic subscription privilege). If you render payment for a fewer number of shares of common stock than you are electing to receive in the oversubscription, you will only be eligible to receive such fewer number of shares (if those shares are available for purchase in the oversubscription). In addition, if you paid amounts with respect to the oversubscription privilege that are not applied to purchase shares of common stock because of prorationing, the amounts not applied to the purchase of shares will be returned to you without interest or deduction, as soon as practicable after the expiration date of this rights offering. Using the above example, both Holder A and Holder B must pay for the 100 shares they each elected to receive in the oversubscription no later than 5:00 p.m. Eastern Time on the expiration date even though each will receive only 34 and 67 shares of common stock, respectively, due to prorationing. We will refund to each of Holder A and Holder B, without interest or deduction, the difference between the amount paid by each of Holder A and Holder B for the 100 shares elected and the purchase price for the 34 and 67 shares each actually received by such holder.

 

Am I required to exercise the rights I receive in this rights offering?

 

No. You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights. However, if you choose not to fully exercise your basic subscription privilege and other holders fully exercise their basic subscription privilege, the percentage of our common stock owned by other holders will increase, the relative percentage of our common stock that you own will decrease, and your voting and other rights will be diluted. In addition, if you do not exercise your basic subscription privilege in full, you will not be entitled to participate in the oversubscription privilege.

Will fractional shares be issued?

 

No. We will not issue fractional shares or cash in lieu of fractional shares. Fractional shares of common stock resulting from the exercise of subscription rights will be rounded up to the nearest whole share, with the total subscription payment adjusted accordingly.

 

What are some factors our board of directors considered in authorizing this rights offering?

 

In authorizing this rights offering, our board of directors evaluated our future need for additional liquidity and our need for increased financial flexibility in order to enable us to achieve our business plan and growth strategy. In the course of this process, our board of directors consulted with our senior management and Stephens. In addition, a committee of our board of directors formed as described below in connection with the rights offering consulted with Baird, which was engaged as an independent financial advisor. Both groups considered a number of factors in favor of this rights offering, including the following:

 

 

Our board of directors also considered the following factors adverse to this rights offering:

 

 

How was the subscription price of $2.70 per share determined?

 

In determining the subscription price for the rights, our board of directors considered, among other things, the likely cost and relative difficulty of obtaining capital from other sources, the size and timing of the rights offering, the price at which our stockholders might be willing to participate in the rights offering and historical and current trading prices of our common stock. Our board of directors also received and considered analysis from Stephens concerning prior rights offerings by other companies and the range of discounts that the subscription prices represented to then prevailing and historical trading prices for those offerings. Our board of directors also established a committee responsible for evaluating the rights offering, including pricing terms. The committee received an analysis from Stephens regarding the rights offering as described above and also received an analysis from Baird, its independent financial advisor, regarding prior rights offerings by other companies and the range of discounts that the subscription prices represented to then prevailing and historical trading prices for those offerings.

 

The last trading price for shares of our common stock on November 5, 2010 was $4.00 per share. The subscription price of $2.70 per share is not intended to bear any relationship to the book value of our assets or our past operations, cash flows, losses, financial condition, net worth or any other established criteria used to value securities. You should not consider the subscription price to be an indication of the fair value of the common stock offered in the rights offering.

Does exercising my subscription rights involve risks?

 

Yes. The exercise of your subscription rights involves risks. By exercising your subscription rights you are purchasing shares of our common stock. The purchase of additional shares of our common stock should be considered as carefully as you would consider other equity investments. Among other things, you should carefully consider the risks described under the heading “Risk Factors” in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference into this prospectus supplement or the accompanying prospectus.

 

Has our board of directors made a recommendation to our stockholders regarding the exercise of rights under the rights offering?

 

No. Our board of directors is making no recommendation regarding your exercise of the subscription rights. Stockholders who exercise their subscription rights risk loss of all or a portion of their investment. We cannot assure you that the market price of our common stock will be above the subscription price or that anyone purchasing shares at the subscription price will be able to sell those shares in the future at the same price or a higher price. You are urged to make your decision based on your own assessment of our business and the rights offering. Please see the risks described under the heading “Risk Factors” in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference into this prospectus supplement for a discussion of some of the risks involved in investing in our common stock. Among other things, you should carefully consider the risks described under the heading “Risk Factors” in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference into this prospectus supplement and the accompanying prospectus.

 

Are we requiring a minimum subscription to complete the rights offering?

 

No; although we reserve the right, in our sole discretion, to cancel, extend or otherwise amend the terms of this rights offering for any reason prior to the expiration date. Further, if we are unable to raise sufficient amounts in this rights offering to close the Refinancing Transactions, we intend to cancel or amend this rights offering. If we amend this rights offering for such reason, holders who have previously exercised their subscription rights would be entitled to revoke their previous exercise of subscription rights. We will notify you of any cancellation, extension or amendment by issuing a press release. See “Can this rights offering be cancelled, extended or amended” below.

 

Have we entered into any agreements to ensure the offering is fully subscribed?

 

No; we are not entering into any standby purchase agreement or similar agreement with respect to the purchase of any shares of our common stock subscribed for through the basic subscription privilege or the oversubscription privilege. Therefore, there is no certainty that any shares will be purchased pursuant to the rights offering and there is no minimum purchase requirement as a condition to our accepting subscriptions. However, Stephens and The Stephens Group, LLC, and certain of their respective affiliates, which owned approximately 21.3% and 26.0%, respectively, of our outstanding shares of common stock as of the record date, have each indicated to us that they intend to exercise their rights under the basic subscription privilege and the oversubscription privilege in full in connection with the rights offering as described in this prospectus supplement, though neither has entered into a binding agreement to do so. Each has also indicated that it does not intend to trade in the rights (other than normal market-making activities by Stephens). In connection with this rights offering, three registered broker-dealers, including Stephens and Baird, have indicated that they intend to make a market in the rights and our common stock on the Nasdaq Global Select Market. See “Plan of Distribution” in this prospectus supplement for further information.

 

May I transfer my rights?

 

Yes. The subscription rights are transferable. The subscription rights have been admitted for trading and currently trade on the Nasdaq Global Select Market under the symbol “CONNR.” We currently expect that they will continue to trade until 4:00 p.m., Eastern Time, on November 22, 2010, the last business day prior to November 23, 2010, the expiration date.

How does a rights holder transfer a subscription right?

 

If you hold your shares through a broker, custodian bank or other nominee, you may sell your subscription rights by contacting your broker, custodian bank or other nominee until the close of business on the last business day preceding the expiration date of this rights offering. To sell your subscription rights, in addition to any other procedures your broker, custodian bank or other nominee may require, you should complete and return to your broker, custodian bank or other nominee the form entitled “Beneficial Owner Election Form” such that it will be received by 5:00 p.m., Eastern Time, on November 22, 2010, the last business day prior to the expiration date of this rights offering. In addition, your broker, custodian bank or other nominee may permit you to effect sales through an Internet website that it maintains and through which you may access your account. If you are a record holder of a subscription rights certificate, you may transfer your subscription rights through the subscription agent, which is Computershare Trust Company, N.A. To do so, you must deliver your properly executed subscription rights certificate, with appropriate instructions, to the subscription agent. The subscription agent will only facilitate subdivisions or transfers of the rights until 5:00 p.m., Eastern Time, on November 17, 2010, six days prior to the scheduled November 23, 2010 expiration date. See “The Rights Offering — Methods for Transferring and Selling Subscription Rights — General Considerations Regarding the Partial Exercise, Transfer or Sale of Subscription Rights.” If you are a record holder of a subscription rights certificate, you may also choose to sell your subscription rights through a broker, custodian bank or other nominee and you should contact your broker, custodian bank or other nominee for instructions on how to do so. The subscription rights are a new issue of securities with no prior trading market, and we cannot provide you any assurances as to the liquidity of any trading market for the subscription rights or the market value of the subscription rights. Please see “Risk Factors” in this prospectus supplement for further information.

 

Can this rights offering be cancelled, extended or amended?

 

Yes. We reserve the right, in our sole discretion, to cancel, extend or otherwise amend the terms of this rights offering for any reason prior to the expiration date. We will notify you of any cancellation, extension or amendment by issuing a press release. In the event of a material amendment to the terms of this rights offering, we will distribute an amended prospectus supplement to stockholders of record, extend the expiration of this rights offering and offer all holders who have exercised their subscription rights a period of time to revoke their previously exercised subscription rights. If you then revoke your previously exercised subscription rights under such circumstances, the subscription agent will refund to you any payments you have made, without interest or deduction, as soon as practicable.

 

If this rights offering is not completed, will my subscription payment be refunded to me?

 

Yes. The subscription agent will hold all funds it receives in a segregated bank account until completion of this rights offering. If this rights offering is cancelled or is not completed for any reason, the subscription agent will return, without interest or deduction, as soon as practicable all subscription payments. In addition, if you paid amounts with respect to the oversubscription privilege which are not applied to purchase shares of common stock because of prorationing, the amounts not applied to the purchase of shares will be returned to you without interest or deduction, as soon as practicable after the expiration date of this rights offering. If you own shares in “street name,” it may take longer for you to receive payment because the subscription agent will return payments through the record holder of the shares.

 

How soon must I act to exercise my subscription rights?

 

The subscription rights may be exercised at any time during the subscription period, which commences on November 8, 2010, and continues through the expiration date for this rights offering, which is 5:00 p.m., Eastern Time, on November 23, 2010 unless extended by us. If you elect to exercise any subscription rights, the subscription agent must actually receive all required documents and payments from you or your broker by 5:00 p.m., Eastern Time, on November 23, 2010, this means that payment must clear prior to 5:00 p.m., Eastern Time, on November 23, 2010. Although we have the option of extending the expiration date of the subscription period at our sole discretion, we currently do not intend to do so.

How do I exercise my subscription rights? What forms and payment are required to purchase the shares of common stock?

 

If you wish to participate in this rights offering, you must take the following steps, unless your shares of common stock are held by a broker, dealer or other nominee:

 

 

If you use the mail, we recommend that you use an insured overnight carrier that provides delivery tracking. We will not be obligated to honor your exercise of subscription rights if the subscription agent receives the documents and payment relating to your exercise after the rights offering expires, regardless of when you transmitted the documents and payment. If your shares of common stock are currently held by a broker, dealer or other nominee, please see below.

 

If you do not indicate the number of subscription rights being exercised or do not indicate if the oversubscription privileges are being exercised, or do not deliver full payment of the aggregate subscription price for the number of subscription rights that you indicate are being exercised, then you will be deemed to have exercised the maximum number of subscription rights that may be exercised with the aggregate subscription price payment you tendered to the subscription agent. If your aggregate subscription price payment is greater than the amount you owe for your subscription, we or the subscription agent will return the excess amount to you by mail, without interest or deduction, as soon as practicable after the expiration date of this rights offering.

 

If you are a holder of record and you wish to exercise your subscription rights but will be unable to deliver the subscription rights certificate prior to the expiration date, you may deliver a Notice of Guaranteed Delivery in accordance with this prospectus supplement. See “The Rights Offering — Notice of Guaranteed Delivery.” Even if you elect this option, you are still required to make payment before 5:00 p.m., Eastern Time, on November 23, 2010.

 

What should I do if I want to participate in this rights offering, but my shares of common stock are held in the name of my broker, custodian bank or other nominee?

 

If you hold your shares of our common stock through a broker, custodian bank or other nominee, then your broker, custodian bank or other nominee is the record holder of the shares you own. The record holder must exercise the subscription rights on your behalf for the common stock you wish to purchase.

 

If you wish to participate in this rights offering and purchase shares of common stock, please promptly contact the record holder of your shares of common stock. We will ask your broker, custodian bank, or other nominee to notify you of this rights offering. In addition to any other procedures your broker, custodian bank or other nominee may require, you should complete and return to your record holder the form entitled “Beneficial Owner Election Form” such that it will be received by 5:00 p.m., Eastern Time, on November 22, 2010, the last business day prior to the expiration date of this rights offering. You should receive this form from your record holder with the other rights offering materials. You should contact your broker, custodian bank or other nominee if you do not receive this form, but you believe you are entitled to participate in this rights offering. We are not responsible if you do not receive the form from your broker, custodian bank or nominee or if you receive it without sufficient time to respond. In addition, your broker, custodian bank or other nominee may permit you to participate in this rights offering and purchase shares of common stock through an Internet website that it maintains and through which you may access your account.

How may I pay the subscription price, and where do I send my completed subscription rights certificate and payment?

 

Your payment of the subscription price must be made in U.S. dollars for the full number of shares of common stock you wish to acquire under the basic subscription privilege and the oversubscription privilege by either:

 

 

Computershare Trust Company, N.A. is acting as the subscription agent for this rights offering under an agreement with us. All subscription rights certificates, payments of the subscription price and nominee holder certifications, to the extent applicable to your exercise of subscription rights, must be delivered to Computershare Trust Company, N.A. as follows:

 

By express mail or courier:

 

Computershare Trust Company, N.A.
Attention: Voluntary Corporate Actions
250 Royall St. , Suite V
Canton, MA 02021

 

By mail:

 

Computershare Trust Company
Rights Offering
P.O. Box 43011
Providence, RI 02940-3011

 

You should direct any questions or requests for assistance concerning the method of subscribing for the shares of common stock or for additional copies of this prospectus supplement to Georgeson Inc. at (866) 357-4029.

 

If you use the mail, we recommend that you use an insured overnight carrier that provides delivery tracking. If you cannot deliver your subscription rights certificate to the subscription agent on time, you may follow the guaranteed delivery procedures described under “The Rights Offering — Notice of Guaranteed Delivery.” Even if you elect this option, you are still required to make payment before 5:00 p.m., Eastern Time, on November 23, 2010.

 

After I exercise my subscription rights, can I change my mind?

 

No. All exercises of subscription rights are irrevocable (except in certain limited circumstances relating to a material amendment of the terms of this rights offering, in which case we will advise you of the material amendment) by the stockholders, even if you later learn information about us that you consider unfavorable. You should not exercise your subscription rights unless you are certain that you wish to purchase the shares of common stock offered pursuant to this rights offering. However, we may cancel, extend or otherwise amend this rights offering at any time prior to the expiration date.

 

What fees or charges apply if I exercise my subscription rights?

 

We are not charging any fees or sales commissions to issue subscription rights to you or to issue shares of our common stock to you if you exercise your subscription rights. If you exercise your subscription rights through a broker or other record holder of your shares, you are responsible for paying any fees they may charge.

How do I exercise my subscription rights if I live outside of the United States or have an army post office or foreign post office address?

 

The subscription agent will hold subscription rights certificates for stockholders having addresses outside the United States or who have an army post office or foreign post office address. In order to exercise subscription rights, our foreign stockholders and stockholders with an army post office or foreign post office address must notify the subscription agent and timely follow other procedures described in the section of this prospectus supplement entitled “The Rights Offering — Foreign and Other Stockholders.”

 

When will I receive my new shares of common stock?

 

Stock certificates will not be issued for shares of our common stock purchased in this rights offering. As soon as practicable after the expiration of the subscription period, the subscription agent will arrange for issuance through the Depository Trust Company, or DTC, to each subscription rights holder of record that has validly exercised its basic subscription privilege, the shares of common stock purchased pursuant to the basic subscription privilege. Shares subscribed for pursuant to the oversubscription privilege will be delivered through DTC promptly after the expiration date of this rights offering and following the completion of any pro-rations as may be necessary in the event the oversubscription requests exceed the number of shares not subscribed for pursuant to the basic subscription privilege. If you are not a DTC participant, all shares that you purchase in this rights offering will be issued in book-entry, or uncertificated, form. When issued, the shares will be registered in the name of the subscription rights holder of record.

 

What are the U.S. federal income tax consequences of exercising my subscription rights?

 

A U.S. holder, as defined in “Certain Material U.S. Federal Income Tax Consequences” to this prospectus supplement, should not recognize income, gain, or loss for U.S. federal income tax purposes upon the receipt and exercise of the subscription rights. See “Certain Material U.S. Federal Income Tax Consequences” of this prospectus supplement for further discussion.

 

You should consult your own tax advisors concerning the U.S. federal income tax consequences of the receipt, exercise, expiration, and sale of the subscription rights in light of your own particular circumstances and any consequences arising under the laws of any state, local, or foreign taxing jurisdiction.

 

How many shares of common stock will be outstanding after this rights offering?

 

We will issue up to approximately 9,259,390 shares of common stock in this rights offering, depending on the number of subscription rights that are exercised. Based on the number of shares of common stock outstanding as of November 1, 2010, if we issue 9,259,390 shares of common stock available to be purchased in this rights offering, there will be 31,758,211 shares of common stock outstanding following the completion of this rights offering.

 

Whom should I contact if I have more questions?

 

If you have more questions about this rights offering or need additional copies of the rights offering documents, please contact the information agent, Georgeson Inc., at (866) 357-4029. For a complete description of the rights offering, see “The Rights Offering” in this prospectus supplement.

 

Prospectus Supplement Summary

	•	amend and restate our existing syndicated asset-based revolving credit facility, which we refer to as our existing ABL facility, led by Bank of America, N.A. and JPMorgan Chase Bank, National Association to, among other things, increase the commitments available to us from $210.0 million to an aggregate amount of $375.0 million, subject to a borrowing base, and extend the maturity date of the facility from 2011 to 2013; and
	•	enter into a term loan with GA Capital, LLC, as Administrative Agent for certain lenders, in the aggregate amount of $100.0 million with a maturity date of 2014.

	•	terminate our existing $10.0 million unsecured bank line of credit under which no amounts were drawn as of July 31, 2010; and
	•	redeem our Asset-Backed Notes at the stated principal amount plus accrued and unpaid interest.

	•	net sales for the nine months ended October 31, 2010, were $478.6 million, a decrease of $73.2 million, or 13.2%, as compared to the nine months ended October 31, 2009;

	•	net sales, which represent total product sales, repair service agreement commissions and service revenues, for the fiscal quarter ended October 31, 2010, decreased $24.7 million, or 15.3%, to $136.7 million as compared to the fiscal quarter ended October 31, 2009;
	•	same store sales decreased 14.2% for the nine months ended October 31, 2010, as compared to the same period in the prior year;
	•	same store sales decreased 16.4% for the three months ended October 31, 2010, as compared to the same quarter in the prior year;
	•	the retail gross margin percent, which includes gross profit from both product and repair service agreement sales, for the quarter ended October 31, 2010 increased to approximately 25%, as compared to the 22.4% experienced in the fiscal quarter ended October 31, 2009;
	•	estimated net charge-offs for the quarter ended October 31, 2010 totaled approximately $9.5 million, or 5.5% of the average balance outstanding; the net charge-off percentage has been negatively impacted by the declining portfolio balance;
	•	the total portfolio balance outstanding has declined to approximately $677.0 million as of October 31, 2010, from $738.2 million as of October 31, 2009;
	•	60+ day delinquency percentage increased 60 basis points to 9.6% as of October 31, 2010, from 9.0% at July 31, 2010; in the prior year period, 60+ day delinquency percentage increased 170 basis points to 9.3% at October 31, 2009, from 7.6% at July 31, 2009. The 60+ day delinquency percentage has also been negatively impacted by the declining portfolio balance;
	•	the total balance 60+ days delinquent was $64.9 million at October 31, 2010, as compared to $68.5 million at October 31, 2009;
	•	the percent of the portfolio reaged has increased 30 basis points from 18.4% at July 31, 2010, to 18.7% as of October 31, 2010, as compared to 18.8% at October 31, 2009. The percentage of the portfolio reaged has also been negatively impacted by the declining portfolio balance;
	•	the total balance reaged has decreased to $126.3 million as of October 31, 2010, from $139.1 million as of October 31, 2009; and
	•	the payment rate, which is the amount collected from customers as a percentage of the portfolio balance, increased for the third consecutive fiscal quarter, increasing to 5.1% for the fiscal quarter ended October 31, 2010, from 5.0% for the fiscal quarter ended October 31, 2009.

