Conn's Inc (CONN) 2007 Q1 法說會逐字稿

Good morning, and thank you for holding. Welcome to the Conn's Inc. conference call to discuss earnings for the first quarter ended April 30, 2007. My name is Audra, and I will be your operator today. During the presentation, all participants will be in a listen-only mode. After the speakers' remarks, you will be invited to participate in a question-and-answer session. As a reminder, this conference is being recorded.

Your speakers today are Thomas J. Frank Sr., Chairman and Chief Executive Officer of Conn's; and Mr. David L. Rogers, the Company's Chief Financial Officer. I would like to turn the conference over to Mr. Rogers. Please go ahead, sir.

Thank you, Audra. Good morning, everyone, and thank you for joining us. I am speaking to you today from Conn's corporate offices in Beaumont, Texas. You should have received a copy of our earning release dated May 31, 2007, distributed before the market opened this morning which describes our earnings and other financial information for the quarter ended April 30, 2007. If for some reason, you did not receive a copy of the release, you can download it from our website at conns.com.

I must remind that you some of the statements made in this call are forward-looking statements within the meaning of the Securities and Exchange Act of 1934. These forward-looking statements represent the Company's present expectations or beliefs concerning future events. The Company cautions that such statements are necessarily based on certain assumptions which are subject to risks and uncertainties which could cause actual results to differ materially from those indicated today.

I would now like to turn the call over to today's host, Thomas J. Frank Sr., Conn's Chairman and CEO. Tommy?

Good morning. First we'll address our store sales. As we look at our same-store sales being essentially flat at three-tenths of 1% down against last year a same-store sales for the same quarter, we had a 16% increase. So being up against that large increase, we really held our own in this same-store sale area. In the non-affected storm areas, our same-store sales grew during the quarter at 2.9%, while overall sales were up 5.6%. We saw continued improvement month-over-month in the first quarter in the same-store sales and in fact, booked through this morning's same-store sales for our entire Company, all areas including storm affected areas were up 1.4%. This occurs even though we still face large comps in the second quarter of last year's 7.2% due to storm-related activities. We feel that we have definitely turned the corner on same-store comps.

As we look at the categories; our appliance sales were down about 6.4% for the first quarter. In some part that is due to the influence of the storm, and other parts, I think it is a need for better execution on our part. Month to date in May, we're at positive growth once again in this core category of appliances, while the appliance industry itself is projecting negative growth in low to mid single digit range.

Lawn and garden fluctuates and the outlook looks very good with much rainfall in our area, as it continues to be helpful for this category of our business. Furniture growth increased at a rate of 150%. We like this area very much, as the margins are greater and we can compete very favorably because we stock this merchandise and offer next day delivery.

As we look at our mattress category -- what is affecting the volume there is that we are actually ending the last month of an exclusive 36-month arrangement with a single vendor. We expect to broaden selection and vendors and return to positive growth in this area over the next two quarters.

Our inventories are down approximately $6 million or 7% from January 31st, '07, and we are focused on better supply chain management, while at the same time, striving to return our top line sales growth to double-digit performance.

As we look at our credit portfolio, the receivables grew by $25 million year-over-year, while our 60-day delinquency decreased in hard dollars at $2.3 million for the same period year-over-year. Extensions were stable at 2.25%. The reage portion of our portfolio at the end of January '07 was 18.14%, and it dropped to 17.11% during this first quarter, for a decrease of 103 basis points.

Our charge-offs are $700,000 less this quarter versus the same quarter a year ago, at an annualized net charge-off rate of 2.7% this quarter versus last year's annualized charge-off rate for the same period of 3.6%. That's a 25% decrease in charge-offs period-over-period from a year ago. Our 60-day delinquency decreased from January of '07 from 6.6% to 6.0%. This delinquency is down for the second quarter in a row.