		Quarter Ended October 31,
		2010				% of Total				2009				% of Total				Change				% Change
		(dollars in thousands)
Consumer electronics		$	42,306				31.0	%		$	56,216				34.8	%		$	(13,910	)			-24.7	%
Home appliances			41,604				30.4	%			47,842				29.6	%			(6,238	)			-13.0	%
Track			20,701				15.1	%			21,297				13.2	%			(596	)			-2.8	%
Furniture and mattresses			16,356				12.0	%			15,906				9.9	%			450				2.8	%
Other			6,058				4.4	%			7,202				4.5	%			(1,144	)			-15.9	%
Total product sales			127,025				92.9	%			148,463				92.0	%			(21,438	)			-14.4	%
Repair service agreement commissions			5,894				4.3	%			7,320				4.5	%			(1,426	)			-19.5	%
Service revenues			3,769				2.8	%			5,599				3.5	%			(1,830	)			-32.7	%
Total net sales		$	136,688				100.0	%		$	161,382				100.0	%		$	(24,694	)			-15.3	%

	•	consumer electronics category sales declined as a result of a 13.0% drop in the average selling price of flat-panel televisions and a 14.4% decrease in unit sales; lower LCD unit sales offset increased sales of LED and plasma televisions;
	•	home appliance category sales declined during the third fiscal quarter on lower unit sales and a decline in the average selling price, though room air conditioning sales increased during the quarter;
	•	track sales declined slightly as increased sales of accessories, MP3 players and compact stereos were offset primarily by declines in the sales of camcorders, digital cameras, GPS devices, computer equipment and video game hardware;
	•	the growth in furniture and mattress sales was driven by the addition of in-store specialists focused on this category, improved in-store displays and expanded product selection;
	•	the decrease in other product sales resulted largely from declines in lawn and garden sales and delivery revenues;
	•	the decline in repair service agreement commissions was driven largely by the decline in product sales and increased cancellations of these agreements as a result of higher credit charge-offs;
	•	service revenues decreased as we increased our use of third-party servicers during the quarter to provide cost-effective, timely product repairs for our customers; and
	•	sales from two stores opened since August 1, 2009, reduced by the closure of the Baytown, Texas clearance center, partially offset the decrease in Total net sales.

	•	the current economic conditions,
	•	the limitations imposed by our current capital structure and the resulting impact on our ability to extend credit,
	•	our decision to tighten credit underwriting requirements to protect the quality of our credit portfolio, and
	•	our emphasis on improving retail gross margin, while maintaining pricing competitiveness in the marketplace.

Securities Offered		We distributed at no charge one transferable subscription right for each share of common stock that you owned as of 5:00 p.m., Eastern Time, on the record date, November 1, 2010, either as a holder of record or, in the case of shares held of record by brokers, dealers, custodian banks or other nominees on your behalf, as beneficial owner of the shares. Each subscription right represents the right to purchase shares of our common stock at the subscription price of $2.70 per share and consists of a basic subscription privilege and an oversubscription privilege.
Record Date		5:00 p.m., Eastern Time, on November 1, 2010.
Expiration Date		The subscription rights will expire at 5:00 p.m., Eastern Time, on November 23, 2010, unless we extend the expiration date. We reserve the right to extend the subscription rights period and consequently the expiration date at our sole discretion. We reserve the right, in our sole discretion, to cancel, extend or otherwise change the subscription rights period and consequently the expiration date at our sole discretion for any reason prior to the expiration date.
Subscription Price		The subscription price per share of common stock shall be equal to $2.70. To be effective, any payment related to the exercise of a subscription right must clear prior to the expiration of the subscription period. You must pay for the total number of shares you subscribe for pursuant to both your basic subscription privilege and your oversubscription privilege by 5:00 p.m., Eastern Time, on November 23, 2010.
Basic Subscription Privilege		The basic subscription privilege entitles holders of each subscription right to purchase 0.41155 shares of our common stock at the subscription price. You may exercise your basic subscription privilege for some or all of your subscription rights, or you may choose not to exercise your subscription rights. In addition, you may sell or transfer some or all of your subscription rights as described below.
Oversubscription Privilege		If you exercise your basic subscription privilege in full with respect to subscription rights you hold at the time of exercise, you will also have an oversubscription privilege to purchase any shares that our other subscription rights holders do not purchase under their basic subscription privilege. The subscription price for shares purchased pursuant to the oversubscription privilege will be the same as the subscription price for the basic subscription privilege.
		If holders exercise oversubscription privileges for more shares than are available to be purchased pursuant to the oversubscription privileges,

		we will allocate the shares of our common stock to be issued pursuant to the exercise of the oversubscription privilege pro rata among those over-subscribing rights holders. “Pro rata” means to each oversubscribing holder based on the number of shares such holder purchased pursuant to the exercise of its basic subscription privilege in proportion to the total number of shares purchased by all oversubscribing holders pursuant to the exercise of their basic subscription privileges. For example, if Holder A purchased 100 shares pursuant to the exercise of its basic subscription privilege and Holder B purchased 200 shares pursuant to the exercise of its basic subscription privilege, and Holder A and Holder B both exercise their respective oversubscription privileges and elect to each purchase an additional 100 shares, but there were only 100 total shares available to fulfill all oversubscription requests, then Holder A would receive 33.33 (or when rounded up to the nearest whole share, 34) shares and Holder B would receive 66.66 (or when rounded up to the nearest whole share, 67) shares. If you are not allocated the full amount of shares for which you oversubscribe, you will receive a refund of the subscription price, without interest or deduction, that you delivered for those shares of our common stock that are not allocated to you. The subscription agent will mail such refunds as soon as practicable after the completion of this rights offering.
Indications from Certain Holders		Stephens and The Stephens Group, LLC, and certain of their respective affiliates, which owned approximately 21.3% and 26.0%, respectively, of our outstanding shares of common stock as of the record date, have each indicated to us that they intend to exercise their rights under the basic subscription privilege and the oversubscription privilege in full in connection with the transactions as described in this prospectus supplement, though neither has entered into a binding agreement to do so. Each has also indicated that it does not intend to trade in the rights (other than normal market-making activities by Stephens). Assuming no other holders exercise their rights in this offering, and that Stephens and The Stephens Group, LLC, and their respective affiliates, exercise their basic and oversubscription privileges in full as they have indicated, after giving effect to this offering, Stephens and The Stephens Group, LLC, and their respective affiliates, would own approximately 30.0% and 34.4%, respectively, of our outstanding common stock.
		In connection with this rights offering, three registered broker-dealers, including Stephens and Baird, have indicated that they intend to make a market in the rights and our common stock on the Nasdaq Global Select Market. See “Plan of Distribution” in this prospectus supplement for further information.
Procedure for Exercising Subscription Rights and Making Payments Therefor		The subscription rights may be exercised at any time during the subscription period, which commences on November 8, 2010. If you are a holder of record of subscription rights, to exercise your subscription rights, you must properly complete the enclosed subscription rights certificate and deliver it, along with the full subscription price (including any amounts in respect of your oversubscription privilege), to the subscription agent, Computershare Trust Company, N.A., before 5:00 p.m., Eastern Time, on the expiration date, and payment must clear prior to the expiration of this rights offering. For

		the exercise of a subscription right to be effective, your subscription rights certificate, together will full payment of the subscription price, must be received by the subscription agent by 5:00 p.m., Eastern Time, on the expiration date of this rights offering.
		If you use the mail, we recommend that you use an insured overnight carrier that provides delivery tracking. If you cannot deliver your subscription rights certificate to the subscription agent on time, you may follow the guaranteed delivery procedures described under “The Rights Offering — Notice of Guaranteed Delivery.” Even if you elect this option, you are still required to make payment before 5:00 p.m., Eastern Time, on November 23, 2010.
		If you hold your shares of our common stock in the name of a broker, custodian bank or other nominee, then your broker, custodian bank or other nominee is the record holder of the shares you own. The record holder must exercise the subscription rights on your behalf for the common stock you wish to purchase. If you wish to participate in this rights offering and purchase shares of common stock, please promptly contact the record holder of your shares of common stock. We will ask your broker, custodian bank, or other nominee to notify you of this rights offering. You should complete and return to your record holder the form entitled “Beneficial Owner Election Form” such that it will be received by 5:00 p.m., Eastern Time, on November 22, 2010, the last business day prior to the expiration date of this rights offering. You should receive this form from your record holder with the other rights offering materials. You should contact your broker, custodian bank or other nominee if you do not receive this form, but you believe you are entitled to participate in this rights offering. We are not responsible if you do not receive the form from your broker, custodian bank or nominee or if you receive it without sufficient time to respond. In addition, your broker, custodian bank or other nominee may permit you to effect sales though an Internet website that it maintains and through which you may access your account.
Use of Proceeds from this Rights Offering		The net proceeds to us from this rights offering will depend on the number of subscription rights that are exercised. If each stockholder exercises its subscription rights in full at a subscription price of $2.70 per share, we will receive gross proceeds of approximately $25.0 million in this rights offering. We currently estimate that the expenses of the rights offering will be approximately $1.5 million in the aggregate. We plan to combine the proceeds of this rights offering with borrowings under our restated ABL facility and under our new term loan, which we plan to enter into contemporaneously with the completion of this rights offering, to redeem all of our Asset-Backed Notes at the stated principal amount plus accrued and unpaid interest. See “Use of Proceeds” in this prospectus supplement for further information.
Transferability of Subscription Rights		You may sell your subscription rights by contacting your broker or the institution through which you hold your securities until the close of business on the business day preceding the expiration date of this rights offering. In addition, you may transfer your subscription rights through the subscription agent as described in this prospectus supplement. See “The Rights Offering — Methods for Transferring and Selling Subscription Rights.”

		The subscription rights were admitted for trading on the Nasdaq Global Select Market under the symbol “CONNR” as of November 8, 2010 and may be traded until 4:00 p.m., Eastern Time, on November 22, 2010, the last business day prior to November 23, 2010, the expiration date. Although the subscription rights are currently listed, an active trading market for the rights may not be sustained. If the trading market is not sustained, you may be unable to sell your subscription rights or unable to sell your subscription rights at a price that is satisfactory to you. We have received representations from three registered broker-dealers, including Stephens, that they intend to make a market in the rights though we cannot assure you how liquid the market for our subscription rights will be. See “Risk Factors — No prior market exists for the subscription rights and accordingly you may not be able to sell your subscription rights” in this prospectus supplement for further information.
No Revocation of Exercise by Stockholders		All exercises of subscription rights are irrevocable (except in limited circumstances relating to a material amendment to the terms of the rights offering), even if you later learn information about us that you consider unfavorable. You should not exercise your subscription rights unless you are certain that you wish to purchase the shares of common stock offered pursuant to this rights offering.
Amendment; Cancellation		We may amend the terms of this rights offering or extend the subscription period. In the event of a material amendment to the terms of this rights offering, we will distribute an amended prospectus supplement to stockholders of record, extend the expiration of this rights offering and offer all holders who have exercised their subscription rights a period of time to revoke their previously exercised subscriptions. We also reserve the right to cancel this rights offering at any time prior to the expiration date for any reason. If this rights offering is cancelled, all subscription payments received by the subscription agent will be returned, without interest or deduction, as soon as practicable to those persons who subscribed for shares in this rights offering.
No Recommendation		Our board of directors is not making any recommendation regarding your exercise of the subscription rights. The trading price of our common stock may decline during or after this rights offering. We cannot assure you that you will be able to sell shares purchased in this rights offering at a price equal to or greater than the subscription price. You are urged to make your own decision whether or not to exercise your subscription rights based on your own assessment of our business and this rights offering. See “Risk Factors” of this prospectus supplement for further discussion.
Issuance of Common Stock		If you purchase shares of common stock through this rights offering, we will issue those shares to you through DTC as soon as practicable after the completion of this rights offering. Stock certificates will not be issued for shares of our common stock purchased in this rights offering. If you are not a DTC participant, all shares that you purchase in the rights offering will be issued in book-entry, or uncertificated, form. When issued, the shares will be registered in the name of the subscription rights holder of record.
Listing of Common Stock		Our common stock trades on the Nasdaq Global Select Market under the symbol “CONN,” and the shares to be issued in connection with

		this rights offering will also be listed on the Nasdaq Global Select Market under the same symbol.
Listing of Rights		The subscription rights have been admitted for trading and currently trade on the Nasdaq Global Select Market under the symbol “CONNR.” We currently expect that they will continue to trade until 4:00 p.m., Eastern Time, on November 22, 2010, the last business day prior to November 23, 2010, the expiration date.
Certain Material U.S. Federal Income Tax Consequences		A U.S. holder, as defined in “Certain Material U.S. Federal Income Tax Consequences” to this prospectus supplement, should not recognize income, gain, or loss for U.S. federal income tax purposes upon the receipt and exercise of the subscription rights. See “Certain Material U.S. Federal Income Tax Consequences” of this prospectus supplement for further discussion.
		You should consult your own tax advisors concerning the U.S. federal income tax consequences of the receipt, exercise, expiration, and sale of the subscription rights in light of your own particular circumstances and any consequences arising under the laws of any state, local, or foreign taxing jurisdiction.
Subscription Agent		Computershare Trust Company, N.A.
Information Agent		Georgeson Inc.
Shares of Common Stock Outstanding Before this Rights Offering		As of November 1, 2010, there were 22,498,821 shares of our common stock outstanding.
Shares of Common Stock Outstanding After Completion of this Rights Offering		We will issue up to 9,259,390 shares of common stock in this rights offering, depending on the number of subscription rights that are exercised. Based on the number of shares of common stock outstanding as of November 1, 2010, if we issue 9,259,390 shares of common stock available to be purchased in this rights offering, we would have 31,758,211 shares of common stock outstanding following the completion of this rights offering.
Risk Factors		Our business is subject to uncertainties and risks. Stockholders considering making an investment by exercising subscription rights in this rights offering should carefully read and consider the information discussed under the heading “Risk Factors” in this prospectus supplement, together with the other information contained in or incorporated by reference into this prospectus supplement, including the information discussed under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 25, 2010, Amendment No. 1 to our Annual Report on Form 10-K filed with the SEC on April 12, 2010; and any subsequently filed Quarterly Reports on Form 10-Q, including all amendments thereto, before making a decision to invest in our common stock. Our business, financial condition, liquidity or results of operations could be materially adversely affected by any of these risks.
Fees and Expenses		We will pay the fees and expenses related to this rights offering. However, you are responsible for all commissions, fees and other expenses, including brokerage commissions and transfer taxes, incurred in connection with the purchase, transfer or exercise of your subscription rights.

														Six Months Ended
		Fiscal Year Ended January 31,												July 31,
		2008				2009				2010				2009				2010
		(Dollars in thousands)
Statement of Operations:
Revenues:
Product Sales		$	671,571			$	743,729			$	667,401			$	360,206			$	316,743
Repair service agreement commissions, net (1)			36,424				40,199				33,272				18,649				16,258
Service revenues (2)			22,997				21,121				22,115				11,596				8,940
Total net sales			730,992				805,049				722,788				390,451				341,941
Finance charges and other (3)			139,538				154,492				152,797				79,828				69,243
Total revenues			870,530				959,541				875,585				470,279				411,184
Costs and expenses:
Cost of goods sold, including warehousing and occupancy cost			508,787				580,423				534,299				286,631				244,433
Cost of parts sold, including warehousing and occupancy cost			8,379				9,638				10,401				5,384				4,492
Selling, general and administrative expenses			245,761				254,172				255,942				127,717				124,221
Goodwill impairment (4)			—				—				9,617				—				—
Provision for bad debts			19,465				27,952				36,843				13,670				15,322
Total costs and expenses			782,392				872,185				847,102				433,402				388,468
Operating income			88,138				87,356				28,483				36,877				22,716
Interest expense, net			24,839				23,597				20,571				10,346				10,660
Other (income) expense, net (5)			(943	)			117				(123	)			(21	)			183
Income before income taxes			64,242				63,642				8,035				26,552				11,873
Provision for income taxes			22,575				23,624				4,111				9,972				4,641
Net income		$	41,667			$	40,018			$	3,924			$	16,580			$	7,232
Balance Sheet Data:
Cash and cash equivalents		$	11,024			$	11,909			$	12,247			$	4,956			$	8,466
Inventory			81,495				95,971				63,499				100,867				99,106
Total assets			835,499				957,566				892,466				939,270				892,337
Total debt, including current maturities			468,119				505,417				452,304				490,295				429,737
Total stockholders’ equity			288,726				332,784				339,336				350,604				347,697

														Six Months Ended
		Fiscal Year Ended January 31,												July 31,
		2008				2009				2010				2009				2010
		(Dollars in thousands)
Other Financial Data:
Adjusted interest expense (6)			—				—				—				—			$	14,316
Depreciation and amortization			12,128				12,541				14,012				7,097				8,332
Rent expense (7)			18,905				22,242				23,703				11,792				11,776
Capital expenditures			18,955				17,597				10,255				6,763				1,650
Cash paid for interest (8)			24,929				24,153				20,841				10,327				10,618
Cash paid (refunded) for income taxes			22,935				24,950				18,163				19,686				(3,496	)
Cash flows provided by (used in):
Operating activities			(39,371	)			(20,468	)			64,239				15,350				23,936
Investing activities			(6,009	)			(13,344	)			(10,103	)			(6,741	)			(1,061	)
Financing activities			(193	)			34,697				(53,798	)			(15,562	)			(26,656	)
Retail Data:
Retail Gross Margin % (9)			28.1	%			26.0	%			23.7	%			24.3	%			26.6	%
Stores open at end of period			69				76				76				75				76
Same store sales growth (10)			3.2	%			2.0	%			(13.8	)%			(4.9	)%			(13.3	)%
Credit Data:
Percent of retail sales financed			62.2	%			62.6	%			58.1	%			55.4	%			59.8	%
Total portfolio outstanding balance (period end)		$	654,867			$	753,513			$	736,041			$	745,878			$	706,339
Account balances over 60 days past due (period end)			49,778				55,141				73,391				57,042				63,644
Percent of balances over 60 days past due to total outstanding balance (period end)			7.6	%			7.3	%			10.0	%			7.6	%			9.0	%
Total account balances reaged (period end)		$	107,727			$	141,162			$	144,173			$	140,787			$	129,826
Percent of reaged balances to total outstanding balances (period end)			16.5	%			18.7	%			19.6	%			18.9	%			18.4	%
Bad debt charge-offs (net of recoveries)		$	17,418			$	22,362			$	28,942			$	12,005			$	16,493
Percent of net charge-offs to average outstanding balance			2.9	%			3.2	%			3.9	%			3.2	%			4.6	%
Estimated percent of reaged balances collected (11)			90.0	%			89.6	%			87.2	%			89.6	%			84.2	%
Interest income and fee yield (12)			19.3	%			19.0	%			18.3	%			18.8	%			17.1	%

(1)		Includes commissions from sales of third-party repair service agreements and replacement product programs, and income from company-obligor renewal repair service agreements.
(2)		Includes revenues derived from parts sales and labor sales on products serviced for customers, both covered under manufacturer warranty and outside manufacturer’s warranty coverage.
(3)		Includes primarily interest income and fees earned on credit accounts and commissions earned from the sale of third-party credit insurance products.
(4)		Includes the write-off of the carrying amount of goodwill after interim testing in the third quarter of fiscal 2010 determined that the goodwill was fully impaired.
(5)		Includes primarily gains or losses resulting from sales of fixed assets during the period.
(6)		Adjusted interest expense is our interest expense for the six months ended July 31, 2010, adjusted to give effect to the Refinancing Transactions. Interest Expense and Adjusted Interest Expense do not include the amortization of deferred financing fees. Amortization expense related to deferred financing fees would have increased $0.6 million for the six months ended July 31, 2010, after giving effect to the Refinancing Transactions.

(7)		Rent expense includes rent expense incurred on our properties, equipment and vehicles, and is net of any rental income received.
(8)		Cash paid for interest excludes amortization of deferred financing fees.
(9)		Retail gross margin percentage is calculated by dividing the sum of Product sales and Repair service agreement commissions less Cost of goods sold, including warehousing and occupancy costs by the sum of Product sales and Repair service agreement commissions.
(10)		Same store sales is calculated by comparing the reported sales for all stores that were open during the entirety of a period and the entirety of the same period during the prior fiscal year. Sales from closed stores, if any, are removed from each period. Sales from relocated stores have been included in each period because each such store was relocated within the same general geographic market. Sales from expanded stores have been included in each period.
(11)		Calculated as 1 minus the percent of bad debt charge-offs (net of recoveries) of reage balances as a percent of average reage balances outstanding. The reage bad debt charge-offs are included as a component of percent of bad debt charge-offs (net of recoveries) to average outstanding balance.
(12)		Interest income and fees earned on credit accounts, as a percentage of the average portfolio balance for the period shown.

 

An investment in our common stock involves risks and uncertainties. You should consider carefully the following information about these risks and uncertainties before buying shares of our common stock. The occurrence of any of the risks described below could adversely affect our business prospects, financial condition or results of operations. In that case, the trading price of our stock could decline, and you could lose all or part of the value of your investment.

 

Risks Related to Our Business

 

We have significant future capital needs and the inability to obtain funding for our credit operations may adversely affect our business and expansion plans.

 

We currently finance our customer receivables through asset-backed securitization facilities and an asset-based loan facility that together provide $530.0 million in financing commitments as of July 31, 2010. The securitization facilities provide two separate series of asset-backed notes that allowed us as of July 31, 2010, to borrow up to $320.0 million to finance customer receivables. Our existing ABL facility currently is a $210.0 million facility. At July 31, 2010, under our existing ABL facility, we had the ability to borrow $188.2 million, of which we had drawn $109.4 million and had outstanding letters of credit of $21.7 million.

 

Our ability to raise additional capital through future securitization transactions or other debt or equity transactions, and to do so on economically favorable terms, depends in large part on factors that are beyond our control.

 

These factors include:

 

 

If adequate capital and funds are not available at the time we need capital, we will have to curtail future growth, which could materially adversely affect our business, financial condition, operating results or cash flow. As we grow our business, capital expenditures during future years are likely to exceed our historical capital expenditures. The ultimate amount of capital expenditures needed will be dependent on, among other factors, the availability of capital to fund new store openings and customer receivables portfolio.

 

In addition, we historically used our customer receivables as collateral to raise funds through securitization programs. We have in the past completed amendments to our existing credit facilities and securitization facilities to obtain relief from covenant violations and revise certain covenant requirements. If we require amendments in the future and are unable to obtain such amendments or we are unable to arrange substitute financing facilities or other sources of capital, we may have to limit or cease offering credit through our finance programs due to our inability to draw under our existing ABL facility or our restated ABL facility upon the occurrence of a default. If availability under the borrowing base calculations of existing ABL facility or our restated ABL facility is reduced, or otherwise

becomes unavailable, or we are unable to arrange substitute financing facilities or other sources of capital, we may have to limit the amount of credit that we make available through our customer finance programs. A reduction in our ability to offer customer credit will adversely affect revenues and results of operations and could have a material adverse effect on our results of operations. Further, our inability or limitations on our ability to obtain funding through securitization facilities or other sources may adversely affect the profitability of outstanding accounts under our credit programs if existing customers fail to repay outstanding credit due to our refusal to grant additional credit.

 

Additionally, the inability of any of the financial institutions providing our financing facilities to fund their commitment would adversely affect our ability to fund our credit programs, capital expenditures and other general corporate needs.

 

Our existing ABL facility and the revolving portion of our asset-backed securitization facilities both mature in August 2011. Concurrently with this rights offering, we plan to amend and restate our asset-based revolving credit facility to, among other things, increase the commitments available to us from $210.0 million to an aggregate amount of $375.0 million, subject to our borrowing base, and extend the maturity date of the facility from 2011 to 2013. We also plan to enter into a term loan in the aggregate amount of $100.0 million with a maturity date of 2014. For a description of the terms of our restated ABL facility, see “The Restated ABL Facility” and for a description of the terms of the new term loan, see “The Term Loan.” If we are unable to satisfy the conditions to closing required for both facilities, we may be unable to complete the Transactions.

 

With the proceeds of this rights offering and borrowings from the above credit facilities, we plan to redeem all of our Asset-Backed Notes issued in connection with our asset-backed securitization facility. See “Use of Proceeds” of this prospectus supplement for more information. We have entered into commitment letters with lenders regarding the restated ABL facility and the new term loan. If, however, we are unable to renew or replace our existing credit facilities for any reason, including as a result of our failure to consummate this rights offering or the Refinancing Transactions, we would be required to reduce, or possibly cease, offering customer credit which could materially and adversely affect our revenues and results of operations in the same manner as discussed above.

 

Failure to comply with our covenants in our credit facilities could materially and adversely affect us.

 

Under our existing ABL facility, we have, and under the restated ABL facility and the new term loan, we will have certain obligations, including maintaining certain financial covenants. See “The Restated ABL Facility — Covenants” and “The Term Loan — Covenants.” If we fail to maintain our financial covenants in our credit facility and are not able to obtain relief from any covenant violation, then an event of default could occur and the lenders could cease lending to us and accelerate the payments of our debt. Any such action by the lenders could materially and adversely affect us and could even result in bankruptcy. While we were in compliance with the covenants in our existing ABL facility as of July 31, 2010, and believe we will be in compliance with the covenants in the restated ABL facility and new term loan at the time they close, if our retail and credit operation performance does not improve, we could be in breach of one or more covenants within the next twelve months.

 

Future financings could adversely affect common stock ownership interest and rights in comparison with those of other security holders.

 

Our board of directors has the power to issue additional shares of common or preferred stock without stockholder approval. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage of ownership of our existing stockholders will be reduced, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we issue additional common stock or securities convertible into common stock, such issuance will reduce the proportionate ownership and voting power of each other stockholder. In addition, such stock issuances might result in a reduction of the book value of our common stock.

 

Increased borrowing costs will negatively impact our results of operations.

 

Because most of our customer receivables have interest rates equal to the highest rate allocated under applicable law, we will not be able to pass these higher borrowing costs along to our customers and our results of operations will be negatively impacted.

The interest rates on our existing ABL facility and the 2002 Series A program under our asset-backed securitization facility fluctuate up or down based upon the LIBOR rate, the prime rate of our administrative agent or the federal funds rate in the case of the revolving credit facility and the commercial paper rate in the case of the 2002 Series A program. The level of interest rates in the market in general will impact the interest rate on any debt instruments issued, if any. Additionally, we may issue debt securities or enter into credit facilities under which we pay interest at a higher rate than we have historically paid, including our restated ABL facility and the new term loan, which would further reduce our margins and negatively impact our results of operations.

 

If we complete the Refinancing Transactions, the interest rate on our restated ABL facility will fluctuate up or down based upon the LIBOR rate, the prime rate of our administrative agent or the federal funds rate. The interest rate on the new term loan will fluctuate up or down based upon the LIBOR rate, with a floor on the LIBOR rate used in computing interest of 3.0%. The level of interest rates in the market in general will impact the interest rate on any debt instruments issued, if any. Additionally, we may issue debt securities or enter into credit facilities under which we pay interest at a higher rate than we have historically paid, which would further reduce our margins and negatively impact our results of operations.

 

We may not be able to open and profitably operate new stores in existing, adjacent and new geographic markets.

 

Dependent on capital availability, following the consummation of the Transactions, we expect to be in a better position to, and may, reinstate our new store opening program. New stores are not likely to be profitable on an operating basis during the first three to six months after they open and even after that time period may not be profitable or meet our goals. Any of these circumstances could have a material adverse effect on our financial results. There are a number of factors that could affect our ability to open and operate new stores consistent with our business plan, including:

 

 

 

These factors may also affect the ability of any newly opened stores to achieve sales and profitability levels comparable with our existing stores or to become profitable at all. As a result, we may determine that we need to close certain stores or continue to reduce the hours of operation in some stores, which could materially adversely impact our business, financial condition, operating results or cash flows, as we may incur expenses and non-cash write-offs related to closing a store and settling our remaining lease obligations and our initial investment in fixed assets and related store costs.

 

If we are unable to manage our growing business, our revenues may not increase as anticipated, our cost of operations may rise and our results of operations may decline.

 

We face many business risks associated with growing companies, including the risk that our management, financial controls and information systems will be inadequate to support our expansion in the future. Our growth will require management to expend significant time and effort and additional resources to ensure the continuing adequacy of our financial controls, operating procedures, information systems, product purchasing, warehousing and distribution systems and employee training programs. We cannot predict whether we will be able to manage effectively these increased demands or respond on a timely basis to the changing demands that our expansion will impose on our management, financial controls and information systems. If we fail to manage successfully the challenges of growth, do not continue to improve these systems and controls or encounter unexpected difficulties during expansion, our business, financial condition, operating results or cash flows could be materially adversely affected.

 

We may expand our retail offerings which may have different operating or legal requirements than our current operations.

 

In addition to the retail and consumer finance products we currently offer, we may offer other products and services in the future, including “rent-to-own” programs. These products and services may require additional or different operating systems or have additional or different legal or regulatory requirements than the products and services we currently offer. In the event we undertake such an expansion and do not have the proper infrastructure or personnel, or do not successfully execute such an expansion, our business, financial condition, operating results or cash flows could be materially adversely affected.

 

A decrease in our credit sales or a decline in credit quality could lead to a decrease in our product sales and profitability.

 

In the last three fiscal years, we financed, on average, approximately 61% of our retail sales through our in-house propriety credit programs to customers with a broad range of credit worthiness. During the six months ended July 31, 2010, the weighted average origination credit score of all sales financed under our credit program was 620. These sales included sales financed through our secondary portfolio with a weighted average origination credit score of 560 during the same time period. A large portion of our credit portfolio is to customers considered by many to be subprime borrowers. Our ability to provide credit as a financing alternative for our customers depends on many factors, including the quality of our customer receivable portfolio. Payments on some of our credit accounts become delinquent from time to time, and some accounts end up in default, due to several factors, such as general and local economic conditions, including the impact of rising interest rates and unemployment rates. As we expand into new markets, we will obtain new credit accounts that may present a higher risk than our existing credit accounts since new credit customers do not have an established credit history with us. A general decline in the quality of our customer receivable portfolio could lead to a reduction in the advance rates used or eligible customer receivable balances included in the borrowing base calculations under our revolving credit facility and thus a reduction of available credit to fund our finance operations. As a result, if we are required to reduce the amount of credit we grant to our customers, we most likely would sell fewer products, which would adversely affect our earnings and cash flows. Further, because approximately 60% of our credit customers have historically made their credit account

payments in our stores, any decrease in credit sales could reduce traffic in our stores and lower our revenues. A decline in the credit quality of our credit accounts could also cause an increase in our credit losses, which would result in an adverse effect on our earnings. A decline in credit quality could also lead to stricter underwriting criteria which would likely have a negative impact on net sales.

 

Deterioration in the performance of our customer receivables portfolio could significantly affect our liquidity position and profitability.

 

Our liquidity position and profitability are heavily dependent on our ability to collect our customer receivables. If our customer receivables portfolio were to substantially deteriorate, the liquidity available to us would most likely be reduced due to the challenges of complying with the covenants and borrowing base calculations under our credit facilities and our earnings may decline due to higher provisions for bad debt expense, higher net charge-off rates and lower interest and fee income. In addition, a significant percentage of our current net income and cash flows is derived from our credit operations and the ability to grow our credit portfolio is important to our future success.

 

Our ability to collect from credit customers may be materially impaired by store closings and our need to rely on a replacement servicer in the event of our liquidation.

 

We may be unable to collect a large portion of periodic credit payments should our stores close as many of our customers remit payments “in store”. During the course of fiscal 2010, approximately 60% of our active credit customers made a payment in one of our stores. In the event of store closings, credit customers may not pay balances in a timely fashion, or may not pay at all, since a large number of our customers have not traditionally made payments to a central location.

 

In addition, we service all of our credit customers through our in-house servicing operation. At this time, there is not a formalized back-up servicer plan in place for our customer receivables. In the event of our liquidation, a servicing arrangement would have to be implemented, which could materially impact the collection of our customer receivables.

 

In deciding whether to extend credit to customers, we rely on the accuracy and completeness of information furnished to us by or on behalf of our credit customers. If we and our systems are unable to detect any misrepresentations in this information, this could have a material adverse effect on our results of operations and financial condition.

 

In deciding whether to extend credit to customers, we rely heavily on information furnished to us by or on behalf of our credit customers and our ability to validate such information through third-party services, including employment and personal financial information. If a significant percentage of our credit customers intentionally or negligently misrepresented any of this information, and we and our systems did not detect such misrepresentations, this could have a material adverse effect on our ability to effectively manage our credit risk, which could have a material adverse effect on our results of operations and financial condition.

 

Our policy of reaging certain delinquent borrowers affects our delinquency statistics and the timing and amount of our write-offs.

 

As of July 31, 2010, 18.4% of our credit portfolio consisted of “reaged” customer receivables. Reaging is offered to certain eligible past due customers if they meet the conditions of our reage policy. Our decision to offer a delinquent customer a reage program is based on that borrower’s specific condition, our history with the borrower, the amount of the loan and various other factors. When we reage a customer’s account, we move the account from a delinquent status to a current status. Management exercises a considerable amount of discretion over the reaging process and has the ability to reage an account multiple times during its life. Treating an otherwise uncollectible account as current affects our delinquency statistics, as well as impacting the timing and amount of charge-offs. If these accounts had been charged off sooner, our net loss rates might have been higher.

If we fail to timely contact delinquent borrowers, then the number of delinquent customer receivables eventually being charged off could increase.

 

We contact customers with delinquent credit account balances soon after the account becomes delinquent. During periods of increased delinquencies it is important that we are proactive in dealing with borrowers rather than simply allowing customer receivables to go to charge-off. Historically, when our servicing becomes involved at an earlier stage of delinquency with credit counseling and workout programs, there is a greater likelihood that the customer receivable will not be charged off.

 

During periods of increased delinquencies, it becomes extremely important that we are properly staffed and trained to assist borrowers in bringing the delinquent balance current and ultimately avoiding charge-off. If we do not properly staff and train our collections personnel, then the number of accounts in a delinquent status or charged-off could increase. In addition, managing a substantially higher volume of delinquent customer receivables typically increases our operational costs. A rise in delinquencies or charge-offs could have a material adverse effect on our business, financial condition, liquidity and results of operations.

 

We rely on internal models to manage risk and to provide accounting estimates. Our results could be adversely affected if those models do not provide reliable accounting estimates or predictions of future activity.

 

We make significant use of business and financial models in connection with our efforts to measure and monitor our risk exposures and to manage our credit portfolio. For example, we use models as a basis for credit underwriting decisions, portfolio delinquency, charge-off and collection expectations and other market risks, based on economic factors and our experience. The information provided by these models is used in making business decisions relating to strategies, initiatives, transactions and pricing, as well as our provisions for bad debt expense and the size of our allowance for doubtful accounts, among other accounting estimates.

 

Models are inherently imperfect predictors of actual results because they are based on historical data available to us and our assumptions about factors such as credit demand, payment rates, default rates, delinquency rates and other factors that may overstate or understate future experience. Our models could produce unreliable results for a number of reasons, including the limitations of historical data to predict results due to unprecedented events or circumstances, invalid or incorrect assumptions underlying the models, the need for manual adjustments in response to rapid changes in economic conditions, incorrect coding of the models, incorrect data being used by the models or inappropriate application of a model to products or events outside of the model’s intended use. In particular, models are less dependable when the economic environment is outside of historical experience, as has been the case recently.

 

In addition, we continually receive new economic data. Our critical accounting estimates, such as our provision for bad debt expense and the size of our allowance for doubtful accounts, are subject to change, often significantly, due to the nature and magnitude of changes in economic conditions. However, there is generally a lag between the availability of this economic information and the preparation of our consolidated financial statements. When economic conditions change quickly and in unforeseen ways, there is a risk that the assumptions and inputs reflected in our models are not representative of current economic conditions.

 

Due to the factors described above and in the “Management’s discussion and analysis of financial condition and results of operations” section in our most recent Annual Report on Form 10-K and our subsequently filed Quarterly Reports on Form 10-Q, including all amendments thereto, we may be required or may deem it necessary to increase our allowance for doubtful accounts in the future. Increasing our allowance for doubtful accounts would adversely affect our results of operations and our financial position.

 

The dramatic changes in the economy, credit and capital markets have required frequent adjustments to our models and the application of greater management judgment in the interpretation and adjustment of the results produced by our models. This application of greater management judgment reflects the need to take into account updated information while continuing to maintain controlled processes for model updates, including model development, testing, independent validation and implementation. As a result of the time and resources, including technical and staffing resources, that are required to perform these processes effectively, it may not be possible to

replace existing models quickly enough to ensure that they will always properly account for the impacts of recent information and actions.

 

The current economic downturn has affected consumer purchases of discretionary items from us as well as their ability to repay their credit obligations to us, which could have a continued or prolonged negative effect on our net sales, gross margins and credit portfolio performance.

 

A significant portion of our net sales represent discretionary spending by our customers. Many factors affect spending, including regional or world events, war, conditions in financial markets, general business conditions, interest rates, inflation, energy and gasoline prices, consumer debt levels, the availability of consumer credit, taxation, unemployment trends and other matters that influence consumer confidence and spending. Our customers’ purchases of discretionary items, including our products, decline during periods when disposable income is lower or periods of actual or perceived unfavorable economic conditions. If this occurs, our net sales and results of operations would decline.

 

Recent turmoil in the national economy, including instability in the financial markets, declining consumer confidence and falling oil prices have negatively impacted our markets and present significant challenges to our operations in the coming quarters. Specifically, sales volumes and gross profit margins have been negatively impacted, and thus negatively impacted our overall profitability and liquidity, and these effects may continue for several additional fiscal quarters. Also, the declining economic conditions in our markets have impacted our customers’ ability to repay their credit obligations to us and thus our credit portfolio performance, including, net charge offs and delinquency trends, and we experienced significant declines in same-store sales. These factors led to a net operating loss in the second half of fiscal 2010, and as a result, we entered into amendments to our revolving credit facility and our securitization facilities to modify our covenants. If these conditions persist, we may incur further operating losses in the future and we may be required to seek covenant relief under our revolving credit facility and our securitization facilities, curtail our expansion plans, sell assets and take other measures to continue our access to capital.

 

We face significant competition from national, regional, local and Internet retailers of home appliances, consumer electronics and furniture.

 

The retail market for consumer electronics is highly fragmented and intensely competitive and the market for home appliances is concentrated among a few major dealers. We currently compete against a diverse group of retailers, including national mass merchants such as Sears, Wal-Mart, Target, Sam’s Club and Costco, specialized national retailers such as Best Buy and Rooms To Go, home improvement stores such as Lowe’s and Home Depot, and locally-owned regional or independent retail specialty stores that sell home appliances, consumer electronics and furniture similar, and often identical, to those items we sell. We also compete with retailers that market products through store catalogs and the Internet. In addition, there are few barriers to entry into our current and contemplated markets, and new competitors may enter our current or future markets at any time.

 

We may not be able to compete successfully against existing and future competitors. Some of our competitors have financial resources that are substantially greater than ours and may be able to purchase inventory at lower costs and better endure economic downturns. As a result, our sales may decline if we cannot offer competitive prices to our customers or we may be required to accept lower profit margins. Our competitors may respond more quickly to new or emerging technologies and may have greater resources to devote to promotion and sale of products and services. If two or more competitors consolidate their businesses or enter into strategic partnerships, they may be able to compete more effectively against us.

 

Our existing competitors or new entrants into our industry may use a number of different strategies to compete against us, including:

 

 

 

Competition from any of these sources could cause us to lose market share, sales and customers, increase expenditures or reduce prices, any of which could have a material adverse effect on our results of operations.

 

If new products are not introduced or consumers do not accept new products, our sales may decline.