I would like to talk a moment about promotional credit, as I think we may not have always clearly defined this term for you as we use it. Extended promotional credit is granted generally to those customers with credit scores of around the 700 area or better. All of this credit that is promotional requires that monthly payments be made on time and if the payment is not made on a timely basis, interest is assessed on the balance. We do not defer payments under this program. This credit is generally used to promote high-end products with higher gross margin and gives us access to a broader range of customers. This represents about 21% of our portfolio, and it is up from about 18%. We consider this good, as it balances the quality of our portfolio while accomplishing already mentioned objectives. So while there may be much anxiety about many other portfolios in the industry, our numbers are trending in a very positive manner and it is our expectations that we will continue to improve these operations and perform in the realm of pre-storm standards.

As we look at store growth, there were no new stores opened in the first quarter. We are projecting seven to ten new stores, mainly in the third and fourth quarter. We have also executed letters of intent to open stores in Oklahoma, thus expanding our geographical base. We are also relocating three of our older, smaller stores; two in Houston and one in the Golden Triangle. We expect increased sales as a result of these relocations. You should also note, that as a defensive move, we have in the past and will continue in the future to cannibalize some of our own stores with new openings.

To date, we have repurchased about $10 million of our stock, and we expect to continue this program as conditions warrant. Additionally, you can expect an 8-K release shortly, addressing the following issues. Our Company's Board of Directors approved new officers responsibilities yesterday. These responsibilities and the changes included extending your CEO employment agreement for an additional three years, expiring -- currently expired January of '08, and it is now extended to January of 2011.

Bill Nylin's title was changed from Executive Vice Chairman and Chief Operating Officer to Executive Vice Chairman. And his employment agreement was extended an additional two years -- was expiring on January of '08, and now expires January 2010. Tim Frank picked up the title -- in addition to the title of President, of Chief Operating Officer. David Trahan and Tim's duties were broadened. David Trahan was elected as Executive Vice President from a retail, from his existing office of Senior Vice President, and his duties were expanded. We also elected Rey de la Fuente as Executive VP of Credit, from his existing office of Senior Vice President of Credit.

David, that concludes my remarks. I will turn it over to you.

Thank you, Tommy. We're very pleased with our performance this quarter, as we were up against a hurricane-impacted comp store sales increase of 16.1%, and still grew diluted earnings per share 10.2%.

Before we discuss our financial performance this quarter any further, I want to give an overview of some accounting changes that took place during the period. We adopted several new accounting principles during the quarter that impacted the accounting for our securitization transaction. We adopted FAS 155, FAS 156, FAS 157, and FAS 159. Specifically, these changes effective February 1, 2007, resulted in changes in the fair value of our interest and securitized assets being reflected in current earnings in the line, finance charges and other, with no adjustment to prior periods. Previously, these changes were recorded in other comprehensive income. For the first quarter, finance charges and other and pre-tax income benefited $64,000 as a result of these changes.

While the underlying economics of the securitization transaction have not changed, this change in the way that we account for it could produce more volatility in the future reported earnings, as changes in the assumptions used to value our interest vary over time. The assumptions that could produce significant changes include; the discount rate, interest rates, expected losses, and projected expenses. For example, if we were to complete a new bond offering at a borrowing rate that is 100 basis points higher than our current variable funding note rate, there would be a $3.1 million charge to earnings, assuming no changes in the portfolio balance or other assumption changes. To put this statistic in perspective, however, if we were to complete a new bond offering today, we believe the borrowing rate would be lower, not higher.

See our 10-K filed on March 29, 2007, for more information about the sensitivity of this valuation to various changes in the assumptions. That information can be found on page 75 of that document.

Another accounting change in the quarter was the adoption of FIN 48. While we made no adjustments to our books, we did make that adoption on February 1st.

Returning to our discussion of the financial performance for the quarter; total revenues were up 6.8% to $205.3 million, made up of an increase in finance charges and other of 16.9% and a net sales increase of 5.6%. Same-store sales, as Tommy said, were down 30 basis points versus a 16.1% increase in the prior year. Finance charges and other increased as the net charge-off rate fell significantly from the prior year period to 2.7%. And we experienced strong portfolio growth during the quarter, at an annual rate of 10%.