 

Our ability to maintain and increase sales depends to a large extent on the periodic introduction and availability of new products and technologies. We believe that the introduction and continued growth in consumer acceptance of new or enhanced products, such as digital Blu-ray players and digital, high-definition televisions, will have a significant impact on our ability to increase sales. These products are subject to significant technological changes and pricing limitations and are subject to the actions and cooperation of third parties, such as movie distributors and television and radio broadcasters, all of which could affect the success of these and other new consumer electronics technologies. It is possible that new products will never achieve widespread consumer acceptance or will be supplanted by alternative products and technologies that do not offer us a similar sales opportunity or are sold at lower price points or margins.

 

If we fail to anticipate changes in consumer preferences, our sales will decline.

 

Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to change. Our success depends upon our ability to anticipate and respond in a timely manner to trends in consumer preferences relating to home appliances, consumer electronics and furniture. If we fail to identify and respond to these changes, our sales of these products will decline. In addition, we often make commitments to purchase products from our vendors up to six months in advance of proposed delivery dates. Significant deviation from the projected demand for products that we sell may have a material adverse effect on our results of operations and financial condition, either from lost sales or lower margins due to the need to reduce prices to dispose of excess inventory.

 

We may experience significant price pressures over the life cycle of our products from competing technologies and our competitors and we may not be able to maintain our historical gross margin levels.

 

Prices for many of our products decrease over their life cycle. Such decreases often result in decreased gross profit margins for us. There is also substantial and continuing pressure from customers to reduce their total costs for products. Suppliers may also seek to reduce our margins on the sales of their products in order to increase their own profitability. The consumer electronics industry depends on new products to drive same store sales increases. Typically, these new products, such as high-definition and 3-D televisions, Blu-ray and DVD players, digital cameras, MP3 players and GPS devices are introduced at relatively high price points that are then gradually reduced as the product becomes mainstream. To sustain positive same store sales growth, unit sales must increase at a rate greater than the decline in product prices. The affordability of the product helps drive the unit sales growth. However, as a result of relatively short product life cycles in the consumer electronics industry, which limit the amount of time available for sales volume to increase, combined with rapid price erosion in the industry, retailers are challenged to maintain overall gross margin levels and positive same store sales. This has historically been our experience, and we continue to adjust our marketing strategies to address this challenge through the introduction of new product categories and new products within our existing categories. Gross margins realized on product sales fell from 24.2% in fiscal year 2008 to 19.9% in fiscal year 2010. If we fail to accurately anticipate the introduction of new technologies, we may possess significant amounts of obsolete inventory that can only be sold at substantially lower prices and profit margins than we anticipated. In addition, we may not be able to maintain our historical margin levels in the future due to increased sales of lower margin products such as personal electronics products and declines in average selling prices of key products. If sales of lower margin items continue to increase and replace

sales of higher margin items or our consumer electronics products average selling prices decreases due to the maturity of their life cycle, our gross margin and overall gross profit levels will be adversely affected.

 

A disruption in our relationships with, or in the operations of, any of our key suppliers could cause our sales to decline.

 

The success of our business and growth strategies depends to a significant degree on our relationships with our suppliers, particularly our brand name suppliers such as General Electric, Whirlpool, Frigidaire, Friedrich, Maytag, LG, Mitsubishi, Panasonic, Samsung, Sony, Toshiba, Bose, Canon, JVC, Serta, Spring Air, Ashley, Lane, Broyhill, Jackson Furniture, Franklin, Hewlett Packard, Compaq, Poulan, Husqvarna and Toro. We do not have long term supply agreements or exclusive arrangements with the majority of our vendors. We typically order our inventory and repair parts through the issuance of individual purchase orders to vendors. We also rely on our suppliers for cooperative advertising support. We may be subject to rationing by suppliers with respect to a number of limited distribution items. In addition, we rely heavily on a relatively small number of suppliers. Our top five suppliers represented 51.7% of our purchases for fiscal 2010, and the top two suppliers represented approximately 23.3% of our total purchases. The loss of any one or more of these key vendors or failure to establish and maintain relationships with these and other vendors, and limitations on the availability of inventory or repair parts could have a material adverse effect on our results of operations and financial condition. If one of our vendors were to go out of business, it could have a material adverse effect on our results of operations and financial condition if such vendor is unable to fund amounts due to us, including payments due for returns of product and warranty claims.

 

Our ability to enter new markets successfully depends, to a significant extent, on the willingness and ability of our vendors to supply merchandise to additional warehouses or stores. If vendors are unwilling or unable to supply some or all of their products to us at acceptable prices in one or more markets, our results of operations and financial condition could be materially adversely affected.

 

Furthermore, we rely on credit from vendors to purchase our products. As of July 31, 2010, we had $62.1 million in accounts payable and $99.1 million in merchandise inventories. A substantial change in credit terms from vendors or vendors’ willingness to extend credit to us, including providing inventory under consignment arrangements, would reduce our ability to obtain the merchandise that we sell, which would have a material adverse effect on our sales and results of operations.

 

Our vendors also supply us with marketing funds and volume rebates. If our vendors fail to continue these incentives it could have a material adverse effect on our sales and results of operations.

 

You should not rely on our comparable store sales as an indication of our future results of operations because they fluctuate significantly.

 

Our historical same store sales growth figures have fluctuated significantly from quarter to quarter. For example, same store sales growth for each of the quarters of fiscal 2010 and the first two quarters of fiscal 2011 was -4.6%, -5.2%, -9.3%, -31.7%, -19.7% and -6.4%, respectively, while same store sales growth for each of the quarters for fiscal 2009 was 1.0%, -1.4%, -5.8%, and 12.5%, respectively. A number of factors have historically affected, and will continue to affect, our comparable store sales results, including:

 

 

 

Changes in our quarterly and annual comparable store sales results could cause the price of our common stock to fluctuate significantly.

 

We experience seasonal fluctuations in our sales and quarterly results.

 

We typically experience seasonal fluctuations in our net sales and operating results, with the quarter ending January 31, which includes the holiday selling season, generally accounting for a larger share of our net sales and net income. We also incur significant additional expenses during such fiscal quarter due to higher purchase volumes and increased staffing. If we miscalculate the demand for our products generally or for our product mix during the fiscal quarter ending January 31, or if we experience adverse events, such as bad weather in our markets during our fourth fiscal quarter, our net sales could decline, resulting in excess inventory or increased sales discounts to sell excess inventory, which would harm our financial performance. A shortfall in expected net sales, combined with our significant additional expenses during this fiscal quarter, could cause a significant decline in our operating results and such sales may not be deferred to future periods.

 

Our business could be adversely affected by changes in consumer protection laws and regulations.

 

Federal and state consumer protection laws and regulations, such as the Fair Credit Reporting Act, limit the manner in which we may offer and extend credit. Because our customers finance through our credit segment a substantial portion of our sales, any adverse change in the regulation of consumer credit could adversely affect our total sales and gross margins. For example, new laws or regulations could limit the amount of interest or fees that may be charged on consumer credit accounts, including by reducing the maximum interest rate that can be charged in the states in which we operate, or restrict our ability to collect on account balances, which would have a material adverse effect on our cash flow and results of operations. Compliance with existing and future laws or regulations, including regulations that may be applicable to us under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted into law in July 2010, could require us to make material expenditures, in particular personnel training costs, or otherwise adversely affect our business or financial results. Failure to comply with these laws or regulations, even if inadvertent, could result in negative publicity, fines or additional licensing expenses, any of which could have an adverse effect on our cash flow, results of operations and stock price.

 

Pending litigation relating to the sale of credit insurance and the sale of repair service agreements in the retail industry could adversely affect our business.

 

We understand that states’ attorneys general and private plaintiffs have filed lawsuits against other retailers relating to improper practices conducted in connection with the sale of credit insurance in several jurisdictions around the country. We offer credit insurance in our stores on sales financed under our credit programs and require the customer to purchase property insurance from us or provide evidence from a third party insurance provider, at their election, in connection with sales of merchandise on installment credit; therefore, similar litigation could be brought against us. While we believe we are in full compliance with applicable laws and regulations, if we are found liable in any future lawsuit regarding credit insurance or repair service agreements, we could be required to pay

substantial damages or incur substantial costs as part of an out-of-court settlement or require us to modify or suspend certain operations any of which could have a material adverse effect on our results of operations. An adverse judgment or any negative publicity associated with our repair service agreements or any potential credit insurance litigation could also affect our reputation, which could have a negative impact on our cash flow and results of operations.

 

Adverse or negative publicity, including the publicity related to the settlement of the lawsuit filed against us by the Texas Attorney General, could cause our business to suffer or result in copycat lawsuits.

 

Any negative publicity associated with the settlement of the lawsuit filed against us by the Texas Attorney General or our repair service agreements or our product replacement agreements or any other negative publicity could adversely affect our reputation and negatively impact our sales and results of operations. On November 24, 2009, we settled litigation filed against us earlier in the year by the Texas Attorney General. The suit alleged that we engaged in deceptive trade practices in violation of the Texas Deceptive Trade Practices-Consumer Protection Act regarding our service maintenance and product replacement agreement business activities. The Attorney General alleged, among other things, that we failed to honor product maintenance and replacement agreements, misled customers about the nature of our product maintenance and replacement arrangements, and engaged in false advertising with respect to our product maintenance and replacement agreements. We denied those allegations in our answer to the suit and, under the terms of the settlement with the Texas Attorney General, we continue to deny any wrongdoing. However, the negative publicity associated with this settlement or our service maintenance and replacement program agreements could adversely affect our reputation and negatively impact our net sales.

 

The Texas Attorney General’s lawsuit and the resulting changes to our operations could materially adversely affect our results of operations and financial position.

 

Under our settlement agreement with the Texas Attorney General relating to litigation filed against us in May of last year, we consented to certain changes made to the service agreements and replacement product plan agreements that we sell for a third party insurer and to strengthen the manner in which we market and service these programs. The impact of the changes in these programs is unknown and could materially and adversely affect our results of operations.

 

Our corporate actions may be substantially controlled by our principal shareholders and affiliated entities.

 

As of the record date, Stephens and The Stephens Group, LLC, two of our stockholders, and their affiliated entities beneficially owned approximately 23.8% and 26.0%, respectively, of our common stock and their interests may conflict with the will or interests of our other equityholders. While Stephens and its affiliates hold their 23.8% of our common stock through a voting trust that will vote the shares in the same proportion as votes cast by all other stockholders, this voting trust agreement will expire in 2013, unless extended, and upon expiration Stephens and its affiliates will not be restricted on how it votes its shares. These stockholders, acting individually or as a group, could exert substantial influence over matters such as electing directors and approving mergers or other business combination transactions. Assuming no other holders exercise their rights in this offering, and that Stephens, The Stephens Group, LLC and certain of their respective affiliates, each exercises its basic and oversubscription privileges in full as they have indicated, after giving effect to this offering, Stephens and The Stephens Group, LLC and their respective affiliates, would own approximately 30.0% and 34.4%, respectively, of our outstanding common stock.

 

If we lose key management or are unable to attract and retain the qualified sales and credit granting and collection personnel required for our business, our operating results could suffer.

 

Our future success depends to a significant degree on the skills, experience and continued service of our key executives or the identification of suitable successors for them. If we lose the services of any of these individuals, or if one or more of them or other key personnel decide to join a competitor or otherwise compete directly or indirectly with us, and we are unable to identify a suitable successor, our business and operations could be harmed, and we could have difficulty in implementing our strategy. In addition, as our business grows, we will need to locate, hire

and retain additional qualified sales personnel in a timely manner and develop, train and manage an increasing number of management level sales associates and other employees. Additionally, if we are unable to attract and retain qualified credit granting and collection personnel, our ability to perform quality underwriting of new credit transactions and maintain workloads for our collections personnel at a manageable level, our operation could be adversely impacted and result in higher delinquency and net charge-offs on our credit portfolio. Competition for qualified employees could require us to pay higher wages to attract a sufficient number of employees, and increases in the federal minimum wage or other employee benefits costs could increase our operating expenses. If we are unable to attract and retain personnel as needed in the future, our net sales and operating results could suffer.

 

Our costs of doing business could increase as a result of changes in federal, state or local regulations.

 

Changes in the federal, state or local minimum wage requirements or changes in other wage or workplace regulations could increase our cost of doing business. In addition, changes in federal, state or local regulations governing the sale of some of our products or tax regulations could increase our cost of doing business. Also, passage of the Employer Free Choice Act or similar laws in Congress could lead to higher labor costs by encouraging unionization efforts among our associates and disruption of store operations.

 

Because our stores are located in Texas, Louisiana and Oklahoma, we are subject to regional risks.

 

Our 76 stores are located exclusively in Texas, Louisiana and Oklahoma. This subjects us to regional risks, such as the economy, weather conditions, hurricanes and other natural or man-made disasters. If the region suffers a continued or another economic downturn or any other adverse regional event, there could be an adverse impact on our net sales and results of operations and our ability to implement our planned expansion program once we have adequate capital availability. Several of our competitors operate stores across the United States and thus are not as vulnerable to the risks of operating in one region. Additionally, these states in general, and the local economies where many of our stores are located in particular, are dependent, to a degree, on the oil and gas industries, which can be very volatile. Additionally, because of fears of climate change and adverse effects of drilling explosions and oil spills in the Gulf of Mexico, legislation has been introduced or is being considered, and governmental emergency pronouncements, regulations and orders have been issued and are under consideration, including moratoriums on offshore drilling, which, combined with the local economic and employment conditions caused by both, could materially and adversely impact the oil and gas industries and the areas in which a majority of our stores are located in Texas and Louisiana. To the extent the oil and gas industries are negatively impacted by declining commodity prices, climate change or other legislation and other factors, we could be negatively impacted by reduced employment, or other negative economic factors that impact the local economies where we have our stores.

 

In addition, recent turmoil in the national economy, including instability in the financial markets, has impacted our local markets. In June 2010, the average unemployment rate in Texas, Louisiana and Oklahoma was 8.2%, 7.0% and 6.8%, respectively compared to 7.5%, 6.8% and 6.3% in 2009, respectively and 4.4%, 3.8% and 3.9% in 2008, respectively. The current recession or a further downturn in the general economy, or in the region where we have our stores, could have a negative impact on our net sales and results of operations.

 

Our information technology infrastructure is vulnerable to damage that could harm our business.

 

Our ability to operate our business from day to day, in particular our ability to manage our credit operations and inventory levels, largely depends on the efficient operation of our computer hardware and software systems. We use management information systems to track inventory information at the store level, communicate customer information, aggregate daily sales information and manage our credit portfolio, including processing of credit applications and management of collections. These systems and our operations are subject to damage or interruption from:

 

 

 

In addition, the software that we have developed to use in our daily operations may contain undetected errors that could cause our network to fail or our expenses to increase. Any failure of our systems due to any of these causes, if it is not supported by our disaster recovery plan, could cause an interruption in our operations and result in reduced net sales and results of operations. Though we have implemented contingency and disaster recovery processes in the event of one or several technology failures, any unforeseen failure, interruption or compromise of our systems or our security measures could affect our flow of business and, if prolonged, could harm our reputation. The risk of possible failures or interruptions may not be adequately addressed by us or the third parties on which we rely, and such failures or interruptions could occur. The occurrence of any failures or interruptions could have a material adverse effect on our business, financial condition, liquidity and results of operations.

 

If we are unable to maintain our insurance licenses in the states we operate, our results of operations would suffer.

 

We derive a significant portion of our revenues and operating income from the commissions we earn from the sale of various insurance products of third-party insurers to our customers. These products include credit insurance, repair service agreements and product replacement policies. We also are the direct obligor on certain extended repair service agreements we offer to our customers. If for any reason we were unable to maintain our insurance licenses in the states we operate or if there are material claims or future material litigation involving our repair service agreements or product replacement policies, our results of operations would suffer.

 

If we are unable to continue to offer third-party repair service agreements to our customers who purchase, or have purchased our products, we could incur additional costs or repair expenses, which would adversely affect our financial condition and results of operations.

 

There are a limited number of insurance carriers that provide repair service agreement programs. If insurance becomes unavailable from our current providers for any reason, we may be unable to provide repair service agreements to our customers on the same terms, if at all. Even if we are able to obtain a substitute provider, higher premiums may be required, which could have an adverse impact on our profitability if we are unable to pass along the increased cost of such coverage to our customers. Inability to maintain the repair service agreement program could cause fluctuations in our repair expenses and greater volatility of earnings and could require us to become the obligor under new contracts sold.

 

If we are unable to maintain group credit insurance policies from insurance carriers, which allow us to offer their credit insurance products to our customers purchasing our merchandise on credit, our revenues would be reduced and the provision for bad debts might increase.

 

There are a limited number of insurance carriers that provide credit insurance coverage for sale to our customers. If credit insurance becomes unavailable for any reason we may be unable to offer substitute coverage on the same terms, if at all. Even if we are able to obtain substitute coverage, it may be at higher rates or reduced coverage, which could affect the customer acceptance of these products, reduce our revenues or increase our credit losses.

 

Changes in premium and commission rates allowed by regulators on the credit insurance, repair service agreements or product replacement agreements we sell as allowed by the laws and regulations in the states in which we operate could affect our revenues.

 

We derive a significant portion of our revenues and operating income from the sale of various third-party insurance products to our customers. These products include credit insurance, repair service agreements and product replacement agreements. If the commission we retain from sales of those products declines, our operating results would suffer.

Changes in trade regulations, currency fluctuations and other factors beyond our control could affect our business.

 

A significant portion of our inventory is manufactured and/or assembled overseas and in Mexico. Changes in trade regulations, currency fluctuations or other factors beyond our control may increase the cost of items we purchase or create shortages of these items, which in turn could have a material adverse effect on our results of operations and financial condition. Conversely, significant reductions in the cost of these items in U.S. dollars may cause a significant reduction in the retail prices of those products, resulting in a material adverse effect on our sales, margins or competitive position. In addition, commissions earned on our credit insurance, repair service agreement or product replacement agreement products could be adversely affected by changes in statutory premium rates, commission rates, adverse claims experience and other factors.

 

We may be unable to protect our intellectual property rights, which could impair our name and reputation.

 

We believe that our success and ability to compete depends in part on consumer identification of the name “Conn’s.” We have registered the trademarks “Conn’s” and our logo. We intend to protect vigorously our trademark against infringement or misappropriation by others. A third party, however, could attempt to misappropriate our intellectual property in the future. The enforcement of our proprietary rights through litigation could result in substantial costs to us that could have a material adverse effect on our financial condition or results of operations.

 

Failure to protect the security of our customer’s information could expose us to litigation, judgments for damages and undermine the trust placed with us by our customers.

 

We capture, transmit, handle and store sensitive information, which involves certain inherent security risks. Such risks include, among other things, the interception of customer data and information by persons outside us or by our own employees. While we believe we have taken appropriate steps to protect confidential information, there can be no assurance that we can prevent the compromise of our customers’ data or other confidential information. If such a breach should occur it could have a severe negative impact on our business and results of operations.

 

Any changes in the tax laws of the states in which we operate could affect our state tax liabilities. Additionally, beginning operations in new states could also affect our state tax liabilities.

 

As we experienced in fiscal year 2008 with the change in the Texas tax law, legislation could be introduced at any time that changes our state tax liabilities in a way that has an adverse impact on our results of operations. The Texas margin tax increased our effective rate from approximately 35.1%, before its introduction, to 37.1% in fiscal year 2009 and to 51.2% in fiscal year 2010. Our recent commencement of operations in Oklahoma and the potential to enter new states in the future could adversely affect our results of operations, dependent upon the tax laws in place in those states.

 

Significant volatility in oil and gasoline prices could affect our customers’ determination to drive to our stores, and cause us to raise our delivery charges.

 

Significant volatility in oil and gasoline prices could adversely affect our customers’ shopping decisions and patterns. We rely heavily on our internal distribution system and our next day delivery policy to satisfy our customers’ needs and desires, and increases in oil and gasoline prices could result in increased distribution charges. Such increases may not significantly affect our competitors.

 

Risks Related to this Rights Offering

 

The subscription price determined for the rights offering is not an indication of the fair value of our common stock.

 

Our board of directors determined the subscription price considering the likely cost of obtaining capital from other sources, the size and timing of the rights offering, and the price at which our stockholders might be willing to participate in the rights offering, among other things. The subscription price is not intended to bear any relationship

to the book value of our assets or our past operations, cash flows, losses, financial condition, net worth, or any other established criteria used to value securities. You should not consider the subscription price to be an indication of the fair value of the common stock to be offered in the rights offering. After the date of this prospectus supplement, our common stock may trade at prices above or below the subscription price.

 

The price of our common stock is volatile and may decline before or after the subscription rights expire or after you exercise your subscription rights.

 

The market price of our common stock could be subject to wide fluctuations in response to numerous factors, including the rights offering, announcement of the Refinancing Transactions and reports on our recent performance, as well as factors that have little to do with us or our performance, and these fluctuations could materially reduce our stock price. These factors include, among other things, actual or anticipated variations in our operating results and cash flow, the nature and content of our earnings releases, and our competitors’ and customers’ earnings releases, changes in financial estimates by securities analysts, business conditions in our markets and the general state of the securities markets and the market for similar stocks, the number of shares of our common stock outstanding, changes in capital markets that affect the perceived availability of capital to companies in our industries, governmental legislation or regulation, currency and exchange rate fluctuations, as well as general economic and market conditions, such as recessions. In addition, the market price of our common stock historically has experienced significant price and volume fluctuations similar to those experienced by the broader stock market in recent years. These broad market fluctuations may cause declines in the market price of our common stock.

 

We cannot assure you that the public trading market price of our common stock will not decline after you elect to exercise your subscription rights. If that occurs, you may have committed to buy shares of common stock in the rights offering at a price greater than the prevailing market price and could have an immediate unrealized loss. Moreover, we cannot assure you that, following the exercise of your rights, you will be able to sell your common stock at a price equal to or greater than the subscription price, and you may lose all or part of your investment in our common stock.

 

There may be future sales or other dilution of our equity, which may adversely affect the market price of our common stock.

 

We are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or any substantially similar securities. The market price of our common stock could decline as a result of the sales of shares of common stock or similar securities in the market made after this offering or the perception that such sales could occur.

 

We have broad discretion in the use of net proceeds from this offering and may not use the proceeds effectively.

 

Although we plan to use the proceeds from this offering, together with incremental borrowings under our restated ABL facility and the capital provided by our new term loan, to redeem all of the outstanding Asset-Backed Notes as described in “Prospectus Supplement Summary — The Refinancing Transactions,” we will not be restricted to such use, will have broad discretion in determining how the proceeds of this offering will be used and could, in our sole discretion, use the proceeds for other purposes, including for general corporate purposes such as reinstating our store opening program or expanding our credit operations. Our discretion is not substantially limited by the uses set forth in “Use of Proceeds” of this prospectus supplement. While our board of directors believes the flexibility in application of the net proceeds is prudent, the broad discretion it affords entails increased risks to the investors in this rights offering. Investors in this rights offering have no current basis to evaluate the possible merits or risks of any application of the net proceeds of this offering. Our stockholders may not agree with the manner in which we choose to allocate and spend the net proceeds.

Because we do not have any formal commitments from any of our stockholders to participate in this rights offering, and have not entered into a standby purchase agreement with any person concerning this rights offering, the net proceeds we receive from this rights offering may be lower than currently anticipated and the gross proceeds may be less than $25.0 million.

 

We do not have any binding commitments from any of our stockholders to participate in this rights offering and we cannot assure you that any of our other stockholders will exercise all or any part of their basic subscription privilege or their oversubscription privilege. If our stockholders subscribe for fewer shares of our common stock than anticipated, the gross proceeds may be less than $25.0 million. Although Stephens, The Stephens Group, LLC and certain of their respective affiliates have each indicated to us their respective intentions to exercise their basic and oversubscription privileges in full, we have not entered into any agreements with Stephens or The Stephens Group, LLC obligating either of them to do so. Either or both of Stephens or The Stephens Group, LLC may elect not to participate in this offering at any time. In addition, we are not entering into any standby purchase agreement or similar agreement with respect to the purchase of any shares of our common stock subscribed for through the basic subscription privilege or the oversubscription privilege. Therefore, there is no certainty that any shares will be purchased pursuant to the rights offering and there is no minimum purchase requirement as a condition to our accepting subscriptions.

 

If we are unable to raise $25.0 million in this rights offering, it may effect our ability to complete the Refinancing Transactions. If we fail to complete the Refinancing Transactions, we may be unable to renew or replace our existing credit facilities and asset-backed securitization facilities which mature in August 2011, which would require us to reduce, or possibly cease, offering customer credit which could materially and adversely affect our revenues and results of operations. If we were unable to renew or replace our existing credit facilities and asset-backed securitization facilities which mature in August 2011, then we may be unable to pay the full principal amounts due when these facilities mature which would materially and adversely affect our business. Additionally, if we are unable to renew or replace our existing credit facilities and asset-backed securitization facilities which mature in August 2011, then we may be unable to obtain an unqualified audit opinion with respect to our fiscal 2011 financial statements, which would result in an event of default under the provisions of the facilities, which if not waived would result in a default under the provisions of the facilities.

 

We may cancel this rights offering at any time prior to the expiration of the subscription period, and neither we nor the subscription agent will have any obligation to you except to return your subscription payment.

 

We may at our sole discretion cancel this rights offering at any time prior to the expiration of the subscription period. If we elect to cancel this rights offering, neither we nor the subscription agent will have any obligation with respect to the subscription rights except to return to you, without interest or deduction, as soon as practicable any subscription payments. If you purchase subscription rights and this rights offering is cancelled, your investment will be worthless and you will have no recourse against us, the subscription agent or the person from whom you purchased the subscription rights.

 

Because you may not revoke or change your exercise of the subscription rights, you could be committed to buying shares above the prevailing trading price at the time this rights offering is completed.

 

Once you exercise your subscription rights, except in limited circumstances relating to a material amendment to the terms of this rights offering, you may not revoke or change the exercise. The trading price of our common stock may decline before the subscription rights expire. If you exercise your subscription rights, and afterwards, the trading price of our common stock decreases below the subscription price, you will have committed to buying shares of our common stock at a price above the prevailing trading price and could have an immediate unrealized loss. Our common stock is traded on the Nasdaq Global Select Market under the symbol “CONN,” and the closing sale price of our common stock on the Nasdaq Global Select Market on November 5, 2010, was $4.00 per share. There can be no assurances that the trading price of our common stock will equal or exceed the subscription price at the time of exercise or at the expiration of the subscription period or thereafter.

Further, material information may become available between the date of this prospectus supplement and the expiration date of this rights offering which could impact your decision to exercise your rights. If you exercise your subscription rights prior to obtaining any such information, you still will not be able to revoke your prior exercise of your subscription rights.

 

You may not be able to resell any shares of our common stock that you purchase pursuant to the exercise of subscription rights immediately upon expiration of the subscription period or be able to sell your shares at a price equal to or greater than the subscription price.

 

If you exercise subscription rights, you may not be able to resell the common stock purchased by exercising your subscription rights until you, or your broker, custodian bank or other nominee, if applicable, have received those shares. Moreover, you will have no rights as a stockholder of the shares you purchased in this rights offering until we issue the shares to you. Although we will endeavor to issue the shares as soon as practicable after completion of this rights offering, there may be a delay between the expiration date of this rights offering and the time that the shares are issued. In addition, we cannot assure you that, following the exercise of your subscription rights, you will be able to sell your common stock at a price equal to or greater than the subscription price.

 

No prior market exists for the subscription rights and accordingly you may not be able to sell your subscription rights.

 

The subscription rights are a new issue of securities with no established trading market prior to November 8, 2010. The subscription rights trade on the Nasdaq Global Select Market under the symbol “CONNR” and we currently expect them to continue to trade until 4:00 p.m., Eastern Time, on November 22, 2010, the last business day prior to the expiration date. We cannot assure you, however, that a market will develop or how liquid any market for the subscription rights will be. Three registered broker-dealers, including Stephens, have indicated that they intend to make a market in the rights and our common stock on the Nasdaq Global Select Market, but none of them are obligated to do so and may discontinue any such market-making at any time without notice If you sell your subscription rights through your broker, custodian bank or other nominee, you must deliver your order to sell to your broker, custodian bank or other nominee such that it will be actually received well in advance of 5:00 p.m., Eastern Time, on November 22, 2010, the last business day prior to November 23, 2010, the scheduled expiration date of this rights offering. If you wish to sell your subscription rights or the subscription agent tries to sell subscription rights on your behalf in accordance with the procedures discussed in this prospectus supplement but such subscription rights cannot be sold, or if you provide the subscription agent with instructions to exercise the subscription rights and your instructions are not timely received by the subscription agent or if you do not provide any instructions to exercise your subscription rights, then the subscription rights will expire and will be void and no longer exercisable.

 

If you do not act promptly and follow the subscription instructions, your exercise of subscription rights will be rejected.

 

Stockholders who desire to purchase shares in this rights offering must act promptly to ensure that all required forms and payments are actually received by the subscription agent prior to the expiration date of this rights offering. If you are a beneficial owner of shares, you must act promptly to ensure that your broker, dealer, custodian bank or other nominee acts for you and that all required forms and payments are actually received by the subscription agent prior to the expiration of the subscription period. We are not responsible if your broker, dealer, custodian bank or nominee fails to ensure that all required forms and payments are actually received by the subscription agent prior to the expiration of the subscription period. If you fail to complete and sign the required subscription forms, send an incorrect payment amount, your payment does not clear or otherwise fail to follow the subscription procedures that apply to your exercise in this rights offering prior to the expiration of the subscription period, the subscription agent may, depending on the circumstances, reject your subscription or accept it only to the extent of the payment received. Neither we nor the subscription agent undertakes to contact you concerning, or attempt to correct, an incomplete or incorrect subscription form. We have the sole discretion to determine whether the exercise of your subscription rights properly and timely follows the subscription procedures.

If you do not fully exercise your basic subscription privilege and this rights offering is completed, your interest in us will most likely be significantly diluted. In addition, if you do not exercise your basic subscription privilege in full and the subscription price is less than the fair value of our common stock, then you would experience an immediate dilution of the aggregate fair value of your shares, which could be substantial.

 

We may issue up to 9,259,390 shares of common stock in this rights offering. If you do not choose to fully exercise your basic subscription privilege, your percentage ownership interest in us will decrease if this rights offering is completed, and if you do not exercise your basic subscription privilege at all, your percentage ownership in us could decrease significantly. In addition, if you exercise your basic subscription privilege in full but do not exercise your oversubscription privilege and other stockholders exercise both their basic and oversubscription privileges, the percentage of our common stock owned by those other stockholders will increase. For example, if you own 1,000,000 shares of common stock before this rights offering, or approximately 4.4% of our common stock, and you do not exercise any of your basic or oversubscription privileges while all other stockholders exercise their subscription privileges in full, then your percentage ownership will be reduced to approximately 3.1%. In addition, if you do not exercise your basic subscription privilege in full and the subscription price is less than the fair value of our common stock, you would experience immediate dilution of the value of your shares relative to what your value would have been had our common stock been issued at fair value. This dilution could be substantial.

 

In administering this rights offering, we will be relying on statements, representations and other information provided to us by third parties.

 

In administering the exercising of rights and the pro rationing of oversubscription privileges in this rights offering, we will rely on the accuracy of various statements and representations provided to us by brokers, dealers, holders of rights and other third parties. If these statements or representations are false or inaccurate, it may delay or otherwise negatively effect our or the subscription agent’s ability to administer this rights offering in accordance with the terms and conditions described in this prospectus supplement.

 

The net proceeds to us from this rights offering will depend on the number of subscription rights that are exercised. If each stockholder exercises its subscription rights in full, at a subscription price of $2.70 per share, we will receive gross proceeds of approximately $25.0 million in this rights offering. We currently estimate that the expenses of the rights offering will be approximately $1.5 million. Accordingly, if each stockholder exercises its subscription rights in full at a subscription price of $2.70 per share, we expect to receive net proceeds of approximately $23.5 million from this rights offering.

 

We intend to use the proceeds from this offering, together with incremental borrowings under our restated ABL facility and the capital provided by our new term loan, to redeem all of the outstanding Asset-Backed Notes as described in “Prospectus Supplement Summary — The Refinancing Transactions.” As a result of the Transactions, we expect to be better positioned to review our strategic business plan.

 

The 2002 Series A securitization facility consists of $170.0 million aggregate principal amount of notes which mature in August 2011 and bear interest at commercial paper rates plus a spread of 250 basis points and require payment of a quarterly commitment fee. The 2006 Series A securitization facility, which was consummated in August 2006 and matures in April 2017, consists of $135.0 million aggregate principal amount of notes, after the scheduled September and October principal payments, of private bond placements. We began making scheduled principal payments in September 2010 of $7.5 million a month. As of July 31, 2010, we had issued $320.0 million under our existing securitization facilities in the form of the Asset-Backed Notes, with a weighted average interest rate on the 2002 Series A variable funding note of 4.9% during the month of July 2010 and a weighted fixed rate of 5.75% on the 2006 Series A notes. In addition, the borrowings under our existing ABL facility bore interest at a weighted average rate of 4.8% at July 31, 2010, including the interest expense associated with our interest rate swaps, and mature in August 2011.

 

Purchasers of our common stock in the rights offering will experience an immediate accretion of their shares of our common stock. At July 31, 2010, we had a net tangible book value of approximately $347.7 million, or $15.46 per share of our common stock held by continuing stockholders. After giving effect to the sale of approximately 9,259,390 shares of our common stock in the rights offering and after deducting transaction and offering expenses, the pro forma net tangible book value at July 31, 2010 attributable to holders of our common stock would have been $370.1 million, or $11.66 per share of our common stock. The following table illustrates this per share accretion.

 

 

The following table sets forth our cash and cash equivalents and capitalization as of July 31, 2010, on an actual basis and on an as adjusted basis to give effect to (i) the sale of all 9,259,390 shares of common stock offered in this rights offering at a price of 2.70 per share, (ii) the consummation of the Refinancing Transactions and (iii) payment of estimated expenses of $13.9 million in connection with completion of the Transactions. The following information should be read in conjunction with our consolidated financial statements and the notes thereto included in our Quarterly Report on Form 10-Q for the three months ended July 31, 2010, the information provided in this prospectus supplement, the accompanying prospectus and the other documents incorporated by reference in this prospectus supplement and the accompanying prospectus.

 

 

 

 

The Subscription Rights

 

We distributed to holders of our common stock as of 5:00 p.m., Eastern Time, on November 1, 2010, which is the record date for this rights offering, at no charge, transferable subscription rights to purchase shares of our common stock. If you were a holder of our common stock at that time, you received one subscription right for each share of common stock you owned as of 5:00 p.m., Eastern Time, on the record date. The subscription rights will be evidenced by subscription rights certificates. Subscription rights may be exercised at any time during the subscription period, which commences on November 8, 2010, and continues through the expiration date for this rights offering, which is 5:00 p.m., Eastern Time, on November 23, 2010. You are not required to exercise any of your subscription rights.

 

Basic Subscription Privilege

 

Each subscription right has a basic subscription privilege that will entitle you to purchase 0.41155 shares of our common stock at a subscription price of $2.70 per share. You may exercise any number of your subscription rights, or you may choose not to exercise any subscription rights. In addition, you may sell or transfer some or all of your subscription rights as described below.

 

Oversubscription Privilege

 

If you exercise your basic subscription privilege in full with respect to all subscription rights you hold at the time of exercise, you will also have an oversubscription privilege to purchase any shares that our other subscription rights holders do not purchase under their basic subscription privilege. If you have fully exercised your basic subscription privilege as described in the last sentence, you will be eligible to exercise this oversubscription privilege whether you were issued rights because you were a holder of common stock on the record date or you subsequently acquired subscription rights during the subscription period. The subscription price for shares purchased pursuant to the oversubscription privilege will be the same as the subscription price for the basic subscription privilege. Thus, you may purchase additional shares of our common stock by exercising the oversubscription privilege at a price of $2.70 per share so long as all of the basic subscription rights held by other holders of rights are not exercised in full.

 

You may exercise your oversubscription privilege only if you exercise your basic subscription privilege in full with respect to all subscription rights you hold at the time of exercise. However, you may exercise your basic subscription privilege in full without exercising your oversubscription privilege. To determine if you have fully exercised your basic subscription privilege, we will consider only the basic subscription privilege held by you in the same capacity at the time of exercise. For example, if you were granted subscription rights for shares of our common stock that you own individually and shares of our common stock that you own jointly with your spouse, you may exercise your oversubscription privilege with respect to the subscription rights you own individually, as long as you fully exercise your basic subscription privilege with respect to your individually owned subscription rights. You will not, however, be able to exercise the oversubscription privilege you own collectively with your spouse unless the basic subscription privilege collectively owned by you and your spouse is fully exercised. You do not have to subscribe for any shares under the basic subscription privilege owned jointly with your spouse to exercise your individual oversubscription privilege.

 

When you complete the portion of your subscription rights certificate to exercise your oversubscription privilege, you will be representing and certifying that you have fully exercised your basic subscription privilege as to the rights you hold in that capacity at the time of exercise. You must exercise your oversubscription privilege at the same time you exercise your basic subscription privilege in full. If you have transferred some of the subscription rights prior to the exercise of your basic subscription privilege, you must fully exercise you basic subscription privilege for all subscription rights you have not transferred and hold at the time of exercise in order to exercise your oversubscription privilege.

 

If holders exercise oversubscription privileges for more shares than are available to be purchased pursuant to the oversubscription privileges, we will allocate the shares of our common stock to be issued pursuant to the

exercise of the oversubscription privilege pro rata among those oversubscribing holders. “Pro rata” means to each oversubscribing holder based on the number of shares such holder purchased pursuant to the exercise of its basic subscription privilege in proportion to the total number of shares purchased by all oversubscribing holders pursuant to the exercise of their basic subscription privileges. For example, if Holder A purchased 100 shares pursuant to its basic subscription privilege and Holder B purchased 200 shares pursuant to its basic subscription privilege, and Holder A and Holder B both exercise their respective oversubscription privileges and elect to each purchase an additional 100 shares, but there were only 100 total shares available to fulfill all oversubscription requests, then Holder A would receive 33.33 (or when rounded up to the nearest whole share, 34) shares and Holder B would receive 66.66 (or when rounded up to the nearest whole share, 67) shares. Each holder participating in the oversubscription must pay the full amount for all shares of common stock requested in the oversubscription no later than 5:00 p.m. Eastern Time on the expiration date (the same time such holder pays for the shares purchased by exercising its basic subscription privilege). If you render payment for a fewer number of shares of common stock than you are electing to receive in the oversubscription, you will only be eligible to receive such fewer number of shares (if those shares are available for purchase in the oversubscription).

 

If there is a pro rata allocation of the remaining shares of our common stock and you would otherwise receive an allocation of a greater number of shares than you subscribed for under your oversubscription privilege, then we will allocate to you only the number of shares for which you subscribed. We will allocate the remaining shares among all other holders exercising their oversubscription privilege. If you are not allocated the full amount of shares for which you over-subscribe, you will receive a refund of the subscription price, without interest or deduction, that you delivered for those shares of our common stock that are not allocated to you. The subscription agent will mail such refunds as soon as practicable after the completion of this rights offering. Using the above example, both Holder A and Holder B must pay for the 100 shares they each elected to receive in the oversubscription no later than 5:00 p.m. Eastern Time on the expiration date even though each will receive only 34 and 67 shares of common stock, respectively, due to prorationing. We will refund to each of Holder A and Holder B, without interest or deduction, the difference between the amount paid by each of Holder A and Holder B for the 100 shares elected and the purchase price for the 34 and 67 shares each actually received by such holder.