Our gross margin improved by 100 basis points, primarily due to a 17.8% drop in net credit charge-offs and solid portfolio growth during the quarter. Our product gross margin was up 10 basis points over the prior year period.

SG&A expenses increased as a percentage of revenues by 90 basis points, offsetting most of the increase in gross margin. The SG&A increase as a percentage of revenues was driven primarily by higher net advertising cost and higher occupancy cost, due largely to new stores opened in the past year.

Both the provision for bad debts and the provision for income taxes were up. The provision for bad debts for owned receivables was up due to higher losses in the current period compared to lower losses combined with reserve reversals in the prior period. The provision for taxes was up due to a new margin tax implemented -- I am sorry, implemented in June of last year in the state of Texas.

Net income increased $1 million or 8.3% to $12.9 million, and earnings per diluted share grew 10.2% to $0.54.

Turning to the balance sheet and cash flows, we used $5.6 million of cash flow in operations for the three months ended April 30, 2007, compared with cash used of $8.4 million for the three months ended April 30, 2006. Both periods were negatively impacted by the timing of payments on accounts payable and accrued expenses. The current period was impacted heavily by the timing of receipts of inventory, which was down by 7%, as we anticipated, while the prior year period was impacted by the repayment of amounts that had been deferred as a result of the hurricanes. Also impacting cash flows for the current period was an increase in our retained interest and sold receivables, as a result of a decrease in our effective funding rate due to the effect of the paydown of the 2002 series of bonds.

Cash from investing activities provided $6 million in the current period as a result of proceeds of $8.7 million from the sales of two of our properties, compared with $7 million used a year ago, which primarily represented investments in property and equipment. We realized $2.1 million of gains on the sales of properties in the current period, with $800,000 recorded in current earnings and the remaining $1.3 million deferred. The amounts deferred relate to properties that were leased back for continued use in our operations and will be amortized into income as a reduction of lease expense over the lives of the leases.

Financing activities used $4.1 million in the current year, primarily for purchases of $4.6 million of treasury stock, compared with cash provided of $1.1 million in the three months ended April 30, 2006, primarily from proceeds from issuance of stock under employee benefit plans. Through May 30th, we had purchased 425,500 shares of our stock and have approximately $39.6 million remaining under our $50 million authorization to repurchase shares. We intend to continue purchasing shares under this plan, dependent upon market conditions and share price.

We have no bank debt on our balance sheet and have lines of credit from banks of $49 million, net of LOCs, and $8 million under an unsecured line of credit available to be drawn for working capital and/or capital expenditures needs. In addition, at April 30, 2007, we had $44.9 million of cash invested.

We reconfirmed today our guidance for fiscal year 2008, at $1.75 to $1.85. All of the analysis that I just provided and much more is available in our Form 10-Q for the quarter ended April 30, 2007, to be filed with the Securities & Exchange Commission later today.

Tommy, that concludes my remarks -- if you're ready to take questions.

We're ready.

All right. We'll open the lines up for questions.

Thank you. (OPERATOR INSTRUCTIONS) We'll go first to Rick Nelson at Stephens, Inc.

Congratulations on a great quarter.

Thank you, Rick. Good morning.

The promotional credit -- can you tell us where you are, relative to your limits?

Yes. We have a 30% limit on the portfolio. And I believe the number I quoted was 18% -- is where we are presently.

Got you. And you will be refunding the notes related to the securitization, the series A amended. Wondering how you see demand for that?

Rick, at this time we don't see any problem relative to that. We think that we'll have the same kind of demand that we have experienced in the past, which has been very good. Obviously, there is market conditions that could affect that. But we expect that we'll have good demand for these bonds, which we expect to probably go to the market with in late summer.

Past indications have shown that those issues have been over-subscribed, substantially.

And 100-basis point increase in interest rates, you were saying would result in a $3.1 million charge, but rates are presently lower if -- would that be a credit?

It would be. That would end up being income, yes.

Got you. It's all of similar magnitude?

If it was of a similar change, Rick. But there is other factors that enter into that, and I don't know that it will be one for one. But we would not --again, we would not expect at this point, obviously, to have 100 basis point increase, nor would I expect to have 100 basis point decrease. I think we're -- the way it would look right now is it would be something very similar to what we're already experiencing.

Got you. And the loss ratio of 2.7%, that's approaching your all-time low. I am wondering what the drivers are to that? And where you see that ratio trending, as we look forward?

I think it is strictly our execution and our ability to re-establish quality people that do this work for us that we lost during the storm. And as I said earlier, anything around that number we're pleased with. So we think the low that we reached was around 2.3 or 2.4%, and 2.7% looks good to us.

Great. Thank you.

Thank you.

We'll move next to David Magee at Suntrust Robinson Humphrey.

Good morning and good quarter.

Thank you.

Just a couple of questions. On the product gross margins, it was good to see that the number higher year-to-year. Is that -- I am assuming it is reflective, to some degree, of better TB pricing than we saw maybe late last year. What are you assuming is going to happen in the arena over the next couple of quarters, in terms of the promotional atmosphere with the flat panel TVs?

Well, first of all, I think the increase was due partially to what you attributed it to and also was due to the mix in our furniture, which tends to have higher margins, as I stated. I think it would be very difficult for us to forecast what's going to happen to margins in that arena. But we will tell you that certainly there is increased competition there, as everyone is well aware of. However, our mix of high-end products that we sell, the margins have continued to stabilize. And I really wouldn't venture to forecast, David, because that market changes so abruptly that anything I would say would be strictly a guess. But Conn's is positioned well with buying power and inventory to compete in the pricing category and maintain margins as well as anyone in the industry.

Also, on the advertising expense side, that being up a little bit in the first quarter, do you anticipate that to be a similar pattern over the next couple of quarters, as well?

I think, again, it depends on if we can get this double-digit increases that I feel like we should be obtaining. I don't look for it to decrease significantly.

And when you say double-digit increases -- ?

In sales at the top line.

Thank you. Good luck.

Thanks, David.

Next we'll move to Laura Champine at Morgan Keegan.

Good morning.

Good morning.

I noticed that you added another store, I think, to the expected store growth this year. And wanted to get a little more color around how that decision got made. And also maybe talk about what that implies for full year capital expenditures?

First of all, how the decision got made is, how quickly can we bring the stores on? And there are a lot of moving parts to bringing a store on; leases to be signed, buildings to be built out -- and those are still estimates that we're estimating, so it could still change back down. So we continue to evaluate the properties that are available and the locations available that offer us opportunities.

The capital expenditure budget should not change significantly. We asked for no changes in our board meeting yesterday, and we don't see significant changes as a result of that number changing.

Great. Thank you.

Next we'll take a question from Michael McTighe at Nollenberger Capital.

Hi, guys, thanks. Can you, first of all, remind us when the loan loss rate peaked last year? Was that in the second quarter?

It was in the second quarter last year.

Okay. And what was the rate, then?

I believe it was 3.7% in the second quarter.

Okay.

I think it was -- if my memory serves, it was 3.6% in the first, 3.7% in the second, 2.9% in the third, 2.8% in the fourth, and it's 2.7% this quarter.

In terms of the bond financing, any way to kind of pin you guys down more on a timing of when you expect that to get done?

No.

Okay. You talked about -- a bit in your sales release about some of the things you're doing, in terms of product mix as -- it looks like you're deemphasizing the track business a bit. Can you talk a bit about what you're kind of replacing that with and how you see that track business?

I don't think we're deemphasizing that. I think that that track business is made up of a number of variable components, i.e. computers, laptops -- computers, we perform well in, and it also consists of camcorders, compact stereo, portable TVs, and vacuum cleaners. And while we performed well in the computer business -- which we like because it definitely is a financeable item and it brings traffic into our stores, we did not perform well in camcorders and the industry is down somewhat there. We did not perform well in compact stereos nor portable TVs, which are low margin items. And we also lost some volume in vacuum cleaners. I would say that most of this really is attributable to our own internal performance and is an area that is being corrected, presently.