 

In order to exercise the oversubscription privilege, brokers, dealers, custodian banks and other nominee subscription rights holders who exercise the oversubscription privilege on behalf of beneficial owners must certify to the subscription agent and to us with respect to each beneficial owner:

 

 

If your shares are held by a broker, dealer, custodian bank or other nominee in book-entry form through DTC, then, in addition to the other materials required to be submitted to the subscription agent to exercise your subscription rights, a Nominee Holder Certification will also be required. See “— Method of Exercising Subscription Rights — Subscription by DTC Participants.”

 

No Fractional Shares Will Be Issued

 

We will not issue fractional shares. Fractional shares of common stock resulting from the exercise of the basic subscription privilege or the oversubscription privilege will be eliminated by rounding up to the nearest whole share, with the total subscription payment being adjusted accordingly. You may only exercise your subscription rights to purchase, at the subscription price, a whole number of shares, rounded up to the nearest whole number you are otherwise entitled to purchase. For example, if you owned 100 shares of common stock as of 5:00 p.m., Eastern Time, November 1, 2010, you would receive 100 subscription rights, which would entitle you to purchase 41.155 shares (42 when rounded up to the nearest whole share) at the subscription price of $2.70 per share.

 

Subscription Price

 

Our board of directors determined the subscription price considering the likely cost of capital from other sources, the size and timing of the rights offering, the price at which our stockholders might be willing to participate in the rights offering and historical and current trading prices of our common stock. In addition, our board of

directors also reviewed and considered analysis from Stephens and Baird concerning prior rights offerings by other companies and the range of discounts that the subscription prices represented to their prevailing and historical trading prices for those offerings. The last trading price for shares of our common stock on November 5, 2010 was $4.00 per share. The subscription price is not intended to bear any relationship to the book value of our assets or our past operations, cash flows, losses, financial condition, net worth, or any other established criteria used to value securities. You should not consider the subscription price to be an indication of the fair value of the common stock to be offered in the rights offering.

 

The trading price of our common stock may decline during or after this rights offering. We cannot assure you that you will be able to sell shares purchased in this rights offering at a price equal to or greater than the subscription price. We do not intend to change the subscription price in response to changes in the trading price of our common stock, although we reserve the right to do so. We urge you to obtain a current quote for our common stock before exercising your subscription rights.

 

Expiration Time and Date

 

The subscription rights will expire at 5:00 p.m., Eastern Time, on November 23, 2010, unless we extend the subscription period and consequently the initial expiration date. After the expiration of the subscription period, all unexercised subscription rights will be null and void. We will not be obligated to honor any purported exercise of subscription rights which the subscription agent receives after the expiration of this rights offering, regardless of when you sent the documents regarding that exercise, unless you have used the guaranteed delivery procedures described under “— Notice of Guaranteed Delivery.” Shares purchased in this rights offering will be issued through DTC and any subscription payments received for shares not allocated or validly purchased will be returned, as soon as practicable following the expiration date of this rights offering.

 

Cancellation; Extensions; Amendments

 

We may cancel, extend or otherwise amend this rights offering, in whole or in part, if at any time before completion of this rights offering there is any judgment, order, decree, injunction, statute, law or regulation entered, enacted, amended or held to be applicable to this rights offering that in the sole judgment of our board of directors would or might make this rights offering or its completion, whether in whole or in part, illegal or otherwise restrict or prohibit completion of this rights offering. In addition, we reserve the right, in our sole discretion, to cancel, extend or otherwise amend the terms of this rights offering for any reason prior to the expiration date of this rights offering. Further, if we are unable to raise sufficient amounts in this rights offering to close the Refinancing Transactions, we intend to cancel or amend this rights offering. Additionally, if we believe the Refinancing Transactions are not going to close concurrently with this rights offering, we intend to cancel or amend this rights offering. If we amend this rights offering for such reason, holders who have previously exercised their subscription rights would be entitled to revoke their previous exercise of subscription rights. We will notify you of any cancellation, extension or amendment by issuing a press release. In the event of a material amendment to the terms of this rights offering, we will distribute an amended prospectus supplement to stockholders of record, extend the expiration of this rights offering and offer all holders who have exercised their subscription rights a period of time to revoke their previously exercised subscriptions. If we cancel this rights offering, in whole or in part, all affected subscription rights (including those purchased in the open market) will expire without value, and all subscription payments received by the subscription agent will be returned, without interest or deduction, as soon as practicable.

 

Reasons for this Rights Offering

 

In authorizing this rights offering, our board of directors evaluated our future need for additional liquidity and our need for increased financial flexibility in order to enable us to achieve our business plan and growth strategy. In the course of this process, our board of directors consulted with our senior management and Stephens. In addition, a committee of our board of directors formed in connection with the rights offering consulted with Baird, which was engaged as an independent financial advisor. Both groups considered a number of factors in favor of this rights offering, including the following:

 

 

 

Our board of directors also considered the following factors adverse to this rights offering:

 

 

After weighing the factors discussed above and the effect of the $25.0 million in additional capital, before expenses, that may be generated by the sale of shares pursuant to the rights offering, our board of directors determined that the rights offering is in the best interests of the Company and its stockholders. As described in the section of this prospectus supplement entitled “Use of Proceeds,” we are conducting the rights offering to raise up to approximately $25.0 million in equity capital which we plan to combine with borrowings under our restated ABL facility and under our new term loan to redeem all of our Asset-Backed Notes at the stated principal amount plus accrued and unpaid interest. We believe the rights offering will strengthen our ability to complete the Refinancing Transactions and our ability to do so on terms more advantageous to us. Although we believe that the rights offering will strengthen our financial condition and aid in the completion of the Refinancing Transactions, our board of directors is not making any recommendation as to whether you should exercise your subscription rights.

 

Method of Exercising Subscription Rights

 

The exercise of subscription rights is irrevocable (except in limited circumstances relating to a material amendment of the terms of this rights offering) and may not be cancelled or modified. You may exercise your subscription rights as follows:

 

Subscription by Registered Holders

 

To exercise your basic subscription privilege and your oversubscription privilege, you must properly complete and execute the subscription rights certificate, together with any required signature guarantees, and forward it, together with payment in full of the subscription price for each share of our common stock you are subscribing for, including any shares you subscribe for pursuant to the oversubscription privilege, to the subscription agent at the address set forth under “— Subscription Agent” below, on or prior to the expiration date.

 

Subscription by DTC Participants

 

If your subscription rights are held of record through DTC, you may exercise your basic subscription privilege and your oversubscription privilege by instructing DTC to transfer your subscription rights from your account to the account of the subscription agent, together with certification as to the aggregate number of subscription rights you are exercising and the number of shares of our common stock you are subscribing for under your basic subscription privilege and your oversubscription privilege, if any, and payment in full of the subscription price for each share of our common stock that you subscribed for, including any shares pursuant to the oversubscription privilege. Except as described under the subsection titled “— Notice of Guaranteed Delivery,” subscriptions accepted by the subscription agent via a Notice of Guaranteed Delivery must be delivered to the subscription agent with payment before the expiration of the subscription period.

Subscription by Beneficial Owners through a Broker, Custodian Bank or Other Nominee

 

If you are a beneficial owner of shares of our common stock who holds common stock through a broker, custodian bank or other nominee, we will ask your broker, custodian bank or other nominee to notify you of this rights offering. If you wish to exercise your subscription rights, you will need to have your broker, custodian bank or other nominee act for you and exercise your subscription rights and deliver all documents and payment on your behalf prior to 5:00 p.m., Eastern Time, on November 23, 2010, the expiration date of this rights offering, and payment must also clear prior to the expiration of this rights offering. If you hold certificates of our common stock directly and would prefer to have your broker, custodian bank or other nominee act for you, you should contact your nominee and request it to effect the transactions for you.

 

To indicate your decision with respect to your subscription rights, in addition to any other procedures your broker, custodian bank or other nominee may require, you should complete and return to your broker, custodian bank or other nominee, the form entitled “Beneficial Owner Election Form” such that it will be received by them by 5:00 p.m., Eastern Time, on November 22, 2010, the last business day prior to the expiration date of this rights offering. You should receive this form from your broker, custodian bank or other nominee with the other subscription rights offering materials. If you wish to obtain a separate subscription rights certificate, you should contact the nominee as soon as possible and request that a separate subscription rights certificate be issued to you. You should contact your broker, custodian bank or other nominee if you do not receive this form, but you believe you are entitled to participate in this rights offering. We are not responsible if you do not receive the form from your broker, custodian bank or nominee or if you receive it without sufficient time to respond.

 

Payment Method

 

Your payment of the subscription price must be made in U.S. dollars for the full number of shares of common stock you wish to acquire under the basic subscription privilege and the oversubscription privilege by either:

 

 

Computershare Trust Company, N.A. is acting as the subscription agent for this rights offering under an agreement with us. All subscription rights certificates, payments of the subscription price and nominee holder certifications, to the extent applicable to your exercise of subscription rights, must be delivered to Computershare Trust Company, N.A. as follows:

 

By express mail or courier:

 

Computershare Trust Company, N.A.
Attention: Voluntary Corporate Actions
250 Royall St. , Suite V
Canton, MA 02021

 

By mail:

 

Computershare Trust Company
Rights Offering
P.O. Box 43011
Providence, RI 02940-3011

 

You should direct any questions or requests for assistance concerning the method of subscribing for the shares of common stock or for additional copies of this prospectus supplement to Georgeson Inc. at (866) 357-4029.

Receipt of Payment

 

Your payment will be considered received by the subscription agent only upon receipt by the subscription agent of any certified or cashier’s check or bank draft drawn upon a U.S. bank or any U.S. postal money order. Payment received after the expiration of the subscription period will not be honored, and, in that case, the subscription agent will return your payment to you, without interest or deduction, as soon as practicable. For the exercise of a subscription right to be effective, your subscription rights certificate, together will full payment of the subscription price, must be received by the subscription agent by 5:00 p.m., Eastern Time, on the expiration date of this rights offering, and payment must clear prior to the expiration of this rights offering.

 

If you use the mail, we recommend that you use an insured overnight carrier that provides delivery tracking. If you cannot deliver your subscription rights certificate to the subscription agent on time, you may follow the guaranteed delivery procedures described under “— Notice of Guaranteed Delivery.”

 

If you choose to exercise your Rights, the subscription agent will send you, no later than ten days after the expiration date, a confirmation showing (i) the number of shares of common stock purchased pursuant to your basic subscription privilege and, if applicable, your oversubscription privilege, (ii) the per share and total purchase price for all of the shares of common stock acquired by you, (iii) any excess to be refunded to you as a result of payment for shares of common stock pursuant to your oversubscription privilege that you are not acquiring, and (iv) any additional amount payable by you or any excess to be refunded to you.

 

Instructions for Completing Your Subscription Rights Certificate

 

You should read the instruction letter accompanying the subscription rights certificate carefully and strictly follow it. Do not send subscription rights certificates or payments to us. Except as described below under “— Notice of Guaranteed Delivery,” we will not consider your subscription received until the subscription agent has received delivery of a properly completed and duly executed subscription rights certificate and payment of the full subscription amount. The risk of delivery of all documents and payments is borne by you or your nominee, not us or the subscription agent.

 

The method of delivery of subscription rights certificates and payment of the subscription amount to the subscription agent will be at the risk of the holders of subscription rights. If sent by mail, we recommend that you send those certificates and payments by overnight courier or by express mail, properly insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the subscription agent and clearance of payment before the expiration of the subscription period for this rights offering.

 

Missing or Incomplete Subscription Information

 

If you do not indicate the number of subscription rights being exercised, or do not deliver full payment of the total subscription price for the number of subscription rights that you indicate are being exercised, then you will be deemed to have exercised your subscription rights with respect to the maximum number of subscription rights that may be exercised with the aggregate subscription price payment you delivered to the subscription agent. If your aggregate subscription price payment is greater than the amount you would owe for exercise of your basic subscription privilege in full, you will be deemed to have exercised your oversubscription privilege to purchase the maximum number of shares of our common stock that could be purchased with your over-payment. If the oversubscription payment is not received, oversubscription amounts you elected will be reallocated among stockholders who have elected to participate in the oversubscription privilege and who have made timely payment. If we do not apply your full subscription price payment to your purchase of shares of our common stock, we or the subscription agent will return the excess amount to you by mail, without interest or deduction, as soon as practicable after the expiration date of this rights offering.

 

Methods for Transferring and Selling Subscription Rights

 

You may sell your subscription rights by contacting your broker or the institution through which you hold your common stock, which may permit you to effect sales through an Internet website that it maintains and through which you may access your account. In addition, you may transfer your subscription rights through the subscription

agent as described below. The subscription agent will facilitate subdivisions or sales of the rights until 5:00 p.m., Eastern Time, on November 17, 2010, six days prior to November 23, 2010, the scheduled expiration date. Resales of subscription rights by our affiliates have not been registered and are not permitted. The subscription rights have been admitted for trading and currently trade on the Nasdaq Global Select Market under the symbol “CONNR.” We currently expect that the subscription rights will continue to trade until 4:00 p.m., Eastern Time, on November 22, 2010, the last business day prior to November 23, 2010, the expiration date. There had been no public market for the subscription rights prior to November 8, and we cannot assure you that a trading market for the subscription rights will develop or, if a market develops, that the market will remain available throughout the subscription period. We also cannot assure you of the price at which the subscription rights will trade, if at all. If you do not exercise your subscription rights by 5:00 p.m., Eastern Time, on the expiration date of this rights offering, your subscription rights will expire and be void and no longer exercisable. See “— General Considerations Regarding the Partial Exercise, Transfer or Sale of Subscription Rights” below.

 

Transfer of Subscription Rights

 

You may transfer subscription rights by endorsing the subscription rights certificate for transfer. You may not transfer a basic subscription privilege or oversubscription privilege without transferring the corresponding oversubscription privilege or basic subscription privilege. Please follow the instructions for transfer included in the information sent to you with your subscription rights certificate. Resales of subscription rights by our affiliates have not been registered and are not permitted.

 

If you wish to transfer all or a portion of your subscription rights, you must provide transfer instructions to the subscription agent by 5:00 p.m., Eastern Time, on November 17, 2010, six days prior to November 23, 2010, the scheduled expiration date, in order to allow a sufficient amount of time prior to the expiration date of this rights offering, for the subscription agent to:

 

 

With your subscription rights certificate, you should include instructions to register such portion of the subscription rights evidenced thereby in the name of the transferee and to issue a new subscription rights certificate to the transferee evidencing such transferred subscription rights. If there is sufficient time before the expiration of this rights offering, the subscription agent will send you a new subscription rights certificate evidencing the balance of your subscription rights that you did not transfer to the transferee. You may also instruct the subscription agent to send the subscription rights certificate to one or more additional transferees. If you wish to sell your remaining subscription rights, you may request that the subscription agent send you certificates representing your remaining subscription rights so that you may sell them through your broker, custodian bank or other nominee. If you are a record holder of a subscription rights certificate, you may sell your subscription rights through the subscription agent.

 

If you wish to transfer your subscription rights to any person other than an eligible guarantor institution, the signatures on your subscription rights certificate must be guaranteed by an eligible guarantor institution.

 

Sale of Subscription Rights

 

If you hold your subscription rights through your broker, custodian bank or other nominee and choose to sell your subscription rights (or if you are a holder of record and choose to sell your subscription rights through your broker, custodian bank or other nominee), you must deliver your order to sell to your broker, custodian bank or other nominee such that it will be actually received well in advance of 5:00 p.m., Eastern Time, on November 22, 2010, the last business day prior to November 23, 2010, the scheduled expiration date of this rights offering. If you sell your subscription rights through your broker, custodian bank or other nominee, your sales proceeds will be the actual sales price of your subscription rights less any applicable brokers commission, taxes or other fees. Resales of subscription rights by our affiliates have not been registered and are not permitted.

General Considerations Regarding the Partial Exercise, Transfer or Sale of Subscription Rights

 

The amount of time needed by your transferee to exercise or transfer its subscription rights depends upon the method by which you, as the transferor, deliver the subscription rights certificates, the method of payment made by your transferee and the number of transactions that you instruct the subscription agent to effect. You should also allow several business days for your transferee to exercise or transfer the subscription rights that you transferred to it. Neither we nor the subscription agent will be liable to a transferee or transferor of subscription rights if subscription rights certificates or any other required documents are not received in time for exercise or transfer prior to the expiration date of this rights offering.

 

If time permits, you will receive a new subscription rights certificate upon a partial exercise, transfer or sale of subscription rights and you may then exercise, transfer or sell your unexercised subscription rights. However, the subscription agent will only facilitate subdivisions or transfers of subscription rights certificates until 5:00 p.m., Eastern Time, on November 17, 2010, six days prior to 5:00 p.m., Eastern Time, on November 23, 2010, the scheduled expiration date of this rights offering. We will not issue any subscription rights certificates for unexercised subscription rights after the expiration date of this rights offering, and therefore you will not be able to exercise, transfer or sell your remaining subscription rights after the expiration date.

 

You are responsible for all commissions, fees and other expenses, including brokerage commissions and transfer taxes, incurred in connection with the purchase, transfer or exercise of your subscription rights, except that we will pay certain fees of the subscription agent and information agent associated with this rights offering.

 

Subscription Agent

 

Computershare Trust Company, N.A. is acting as the subscription agent for this rights offering under an agreement with us. All subscription rights certificates, payments of the subscription price and nominee holder certifications, to the extent applicable to your exercise of subscription rights, must be delivered to Computershare Trust Company, N.A. as follows:

 

By express mail or courier:

 

Computershare Trust Company, N.A.
Attention: Voluntary Corporate Actions
250 Royall St. , Suite V
Canton, MA 02021

 

By mail:

 

Computershare Trust Company
Rights Offering
P.O. Box 43011
Providence, RI 02940-3011

 

You should direct any questions or requests for assistance concerning the method of subscribing for the shares of common stock or for additional copies of this prospectus supplement to Georgeson Inc. at (866) 357-4029.

 

We will pay the fees and expenses of Computershare Trust Company, N.A. We have also agreed to indemnify Computershare Trust Company, N.A. against certain liabilities in connection with this rights offering.

 

If you deliver subscription documents, subscription rights certificates or notices of guaranteed delivery in a manner different than that described in this prospectus supplement, then we may not honor the exercise of your subscription privilege.

 

Fees and Expenses

 

We will pay all fees charged by the subscription agent and the information agent. You are responsible for paying any other commissions, fees, taxes or other expenses incurred in connection with the exercise of the subscription rights. Neither the subscription agent nor we will pay such expenses.

Medallion Guarantee May Be Required

 

Your signature on each subscription rights certificate must be guaranteed by an eligible institution, such as a member firm of a registered national securities exchange or a member of the Financial Industry Regulatory Authority, or a commercial bank or trust company having an office or correspondent in the United States, subject to standards and procedures adopted by the subscription agent, unless:

 

 

Notice To Brokers and Nominees

 

If you are a broker, custodian bank or other nominee holder that holds shares of our common stock for the account of others on this rights offering record date, you should notify the respective beneficial owners of such shares of this rights offering as soon as possible to learn their intentions with respect to exercising their subscription rights. You should obtain instructions from the beneficial owner with respect to their subscription rights, as set forth in the instructions we have provided to you for your distribution to beneficial owners. If the beneficial owner so instructs, you should complete the appropriate subscription rights certificates and submit them to the subscription agent with the proper payment. If you hold shares of our common stock for the account(s) of more than one beneficial owner, you may exercise the number of subscription rights to which all such beneficial owners in the aggregate otherwise would have been entitled had they been direct record holders of our common stock on the subscription rights offering record date, provided that you, as a nominee record holder, make a proper showing to the subscription agent by submitting the form entitled “Nominee Holder Certification” that we will provide to you with your subscription rights offering materials. If you did not receive this form, you should contact the subscription agent to request a copy.

 

Notice of Guaranteed Delivery

 

If you wish to exercise your subscription rights, but you do not have sufficient time to deliver the subscription rights certificate evidencing your subscription rights to the subscription agent, on or before the time this rights offering expires, you may exercise your subscription rights by the following guaranteed delivery procedures:

 

 

Your Notice of Guaranteed Delivery must be delivered in substantially the same form provided with the Instructions as to Use of Subscription Rights Certificates, which will be distributed to you with your subscription rights certificate. Your Notice of Guaranteed Delivery must be guaranteed by an eligible institution, such as a member firm of a registered national securities exchange or a member of the Financial Industry Regulatory Authority, or a commercial bank or trust company having an office or correspondent in the United States, subject to standards and procedures adopted by the subscription agent, unless:

 

 

 

In your Notice of Guaranteed Delivery, you must state:

 

 

You may deliver your Notice of Guaranteed Delivery to the subscription agent in the same manner as your subscription rights certificates at the address set forth above under “— Subscription Agent.”

 

The information agent will send you additional copies of the form of Notice of Guaranteed Delivery if you request them. Please call Georgeson Inc., the information agent, at (866) 357-4029 to request any copies of the form of Notice of Guaranteed Delivery.

 

In the case of holders of subscription rights that are held of record through DTC, those subscription rights may be exercised by instructing DTC to transfer subscription rights from that holder’s DTC account to the subscription agent’s DTC account, together with payment of the full subscription price. The Notice of Guaranteed Delivery must be guaranteed by a commercial bank, trust company or credit union having an office, branch or agency in the United States or by a member of a Stock Transfer Association approved medallion program such as STAMP, SEMP or MSP. Notices of guaranteed delivery and payments should be mailed or delivered to the appropriate addresses set forth under “— Subscription Agent.”

 

Questions About Exercising Subscription Rights

 

If you have any questions or require assistance regarding the method of exercising your subscription rights or requests for additional copies of this document, the Instructions as to the Use of Subscription Rights Certificates or the Notice of Guaranteed Delivery, you should contact Georgeson Inc., the information agent at (866) 357-4029.

 

Validity of Subscriptions

 

We will resolve all questions regarding the validity and form of the exercise of your subscription privileges, including time of receipt and eligibility to participate in this rights offering. Our determination will be final and binding. Once made, subscriptions and directions are irrevocable (except in limited circumstances relating to a material amendment of the terms of this rights offering), and we will not accept any alternative, conditional or contingent subscriptions or directions. We reserve the absolute right to reject any subscriptions or directions not properly submitted or the acceptance of which would be unlawful. You must resolve any irregularities in connection with your subscriptions before the subscription period expires, unless waived by us at our sole discretion. Neither the subscription agent nor we shall be under any duty to notify you or your representative of defects in your subscriptions. A subscription will be considered accepted, subject to our right to cancel this rights offering, only when a properly completed and duly executed subscription rights certificate and any other required documents and payment of the full subscription amount have been received by the subscription agent. Our interpretations of the terms and conditions of this rights offering will be final and binding.

 

Segregated Account; Return of Funds

 

The subscription agent will hold funds received in payment for shares of the common stock in a segregated account pending completion of this rights offering. The subscription agent will hold this money until this rights offering is completed or is cancelled. If this rights offering is cancelled for any reason, the subscription agent will return this money to subscribers, without interest or deduction, as soon as practicable.

Certificates for Shares of Common Stock

 

Stock certificates will not be issued for shares of our common stock offered in this rights offering. As soon as practicable after the expiration of the subscription period, the subscription agent will arrange for issuance through DTC to each subscription rights holder of record that has validly exercised its basic subscription privilege, the shares of common stock purchased pursuant to the basic subscription privilege. Shares subscribed for pursuant to the oversubscription privilege will be delivered through DTC as soon as practicable after the expiration date of this rights offering and following the completion of any pro-rations as may be necessary in the event the oversubscription requests exceed the number of shares not subscribed for pursuant to the basic subscription privilege. If you are not a DTC participant, all shares that you purchase in the rights offering will be issued in book-entry, or uncertificated, form. When issued, the shares will be registered in the name of the subscription rights holder of record.

 

Rights of Subscribers

 

You will have no rights as a holder of our common stock with respect to the shares of our common stock underlying the subscription rights until your account, or your account at your broker, custodian bank or other nominee is credited with the shares of our common stock purchased in this rights offering. You will have no right to revoke your subscriptions after you deliver your completed subscription rights certificate, payment and any other required documents to the subscription agent.

 

Foreign and Other Stockholders

 

We will not mail subscription rights certificates to stockholders whose registered addresses are outside the United States or who have an army post office or foreign post office address. The subscription agent will hold these subscription rights certificates for their account. To exercise subscription rights, our foreign stockholders and stockholders with an army post office or foreign post office address must notify the subscription agent prior to 11:00 a.m., Eastern Time, at least three business days prior to the expiration date of this rights offering by completing an international holder subscription form which will be delivered to those holders in lieu of a subscription rights certificate and sending it by mail to the subscription agent at the address set forth under “— Subscription Agent.”

 

No Revocation or Change

 

Once you submit the form of subscription rights certificate to exercise any subscription rights, you are not allowed to revoke or change the exercise or request a refund of monies paid. All exercises of subscription rights are irrevocable (except in limited circumstances relating to a material amendment to the terms of this rights offering), even if you learn information about us that you consider to be unfavorable. You should not exercise your subscription rights unless you are certain that you wish to purchase the shares of common stock offered pursuant to this rights offering.

 

Regulatory Limitation

 

We will not be required to issue to you shares of our common stock pursuant to this rights offering if, in our opinion, you are required to obtain prior clearance or approval from any state or federal regulatory authorities to own or control the shares and if, at the time this rights offering expires, you have not obtained this clearance or approval.

 

U.S. Federal Income Tax Treatment of Subscription Rights Distribution

 

A U.S. holder, as defined in “Certain Material U.S. Federal Income Tax Consequences” to this prospectus supplement, should not recognize income, gain, or loss for U.S. federal income tax purposes upon the receipt and exercise of the subscription rights. See “Certain Material U.S. Federal Income Tax Consequences” of this prospectus supplement for further discussion.

YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE RECEIPT, EXERCISE, EXPIRATION, AND SALE OF THE SUBSCRIPTION RIGHTS IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION. WE ARE NOT PROVIDING ANY TAX ADVICE IN CONNECTION WITH THIS RIGHTS OFFERING.

 

No Recommendation to Subscription Rights Holders

 

Our Board of Directors is not making any recommendation as to whether or not you should exercise, transfer or let lapse your subscription rights. You are urged to make your own decision whether or not to exercise your subscription rights based on your own assessment of our business and this rights offering. See “Risk Factors” in this prospectus supplement and in any document incorporated by reference herein or therein.

 

Shares of Common Stock Outstanding After this Rights Offering

 

Based on the 22,498,821 shares of our common stock outstanding as of November 1, 2010, and assuming (i) no options are exercised until the expiration of the subscription period and (ii) 9,259,390 shares available to be purchased in this rights offering are sold, 31,758,211 shares of our common stock will be outstanding upon completion of this rights offering, representing an increase in the number of outstanding shares of our common stock of approximately 41.2%.

 

Other Matters

 

We are not making this rights offering in any state or other jurisdiction in which it is unlawful to do so, nor are we distributing or accepting any offers to purchase any shares of our common stock from subscription rights holders who are residents of those states or other jurisdictions or who are otherwise prohibited by federal or state laws or regulations from accepting or exercising the subscription rights. We may delay the commencement of this rights offering in those states or other jurisdictions, or change the terms of this rights offering, in whole or in part, in order to comply with the securities laws or other legal requirements of those states or other jurisdictions. Subject to state securities laws and regulations, we also have the discretion to delay allocation and distribution of any shares you may elect to purchase by exercise of your subscription privileges in order to comply with state securities laws. We may decline to make modifications to the terms of this rights offering requested by those states or other jurisdictions, in which case, if you are a resident in those states or jurisdictions or if you are otherwise prohibited by federal or state laws or regulations from accepting or exercising the subscription rights, you will not be eligible to participate in this rights offering. However, we are not currently aware of any states or jurisdictions that would preclude participation in this rights offering.

 

On August 14, 2008, we and certain of our subsidiaries entered into a secured, asset-based revolving credit facility with a syndicate of lenders (as amended by its recent first and second amendments, our existing ABL facility), which was amended in early 2010. The existing ABL facility provides us with revolving loans and, subject to a sublimit, letters of credit in an aggregate amount not to exceed the lesser of $210.0 million or the amount of a periodically-adjusted borrowing base consisting of a substantial portion of our receivables and inventory. We have entered into commitment letters with certain lenders that provide for a secured, asset-based revolving credit facility that amends and restates our existing ABL facility in its entirety. We refer to such new amended and restated credit facility as our restated ABL facility.

 

We anticipate that we will enter into our restated ABL facility concurrently with the closing of this rights offering and that such restated ABL facility will, among other things, (i) increase the revolving line of credit for loans and letters of credit to an aggregate amount not to exceed $375.0 million, subject to a periodically adjusted borrowing base, and (ii) extend the maturity date to three years from the closing of this offering. Our restated ABL facility could be drawn upon by certain of our subsidiaries.

 

Maximum Commitment Amount

 

We anticipate that our restated ABL facility will provide an aggregate commitment for revolving loans and letters of credit, subject to a sublimit, of up to $375.0 million. We anticipate that we may also be entitled to request to increase the commitment up to a maximum amount of $500.0 million, but such request may be approved or declined by the lenders at their discretion.

 

Borrowing Base

 

We anticipate that advances to the respective subsidiaries under our restated ABL facility will be governed by one or more borrowing bases. We expect each borrowing base to differ in relation to the borrowing subsidiary. Generally, the borrowing bases consist of stated percentages of one or more of the following:

 

 

As of July 31, 2010, based on the borrowing base calculation that we anticipate will be in our restated ABL facility, our aggregate unused capacity under our restated ABL facility, after giving effect to the limitations imposed by the restated ABL facility and the new term loan borrowing base calculations and the leverage test in the restated ABL facility, would have been $61.0 million after giving effect to $312.3 million of outstanding loans and $1.7 million of outstanding letters of credit.

 

Repayment and Prepayment Fees

 

We anticipate that revolver loans will be due and payable in full three years from the date of execution of the restated ABL facility. If we terminate or reduce the restated ABL facility prior to the maturity date, we would pay an early termination fee of (a) 0.50% of the aggregate commitments then in effect, if the termination or reduction occurs on or before the first anniversary of the closing date, and (b) 0.25% of the aggregate commitments then in effect, thereafter.

 

Interest Rate and Fees

 

We anticipate that the borrowings will bear interest at either a Base Rate or a LIBOR rate, plus an applicable margin. The applicable margin will vary based upon our leverage ratio in relation to a pricing grid in our restated

ABL facility. The applicable margin for LIBOR rate borrowings will range from 3.75% to 4.00% and the applicable margin for Base Rate borrowings will range from 2.75% to 3.00%. The LIBOR margin and Base Rate margin at October 28, 2010 would have been 4.00% and 3.00%, respectively.

 

We will incur commitment fees for unused portions of our restated ABL facility at an annual rate of the unused line fee percentage. The unused line fee percentage would be equal to (i) 0.75% per annum if the average amount of loans and letters of credit outstanding for the quarterly period is less than 50% of the aggregate maximum commitment of the lenders, or (ii) 0.50% per annum if the average amount of loans and letters of credit outstanding for the quarterly period is equal to or greater than 50% of the aggregate maximum commitment of the lenders.

 

Security and Guarantees

 

We anticipate that our obligations under our restated ABL facility will be secured by first priority liens on substantially all of our existing and future personal assets, including accounts receivable, inventory, rolling stock, machinery and equipment, real property, subsidiary capital stock, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, intellectual property, investment property and leasehold mortgage interests. In addition, our obligations will be guaranteed by all of our current subsidiaries, except for Conn Funding II GP, LLC, Conn Appliance, LLC and Conn Funding II, LP, which we plan to dissolve upon the completion of the Refinancing Transactions. Also, our lenders will be granted a lien of a priority satisfactory to our lenders on all our owned real estate.

 

Covenants

 

We expect that our restated ABL facility will contain customary affirmative and negative covenants, including financial covenants. The financial covenants will include the following:

 

 

Also, our restated ABL facility will limit our capital expenditures to $22 million in the aggregate during any twelve month period, measured quarterly as of the end of each fiscal quarter, and would require that we maintain a cash recovery percentage of greater than 4.74%, measured monthly as of the end of each month, for the trailing three-month period.

 

We anticipate that our restated ABL facility will contain covenants that are substantially similar to those in our existing ABL facility that, among other things, restrict our ability to incur debt, make investments, create liens, pay dividends, make acquisitions, prepay indebtedness, make asset dispositions, enter into mergers and consolidations, enter into transactions with affiliates and hedging contracts and other matters customarily restricted in such agreements.

 

A summary of the significant financial covenants that would govern our restated ABL facility along with our compliance levels as adjusted to give effect to the Refinancing Transactions, as of July 31, 2010, is presented below.

 

 

 

 

Note: All terms in the above table are defined by our restated ABL facility and may or may not agree directly to the financial statement captions in this document.

 

Dominion Trigger Period

 

We expect that under the terms of the restated ABL facility, if any of the following occur: (i) an event of default occurs, (ii) our average availability during a month is less than 15% of the aggregate amount of loans and letters of credit outstanding, or (iii) our availability at any time is less than 10% of the aggregate amount of loans and letters of credit outstanding, then we will trigger a dominion trigger period.

 

During any dominion trigger period, the agent under our restated ABL facility may establish control over our cash management through certain lockbox and deposit account control agreements and may require us to submit to more onerous reporting and other requirements. Once triggered, a dominion trigger period will end if, for a consecutive 90 day period, (x) there has been no other event of default, (y) availability has at all times been greater than 10% of the aggregate amount of loans and letters of credit outstanding, and (z) average availability has at all times been greater than 15% of the aggregate amount of loans and letters of credit outstanding.

 

Events of Default

 

We expect our restated ABL facility will contain customary events of default, including without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, judgment defaults in excess of specified amounts, failure of any guaranty or security document supporting the credit agreement, certain losses of permits or governmental approvals material to the business, criminal conviction of officers, damage not covered by insurance in excess of specified amounts, certain events of bankruptcy and insolvency and a change of control.

 

Conditions in Commitment Letter

 

Our entry into the restated ABL facility as described above is subject to fulfillment of a number of conditions including, without limitation, the following:

 

 

We expect that the restated ABL facility will close concurrently with the settlement date of this rights offering. If we believe the Refinancing Transactions are not going to close concurrently with this rights offering, we intend to cancel or amend this rights offering. If we amend this rights offering for such reason, holders who have previously exercised their subscription rights would be entitled to revoke their previous exercise of subscription rights.

 

We have entered into a commitment letter with GA Capital, LLC, as agent, and certain other lenders that provides for a secured, asset-based term loan to be subordinate to our restated ABL facility. We refer to such term loan as our new term loan. Our new term loan will contain many of the same restrictions, covenants and terms as our restated ABL facility, with the lenders party to our new term loan being in a subordinated position to the lenders party to the restated ABL facility. We anticipate that we will enter into our new term loan concurrently with the closing of this rights offering and our restated ABL facility.

 

Commitment Amount and Maturity Date

 

We anticipate that our new term loan will provide an aggregate commitment of up to $100.0 million. Our new term loan will mature and become due and payable in full on the earlier of four years from the closing date of our new term loan or any occurrence of an event of default.

 

Borrowing Base

 

We anticipate that the borrowing base under our new term loan will be substantially similar to that of our restated ABL facility and will, generally, consist of stated percentages of one or more of the following:

 

 

If at any time the outstanding principal amount of our new term loan exceeds the difference between the borrowing base for our new term loan and borrowing base for our restated ABL facility then a reserve, the Term Loan Borrowing Base Reserve, shall be established against the borrowing base for our restated ABL facility in an amount equal to the result, if a positive number, of (i) the outstanding amount of our new term loan, minus (ii) the amount by which the borrowing base for our new term loan exceeds the borrowing base for our restated ABL facility (without giving effect to the Term Loan Borrowing Base Reserve).

 

Repayment and Prepayments

 

We anticipate that we will be subject to prepayment fees under our new term loan equal to:

 

 

Interest Rate

 

We anticipate that the borrowings will bear interest at a LIBOR rate, plus an applicable margin equal to 11.5% per annum. The LIBOR rate will have a floor equal to 3.00%.

 

Security and Guarantees

 

We anticipate that our obligations under our new term loan will be secured by second priority liens, subordinate to the first priority liens granted to lenders under our restated ABL facility, on substantially all of our existing and future personal assets, including accounts receivable, inventory, rolling stock, machinery and equipment, subsidiary capital stock, chattel paper, deposit accounts, documents, general intangibles, instruments,

intellectual property and investment property. In addition, our obligations will be guaranteed by all of our current subsidiaries, except for Conn Funding II GP, LLC, Conn Appliance, LLC and Conn Funding II, LP, which we plan to dissolve upon the completion of the Refinancing Transactions. Also, the lenders under our new term loan shall receive a first lien priority mortgage on all our owned real property and we will use our commercially reasonable efforts to provide leasehold mortgages or lien waivers for our leased real property.

 

Covenants

 

We expect that our new term loan will contain customary affirmative and negative covenants to be finalized upon closing of our new term loan, including financial covenants. We anticipate that the financial covenants will include the following:

 

 

Also, our new term loan will limit our capital expenditures as provided in our restated ABL facility to $22 million during any twelve month period, measured quarterly as of the end of each fiscal quarter, and would require us to maintain a minimum availability of $25.0 million at all times.

 

A summary of the significant financial covenants that we anticipate will govern our new term loan along with our compliance levels as adjusted to give effect to the Refinancing Transactions, as of July 31, 2010, is presented below.

 

 

 

 

Note: All terms in the above table are defined by our new term loan and may or may not agree directly to the financial statement captions in this document.

 

Cash Management and Dominion

 

We anticipate that the cash management and dominion requirement of our new term loan will be substantially similar to those found in our restated ABL facility.

 

Events of Default

 

Our new term loan will contain events of default customary for a transaction of the nature of our new term loan and satisfactory to the agent and the other lenders.

 

Conditions in Commitment Letter

 

Our entry into the new term loan as described above is subject to fulfillment of a number of conditions including, without limitation, the following:

 

 

 

We expect that the new term loan will close concurrently with the settlement date of this rights offering. If we believe the Refinancing Transactions are not going to close concurrently with this rights offering, we intend to cancel or amend this rights offering. If we amend this rights offering for such reason, holders who have previously exercised their subscription rights would be entitled to revoke their previous exercise of subscription rights.

 

The principal market for our common stock is the NASDAQ Global Select Market. Our common stock is listed on the NASDAQ Global Select Market under the symbol “CONN.” To our knowledge, as of November 1, 2010, we had approximately 49 common stockholders of record and an estimated 3,378 beneficial owners of our common stock. Information regarding the high and low sales prices for our common stock for each quarterly period within the two most recent fiscal years, for the first three quarters of fiscal 2011, as reported on NASDAQ is summarized as follows:

 

 

No cash dividends were paid in fiscal 2008, fiscal 2009 or fiscal 2010. We do not anticipate paying dividends in the foreseeable future. Any future payment of dividends will be at the discretion of the board of directors and will depend upon our results of operations, financial condition, cash requirements and other factors deemed relevant by the board of directors, including the terms of our indebtedness. Provisions in existing credit facilities as well as our restated ABL facility and the new term loan restrict our ability to pay dividends.

 

The following is a discussion of certain material U.S. federal income tax consequences, as of the date of this prospectus supplement, to U.S. holders (as defined below) of the receipt, exercise, expiration, and disposition of subscription rights received by U.S. holders in this rights offering. For purposes of this discussion, a “U.S. holder” is a beneficial owner of shares of our common stock who holds such shares as a “capital asset” for U.S. federal income tax purposes (generally property held for investment) and is for U.S. federal income tax purposes:

 

 

This discussion does not describe all of the tax consequences that may be relevant to a U.S. holder in light of its particular circumstances. For example, this discussion does not address:

 

 

If a partnership or other entity classified as a partnership for U.S. federal tax purposes holds shares of our common stock, the tax treatment of a partner of such partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding shares of our common stock, you should consult your own tax advisors concerning the tax treatment of the receipt, exercise, expiration, and disposition of subscription rights received in this rights offering and of the exercise, lapse, and sale of the subscription rights.