Great. Thanks.

-- that track business and we're going to continue to stay in it.

Next we'll go to Tyler Burke at Trenton Capital.

Hey, guys. Given that you beat the estimates this quarter but you didn't raise guidance; are you effectively trying to lower expectations for the balance of the year?

Well, here is the thing, Tyler. We did not give any guidance by quarter. So what we did this quarter fit our particular model that we have projected for the year. We have not seen anything yet that would cause us to change our estimate for the full year. We would be hopeful, that we would beat that, but we are not in a position at this point to change our guidance.

Okay. And I appreciate you guys giving the reaging stat. That's helpful. I just wanted to clarify the definition of that. Is that -- when you mentioned 17%, is that that -- that have been reaged in the last six months, or is that cumulative?

That's cumulative.

Okay. And then you mentioned the comps month to date are positive, and I just was curious -- you also mentioned that the rain had helped out. Would the comps still be positive without the rain?

I think so. I think what I was referring to when I said the rain, was a category of lawn and garden, which is one of our smaller categories. We didn't -- I didn't actually pull that number out before I told you that those comps were up. But that category is a smaller category. What is up is our clients business, and our electronics continue to be up.

Okay. And then the last question that I have was on the service maintenance agreements. Looked like that revenue was up 16, 17%, and product sales were up 5%. Just curious, what was happening there? Did you just sell more of them or did you change the way you recognized the revenue?

There is no change in revenue recognition. What did occur and what does occur is new stores mature. And as new salespeople become seasoned, the attachment rate of the part of the service maintenance agreement to the product sale increases. So that's an expectation that we had and that is a phenomenon that occurs as we bring on new stores. So you can see it go lower when we bring on a group of new stores, and stabilize and then go back up as a percent. It is strictly driven by the maturity level of our sales staff in new markets.

The other thing that might impact that some, too, is the fact that our loss rates are declining, and that does impact that particular area, also.

I guess on the revenue recognitions -- maybe not revenue recognition but maybe some of the loss you experienced, you just would adjust that line item?

Yes.

Okay. That makes sense. Thank you very much.

We'll move next to [Chuck Grieg] at Blue Line Capital.

Good morning, guys.

Good morning.

Just wanted to ask a quick question regarding the growth in your finance revenues relative to the growth in your product sales. Finance revenues grew about a three times faster rate. Can you just shed a little more light on on what's driving that?

It's strictly a function of what we've been talking about, Chuck, relative to loan losses. They are down, and that line, finance charges and other, is net of losses. We had high losses in the quarter last year and they're much lower this year. That -- so we had a much greater increase in that revenue line, and it outpaced the product revenue.

Are the percentage of of sales that you're financing -- is that percentage change much?

No.

My last question -- was a function of -- you talked about your furniture sales really improving. And I noticed many of the other large competitors continue to struggle, Ethan Allen, furniture brands, Lazy Boy. I was wondering if you can talk about what's driving your success in the furniture category?

Well I think that -- first of all, that we are not a full line furniture dealer. We have selected the fastest moving SKUs that the industry indicates move the fastest, and we were able to obtain these numbers, and those are the products that we stock in our stores. So we're not a full line furniture dealer. Secondly, as people visit our stores and see that we have new product offerings -- that has been a factor in driving it. Thirdly, as people pay their accounts down and they have increased open to buys on their credit accounts -- we have a very loyal customer base, a repeat customer base that likes this product. And so I think those are the three factors that I can tell you that's driving it.

That's great. Thank you very much.

We'll move next to Scott Tilghman at Hudson Square Research.

Good morning.

Hi, Scott.

Really wanted to touch on three things pretty quickly. First of all, on the G&A and the mix between advertising and occupancy costs; can you give us a sense of the relative magnitudes of those two in that 90 basis point increase?

Most of it was in advertising.

Because it seemed like you had been getting a fair amount of leverage in that category up until this quarter. I was wondering whether the occupancy cost is a function of timing on lease renewals, or if that's just a function of sales being relative -- the growth in store sales being relatively low?

I think there was a conscious effort on our part to definitely spend at a higher rate in advertising. I think that last year during that quarter, the cause of the effects of the storm -- we really didn't need to spend as heavily as we had previously. So I think that's what you're seeing. There was a conscious decision on our part to be sure that we had adequate coverage out there, and it just wasn't that kind of need previously.

I think the other thing on occupancy costs -- I think we tend to think in terms of lease costs and things like that, and how are we leveraging those. We've had a fairly substantial increases in property taxes and utility expense and things like that that affect our occupancy costs also, and it is those kinds of things where we're really experiencing the increases.

We really have very low and very competitive rental rates in our stores as base rates.

Second thing I would hit on is on the credit side, I noticed the number of accounts for last year, just from a comparison stand point, is different than what had been published previously -- same for your charge off ratios. Wondering if you can comment on those changes?

Hang on just a second, Scott.

If you want to come back, I can hit on my third.

Why don't do you that?

Third, Tommy, you addressed some of the real estate issues and questions already; but just wondering if you have a sense of how the pipeline looks beyond the current year? As we head into what you call fiscal '09, whether or not we should see similar type store base growth or if you have the opportunity to add another couple stores to that seven to ten number that you've posted for this year?

First of all, I think we'll do a better job in fiscal '09 of trying to bring those stores online -- space more evenly, if you will. We have begun that process several months ago to ensure that that occurs. As far as, is seven to ten the right number for '09? We have said in the past, and I continue to support the concept that a 10 to 12% growth rate in store openings is probably the most practical amount that we should be handling at this time. There is a point that we have experienced in the past when we open these stores too fast, that earnings drop and execution falters. And I am really not interested in experiencing either one of those. So we think that -- our experience has shown us that that's a good, safe number to open. We can do it well and continue to make profit.

Scott, on your numbers you asked about -- on the number of customers, as far as I know, that's just a correction of a number that was published in the past. It is a small change. Relative to the charge-off ratio, that is a change in the way we calculate that figure. This is strictly the net charge-off. We had, in the past, included some of our accruals for bad debts in that number. We stopped that practice when the accruals became to be so large, and we said the real measure is, what are you actually charging off. So we changed that early last year, and so you're probably looking at something that was compared to an old number. Today we take that actual charge-off number and we annualize it for the whole year and that's -- so all of these numbers you're looking at in the press release are on the same basis. They compare on the same way.

Great. Thank you. (OPERATOR INSTRUCTIONS)

We'll go next to Arvind Bhatia at Sterne Agee.

Good morning, guys.

Good morning.

Congratulations on a good quarter.

Thank you, sir.

My first question is; is there a way to look at the potential impact of gasoline prices through the summer, particularly on the demand side of the business, kind of what you experienced in the past?

And then I want to address the furniture question a little bit; the rates there, obviously, are very strong. When do you kind of anniversary those strong rates? And what's a more normalized growth rate in the furniture business that we should be expecting six to twelve months from here?

First of all, we have been through periods of escalating gas prices. We've been around -- most of us have been around long enough to know how it has traditionally impacted our business. Traditionally what has happened, as gasoline prices increase, people reduce the amount of vacation trips they're taking in their car. As they do that, as travel becomes more expensive, they traditionally turn to enhancing their home life, and they do that with the products that we sell. Generally they will focus on entertainment products, but they also focus on remodeling the kitchen. So since we really -- our business is in the secondary market and not the new home market, gas prices in the past have tended to help our business, not hurt our business.

As far as the growth rate of furniture sales, we think that there is a lot of potential left for us in particular. I am not sure what the growth rate is nationally. My understanding is, as one of the earlier speakers has indicated, that many of these larger furniture stores are struggling with it. But remember, this category is an additional category for us. It is not our core category, although I wouldn't mind seeing it grow to a core category. We certainly feel that we have considerable upside potential as we continue to develop stores, like I mentioned, three new stores -- those stores just don't have the capacity to put furniture in them. As we continue to enhance our stores and provide for the space for it, we just think there is a lot of potential since we've been very selective in the SKUs that we've put in that category.

I am sorry I can't give you numbers, but part of it is a forecast that you're asking for. And second one, we just really aren't that familiar with what the furniture industry as a whole has experienced as growth. My understanding is it is somewhat of a decline right now.

Arvind, we didn't have very much of a furniture base to go against in the first quarter of last year. I would expect the comps to get tougher each quarter as we move through the year. But I would think it is probably the fourth quarter until you're really going to see it tighten very much.

Great. Thank you, guys.

Okay.

Next we'll go to [Peter Achberg] at (inaudible).

Hi, guys.

Good morning.

Good morning. I just wanted to make sure I understood exactly how you're coming up with your fair value for the interest on the securitized assets and how it changed from how you were calculating it before.

We're really not changing the way we calculate it, Peter. It is really the way we're reflecting it on our books.

Okay.

We were doing fair value before. We're still doing fair value, with some very minor changes. But before, these changes in valuation were flowing through other comprehensive income on the balance sheet, and those changes then would acreet into income over the life of the receivables. This change now, FAS 159 -- one that we adopted, allows us to do fair value and run all the changes through -- insists that we run all the changes through the income statement. That's really the change. It is how we're reflecting it -- really on the P&L statement.

Okay. It is not like you've gone out and gotten a fair value opinion on the value of these receivables? You're evaluating it the same way that you always have, it is just how it is hitting the income statement?

Yes. We did look at all the assumptions -- relative to FAS 157, we were required to investigate all the assumptions that go into that calculation. It prescribes how we're to fair value that asset. And we looked at every assumption. We have to look at it from the standpoint of someone in the market, how someone who was interested in buying that asset from us, how they would look at it. But to your point, yes, it is not like there is another asset just like this one out there that we could compare it to. So we tried to use objective assumptions where we could, but we have to admit that some of them were very subjective.

Well, have you put any thought into maybe setting a precedent and putting a -- getting a price out there by selling them?

We certainly have considered that in the past.

Okay. Not recently, though.

Not recently.

I mean how would you go about doing that sort of -- would you look at it in terms of being accretive to earnings per share by selling it and buying back shares? How would you look at it to decide if you would sell it? What would your criteria be?

That would be a business decision, and I couldn't tell you exactly the kind of process that we would use. I will tell you that we have looked to outside folks in the past and had them look at our business and see if they were interested in buying the credit business. And we believe we can do a better job of running it right now.

I understand. I understand being -- wanting to be in the credit business, but what about just not keeping the sort of the I/O strip and the remaining residual interest in the principal, just selling that $180 million portion?

We would certainly entertain such a thing if it came up. We just have nothing in the works right now where we're examining that particular item.

Okay. Thank you very much.

We'll take a follow-up from Scott Tilghman at Hudson Square Research.

Thanks. Just wanted to follow-up quickly on the furniture side of the business. Was curious if you have a sense of how many of the furniture purchases are related to either TV or mattress sales, versus being just stand-alone furniture sales, in their own right?

Yes. We did -- what is it, Tim?

52%.

Help us understand that.

52% of the sales are with existing customers that are buying other types of product.

Okay. Thank you.

That does conclude the question-and-answer session. Gentlemen, I will turn the conference back over to you.

Well, again, thank all of you for joining us. We felt like we had a successful quarter. We feel like the effects and the impact of this storm are finally beginning to wane -- and thank goodness. I will tell that you we spent considerable time, money and energy in replicating our home office here in two markets in Dallas and in Houston. And we sure hope and pray that we never have another catastrophic event as we did two years ago. But I can tell you that we have a disaster plan today that we feel like will ensure, not only the successful continuation of our Company, but not experience the kind of deterioration in performance that we experienced by the previous disaster.

So that concludes concludes my remarks -- David, and thank all of you for joining us and have a good day.

Thanks.

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