 

This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, final and temporary Treasury regulations promulgated thereunder, published rulings and judicial decisions as of the date of this prospectus supplement. The foregoing authorities are subject to change or differing interpretations at any time with possible retroactive effect. No advance tax ruling has been or will be sought or obtained from the Internal Revenue Service (the “IRS”) regarding the U.S. federal income tax consequences described below. If the IRS contests a conclusion set forth herein, no assurance can be given that a U.S. holder would ultimately prevail in a final determination by a court.

 

THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE TO ANY U.S. HOLDER. EACH U.S. HOLDER SHOULD CONSULT ITS OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE RECEIPT, EXERCISE, EXPIRATION, AND DISPOSITION OF SUBSCRIPTION RIGHTS RECEIVED IN

THIS RIGHTS OFFERING IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION.

 

Consequences of the Receipt, Exercise, Expiration, and Disposition of the Subscription Rights

 

Receipt of the Subscription Rights

 

For U.S. federal income tax purposes, a U.S. holder should not recognize income, gain, or loss upon its receipt of subscription rights in this rights offering. A U.S. holder’s basis in the subscription rights received in this rights offering will generally be zero unless the subscription rights are exercised or disposed of and either (i) the fair market value of the subscription rights on the date such subscription rights are distributed by us is equal to or exceeds 15% of the fair market value on such date of the shares of our common stock with respect to which the subscription rights are received or (ii) such U.S. holder elects, in its U.S. federal income tax return for the taxable year in which the subscription rights are received, to allocate part of its basis in its shares of our common stock held to the subscription rights. This election is irrevocable and would apply to all of the subscription rights received pursuant to this rights offering. In either case, the U.S. holder’s basis in its shares of our common stock with respect to which the subscription rights are received will be allocated among such shares and the subscription rights received in proportion to their respective fair market values on the date the subscription rights are distributed by us. A U.S. holder’s holding period for the subscription rights will include the U.S. holder’s the holding period in the shares of our common stock with respect to which the subscription rights are received.

 

Exercise of the Subscription Rights

 

For U.S. federal income tax purposes, a U.S. holder should not recognize income, gain, or loss upon its exercise of subscription rights received in this rights offering. A U.S. holder’s basis in the shares of our common stock acquired upon the exercise of the subscription rights should equal the sum of the subscription price paid for the shares and the U.S. holder’s tax basis, if any, in the subscription rights. The holding period for the shares of our common stock acquired through the exercise of the subscription rights will begin on the date the subscription rights are exercised.

 

Notwithstanding the foregoing, if a U.S. holder exercises subscription rights received in this rights offering after disposing of the shares of our common stock with respect to which the subscription rights are received, then certain aspects of the U.S. federal income tax treatment of the exercise of the subscription rights are unclear, including (i) the allocation of the basis of the shares sold and the subscription rights received in respect of such shares, (ii) the impact of such allocation on the amount and timing of gain or loss recognized with respect to the shares sold, and (iii) the impact of such allocation on the basis of the shares of our common stock acquired through the exercise of such subscription rights. If a U.S. holder exercises the subscription rights received in this rights offering after disposing of the shares of our common stock with respect to which the subscription rights are received, such U.S. holder should consult its tax advisors.

 

Expiration of the Subscription Rights

 

For U.S. federal income tax purposes, a U.S. holder should not recognize income, gain, or loss upon the expiration of the subscription rights received in this rights offering, and the tax basis of the shares of our common stock in respect of which the subscription rights were received will equal their basis before receipt of such subscription rights.

 

Disposition of the Subscription Rights

 

Upon a taxable disposition of the subscription rights received in this rights offering, a U.S. holder will generally recognize gain or loss, if any, equal to the difference between the amount realized on the disposition and such U.S. holder’s tax basis in the subscription rights disposed of. A U.S. holder’s amount realized will equal the amount of any cash received plus the fair market value of any other property received for the subscription rights. The gain or loss recognized by a U.S. holder on the taxable disposition of the subscription rights will generally be capital gain or loss and will generally be long-term capital gain or loss if, at the time of such disposition, the U.S. holder’s holding period for the subscription rights is more than one year. Long-term capital gains of non-corporate taxpayers

are currently taxed at lower rates than those applicable to ordinary income. The deductibility of capital losses is subject to certain limitations.

 

Recently Enacted Legislation

 

For taxable years beginning after December 31, 2012, recently enacted legislation is scheduled to impose a 3.8% Medicare contribution tax on the “net investment income” of certain U.S. holders who are individuals and on the undistributed “net investment income” of certain U.S. holders that are estates and trusts. Among other items, “net investment income” would generally include capital gains from the taxable disposition of the subscription rights received in this rights offering, less certain deductions.

 

U.S. holders are urged to consult their own tax advisors regarding the possible implications of the recently enacted legislation described above.

 

THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE TO ANY U.S. HOLDER. EACH U.S. HOLDER SHOULD CONSULT ITS OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE RECEIPT, EXERCISE, EXPIRATION, AND DISPOSITION OF SUBSCRIPTION RIGHTS RECEIVED IN THIS RIGHTS OFFERING IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION.

 

The common stock offered pursuant to this rights offering is being offered by us directly to all holders of the subscription rights which were initially issued to the holders of our common stock. We intend to distribute subscription rights certificates, copies of this prospectus supplement, the accompanying prospectus and certain other relevant documents to those persons that were holders of our common stock at 5:00, p.m., Eastern Time, on November 1, 2010, the record date for this rights offering.

 

This is not an underwritten offering. The shares of our common stock offered hereby are being directly offered by us. We have not employed any brokers, dealer managers, selling agents or underwriters in connection with the solicitation of exercise of subscription rights.

 

Computershare Trust Company, N.A. is acting as the subscription agent and Georgeson Inc. is acting as the information agent for this rights offering. We have also agreed to pay the subscription agent and information agent customary fees plus certain expenses in connection with this rights offering. We have agreed to indemnify the subscription agent and information agent against certain liabilities in connection with this rights offering.

 

Stephens has agreed to act as our financial advisor in connection with the Transactions. In connection with this financial advisory role, we have agreed to pay Stephens a fee of 3.75% of the total aggregate subscription price we receive, plus reimbursement of up to $25,000 of fees and expenses of its outside counsel in connection with filings made with the Financial Industry Regulatory Authority, for its services and have agreed to indemnify Stephens against certain liabilities in connection with the Transactions. In addition, Baird has provided independent financial advisory services to a committee of our board of directors formed in connection with this rights offering. In connection with this financial advisory role, we have agreed to pay Baird a fee of $150,000, plus reimbursement of certain expenses up to $1,000, and indemnify Baird against certain liabilities. We are not reimbursing Baird for any fees and expenses of counsel.

 

Stephens and its affiliates have from time to time performed, and may in the future perform, various financial advisory and investment banking services for us and for our affiliates in the ordinary course of business for which they have received and would receive customary compensation. Stephens and its affiliates collectively owned 5,364,775 shares of our common stock, or approximately 23.8% of our outstanding shares of common stock as of the record date. The Stephens Group, LLC and its affiliates collectively owned 5,841,857 shares of our common stock, or approximately 26.0% of our outstanding shares of common stock as of the record date. Each of Stephens, The Stephens Group, LLC and their respective affiliates has been issued rights to subscribe for shares of our common stock in this offering. In addition, each of Stephens and The Stephens Group, LLC, and certain of their respective affiliates, has indicated to us that they intend to exercise their rights under the basic subscription privilege and oversubscription privilege in full in connection with the Transactions as described in this prospectus supplement, though none of them have entered into a binding agreement to do so. Each has also indicated that it does not intend to trade in the rights (other than normal market-making activities by Stephens). Assuming no other stockholder exercises its rights in connection with this rights offering, and assuming each of Stephens, The Stephens Group LLC and their respective affiliates exercises its rights in full in connection with the Transactions as described in this prospectus supplement, after giving effect to this offering Stephens and its affiliates and The Stephens Group, LLC and its affiliates would own 30.0% and 34.4%, respectively, of our common stock. Stephens and The Stephens Group, LLC, and their respective affiliates, have not entered any agreements with us or each other in connection with this rights offering or any other pending or proposed transaction involving us. Stephens, The Stephens Group, LLC and their respective affiliates may elect not to participate in this offering at any time.

 

The committee of our board of directors formed in connection with this rights offering consisted of Messrs. Bob L. Martin, Scott L. Thompson and Theodore M. Wright. Mr. Martin is a special advisor to the Stephens Group, LLC.

 

In connection with this rights offering, Stephens, Baird and one other registered broker-dealer have indicated that they intend to make a market in the rights and our common stock on the Nasdaq Global Select Market.

 

We are not paying any commissions, underwriting fees or discounts in connection with this rights offering. Some of our employees may solicit responses from you as a holder of subscription rights, but we will not pay our employees any commissions or compensation for these services other than their normal employment compensation. We estimate that our total expenses in connection with this rights offering will be approximately $1.5 million.

 

The validity of the shares of common stock issuable upon exercise of the subscription rights will be passed upon for us by Fulbright & Jaworski L.L.P., Dallas, Texas.

 

The consolidated financial statements of Conn’s, Inc. at January 31, 2010 and 2009, and for each of the three years in the period ended January 31, 2010, appearing in the Conn’s, Inc. Current Report on Form 8-K dated July 7, 2010, including the schedule appearing therein, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

We are currently subject to the information requirements of the Exchange Act of 1934, as amended, the Exchange Act, and in accordance therewith file periodic reports, proxy statements and other information with the Securities and Exchange Commission, the SEC. You may read and copy (at prescribed rates) any such reports, proxy statements and other information at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. For further information concerning the SEC’s Public Reference Room, you may call the SEC at 1-800-SEC-0330. Some of this information may also be accessed through the SEC’s Internet address at http://www.sec.gov.

 

We have filed with the SEC a registration statement on Form S-3 relating to the shares of common stock covered by this prospectus supplement. This prospectus supplement does not contain all the information set forth in the registration statement, parts of which are omitted in accordance with the rules and regulations of the SEC. Any statements made in this prospectus supplement and the accompanying prospectus concerning the provisions of legal documents are not necessarily complete and you should read the documents that are filed as exhibits to the registration statement or otherwise filed with the SEC for a more complete understanding of the document or matter.

 

The SEC allows us to “incorporate by reference” information into this prospectus supplement, which means that we can disclose important information about us by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be a part of this prospectus supplement. This prospectus supplement incorporates by reference the documents and reports listed below (other than portions of these documents that are furnished under Item 2.02 or Item 7.01 of a Current Report on Form 8-K):

 

 

 

We also incorporate by reference the information contained in all other documents we file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than portions of these documents that are furnished under Item 2.02 or Item 7.01 of a Current Report on Form 8-K, unless otherwise indicated therein) after the date of this prospectus supplement and prior to the termination of this rights offering. The information contained in any such document will be considered part of this prospectus supplement from the date the document is filed with the SEC.

 

We undertake to provide without charge to any person, including any beneficial owner, to whom a copy of this prospectus supplement is delivered, upon oral or written request of such person, a copy of any or all of the documents that have been incorporated by reference in this prospectus supplement. Requests for such copies should be directed to Conn’s, Inc., Attention: Sydney K. Boone — Corporate General Counsel and Secretary, 3295 College Street, Beaumont, Texas 77701, (409) 832-1696.

 

You should rely only on the information contained in this prospectus supplement, the accompanying prospectus the documents incorporated by reference and any written communication from us specifying the final terms of this rights offering. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell securities in any jurisdiction in which the offer or sale is not permitted. You should assume that the information appearing in this prospectus supplement is accurate as of the date on the front cover of this prospectus supplement only. Our business, financial condition, results of operations and prospects may have changed since that date.

PROSPECTUS

 

 

$150,000,000

 

CONN’S, INC.

 

Common Stock

Preferred Stock

Debt Securities

Warrants

 

 

 

 

This prospectus will allow us to issue up to an aggregate of $150,000,000 of our common stock, preferred stock, debt securities, and warrants from time to time at prices and on terms determined at or prior to the offering. When we decide to sell a particular class or series of securities, we will provide specific terms of the offered securities in a prospectus supplement. We may offer to sell these securities to or through one or more underwriters, dealers and agents, or directly to purchasers, on a continued or delayed basis. This prospectus describes the general terms of these securities. The specific terms of any securities and the specific manner in which we will offer them will be included in a supplement to this prospectus relating to that offering.

 

You should read carefully this prospectus and any supplement before you invest. You may not use this prospectus to sell securities unless it includes a prospectus supplement.

 

Our common stock is listed on the NASDAQ Global Select Market under the symbol “CONN.” On April 17, 2009, the closing price as quoted on the NASDAQ Global Select Market was $15.60 per share.

 

Our principal executive office is located at 3295 College Street, Beaumont, Texas 77701. Our telephone number is (409) 832 -1696 and our company website is www.conns.com. We do not intend for information contained on our website to be part of this prospectus.

 

Investing in the securities we may offer involves various risks. See the section entitled “Special Note Regarding Forward-Looking Statements” on page 5 and “Risk Factors” on page 4 and contained in our filings made with the Securities and Exchange Commission. Additional risks associated with an investment in our company as well as with the particular types of securities will be described in the related prospectus supplement.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

 

 

The date of the prospectus is April 28, 2009

TABLE OF CONTENTS

 

 

 

You should rely only on the information contained or incorporated by reference in this prospectus. Neither we nor the underwriters have authorized anyone to provide you with any information that differs from the information in this prospectus. The information in this prospectus is complete and accurate as of the date on the front cover, but the information may have changed since that date.

 

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or the SEC, using a “shelf” registration process. Under this shelf registration process, we may from time to time sell:

 

 

 

 

in one or more offerings up to a total dollar amount of $150,000,000. We have provided to you in this prospectus a general description of the securities we may offer. Each time we sell securities under this shelf registration process we will provide a prospectus supplement that will contain specific information about the terms of the offering. We may also add, update, or change in the prospectus supplement any of the information contained in this prospectus. To the extent there is a conflict between the information contained in this prospectus and the prospectus supplement, you should rely on the information in the prospectus supplement, provided that if any statement in one of these documents is inconsistent with a statement in another document having a later date — for example, a document incorporated by reference in this prospectus or any prospectus supplement — the statement in the document having the later date modifies or supersedes the earlier statement.

 

As permitted by the rules and regulations of the SEC, the registration statement, of which this prospectus forms a part, includes additional information not contained in this prospectus. You may read the registration statement and the other reports we file with the SEC at the SEC’s web site or at the SEC’s offices described below under the heading “Incorporation of Documents by Reference.”

 

This summary highlights selected information about us and does not contain all the information that may be important to you. To understand the terms of the securities being offered by this prospectus, the associated prospectus supplement, and any free writing prospectus, we encourage you to read the entire prospectus, especially the risks of investing in the shares described under the section “Risk Factors,” and the documents identified under the caption “Incorporation of Documents by Reference.” Unless the context otherwise requires, all information in this prospectus, any prospectus supplement, and any free writing prospectus which refers to “Conn’s,” “we,” “us” or “our” means Conn’s, Inc. and all of its direct and indirect subsidiaries, limited liability companies, and limited partnerships.

 

Company Overview

 

We are a specialty retailer of home appliances and consumer electronics. We sell home appliances including refrigerators, freezers, washers, dryers, dishwashers, and ranges and a variety of consumer electronics including LCD, plasma and DLP televisions, camcorders, digital cameras, Blu-ray and DVD players, video game equipment, portable audio, MP3 players, GPS devices and home theater products. We also sell home office equipment, lawn and garden equipment, mattresses, and furniture and we continue to introduce additional product categories for the home and for consumer entertainment to help increase same store sales and to respond to our customers’ product needs. We offer over 3,500 product items, or SKUs, at good-better-best price points representing such brands as General Electric, Whirlpool, Electrolux, Frigidaire, Friedrich, Maytag, LG, Mitsubishi, Samsung, Sony, Toshiba, Bose, Canon, JVC, Serta, Simmons, Spring Air, Ashley, Lane, Broyhill, Franklin, Hewlett Packard, Compaq, Poulan, Husqvarna and Toro. Based on revenue in 2007, as reported in Twice, This Week in Consumer Electronics, we were the 9th largest retailer of home appliances and the 41st largest retailer of consumer electronics in the United States.

 

We began as a small plumbing and heating business in 1890. We began selling home appliances to the retail market in 1937 through one store located in Beaumont, Texas. We opened our second store in 1959 and have since grown to 75 stores. We have been known for providing excellent customer service for over 118 years. We believe that our customer-focused business strategies make us an attractive alternative to appliance and electronics superstores, department stores, and other national, regional, and local retailers. We strive to provide our customers with:

 

 

We believe that these strategies drive repeat purchases and enable us to generate substantial brand name recognition and customer loyalty. During fiscal 2009, approximately 67% of our credit customers, based on the number of invoices written, were repeat customers.

 

In 1994, we realigned and added to our management team, enhanced our infrastructure and refined our operating strategy to position ourselves for future growth. From fiscal 1994 to fiscal 1999, we selectively grew our store base from 21 to 26 stores while improving operating margins from 5.2% to 8.7%. Since fiscal 1999, we have generated significant growth in our number of stores, revenue, and profitability. Specifically:

 

 

 

 

Our principal executive offices are located at 3295 College Street, Beaumont, Texas 77701. Our telephone number is (409) 832-1696, and our corporate website is www.conns.com. We do not intend for information contained on our website to be part of this prospectus.

 

Subsidiary Guarantors

 

One or more of our subsidiaries may fully and unconditionally guarantee any series of debt securities offered by this prospectus, as set forth in a related prospectus supplement. These subsidiaries are sometimes referred to in this prospectus as possible subsidiary guarantors. The term “subsidiary guarantors” with respect to a series of debt securities refers to our subsidiaries, if any, that guaranty that series of debt securities. The applicable prospectus supplement will name the subsidiary guarantors, if any, for that series of debt securities and will describe the terms of the guarantee by the subsidiary guarantors.

 

You should rely only on the information contained or incorporated by reference in this prospectus or a prospectus supplement. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus supplement, as well as information we have previously filed with the SEC and incorporated by reference, is accurate as of the date of those documents only. Our business, financial condition, results of operations, and prospects may have changed since those dates.

 

An investment in our securities involves various risk factors. You should carefully consider the risks described in the applicable prospectus supplement, together with all of the other information appearing in this prospectus or incorporated by reference into this prospectus, including without limitation, any risk factors discussed in our Annual Report on Form 10-K and any other filings made with the SEC, in light of your particular investment objectives and financial circumstances. The risks so described are not the only risks facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial conditions, or results of operations could be materially adversely affected by any of these risks. The trading price of our securities could decline due to any of these risks, and you may lose all or part of your investment.

 

This prospectus contains forward-looking statements. We sometimes use words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “project” or the negative of such terms or other similar expressions, as they relate to us, our management and our industry, to identify forward-looking statements. Forward-looking statements relate to our expectations, beliefs, plans, strategies, prospects, future performance, anticipated trends and other future events. We have based our forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business. Actual results may differ materially. Some of the risks, uncertainties and assumptions about us that may cause actual results to differ from these forward-looking statements include, but are not limited to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

You are cautioned not to place undue reliance on any forward-looking statement. The forward-looking statements included or incorporated by reference into this prospectus reflect our views and assumptions only as of the date of this prospectus or the applicable incorporated document. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

 

Unless otherwise provided in the applicable prospectus supplement, we currently intend to use the net proceeds from the sale of the securities under this prospectus for general corporate purposes, including general and administrative expenses, to repay or refinance debt, and for acquisitions of, or investment in, properties, companies, or assets that complement our business. We will set forth in a prospectus supplement relating to a specific offering our intended use for the net proceeds received from the sale of securities in that offering. Pending the application of the net proceeds, we intend to invest net proceeds in short-term investment grade and U.S. government securities.

 

Our ratios of earnings to fixed charges for the periods indicated below were as follows: