For the quarterly period ended ~~July~~October 31, 2010

Commission File Number 000-50421

CONN'S, INC.

(Exact name of registrant as specified in its charter)

A Delaware Corporation	06-1672840
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

3295 College Street

Beaumont, Texas 77701

(409) 832-1696

(Address, including zip code, and telephone

number, including area code, of registrant's

principal executive offices)

NONE

(Former name, former address and former

fiscal year, if changed since last report)

Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ x ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer [ ]	Accelerated filer [ x ]	Non-accelerated filer [ ]	smaller reporting company [ ]
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [ ] No [ x ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of ~~August 24, 2010:~~December 1, ,2010:

Class		Outstanding
Common stock, $.01 par value per share		~~22,489,638~~31,758,211

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	Page No.

Item 1.	Financial Statements		1

	Consolidated Balance Sheets as of January 31, 2010 and ~~July~~October 31, 2010		1

	Consolidated Statements of Operations for the three and ~~six~~nine months ended
	~~July~~October 31, 2009 and 2010		2

	Consolidated Statement of Stockholders’ Equity for the ~~six~~nine months ended
	~~July~~October 31, 2010		3

	Consolidated Statements of Cash Flows for the ~~six~~nine months ended
	~~July~~October 31, 2009 and 2010		4

	Notes to Consolidated Financial Statements		5

Item 2.	Management's Discussion and Analysis of Financial Condition
	and Results of Operations		1619

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4043

~~PART II.~~Item 4.	Controls and Procedures		44

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		4144

Item 1A.	Risk Factors		4144

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		5458

Item 5.	Other Information		5458

Item 6.	Exhibits		5458

~~SIGNATURE~~		55
SIGNATURE			59

~~Part I. FINANCIAL INFORMATION~~

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Conn's, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
Assets	January 31, 2010			October 31, 2010
				(unaudited)
Cash and cash equivalents	$	12,247		$	12,422
(includes balances of VIE of $104 and $2,575, respectively)
Customer accounts receivable, net of allowance of $19,204 and $18,542 respectively		368,304			344,482
(includes balances of VIE of $279,948 and $236,151, respectively)
Other accounts receivable, net of allowance of $50 and $60, respectively		23,254			26,025
Inventories		63,499			83,729
Deferred income taxes		15,237			13,508
Federal income taxes recoverable		8,178			4,467
Prepaid expenses and other assets		8,020			9,577
Total current assets		498,739			494,210
Long-term portion of customer accounts receivable, net of
allowance of $16,598 and $15,542, respectively		318,341			288,738
(includes balances of VIE of $241,971 and $197,937, respectively)
Property and equipment
Land		7,682			7,264
Buildings		10,480			10,314
Equipment and fixtures		25,592			26,642
Leasehold improvements		91,299			91,770
Subtotal		135,053			135,990
Less accumulated depreciation		(75,350	)		(84,375	)
Total property and equipment, net		59,703			51,615
Non-current deferred income tax asset		5,485			6,685
Other assets, net (includes balances of VIE of $7,106 and $13,793, respectively)		10,198			22,101
Total assets	$	892,466		$	863,349
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt	$	64,055		$	7,665
(includes balances of VIE of $63,900 and $7,500, respectively)
Accounts payable		39,944			39,997
Accrued compensation and related expenses		5,697			4,896
Accrued expenses		31,685			27,779
Income taxes payable		2,640			1,482
Deferred revenues and allowances		14,596			12,703
Total current liabilities		158,617			94,522
Long-term debt		388,249			419,932
(includes balances of VIE of $282,500 and $292,700, respectively)
Other long-term liabilities		5,195			4,594
Fair value of interest rate swaps		337			185
Deferred gains on sales of property		905			898
Stockholders' equity
Preferred stock ($0.01 par value, 1,000,000 shares authorized; none issued or outstanding)		-			-
Common stock ($0.01 par value, 40,000,000 shares authorized;
24,194,555 and 24,222,025 shares issued at January 31, 2010 and October 31, 2010, respectively)		242			242
Additional paid-in capital		106,226			108,045
Accumulated other comprehensive loss		(218	)		(120	)
Retained earnings		269,984			272,122
Treasury stock, at cost, 1,723,205 shares		(37,071	)		(37,071	)
Total stockholders' equity		339,163			343,218
Total liabilities and stockholders' equity	$	892,466		$	863,349

Assets
January 31,
2010

July 31,
2010

(unaudited)
Cash and cash equivalents $ 12,247 $ 8,466
(includes balances of VIE of $104 and $104, respectively)
Other accounts receivable, net of allowance of $50 and $61, respectively 23,254 28,753
Customer accounts receivable, net of allowance of $19,204 and $18,479 respectively
(includes balances of VIE of $279,948 and $258,015, respectively) 368,304 355,861
Inventories 63,499 99,106
Deferred income taxes 15,237 13,830
Federal income taxes recoverable 8,148 -
Prepaid expenses and other assets 8,050 7,785
Total current assets 498,739 513,801
Long-term portion of customer accounts receivable, net of
allowance of $16,598 and $15,868, respectively 318,341 305,584
(includes balances of VIE of $241,971 and $221,562, respectively)
Property and equipment
Land 7,682 7,264
Buildings 10,480 10,314
Equipment and fixtures 23,797 24,640
Transportation equipment 1,795 1,684
Leasehold improvements 91,299 91,522
Subtotal 135,053 135,424
Less accumulated depreciation (75,350 ) (81,354 )
Total property and equipment, net 59,703 54,070
5,485 6,364
Other assets, net (includes balances of VIE of $7,106 and $7,569, respectively)
10,198 12,518
Total assets $ 892,466 $ 892,337
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt $ 64,055 $ 122,664
(includes balances of VIE of $63,900 and $122,500, respectively)
Accounts payable 39,944 62,115
Accrued compensation and related expenses 5,697 5,245
Accrued expenses 31,685 26,726
Income taxes payable 2,640 1,612
Deferred revenues and allowances 14,596 13,210
Total current liabilities 158,617 231,572
Long-term debt 388,249 307,073
(includes balances of VIE of $282,500 and $197,500, respectively)
Other long-term liabilities
5,195 4,794
Fair value of interest rate swaps
337 240
Deferred gains on sales of property 905 961
Stockholders' equity
Preferred stock ($0.01 par value, 1,000,000 shares authorized; none issued or outstanding) - -
Common stock ($0.01 par value, 40,000,000 shares authorized;
24,194,555 and 24,212,843 shares issued at January 31, 2010 and July 31, 2010, respectively) 242 242
Additional paid-in capital 106,226 107,465
Accumulated other comprehensive loss (218 ) (155 )
Retained earnings 269,984 277,216
Treasury stock, at cost, 1,723,205 shares (37,071 ) (37,071 )
Total stockholders' equity 339,163 347,697
Total liabilities and stockholders' equity $ 892,466 $ 892,337

See notes to consolidated financial statements.

Conn's, Inc.	Conn's, Inc.											Conn's, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS	CONSOLIDATED STATEMENTS OF OPERATIONS											CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)	(unaudited)											(unaudited)
(in thousands, except earnings per share)	(in thousands, except earnings per share)											(in thousands, except earnings per share)

		Three Months Ended July 31,					Six Months Ended July 31,						Three Months Ended October 31,						Nine Months Ended October 31,
		2009			2010		2009			2010			2009			2010			2009			2010
		(As adjusted					(As adjusted						(As adjusted						(As adjusted
Revenues		see Note 1)					see Note 1)						see Note 1)						see Note 1)
Product sales		$	175,389		$	166,378	$	360,206		$	316,743		$	148,463		$	127,035		$	508,669		$	443,778
Repair service agreement commissions, net			8,859			8,341		18,649			16,258			7,320			6,035			25,968			22,293
Service revenues			6,052			4,183		11,596			8,940			5,599			3,769			17,195			12,709

Total net sales			190,300			178,902		390,451			341,941			161,382			136,839			551,832			478,780

Finance charges and other			40,128			34,763		79,828			69,243			36,116			33,019			115,945			102,262


Total revenues			230,428			213,665		470,279			411,184			197,498			169,858			667,777			581,042

Cost and expenses
Cost of goods sold, including warehousing
and occupancy costs			140,761			130,276		286,631			244,433			120,963			99,546			407,594			343,979
Cost of parts sold, including warehousing
and occupancy costs			2,797			2,120		5,384			4,492			2,672			1,642			8,056			6,134
Selling, general and administrative expense			64,979			63,478		127,717			124,221			65,307			56,507			192,326			178,876
Goodwill impairment														9,617			-			9,617			-
Costs related to financing transactions not completed														-			2,896			-			2,896
Provision for bad debts			8,026			9,048		13,670			15,322			12,651			9,372			26,321			24,694

Total cost and expenses			216,563			204,922		433,402			388,468			211,210			169,963			643,914			556,579

Operating income			13,865			8,743		36,877			22,716
Operating income (loss)														(13,712	)		(105	)		23,863			24,463
Interest expense, net			5,342			5,875		10,346			10,660			5,649			7,722			16,692			20,234
Other (income) expense, net			(13	)		12		(21	)		183			(34	)		(17	)		(54	)		166

Income before income taxes			8,536			2,856		26,552			11,873
Income (loss) before income taxes														(19,327	)		(7,810	)		7,225			4,063

Provision for income taxes			3,312			1,171		9,972			4,641
Provision (benefit) for income taxes														(4,955	)		(2,716	)		5,017			1,925

Net income		$	5,224		$	1,685	$	16,580		$	7,232
Net income (loss)													$	(14,372	)	$	(5,094	)	$	2,208		$	2,138

Earnings per share
Earnings (loss) per share
Basic		$	0.23		$	0.07	$	0.74		$	0.32		$	(0.64	)	$	(0.23	)	$	0.10		$	0.10
Diluted		$	0.23		$	0.07	$	0.73		$	0.32		$	(0.64	)	$	(0.23	)	$	0.10		$	0.10
Average common shares outstanding
Basic			22,454			22,484		22,450			22,479			22,459			22,493			22,453			22,484
Diluted			22,660			22,488		22,675			22,483			22,459			22,493			22,658			22,487

See notes to consolidated financial statements.

Conn's, Inc.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six Months Ended July 31, 2010
(unaudited)
(in thousands, except descriptive shares)

Other
Additional Compre-
Common Stock Paid-in hensive Retained Treasury
Shares Amount Capital Loss Earnings Stock Total

Balance January 31, 2010 24,194 $ 242 $ 106,226 $ (218 ) $ 269,984 $ (37,071 ) $ 339,163

Issuance of shares of common
stock under Employee
Stock Purchase Plan 19 - 93 93

Stock-based compensation 1,146 1,146

Net income 7,232 7,232

Adjustment of fair value of
interest rate swaps
net of tax of $34 63 63
Other comprehensive income 63 63
Total comprehensive income 7,295

Balance July 31, 2010 24,213 $ 242 $ 107,465 $ (155 ) $ 277,216 $ (37,071 ) $ 347,697

Conn's, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Nine Months Ended October 31, 2010
(unaudited)
(in thousands, except descriptive shares)

							Other
					Additional		Compre-
	Common Stock				Paid-in		hensive			Retained		Treasury
	Shares		Amount		Capital		Loss			Earnings		Stock			Total

Balance January 31, 2010		24,194	$	242	$	106,226	$	(218	)	$	269,984	$	(37,071	)	$	339,163

Issuance of shares of common
stock under Employee
Stock Purchase Plan		28		-		129										129

Stock-based compensation						1,690										1,690

Net income											2,138					2,138

Adjustment of fair value of
interest rate swaps
net of tax of $53								98								98
Other comprehensive income								98								98
Total comprehensive income																2,236

Balance October 31, 2010		24,222	$	242	$	108,045	$	(120	)	$	272,122	$	(37,071	)	$	343,218

See notes to consolidated financial statements.

~~Conn’s, Inc.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(unaudited) (in thousands)~~

Conn’s, Inc.							Conn’s, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS							CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)							(unaudited) (in thousands)
	Six Months Ended July 31,							Nine Months Ended October 31,
	2009			2010				2009			2010
	(As adjusted							(As adjusted
Cash flows from operating activities	see Note 1)							see Note 1)
Net income	$	16,580		$	7,232			$	2,208		$	2,138
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		6,660			6,625				10,062			9,776
Amortization, net		437			1,707				369			2,026
Costs related to financing transactions not completed									-			2,896
Provision for bad debts		13,670			15,322				26,321			24,694
Stock-based compensation		1,272			1,146				1,869			1,690
Goodwill impairment									9,617			-
Discounts and accretion on promotional credit		(1,396	)		(1,011	)			(926	)		(1,570	)
Provision for deferred income taxes		(1,522	)		840				(3,948	)		822
(Gains) losses on sales of property and equipment		(5	)		62				(79	)		176
Changes in operating assets and liabilities:
Customer accounts receivable		(4,634	)		10,906				(4,551	)		30,317
Other accounts receivable		10,044			(5,499	)			11,148			(2,771	)
Inventory		(4,896	)		(35,607	)			24,273			(20,230	)
Prepaid expenses and other assets		997			235				(1,287	)		(1,558	)
Accounts payable		(2,551	)		22,171				(15,150	)		53
Accrued expenses		(10,306	)		(5,411	)			5,673			(6,173	)
Income taxes payable		(8,231	)		6,804				(11,224	)		2,207
Deferred revenue and allowances		(769	)		(1,586	)			571			(1,893	)
Net cash provided by operating activities		15,350			23,936				54,946			42,600
Cash flows from investing activities
Purchases of property and equipment		(6,763	)		(1,650	)			(8,627	)		(2,340	)
Proceeds from sales of property		22			589				57			601
Increase in restricted cash									-			(6,532	)
Net cash used in investing activities		(6,741	)		(1,061	)			(8,570	)		(8,271	)
Cash flows from financing activities
Proceeds from stock issued under employee benefit plans		117			93				165			129
Borrowings under lines of credit		198,146			127,372				239,931			200,171
Payments on lines of credit		(213,444	)		(149,870	)			(282,331	)		(224,769	)
Increase in deferred financing costs		(378	)		(4,182	)			(437	)		(9,576	)
Payment of promissory notes		(3	)		(69	)			(26	)		(109	)
Net cash used in financing activities		(15,562	)		(26,656	)			(42,698	)		(34,154	)
Net change in cash		(6,953	)		(3,781	)			3,678			175
Cash and cash equivalents
Beginning of the year		11,909			12,247				11,909			12,247
End of period	$	4,956		$	8,466			$	15,587		$	12,422

See notes to consolidated financial statements.

Conn’s, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

~~July~~October 31, 2010

1. Summary of Significant Accounting Policies

Basis of Presentation. The accompanying unaudited, condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The accompanying financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature, except as otherwise described herein. Op erating results for the three and ~~six~~nine month periods ended ~~July~~October 31, 2010, are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2011. The financial statements should be read in conjunction with the Company’s (as defined below) audited consolidated financial statements and the notes thereto included in the Company’s Current Report on Form 8-K filed on July 7, 2010.

The Company’s balance sheet at January 31, 2010, has been derived from the audited financial statements at that date, revised for the retrospective application of the new accounting principles discussed below, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for a complete financial presentation. Please see the Company’s Form 8-K filed on July 7, 2010 for a complete presentation of the audited financial statements for the fiscal year ended January 31, 2010, together with all required footnotes, and for a complete presentation and explanation of the components and presentations of the financial statements.

Business Activities. The Company, through its retail stores, provides products and services to its customer base in seven primary market areas, including southern Louisiana, southeast Texas, Houston, South Texas, San Antonio/Austin, Dallas/Fort Worth and Oklahoma. Products and services offered through retail sales outlets include home appliances, consumer electronics, home office equipment, lawn and garden products, mattresses, furniture, repair service agreements, installment and revolving credit account programs, and various credit insurance products. These activities are supported through an extensive service, warehouse and distribution system. For the reasons discussed below, the Company has aggregated its results into two operating segments: credit and retail. The Company’s retail stores bear the “Conn’s” name, and deliver the same products and services to a common customer group. The Company’s customers generally are individuals rather than commercial accounts. All of the retail stores follow the same procedures and methods in managing their operations. The Company’s management evaluates performance and allocates resources based on the operating results of its retail and credit segments. With the adoption of the new accounting principles discussed below, which require the consolidation of the Company’s variable interest entity engaged in receivables securitizations, management began separately evaluating the performance of its retail and credit operations. As a result, management believes it is appropriate to disclose separate financial information of its retail and credit segments. The separate financial information is disclosed in footnote 6 – “Segment Reporting”.

Adoption of New Accounting Principles. The Company enters into securitization transactions to transfer eligible retail installment and revolving customer receivables and retains servicing responsibilities and subordinated interests. Additionally, the Company transfers the eligible customer receivables to a bankruptcy-remote variable interest entity (VIE). In June 2009, the FASB issued revised authoritative guidance to improve the relevance and comparability of the information that a reporting entity provides in its financial statements about:

aA transfer of financial assets;

~~the~~The effects of a transfer on its financial position, financial performance, and cash flows; and

-	-	aA transferor’s continuing involvement, if any, in transferred financial assets;

and,

Improvements in financial reporting by companies involved with variable interest entities to provide more relevant and reliable information to users of financial statements by requiring an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has both of the following characteristics:

The power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and

The obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity.

After the effective date, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes. Therefore, formerly qualifying special-purpose entities (as defined under previous accounting standards) ~~should be~~are evaluated for consolidation by reporting entities on and after the effective date in accordance with the applicable consolidation guidance. If the evaluation on the effective date results in consolidation, the reporting entity ~~should apply~~applies the transition guidance provided in the pronouncement that requires consolidation. The new FASB-issued authoritative guidance was effective for the Company beginning February 1, 2010.

The Company determined that it qualifies as the primary beneficiary of its VIE based on the following considerations:

The Company directs the activities that generate the customer receivables that are transferred to the ~~VIE,~~VIE;

The Company directs the servicing activities related to the collection of the customer receivables transferred to the ~~VIE,~~VIE;

The Company absorbs all losses incurred by the VIE to the extent of its residual interest in the customer receivables held by the VIE before any other investors incur ~~losses,~~losses; and

The Company has the rights to receive all benefits generated by the VIE after paying the contractual amounts due to the other investors.

As a result, the Company’s adoption of the provisions of the new guidance, effective February 1, 2010, resulted in the Company’s VIE, which is engaged in customer receivable financing and securitization, being consolidated in the Company’s balance sheet and the Company’s statements of operations, stockholders’ equity and cash flows. Previously, the operations of the VIE were reported off-balance sheet. The Company ~~has~~ elected to apply the provisions of this new guidance by retrospectively restating prior period financial statements to give effect to the consolidation of the VIE, presenting the balances at their carrying value as if they had always been carried on its balance sheet. The retrospective application impacted the comparative ~~prio r period~~prior pe riod financial statements as follows:

For the three and ~~six~~nine months ended ~~July~~October 31, 2009, Income before income taxes was increased by approximately ~~$0.4~~$1.4 million and ~~$0.2~~$1.6 million, ~~respectively.~~respectively;

For the three and ~~six~~nine months ended ~~July~~October 31, 2009, Net income was increased by approximately ~~$0.3~~$0.9 million and ~~$0.1~~$1.0 million, ~~respectively.~~respectively;

For the three and ~~six~~nine months ended ~~July~~October 31, 2009, Basic and diluted earnings per share ~~was~~were increased by ~~$.01~~$0.04 and $0.05, respectively;

For the ~~three~~nine months ended ~~July 31, 2009, Diluted earnings per share was increased by $.01. For the six months ended July 31, 2009, Diluted earnings per share was unchanged.~~

~~For the six months ended July~~October 31, 2009, Cash flows from operating activities was increased by approximately ~~$82.5 million.~~$109.4 million; and

For the ~~six~~nine months ended ~~July~~October 31, 2009, Cash flows from financing activities was reduced by approximately ~~$82.5~~$104.5 million.

Principles of Consolidation. The consolidated financial statements include the accounts of Conn’s, Inc. and all of its wholly-owned subsidiaries (the Company), including the Company’s VIE. The liabilities of the VIE and the assets specifically collateralizing those obligations are not available for the general use of the Company and have been parenthetically presented on the face of the Company’s balance sheet. Conn’s, Inc. is a holding company with no independent assets or operations other than its investments in it is subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Fair Value of Financial Instruments. The fair value of cash and cash equivalents, receivables and accounts payable approximate their carrying amounts because of the short maturity of these instruments. The fair value of the Company’s long-term debt ~~and the VIE’s $170 million 2002 Series A variable funding note approximate their~~approximates its carrying amount based on the fact that the ~~agreements were~~facility was recently ~~amended~~extended and ~~the cost of the borrowings were revised~~expanded to reflect current market conditions. The VIE’s 2002 Series A variable funding note approximates its carrying amount based on the fact that the note has now been retired. The estimated fair value of the VIE’s ~~$150 million~~ 2006 Series A medium term notes was approximately ~~$143~~$135 million on principal of $135 million outstanding as of October 31, 2010 and $139 million on principal of $150 mi llion as of ~~July 31, 2010 and~~ January 31, 2010, respectively, based on its estimate of the rates available at these dates, for instruments with similar terms and maturities. The fair value as of October 31, 2010 was deemed to approximate the carrying amount as these notes have now been retired. The Company’s interest rate swaps are presented on the balance sheet at fair value.

Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Earnings Per Share (EPS). The Company calculates basic earnings per share by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share include the dilutive effects of any stock options granted, as calculated under the treasury-stock method. The weighted average number of anti-dilutive stock options not included in calculating diluted EPS was 1.5 million and 2.7 million for the three months ended ~~July~~October 31, 2009 and 2010, respectively. Due to the net loss incurred for the three months ended October 31, 2009 and the three months ended October 31, 2010, no stock options were included in the computation of diluted loss per share. The weighted average number ofo f anti-dilutive stock options not included in calculating diluted EPS was 1.5 million and 2.7 million for the ~~six~~nine months ended ~~July~~October 31, 2009 and 2010, respectively. The following table sets forth ~~th e~~the shares outstanding for the earnings per share calculations:

The following table sets forth the shares outstanding for the earnings per share calculations:

	Three Months Ended				Three Months Ended
	July 31,				October 31,
	2009		2010		2009		2010

Common stock outstanding, net of treasury stock, beginning of period		22,452,045		22,480,848		22,457,486		22,489,638
Weighted average common stock issued to employee stock purchase plan		1,893		3,057		1,767		3,194
Shares used in computing basic earnings per share		22,453,938		22,483,905		22,459,253		22,492,832
Dilutive effect of stock options, net of assumed repurchase of treasury stock		206,360		3,679		-		-
Shares used in computing diluted earnings per share		22,660,298		22,487,584		22,459,253		22,492,832

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements. We sometimes use words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "project" and 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~~a ctual results to differ from these forward-looking statements include, but ~~ar e~~are not limited to:

Our ability to obtain capital to fund expansion of our credit portfolio;

Our ability to obtain capital for required capital expenditures and costs related to the opening of new stores or to update, relocate or expand existing stores;

~~our~~Our ability to fund our operations, capital expenditures, debt repayment and expansion from cash flows from operations, borrowings from our revolving line of credit, and proceeds from securitizations ~~and proceeds from~~or accessing other debt or equity markets;

~~our~~Our ability to renew or replace our existing borrowing facilities on or before the maturity dates of the facilities;

~~the~~The cost or terms of any amended, renewed or replacement credit facilities;

~~our~~Our ability to obtain additional funding for the purpose of funding the customer receivables generated by ~~us, including limitations on our ability to obtain financing through the commercial paper-based funding sources in our securitization program;~~us;

~~our inability~~Our ability to maintain compliance with debt covenant requirements, including taking the actions necessary to maintain compliance with the covenants, such as obtaining amendments to the borrowing facilities that modify the covenant requirements, which could result in higher borrowing costs;

~~reduced~~Reduced availability under our asset-based revolving credit facility as a result of borrowing base requirements and the impact on the borrowing base calculation of changes in the performance or eligibility of the customer receivables financed by that facility;

increases in the retained portion of our customer receivables portfolio under our asset-backed securitization program as a result of changes in performance or types of customer receivables transferred, or as a result of a change in the mix of funding sources available to the securitization program, requiring higher collateral levels, or limitations on our ability to obtain financing through commercial paper-based funding sources;

~~the~~The success of our growth strategy and plans regarding opening new stores and entering adjacent and new markets, including our plans to continue expanding into existing markets;

~~our~~Our ability to open and profitably operate new stores in existing, adjacent and new geographic markets;

Our ability to profitably expand our credit operations;

Our intention to update or expand existing stores;

The potential to incur expenses and non-cash write-offs related to decisions to close store locations and settling our remaining lease obligations and our initial investment in fixed assets and related store costs;

Our ability to introduce additional product categories;

~~the~~

The ability of the financial institutions providing lending facilities to us to fund their commitments;

~~the~~The effect of any downgrades by rating agencies of our lenders on borrowing costs;

~~the~~The effect on our borrowing cost of changes in laws and regulations affecting the providers of debt financing;

~~the~~The effect of rising interest rates or borrowing spreads that could increase our cost of ~~borrowing or reduce securitization income;~~borrowing;

~~the~~The effect of rising interest rates or other economic conditions ~~on mortgage borrowers~~ that could impair our customers’ ability to make payments on outstanding credit accounts;

~~our~~Our inability to ~~make~~continue to offer existing customer financing programs or make new programs available that allow consumers to purchase products at levels that can support our growth;

~~the~~The potential for deterioration in the delinquency status of ~~the transferred or owned~~our credit ~~portfolios~~portfolio or higher than historical net charge-offs in the ~~portfolios~~portfolio that could adversely impact earnings;

~~technological~~Technological and market developments, growth trends and projected sales in the home appliance and consumer electronics industry, including, with respect to digital products like Blu-ray players, HDTV, LED and 3-D televisions, GPS devices, home networking devices and other new products, and our ability to capitalize on such growth;

~~the~~The potential for price erosion or lower unit sales points that could result in declines in revenues;

~~the~~The effect of changes in oil and gas prices that could adversely affect our customers’ shopping decisions and patterns, as well as the cost of our delivery and service operations and our cost of products, if vendors pass on their additional fuel costs through increased pricing for products;

~~the~~The ability to attract and retain qualified personnel;

~~both~~Both the short-term and long-term impact of adverse weather conditions (e.g. hurricanes) that could result in volatility in our revenues and increased expenses and casualty losses;

~~changes~~Changes in laws and regulations and/or interest, premium and commission rates allowed by regulators on our credit, credit insurance and repair service agreements as allowed by those laws and regulations;

~~our~~Our relationships with key suppliers and their ability to provide products at competitive prices and support sales of their products through their rebate and discount programs;

~~the~~The adequacy of our distribution and information systems and management experience to support our expansion plans;

~~the~~The accuracy of our expectations regarding competition and our competitive advantages;

~~changes~~Changes in our stock price or the number of shares we have outstanding;

~~the~~The potential for market share erosion that could result in reduced revenues;

~~the~~The accuracy of our expectations regarding the similarity or dissimilarity of our existing markets as compared to new markets we enter;

~~the~~The use of third parties to complete certain of our distribution, delivery and home repair services;

~~general~~General economic conditions in the regions in which we operate; and

~~the~~The outcome of litigation or government investigations affecting our business.

Additional important factors that could cause our actual results to differ materially from our expectations are discussed under “Risk Factors” in our filings with the Securities and Exchange Commission, including our Form 10-K/A filed on April 12, 2010 and our Form ~~10-Q/A~~10-Q filed on ~~July 7,~~August 26, 2010. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report might not happen.

The forward-looking statements in this report reflect our views and assumptions only as of the date of this report. 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.

All forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.

General

We intend for the following discussion and analysis to provide you with a better understanding of the financial condition and performance of our retail and credit segments for the indicated periods, including an analysis of those key factors that contributed to our financial condition and performance and that are, or are expected to be, the key “drivers” of our business.

We are a specialty retailer with 76 retail locations in Texas, Louisiana and Oklahoma, that sells home appliances, including refrigerators, freezers, washers, dryers, dishwashers and ranges, a variety of consumer electronics, including LCD, LED, 3-D, plasma and DLP televisions, camcorders, digital cameras, Blu-ray and DVD players, video game equipment, MP3 players and home theater products, lawn and garden products, mattresses and furniture. We also sell home office equipment, including computers, notebooks and computer accessories and continue to introduce additional product categories for the home and consumer entertainment, such as GPS devices, to help increase same store sales and to respond to our customers' product needs. We require our sales associates to be knowledgeable of all of our products.

Unlike many of our competitors, we provide flexible in-house credit options for our customers. In the last three years, we financed, on average, approximately 61% of our retail sales through our internal credit programs. In addition to interest-bearing installment and revolving charge contracts, at times, we offer promotional credit programs to certain customers that provide for “same as cash” or deferred interest interest-free periods of varying terms, generally three, six, 12, 18, 24 and 36 months, and require monthly payments beginning in the month after the sale. In turn, we finance substantially all of our customer receivables from these credit programs with cash flow from operations, available working capital and through an ~~asset-based~~asset- based revolving credit facility and ~~an asset-backed securitization facility.~~facility second lien term loan. In addition to our own ~~cred it~~credit programs, we use third-party financing programs to provide a portion of the non-interest bearing financing for purchases made by our customers and to provide our customers a rent-to-own payment option.

The following tables present, for comparison purposes, information about our credit portfolios (dollars in thousands, except average outstanding customer balance).

	Primary Portfolio (1)												Primary Portfolio (1)
	Six Months Ended												Nine Months Ended
	1/31/2009			7/31/2009			1/31/2010			7/31/2010			1/31/2009			10/31/2009			1/31/2010			10/31/2010

Total outstanding balance (period end)	$	589,922		$	593,104		$	597,360		$	575,652		$	589,922		$	593,088		$	597,360		$	556,916
Average outstanding customer balance	$	1,403		$	1,393		$	1,339		$	1,330		$	1,403		$	1,360		$	1,339		$	1,306
Number of active accounts (period end)		420,585			425,914			446,203			432,912			420,585			435,976			446,203			426,439
Account balances over 60 days past due (period end) ~~(4)~~(2)	$	35,153		$	37,681		$	48,775		$	43,100		$	35,153		$	44,777		$	48,775		$	44,872
Percent of balances over 60 days past due to
total outstanding balance (period end)		6.0	%		6.4	%		8.2	%		7.5	%		6.0	%		7.5	%		8.2	%		8.1	%
Total account balances reaged (period end) ~~(4)~~(2)		90,560			90,076			95,038			87,361			90,560			90,064			95,038			86,728
Percent of reaged balances to
total outstanding balance (period end)		15.4	%		15.2	%		15.9	%		15.2	%		15.4	%		15.2	%		15.9	%		15.6	%
Account balances reaged more than six months (period end)	$	36,452		$	37,146		$	35,448		$	33,861		$	36,452		$	35,586		$	35,448		$	33,137
Weighted average credit score of outstanding balances		603			599			600			598			603			603			600			601
Total applications processed ~~(2)~~(3)		450,880			408,441			394,324			369,620			652,213			596,343			599,206			541,485
Percent of retail sales financed		50.5	%		49.4	%		55.2	%		53.3	%		51.4	%		51.3	%		54.2	%		52.6	%
Weighted average origination credit score of sales financed		635			632			632			630			633			632			631			632
Total applications approved		49.8	%		49.8	%		52.3	%		52.0	%		50.1	%		50.5	%		52.8	%		50.9	%
Average down payment		3.5	%		6.1	%		4.3	%		3.4	%		5.6	%		5.4	%		4.4	%		3.7	%
Average total outstanding balance	$	571,301		$	586,435		$	598,421		$	577,650		$	556,189		$	589,559		$	594,726		$	574,373
Bad debt charge-offs (net of recoveries)	$	8,181		$	8,401		$	12,376		$	12,393		$	11,482		$	14,261		$	16,861		$	19,345
Percent of bad debt charge-offs (net of
recoveries) to average outstanding balance, annualized		2.9	%		2.9	%		4.1	%		4.3	%		2.8	%		3.2	%		3.8	%		4.5	%
Estimated percent of reage balances collected ~~(3)~~(4)		87.6	%		88.9	%		83.2	%		82.9	%		89.2	%		87.1	%		87.7	%		81.8	%

1822

	Secondary Portfolio (1)												Secondary Portfolio (1)
	Six Months Ended												Nine Months Ended
	1/31/2009			7/31/2009			1/31/2010			7/31/2010			1/31/2009			10/31/2009			1/31/2010			10/31/2010

Total outstanding balance (period end)	$	163,591		$	152,774		$	138,681		$	130,687		$	163,591		$	145,109		$	138,681		$	120,078
Average outstanding customer balance	$	1,394		$	1,372		$	1,319		$	1,305		$	1,394		$	1,341		$	1,319		$	1,266
Number of active accounts (period end)		117,372			111,347			105,109			100,132			117,372			108,220			105,109			94,877
Account balances over 60 days past due (period end) ~~(4)~~(2)	$	19,988		$	19,361		$	24,616		$	20,544		$	19,988		$	23,735		$	24,616		$	20,062
Percent of balances over 60 days past due to
total outstanding balance (period end)		12.2	%		12.7	%		17.8	%		15.7	%		12.2	%		16.4	%		17.8	%		16.7	%
Total account balances reaged (period end) ~~(4)~~(2)	$	50,602		$	50,711		$	49,135		$	42,465		$	50,602		$	49,073		$	49,135		$	39,537
Percent of reaged balances to
total outstanding balance (period end)		30.9	%		33.2	%		35.4	%		32.5	%		30.9	%		33.8	%		35.4	%		32.9	%
Account balances reaged more than six months (period end)	$	19,860		$	22,842		$	21,920		$	20,210		$	19,860		$	22,074		$	21,920		$	18,722
Weighted average credit score of outstanding balances		521			524			526			532			521			526			526			536
Total applications processed ~~(2)~~(3)		200,681			182,768			168,845			158,949			292,607			261,998			255,170			236,360
Percent of retail sales financed		9.5	%		6.0	%		6.1	%		6.5	%		9.7	%		6.0	%		6.1	%		6.4	%
Weighted average origination credit score of sales financed		540			546			554			560			535			548			547			563
Total applications approved		22.9	%		20.5	%		19.9	%		22.3	%		27.1	%		20.5	%		21.6	%		20.0	%
Average down payment		19.8	%		21.2	%		21.1	%		15.3	%		19.4	%		21.1	%		20.6	%		15.9	%
Average total outstanding balance	$	148,458		$	156,983		$	145,976		$	132,814		$	151,121		$	154,456		$	148,596		$	130,449
Bad debt charge-offs (net of recoveries)	$	4,089		$	3,604		$	4,561		$	4,100		$	5,543		$	5,840		$	6,476		$	6,627
Percent of bad debt charge-offs (net of
recoveries) to average outstanding balance, annualized		5.5	%		4.6	%		6.2	%		6.2	%		4.9	%		5.0	%		5.8	%		6.8	%
Estimated percent of reage balances collected ~~(3)~~(4)		88.6	%		90.7	%		86.6	%		86.9	%		89.6	%		89.4	%		90.7	%		85.3	%

	Combined Portfolio (1)
	Nine Months Ended
	1/31/2009			10/31/2009			1/31/2010			10/31/2010

Total outstanding balance (period end)	$	753,513		$	738,197		$	736,041		$	676,994
Average outstanding customer balance	$	1,401		$	1,356		$	1,335		$	1,299
Number of active accounts (period end)		537,957			544,196			551,312			521,316
Account balances over 60 days past due (period end) (2)	$	55,141		$	68,512		$	73,391		$	64,934
Percent of balances over 60 days past due to
total outstanding balance (period end)		7.3	%		9.3	%		10.0	%		9.6	%
Total account balances reaged (period end) (2)	$	141,162		$	139,137		$	144,173		$	126,265
Percent of reaged balances to
total outstanding balance (period end)		18.7	%		18.8	%		19.6	%		18.7	%
Account balances reaged more than six months (period end)	$	56,312		$	57,660		$	57,368		$	51,859
Weighted average credit score of outstanding balances		585			588			586			590
Total applications processed (3)		944,820			858,341			854,376			777,845
Percent of retail sales financed		61.1	%		57.3	%		60.3	%		59.0	%
Weighted average origination credit score of sales financed		614			620			619			623
Total applications approved		42.9	%		41.3	%		43.5	%		41.5	%
Average down payment		7.6	%		7.2	%		6.2	%		5.2	%
Average total outstanding balance	$	707,310		$	744,015		$	743,322		$	704,822
Weighted average monthly payment rate		5.3	%		5.3	%		5.0	%		5.4	%
Bad debt charge-offs (net of recoveries)	$	17,025		$	20,101		$	23,337		$	25,972
Percent of bad debt charge-offs (net of
recoveries) to average outstanding balance, annualized		3.2	%		3.6	%		4.2	%		4.9	%
Estimated percent of reage balances collected (4)		89.6	%		88.0	%		88.7	%		83.0	%
Percent of managed portfolio
represented by promotional receivables		16.4	%		16.4	%		15.3	%		13.6	%

1923

__________________________

Combined Portfolio (1)
Six Months Ended
1/31/2009 7/31/2009 1/31/2010 7/31/2010

Total outstanding balance (period end) $ 753,513 $ 745,878 $ 736,041 $ 706,339
Average outstanding customer balance $ 1,401 $ 1,388 $ 1,335 $ 1,325
Number of active accounts (period end) 537,957 537,261 551,312 533,044
Account balances over 60 days past due (period end) (4) $ 55,141 $ 57,042 $ 73,391 $ 63,644
Percent of balances over 60 days past due to
total outstanding balance (period end) 7.3 % 7.6 % 10.0 % 9.0 %
Total account balances reaged (period end) (4) $ 141,162 $ 140,787 $ 144,173 $ 129,826
Percent of reaged balances to
total outstanding balance (period end) 18.7 % 18.9 % 19.6 % 18.4 %
Account balances reaged more than six months (period end) $ 56,312 $ 59,988 $ 57,368 $ 54,071
Weighted average credit score of outstanding balances 585 583 586 586
Total applications processed (2) 651,561 591,209 563,169 528,569
Percent of retail sales financed 60.0 % 55.4 % 61.3 % 59.8 %
Weighted average origination credit score of sales financed 619 619 622 620
Total applications approved 41.5 % 40.7 % 42.6 % 43.1 %
Average down payment 5.6 % 7.9 % 6.0 % 5.0 %
Average total outstanding balance $ 719,759 $ 743,418 $ 744,397 $ 710,464
Weighted average monthly payment rate 5.2 % 5.5 % 5.0 % 5.6 %
Bad debt charge-offs (net of recoveries) $ 12,270 $ 12,005 $ 16,937 $ 16,493
Percent of bad debt charge-offs (net of
recoveries) to average outstanding balance, annualized 3.4 % 3.2 % 4.6 % 4.6 %
Estimated percent of reage balances collected (3) 87.9 % 89.6 % 84.4 % 84.2 %

~~___________________________~~

(1)	The Portfolios consist of owned and transferred receivables.

(2)	Accounts that become delinquent after being reaged are included in both the delinquency and reaged amounts.

(3)	Unapproved and not declined credit applications in the primary portfolio are referred to the secondary portfolio.

~~(3)~~(4)

Is calculated as 1 minus the percent of actual bad debt charge-offs (net of recoveries) of reage balances as a percent of average reage balances. 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.

~~(4)~~

~~Accounts that become delinquent after being reaged are included in both the delinquency and reaged amounts.~~

We also derive revenues from repair services on the products we sell and from product delivery and installation services we provide to our customers. Additionally, acting as an agent for unaffiliated companies, we sell credit insurance and repair service agreements to protect our customers from credit losses due to death, disability, involuntary unemployment and property damage and product failure not covered by a manufacturers’ warranty. We also derive revenues from the sale of extended repair service agreements, under which we are the primary obligor, to protect the customers after the original manufacturer’s warranty or repair service agreement has expired.

Our business is moderately seasonal, with a greater share of our revenues, pretax and net income realized during the quarter ending January 31, due primarily to the holiday selling season.

Executive Overview

This narrative is intended to provide an executive level overview of our operations for the three and ~~six~~nine months ended ~~July~~October 31, 2010. A detailed explanation of the changes in our operations for ~~this period~~these periods as compared to the prior year ~~period~~periods is included under Results of Operations. Some of the more specific items impacting our operating and pretax income were:

For the three months ended ~~July~~October 31, 2010, compared to the same period last year, Total net sales decreased ~~6.0%~~15.2% and Finance charges and other decreased ~~13.4%~~8.6%. Total revenues decreased ~~7.3%~~14.0% while same store sales decreased ~~6.4%~~16.3% for the quarter ended ~~July~~October 31, 2010. The sales decline was ~~primarily driven~~impacted by:

~~more~~Continued challenging economic conditions in ~~Texas compared~~our markets;

The limitations imposed by the Company’s capital structure, prior to the ~~same quarter in~~recently completed refinancing, and the ~~prior year, as evidenced by~~resulting impact on its ability to extend credit;

The Company’s decision to tighten credit underwriting standards to protect the ~~unemployment rate rising from an average~~quality of ~~7.5% to 8.2% for~~ the ~~three month periods ended July 31, 2009 and 2010, respectively,~~credit portfolio; and

~~management’s~~Management’s emphasis on improving retail gross margin through maintaining price discipline on the sales floor, which increased from ~~23.6%~~22.4% to ~~25.4%~~25.2% for the three months ended ~~July~~October 31, 2009, and 2010, respectively, while maintaining price competitiveness.

For the ~~six~~nine months ended ~~July~~October 31, 2010, compared to the same period last year, Total net sales decreased ~~12.4%~~13.2% and Finance charges and other decreased ~~13.3%~~11.8%. Total revenues decreased ~~12.6%~~13.0% while same store sales decreased ~~13.3%~~14.1% for the ~~six~~nine months ended ~~July~~October 31, 2010. The sales decline was primarily driven by the same reasons discussed above for the quarter.

Finance charges and other decreased ~~13.4%~~8.6% and ~~13.3%~~11.8% for the three and ~~six~~nine months ended ~~July~~October 31, 2010, when compared to the same period last year, primarily due to a decrease in interest income and fees as the average interest income and fee yield earned on the portfolio fell from ~~18.9%~~17.6% and ~~18.8 %~~18.4% for the three and ~~six~~nine months ended ~~July~~October 31, 2009, to ~~17.2%~~16.8% and ~~17.1%~~17.0%, for the three and ~~six~~nine months ended ~~July~~October 31, 2010, and the average balance of customer accounts receivable outstanding during the ~~six~~nine months ended ~~July~~October 31, 2010 fell ~~4.4%~~5.3%, as compared to the prior year period. The interest income and fee yield fell as a result of the higher level of charge-offs experienced, resulting in an increase in the reversal of accrued interest and increased reserves for uncollectible interest, and the reduced amount of new credit accounts originated in the three and ~~six~~nine month periods ended ~~July~~October 31, 2010, as ~~compared~~com pared to the same periods in the prior fiscal year. The reduction in new credit accounts originated negatively impacts the yield since interest income is recognized using the Rule of 78’s, which accelerates the recognition of interest earnings.

Deferred interest and ”same as cash” plans under our consumer credit programs continue to be an important part of our sales promotion plans and are utilized to provide a wide variety of financing to enable us to appeal to a broader customer base. For the three and six months ended July 31, 2010, $39.8 million, or 23.9% and $65.4 million, or 20.6%, respectively, of our product sales were financed by our deferred interest and “same as cash” plans. For the comparable period in the prior year, product sales financed by our deferred interest and “same as cash” sales were $32.0 million, or 18.3% and $59.2 million, or 16.4%. Our promotional credit programs (same as cash and deferred interest programs), which require monthly payments, are reserved for our highest credit quality customers, thereby reducing the overall risk in the portfolio, and are typically used to finance sales of our highest margin products. We expect to continue to offer promotional credit in the future. In addition to the amounts above, we used third-party consumer credit programs to finance approximately $3.4 million and $27.7 million, of our product and repair service agreement sales during the six months ended July 31, 2009 and 2010, respectively.

·	Our total gross margin (Total revenues less Cost of goods sold) increased from ~~37.7%~~37.4% to ~~38.0%~~40.4% for the three months ended ~~July~~October 31, 2010, when compared to the same period in the prior year. The increase resulted primarily from:

anAn increase in retail gross margins (includes gross profit from product sales and repair service agreement commissions) from ~~23.6%~~22.4% for the three months ended ~~July~~October 31, 2009, to ~~25.4%~~25.2% for the three months ended ~~July~~October 31, 2010, respectively, which improved the total gross margin by ~~150~~220 basis points. The increase was driven largely by a ~~200~~310 basis point increase in product gross margins to ~~21.7%~~21.6% for the three months ended ~~July~~October 31, 2010, as we focused on improving pricing discipline on the sales floor while maintaining price competitiveness in the ~~marketplace,~~marketplace; and

aA change in the revenue mix in the three months ended ~~July~~October 31, 2010, such that higher gross margin finance charge and other revenues contributed a ~~lesser~~higher percentage of total revenues, resulted in ~~a decrease~~an increase in the total gross margin of approximately ~~120~~80 basis points.

Our gross margin increased from ~~37.9%~~37.8% to ~~39.5%~~39.7% for the ~~six~~nine months ended ~~July~~October 31, 2010, when compared to the same period in the prior year. The increase was a result primarily of an improved retail gross margin, similar to the trend discussed for the three months ended ~~July~~October 31, 2010.

During the three months ended ~~July~~October 31, 2010, Selling, general and administrative (SG&A) expense was reduced by ~~$1.5~~$8.8 million, though it increased as a percent of revenues to ~~29.7%~~33.3% from ~~28.2%~~33.1% in the prior year period, due to the deleveraging effect of the decline in total revenues. The ~~$1.5~~litigation reserve accrual recorded in the prior year period accounted for $4.1 million of the change in SG&A expense. The remainder of the reduction in SG&A expense was driven primarily by lower compensation and related expense and reduced ~~general insurance expense,~~depreciation expense. These decreases were partially offset by increased ~~amortization~~ expense ~~due to the amendments completed to our credit facilities, higher charges related to~~from the increased use of third-party finance providers and increased use of contract delivery and installation services. ~~The prior year period also included a $0.3 million charge to increase our litigation reserves.~~ SG&A expense for the ~~six~~nine month period decreased ~~$3.5~~$13.5 million, though it increased as a percent of revenues to ~~30.2%~~30.8% from ~~27.2%~~28.8% in the prior year period, due to the ~~deleveraging~~deleveragin g effect of the decline in total ~~revenues.~~revenues;

During the quarter ended October 31, 2009, we determined, as a result of the sustained decline in our market capitalization, the increasingly challenging economic environment and its impact on our comparable store sales, credit portfolio performance and operating results, that an interim goodwill impairment test was necessary. A two-step method was utilized for determining goodwill impairment. Our valuation was performed utilizing the services of outside valuation consultants using both an income approach utilizing our discounted debt-free cash flows and comparable valuation multiples. Upon completion of the impairment test, we concluded that the carrying value of our recorded goodwill was impaired. As a result, we recorded a goodwill impairment charge of $9.6 million to write-off the carrying value of our goodwill during the three month period ended October 31, 2009;

During the past year we have explored multiple opportunities in the capital markets to allow us to refinance our borrowing facilities. As a result, we incurred expenses related to working with bankers, lawyers, accountants and other professional service providers to review and pursue the various alternatives presented. Given our decision to pursue the financing transactions recently completed, we concluded as of October 31, 2010, that it was appropriate to write-off the $2.9 million of expenses incurred related to the other financing alternatives considered;

The Provision for bad debts ~~increased~~decreased to ~~$9.0 million and $15.3~~$9.4 million for the three ~~and six~~ months ended ~~July~~October 31, ~~2010, respectively.~~2010. Our total net charge-offs of customer and non-customer accounts receivable increased by ~~$1.8 million and $4.5~~$1.6 million for the three ~~and six~~ months ended ~~July~~October 31, 2010, as compared to the same periods in the prior fiscal year. In the six months ended July 31, 2010 we experienced an improvement in our credit portfolio performance (specifically, the trends in the delinquency rate, payment rate, net charge-off rate and percent of the portfolio reaged) as compared to the fourth quarter of fiscal 2010. Based on our current expectations about future credit portfolio performance we ~~increased~~decreased the allowance for bad debts ~~$0.5~~$0.4 million during the three months ended ~~July~~October 31, 2010, ~~though it has been reduced $1.4~~as compared to an increase of $4.5 million in the prior year period. The Provision for bad debts decreased to $24.7 million for the nine months ended October 31, 2010. Our total net charge-offs of customer and non-customer accounts receivable increased by $6.3 million for the nine months ended October 31, 2010, as compared to the same periods in the prior fiscal year, while the allowance for bad debts decreased $2.1 million during the ~~six~~nine months ended ~~July~~October 31, ~~2010.~~2010, as compared to an increase of $5.8 million in the prior year period;

Net interest expense increased in the three months and ~~six~~nine months ended ~~July~~October 31, 2010, due primarily to a ~~$0.9~~$1.7 million fee paid during the three months ended, ~~July~~and $2.6 million in total fees paid during the nine months ended October 31, 2010, respectively, to the lenders providing the variable funding note under the securitization ~~facility.~~facility and increased deferred financing cost amortization; and

The ~~provision for~~ income ~~taxes~~tax benefit for the three months ~~and six months~~ ended ~~July~~October 31, 2010, was impacted primarily by the change in pre-tax income. The prior year effective tax benefit rate of 25.9% was lower than the 34.6% tax benefit rate in the current year period, primarily due to the fact that we did not record a tax benefit in the prior year period related to the litigation reserve accrual.

Operational Changes and Resulting Outlook

~~While~~We recently completed the refinancing of our debt facilities by entering into a $375 million asset-based loan facility and a $100 million second lien term loan, and successfully completed a rights offering, which raised $25 million of gross proceeds. A portion of the net proceeds were used to repay all of our outstanding obligations under our securitization program. As a result of the changes to our debt financing facilities, we estimate that our weighted average interest rate on debt outstanding during the nine months ended October 31, 2010, would have been approximately 170 basis points higher if the financing transactions had occurred on February 1, 2010.

With our refinancing complete we are ~~continuing~~now reviewing our strategic business plan, including actions to ~~assess the availability of capital for~~improve our existing operations, considering potential new store ~~locations~~openings and ~~growth of the~~expanding our credit ~~portfolio, we~~operations. We do not currently have any new store openings planned and have reduced the size of the credit portfolio since January 31, 2010, in order to reduce the debt outstanding to support the credit operations. Given the declines in sales we have seen over the past couple of years and the limited capital we currently have available for growth, our focus in the near term will be to improve the sales performance and profitability of our existing operations.

During the fiscal year ended January 31, 2010, we adjusted our underwriting guidelines and reduced the volume of credit accounts we originate in our Secondary Portfolio. As a result of the changes in our underwriting guidelines, which reduced retail sales volumes, we saw improved credit portfolio performance during the first ~~six~~nine months of fiscal 2011, evidenced by:

~~a 100~~A 40 basis point reduction in the 60+ day delinquency percentage from 10.0% at January 31, 2010, to ~~9.0%~~9.6% at ~~July~~October 31, 2010, as compared to a 30200 basis point increase in the same percentage from 7.3% at January 31, 2009, to ~~7.6%~~9.3% at ~~July~~October 31, ~~2009,~~2009;

~~a 120~~A 90 basis point, or ~~$14.4~~$17.9 million, reduction in the percent and balance, respectively, of the credit portfolio that has been reaged, to ~~18.4%~~18.7%, or ~~$129.8~~$126.3 million, as of ~~July~~October 31, 2010, as compared to January 31, ~~2010,~~2010; and

~~the~~The payment rate percentage, the amount collected on credit accounts during a month as a percentage of the portfolio balance at the beginning of the month, increased in each of the ~~six~~nine months of the current fiscal year as compared to the same months in the prior fiscal year.

In order to continue to provide flexible financing options to our customers, in light of our adjusted underwriting guidelines, we have also partnered with a third-party rent-to-own provider that provides financing for certain of our customers that do not qualify for credit under our underwriting guidelines. We currently offer this financing alternative in 38 of our stores and financed $4.1 million of our sales during the quarter ended October 31, 2010, through the third-party rent-to-own financing option.

While we benefited from our operations being concentrated in the Texas, Louisiana and Oklahoma region in the earlier months of 2009, recent weakness in the health of the national and state economies have and will present significant challenges to our operations in the coming quarters. Specifically, future sales volumes, gross profit margins and credit portfolio performance could be negatively impacted, and thus impact our overall profitability. Additionally, declines in our future operating performance could impact compliance with our new credit facility ~~covenants, which we recently renegotiated to avoid potentially triggering the default provisions of the credit facilities.~~covenants. As a result, while we will strive to maintain our market share, improve credit portfolio performance and reduce expenses, we will also work to maintain our access to the liquidity necessary to ~~maintain~~main tain our operations through these challenging times.

The consumer electronics industry depends on new products to drive same store sales increases. Typically, these new products, such as high-definition LED and 3-D televisions, Blu-ray and DVD players and 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~~challenge d 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.

Application of Critical Accounting Policies

In applying the accounting policies that we use to prepare our consolidated financial statements, we necessarily make accounting estimates that affect our reported amounts of assets, liabilities, revenues and expenses. Some of these accounting estimates require us to make assumptions about matters that are highly uncertain at the time we make the accounting estimates. We base these assumptions and the resulting estimates on authoritative pronouncements, historical information and other factors that we believe to be reasonable under the circumstances, and we evaluate these assumptions and estimates on an ongoing basis. We could reasonably use different accounting estimates, and changes in our accounting estimates could occur from period to period, with the ~~result~~res ult in each case being a material change in the financial statement ~~presentat ion~~presentation of our financial condition or results of operations. We refer to accounting estimates of this type as critical accounting estimates. We believe that the critical accounting estimates discussed below are among those most important to an understanding of our consolidated financial statements as of ~~July~~October 31, 2010.

Customer Accounts Receivable. Customer accounts receivable reported in our consolidated balance sheet include receivables transferred to our VIE and those receivables not transferred to our VIE. We include the amount of principal and accrued interest on those receivables that are expected to be collected within the next twelve months, based on contractual terms, in current assets on our consolidated balance sheet. Those amounts expected to be collected after 12 months, based on contractual terms, are included in long-term assets. Typically, a receivable is considered delinquent if a payment has not been received on ~~t he~~the scheduled due date. Additionally, we offer reage programs to customers with past due balances that have experienced a financial hardship, if they meet the conditions of our reage policy. Reaging a customer’s account can result in updating it from a delinquent status to a current status. Generally, an account that is delinquent more than 120 days and for which no payment has been received in the past seven months will be charged-off against the allowance for doubtful accounts and interest accrued subsequent to the last payment will be reversed. We have a secured interest in the merchandise financed by these receivables and therefore have the opportunity to recover a portion of any charged-off amount.

Interest Income on Customer Accounts Receivable. Interest income is ~~accrued~~earned using the Rule of 78’s method for installment contracts and the simple interest method for revolving charge accounts, and is reflected in Finance charges and other. Typically, interest income is accrued until the contract or account is paid off or charged-off and we provide an allowance for estimated uncollectible interest. Interest income is recognized on our interest-free promotional accounts based on our historical experience related to customers who fail to satisfy the requirements of the interest-free programs. Additionally, for sales on deferred interest and “same as cash” programs that exceed one year in duration, we discount the sales to their fair value, resulting in a ~~reductio n~~reduction in sales and receivables, and amortize the discount amount in to Finance charges and other over the term of the program.

Allowance for Doubtful Accounts. We record an allowance for doubtful accounts, including estimated uncollectible interest, for our Customer accounts receivable, based on our historical net loss experience and expectations for future losses. The net charge-off data used in computing the loss rate is reduced by the amount of post-charge-off recoveries received, including cash payments, amounts realized from the repossession of the products financed and, at times, payments received under credit insurance policies. Additionally, we separately evaluate the Primary and Secondary portfolios when estimating the allowance for doubtful accounts. The balance in the allowance for doubtful accounts and uncollectible interest for customer receivables was $35.8 million and ~~$34.3~~$34.1 million at ~~Jan uary~~January 31, 2010, and ~~July~~October 31, 2010, respectively. Additionally, as a result of our practice of reaging customer accounts, if the account is not ultimately collected, the timing and amount of the charge-off is impacted. If these accounts had been charged-off sooner the net loss rates might have been higher. Reaged customer receivable balances represented ~~18.4%~~18.7% of the total portfolio balance at ~~July~~October 31, 2010. If the loss rate used to calculate the allowance for doubtful accounts were increased by 10% at ~~July~~October 31, 2010, we would have increased our Provision for bad debts by approximately $3.4 million.

2327

Revenue Recognition. Revenues from the sale of retail products are recognized at the time the customer takes possession of the product. Such revenues are recognized net of any adjustments for sales incentive offers such as discounts, coupons, rebates, or other free products or services and discounts of promotional credit sales that will extend beyond one year. We sell repair service agreements and credit insurance contracts on behalf of unrelated third parties. For contracts where the third parties are the obligors on the contract, commissions are recognized in revenues at the time of sale, and in the case of retrospective commissions, at the time that they are earned. Where we sell repair ~~service~~se rvice renewal agreements in which we are deemed to be the obligor on the ~~cont ract~~contract at the time of sale, revenue is recognized ratably, on a straight-line basis, over the term of the repair service agreement. These repair service agreements are renewal contracts that provide our customers protection against product repair costs arising after the expiration of the manufacturer's warranty and the third party obligor contracts. These agreements typically have terms ranging from 12 to 36 months. These agreements are separate units of accounting and are valued based on the agreed upon retail selling price. The amount of repair service agreement revenue deferred at January 31, 2010, and ~~July~~October 31, 2010, was $7.3 million and ~~$7.1~~$6.6 million, respectively, and is included in Deferred revenues and allowances in the accompanying consolidated balance sheets.

Vendor Allowances. We receive funds from vendors for price protection, product rebates (earned upon purchase or sale of product), marketing, training and promotion programs which are recorded on the accrual basis as a reduction to the related product cost, cost of goods sold, compensation expense or advertising expense, according to the nature of the program. We accrue rebates based on the satisfaction of terms of the program and sales of qualifying products even though funds may not be received until the end of a quarter or year. If the programs are related to product purchases, the allowances, credits or payments are recorded as a reduction of product cost; if the programs are related to ~~product~~pr oduct sales, the allowances, credits or payments are recorded as a reduction of cost of goods sold; if the programs are directly related to promotion, marketing or compensation expense paid related to the product, the allowances, credits, or payments are recorded as a reduction of the applicable expense in the period in which the expense is incurred.

Accounting for Leases. We analyze each lease, at its inception and any subsequent renewal, to determine whether it should be accounted for as an operating lease or a capital lease. Additionally, monthly lease expense for each operating lease is calculated as the average of all payments required under the minimum lease term, including rent escalations. Generally, the minimum lease term begins with the date we take possession of the property and ends on the last day of the minimum lease term, and includes all rent holidays, but excludes renewal terms that are at our option. Any tenant improvement allowances received are deferred and amortized into income as a reduction of lease expense on a ~~straight~~str aight line basis over the minimum lease term. The amortization of leasehold ~~i mprovements~~improvements is computed on a straight line basis over the shorter of the remaining lease term or the estimated useful life of the improvements. For transactions that qualify for treatment as a sale-leaseback, any gain or loss is deferred and amortized as rent expense on a straight-line basis over the minimum lease term. Any deferred gain would be included in Deferred gain on sale of property and any deferred loss would be included in Other assets on the consolidated balance sheets.

2428

Results of Operations

The following table sets forth certain statement of operations information as a percentage of total revenues for the periods indicated:

	Three Months Ended October 31,						Nine Months Ended October 31,
	2010			2009			2010			2009
Revenues:
Product sales		74.8	%		75.2	%		76.4	%		76.1	%
Repair service agreement commissions (net)		3.6			3.7			3.8			3.9
Service revenues		2.2			2.8			2.2			2.6
Total net sales		80.6			81.7			82.4			82.6
Finance charges and other		19.4			18.3			17.6			17.4
Total revenues		100.0			100.0			100.0			100.0
Costs and expenses:
Cost of goods sold, including warehousing and occupancy cost		58.6			61.2			59.2			61.0
Cost of parts sold, including warehousing and occupancy cost		1.0			1.4			1.1			1.2
Selling, general and administrative expense		33.3			33.1			30.8			28.8
Goodwill Impairment		0.0			4.8			0.0			1.5
Write-off of deferred financing costs		1.7			0.0			0.5			0.0
Provision for bad debts		5.5			6.4			4.2			3.9
Total costs and expenses		100.1			106.9			95.8			96.4
Operating income (loss)		(0.1	)		(6.9	)		4.2			3.6
Interest expense, net		4.5			2.9			3.5			2.5
Other (income) / expense, net		0.0			0.0			0.0			0.0
Income (loss) before income taxes		(4.6	)		(9.8	)		0.7			1.1
Provision (benefit) for income taxes		(1.6	)		(2.5	)		0.3			0.8
Net income (loss)		(3.0	)%		(7.3	)%		0.4	%		0.3	%

Three Months Ended Six Months Ended
July 31, July 31,
2010 2009 2010 2009
Revenues:
Product sales 77.9 % 76.1 % 77.0 % 76.6 %
Repair service agreement commissions (net) 3.9 3.9 4.0 4.0
Service revenues 1.9 2.6 2.2 2.4
Total net sales 83.7 82.6 83.2 83.0

Finance charges and other 16.3 17.4 16.8 17.0

Total revenues 100.0 100.0 100.0 100.0
Costs and expenses:
Cost of goods sold, including warehousing and occupancy cost 61.0 61.1 59.5 61.0
Cost of parts sold, including warehousing and occupancy cost 1.0 1.2 1.1 1.1
Selling, general and administrative expense 29.7 28.2 30.2 27.2
Provision for bad debts 4.2 3.5 3.7 2.9
Total costs and expenses 95.9 94.0 94.5 92.2
Operating income 4.1 6.0 5.5 7.8
Interest expense, net 2.8 2.3 2.6 2.2
Other (income) / expense, net 0.0 0.0 0.0 0.0
Income before income taxes 1.3 3.7 2.9 5.6
Provision for income taxes 0.5 1.4 1.1 2.1
Net income 0.8 % 2.3 % 1.8 % 3.5 %

The presentation of gross margins may not be comparable to some other retailers since we include the cost of our in-home delivery and installation service as part of Selling, general and administrative expense. Similarly, we include the cost related to operating our purchasing function in Selling, general and administrative expense. It is our understanding that other retailers may include such costs as part of their cost of goods sold.

2529

Analysis of consolidated statements of operations

Total consolidated	Three months ended						2010 vs. 2009						Six months ended						2010 vs. 2009						Three months ended						2010 vs. 2009						Nine months ended						2010 vs. 2009
	July 31,						Incr/(Decr)						July 31,						Incr/(Decr)						October 31,						Incr/(Decr)						October 31,						Incr/(Decr)
(in thousands except percentages)	2010			2009			Amount			Pct			2010			2009			Amount			Pct			2010			2009			Amount			Pct			2010			2009			Amount			Pct
Revenues
Product sales	$	166,378		$	175,389		$	(9,011	)		(5.1	)%	$	316,743		$	360,206		$	(43,463	)		(12.1	)%	$	127,035		$	148,463		$	(21,428	)		(14.4	)%	$	443,778		$	508,669		$	(64,891	)		(12.8	)%
Repair service agreement
commissions (net)		8,341			8,859			(518	)		(5.8	)		16,258			18,649			(2,391	)		(12.8	)		6,035			7,320			(1,285	)		(17.6	)		22,293			25,968			(3,675	)		(14.2	)
Service revenues		4,183			6,052			(1,869	)		(30.9	)		8,940			11,596			(2,656	)		(22.9	)		3,769			5,599			(1,830	)		(32.7	)		12,709			17,195			(4,486	)		(26.1	)
Total net sales		178,902			190,300			(11,398	)		(6.0	)		341,941			390,451			(48,510	)		(12.4	)		136,839			161,382			(24,543	)		(15.2	)		478,780		$	551,832			(73,052	)		(13.2	)
Finance charges and other		34,763			40,128			(5,365	)		(13.4	)		69,243			79,828			(10,585	)		(13.3	)		33,019			36,116			(3,097	)		(8.6	)		102,262			115,945			(13,683	)		(11.8	)
Total revenues		213,665			230,428			(16,763	)		(7.3	)		411,184			470,279			(59,095	)		(12.6	)		169,858			197,498			(27,640	)		(14.0	)		581,042			667,777			(86,735	)		(13.0	)
Cost and expenses
Cost of goods and parts sold		132,396			143,558			(11,162	)		(7.8	)		248,925			292,015			(43,090	)		(14.8	)		101,188			123,635			(22,447	)		(18.2	)		350,113			415,650			(65,537	)		(15.8	)
Gross Profit		81,269			86,870			(5,601	)		(6.4	)		162,259			178,264			(16,005	)		(9.0	)		68,671			73,863			(5,192	)		(7.0	)		230,930			252,127			(21,197	)		(8.4	)
Gross Margin		38.0	%		37.7	%								39.5	%		37.9	%								40.4	%		37.4	%								39.7	%		37.8	%
Selling, general and
administrative expense		63,478			64,979			(1,501	)		(2.3	)		124,221			127,717			(3,496	)		(2.7	)		56,507			65,307			(8,800	)		(13.5	)		178,876			192,326			(13,450	)		(7.0	)
Costs related to financing
transactions not completed																										2,896			-			2,896						2,896			-			2,896
Goowill Impairment																										-			9,617			(9,617	)		(100.0	)		-			9,617			(9,617	)		(100.0	)
Provision for bad debts		9,048			8,026			1,022			12.7			15,322			13,670			1,652			12.1			9,372			12,651			(3,279	)		(25.9	)		24,694			26,321			(1,627	)		(6.2	)
Total costs and expenses		204,922			216,563			(11,641	)					388,468			433,402			(44,934	)					169,963			211,210			(41,247	)					556,579			643,914			(87,335	)
Operating income		8,743			13,865			(5,122	)		(36.9	)		22,716			36,877			(14,161	)		(38.4	)
Operating income (loss)																										(105	)		(13,712	)		13,607			(99.2	)		24,463			23,863			600			2.5
Operating Margin		4.1	%		6.0	%								5.5	%		7.8	%								-0.1	%		-6.9	%								4.2	%		3.6	%
Interest expense		5,875			5,342			533			10.0			10,660			10,346			314			3.0			7,722			5,649			2,073			36.7			20,234			16,692			3,542			21.2
Other (income) expense		12			(13	)		25			(192.3	)		183			(21	)		204			(971.4	)		(17	)		(34	)		17			(50.0	)		166			(54	)		220			(407.4	)
Pretax Income		2,856			8,536			(5,680	)		(66.5	)		11,873			26,552			(14,679	)		(55.3	)
Provision for income taxes		1,171			3,312			(2,141	)		(64.6	)		4,641			9,972			(5,331	)		(53.5	)
Net Income	$	1,685		$	5,224		$	(3,539	)		(67.7	)	$	7,232		$	16,580		$	(9,348	)		(56.4	)


Income (loss) before income taxes																										(7,810	)		(19,327	)		11,517			(59.6	)		4,063			7,225			(3,162	)		(43.8	)
Provision (benefit) for income taxes																										(2,716	)		(4,955	)		2,239			(45.2	)		1,925			5,017			(3,092	)		(61.6	)
Net income (loss)																									$	(5,094	)	$	(14,372	)	$	9,278			(64.6	)		2,138		$	2,208		$	(70	)		(3.2	)

Retail segment	Three months ended						2010 vs. 2009						Six months ended						2010 vs. 2009						Three months ended						2010 vs. 2009						Nine months ended						2010 vs. 2009
	July 31,						Incr/(Decr)						July 31,						Incr/(Decr)						October 31,						Incr/(Decr)						October 31,						Incr/(Decr)
(in thousands except percentages)	2010			2009			Amount			Pct			2010			2009			Amount			Pct			2010			2009			Amount			Pct			2010			2009			Amount			Pct
Revenues
Product sales	$	166,378		$	175,389		$	(9,011	)		(5.1	)%	$	316,743		$	360,206		$	(43,463	)		(12.1	)%	$	127,035		$	148,463		$	(21,428	)		(14.4	)%	$	443,778		$	508,669		$	(64,891	)		(12.8	)%
Repair service agreement
commissions (net) (a)		11,534			11,433			101			0.9			22,458			23,520			(1,062	)		(4.5	)		9,514			10,166			(652	)		(6.4	)		31,973			33,685			(1,712	)		(5.1	)
Service revenues		4,183			6,052			(1,869	)		(30.9	)		8,940			11,596			(2,656	)		(22.9	)		3,769			5,599			(1,830	)		(32.7	)		12,709			17,195			(4,486	)		(26.1	)
Total net sales		182,095			192,874			(10,779	)		(5.6	)		348,141			395,322			(47,181	)		(11.9	)		140,318			164,228			(23,910	)		(14.6	)		488,460			559,549			(71,089	)		(12.7	)
Finance charges and other		216			131			85			64.9			466			246			220			89.4			215			98			117			119.4			681			345			336			97.4
Total revenues		182,311			193,005			(10,694	)		(5.5	)		348,607			395,568			(46,961	)		(11.9	)		140,533			164,326			(23,793	)		(14.5	)		489,141			559,894			(70,753	)		(12.6	)
Cost and expenses
Cost of goods and parts sold		132,396			143,558			(11,162	)		(7.8	)		248,925			292,015			(43,090	)		(14.8	)		101,188			123,635			(22,447	)		(18.2	)		350,113			415,650			(65,537	)		(15.8	)
Gross Profit		49,915			49,447			468			0.9			99,682			103,553			(3,871	)		(3.7	)		39,345			40,691			(1,346	)		(3.3	)		139,028			144,244			(5,216	)		(3.6	)
Gross Margin		27.4	%		25.6	%								28.6	%		26.2	%								28.0	%		24.8	%								28.4	%		25.8	%
Selling, general and
administrative expense (b)		46,407			49,407			(3,000	)		(6.1	)		89,604			96,303			(6,699	)		(7.0	)		41,379			50,360			(8,981	)		(17.8	)		130,984			146,569			(15,585	)		(10.6	)
Goodwill impairment																										-			9,617			(9,617	)		(100.0	)					9,617			(9,617	)		(100.0	)
Provision for bad debts		207			7			200			2857.1			293			66			227			343.9			174			(22	)		196			(890.9	)		467			43			424			989.1
Total costs and expenses		179,010			192,972			(13,962	)		(7.2	)		338,822			388,384			(49,562	)		(12.8	)		142,741			183,590			(40,849	)		(22.3	)		481,564			571,879			(90,315	)		(15.8	)
Operating income		3,301			33			3,268			9903.0			9,785			7,184			2,601			36.2
Operating income (loss)																										(2,208	)		(19,264	)		17,056			(88.5	)		7,577			(11,985	)		19,562			(163.2	)
Operating Margin		1.8	%		0.0	%								2.8	%		1.8	%								-1.6	%		-11.7	%								1.5	%		-2.1	%
Other (income) expense		12			(13	)		25			(192.3	)		183			(21	)		204			(971.4	)		(17	)		(34	)		17			(50.0	)		166			(54	)		220			(407.4	)
Segment income before
Income Taxes	$	3,289		$	46		$	3,243			7050.0		$	9,602		$	7,205		$	2,397			33.3
Segment income (loss) before
income taxes																									$	(2,191	)	$	(19,230	)	$	17,039			(88.6	)	$	7,411		$	(11,931	)	$	19,342			(162.1	)

~~A summary of the significant financial covenants that govern the 2002 Series A variable funding note compared to actual compliance status at July 31, 2010, is presented below:~~

As reported
Required
Minimum/
Maximum
Issuer interest must exceed required minimum $85.1 million $69.1 million
Gross loss rate must be lower than required maximum (a) 5.3% 10.0%
Serviced portfolio gross loss rate must be lower than required maximum (b) 5.0% 10.0%
Net portfolio yield must exceed required minimum (a) 6.1% 2.0%
Serviced portfolio net portfolio yield must exceed required minimum (b) 7.6% 2.0%
Payment rate must exceed required minimum (a) 6.2% 3.0%
Serviced portfolio payment rate must exceed required minimum (a) 5.20% 4.75%
Consolidated net worth must exceed required minimum $347.7 million $259.8 million

~~(a)~~

~~Calculated for those customer receivables transferred to the securitization program.~~

~~(b)~~

~~Calculated for the total of customer receivables transferred to the securitization program and those retained by the Company.~~

~~Note: All terms in the above table are defined by the asset backed securitization program and may or may not agree directly to the financial statement captions in this document.~~

We expect, based on current facts and circumstances that we will be in compliance with the above covenants for the next 12 months. Events of default under the 2002 Series A variable funding note and the 2006 Series A bonds, subject to grace periods and notice provisions in some circumstances, include, among others: failure of the issuer to pay principal, interest or fees; violation by the issuer of any of its covenants or agreements; inaccuracy of any representation or warranty made by the issuer; certain servicer defaults; failure of the trustee to have a valid and perfected first priority security interest in the collateral; default under or acceleration of certain other indebtedness; bankruptcy and insolvency events; failure to maintain certain loss ratios and portfolio yield; change of control provisions and certain oth er events pertaining to us. The issuer’s obligations under the program are secured by the customer receivables and proceeds.

We continue to service the transferred accounts for the VIE, and we receive a monthly servicing fee, so long as we act as servicer, in an amount equal to .25% multiplied by the average aggregate principal amount of customer receivables serviced, including the amount of average aggregate defaulted customer receivables. The issuer records revenues equal to the interest charged to the customer on the receivables less losses, the cost of funds, the program administration fees paid in connection with either the 2002 Series A or 2006 Series A bond holders, the servicing fee and additional earnings to the extent they are available.

As of ~~July~~October 31, 2010, we had additional borrowing capacity of ~~$57.1~~$38.8 million under our asset-based revolving credit facility, net of standby letters of credit issued, ~~and $10.0 million under our unsecured bank line of credit immediately~~ available to us for general corporate purposes and extended vendor terms for purchases of inventory. In addition to the ~~$57.1~~$38.8 million currently available under the revolving credit facility, an additional ~~$21.8~~$21.9 million may become available if we grow the balance of eligible customer receivables retained by us and total eligible inventory balances. While the credit portfolio performance has improved since January 31, 2010, availability under the asset-based revolving credit facility was reduced by approximately ~~$3.8~~$5.6 million at ~~July~~October 31, 2010, due to recent level of delinquencies and net ~~charge-offs.~~charge - -offs. This ~~a mount~~amount may become available in the future if credit portfolio performance ~~continues~~improves. Additionally, as of October 31, 2010, the three month average net portfolio yield fell to ~~improve.~~4.1%, requiring the VIE to post additional cash reserves of approximately $6.0 million. The principal payments received on customer receivables ~~held by us and by the VIE,~~ which averaged approximately ~~$37.2~~$35.7 million per month during the ~~six~~nine months ended ~~July~~October 31, 2010, are available each month to fund new customer receivables generated. As of November 30, 2010, after completion of the financing transactions, the Company had $273.8 million outstanding under its asset-based revolving credit facility, excluding letters of credit of $2.2 million, and $94.0 million, after $6.0 million original issue discount, outstanding under its second lien term loan. As a result, the Company had total remaining borrowing capacity under its asset-based revolving credit facility, before considering the $25 milli on minimum availability requirement, of $99 million, subject to borrowing base and covenant compliance limitations.

The Company’s $10 million unsecured revolving line of credit expired in September 2010 and was not renewed. The lender that had provided the unsecured revolving line of credit is now a lender under the asset-based revolving credit facility.

We will continue to finance our operations and future growth through a combination of cash flow generated from operations and external borrowings, including primarily bank debt, extended vendor terms for purchases of inventory and acquisition of inventory under consignment arrangements ~~and the asset-backed securitization facilities~~. Based on our current operating plans, we believe that cash generated from operations, available borrowings under our revolving credit facility and ~~unsecured credit line,~~term loan, extended vendor terms for purchases of inventory and acquisition of inventory under consignment arrangements ~~and cash flows from the asset-backed securitization program~~ will be sufficient to fund our operations, store expansion and updating activities and capital programs ~~until August, 201 1,~~for at least the next 12 months, subject to continued compliance with the covenants in our credit facilities. If we are unable to extend or replace our credit facilities prior to August 2011, our revolving credit facility and our VIE’s 2002 Series A program will mature. At the maturity date, our revolving credit facility could become immediately due and payable if a demand for payment is made by the lenders. Additionally, upon maturity of the VIE’s 2002 Series A program, the VIE will no longer be able to purchase additional receivables and cash received by the VIE from collection of the receivables will be used to repay the amounts outstanding under the 2002 Series A and 2006 Series A programs until they are paid in full. Additionally, if there is a default under any of the facilities that is not waived by the various lenders, it could result in the requirement to immediately begin repayment of all amounts owed under our credit facilities, as all of the facilities have cross-default provisions that would result in default ~~und er~~under all of the facilities if there is a default under any one of the facilities. If the repayment of amounts owed under our credit facilities is accelerated for any reason, we may not have sufficient cash and liquid assets at such time to be able to immediately repay all the amounts owed under the facilities.

Both the revolving credit facility and the ~~asset-backed securitization program~~term loan are significant factors relative to our ongoing liquidity and our ability to meet the cash needs associated with the growth of our business. Our inability to use either of these programs because of a failure to comply with their covenants would adversely affect our business operations. Funding of current and future customer receivables under the borrowing facilities can be adversely affected if we exceed certain predetermined levels of re-aged customer receivables, ~~size of the secondary portfolio, the amount of promotional customer receivables,~~ write-offs, bankruptcies or other ineligible customer receivable amounts.

There are several factors that could decrease cash available, including:

●

~~reduced~~·

Reduced demand or margins for our products;

●

~~more~~·

More stringent vendor terms on our inventory purchases;

●

~~loss~~·

Loss of ability to acquire inventory on consignment;

●

~~increases~~·

Increases in product cost that we may not be able to pass on to our customers;

●

~~reductions~~·

Reductions in product pricing due to competitor promotional activities;

●

~~changes~~·

Changes in inventory requirements based on longer delivery times of the manufacturers or other requirements which would negatively impact our delivery and distribution capabilities;

●

increases in the retained portion of our customer receivables portfolio under our current asset-backed securitization program as a result of changes in performance or types of customer receivables transferred (promotional versus non-promotional and primary versus secondary portfolio), or as a result of a change in the mix of funding sources available under the asset-backed securitization program, requiring higher collateral levels, or limitations on our ability to obtain financing through commercial paper-based funding sources;

● ·	~~reduced~~Reduced availability under our asset-based revolving credit facility as a result of borrowing base requirements and the impact on the borrowing base calculation of changes in the performance or eligibility of the customer receivables financed by that facility;

●

~~reduced~~·

Reduced availability under our revolving credit facility or ~~asset-backed securitization financing facilities~~term loan as a result of non-compliance with the covenant requirements;

●

~~reduced~~·

Reduced availability under our revolving credit facility ~~or asset-backed securitization financing facilities~~ as a result of the inability of any of the financial institutions providing those facilities to fund their ~~commitment,~~commitment;

●

~~reductions~~·

Reductions in the capacity or inability to expand the capacity available for financing our customer receivables portfolio under existing or replacement ~~asset-backed securitization~~financing programs or a requirement that we retain a higher percentage of the credit portfolio under such programs;

●

~~increases~~·

Increases in borrowing costs (interest and administrative fees relative to our customer receivables portfolio associated with the funding of our customer receivables);

●

~~increases~~·

Increases in personnel costs or other costs for us to stay competitive in our markets; and

●

~~inability~~·

Inability to renew or replace all or a portion of our current credit facilities at their ~~annual~~ maturity dates. Our asset-based revolving credit facility and the revolving facility of our securitization program mature in August 2011. The medium term notes issued under the securitization program begin repayment in September 2010 and we expect them to be fully repaid by April 2012.

We are pursuing various options to renew or replace our existing credit facilities. As such, we have engaged our commercial and investment banking partners to present and review alternatives to raise capital in the various debt and equity capital markets. The options being considered could result in one or more of the existing credit facilities being repaid in full and not renewed or extended. Additionally, we currently estimate that our total cost of borrowing will increase between 200 and 400 basis points as a result of our capital raising activities. If we are unable to renew or replace our existing credit facilities we could be required to further reduce the size of the customer credit portfolio in order to repay the amounts outstanding under our credit facilities. In order to reduce the size of the credit portfolio we would be re quired to reduce, or possibly cease, originating new customer receivables until the amounts due under our credit facilities are repaid.

If necessary, in addition to available cash balances, cash flow from operations and borrowing capacity under our revolving facilities, additional cash to fund our growth and increases in customer receivables balances could be obtained by:

●

~~reducing~~·

Reducing capital expenditures for new store ~~openings,~~openings;

●

~~reducing~~·

Reducing the size of our customer credit portfolio;

●

~~taking~~·

Taking advantage of longer payment terms and financing available for inventory ~~purchases,~~purchases;

●

~~utilizing~~·

Utilizing other sources for providing financing to our ~~customers,~~customers;

●

~~negotiating~~·

Negotiating to expand the capacity available under existing credit ~~facilities,~~facilities; and

●

~~accessing~~·

Accessing equity or debt markets.

We can provide no assurance that we will be able to obtain these sources of funding on favorable terms, if at all.

During the ~~six~~nine months ended ~~July~~October 31, 2010, net cash provided by operating activities ~~increased~~decreased from ~~$15.4~~$54.9 million provided by operating activities during the ~~six~~nine months ended ~~July~~October 31, 2009, to ~~$23.9~~$42.6 million provided by operating activities. The ~~increase~~decrease was driven primarily by:

–

Cash used for the growth in inventory, other accounts receivable;

The benefit to cash flows from of operations in the nine months ended October 31, 2009, related to the non-cash goodwill impairment charge;

Partially offset by cash provided from decreases in the balance of customer accounts receivable, cash provided from growth in accounts payable ~~to support the inventory growth~~ and cash from income taxes, which was driven by a $9.5 million tax refund received during the ~~period,~~

–	~~partially offset by cash used for the growth in inventory and other accounts receivable, and lower net income.~~period.

Net cash used in investing activities decreased from ~~$6.7~~$8.6 million used in the fiscal 2010 period to ~~$1.1~~$8.3 million used in the fiscal 2011 period. The net decrease in cash used in investing activities resulted primarily from a decline in purchases of property and equipment in the current year period, as we reduced capital expenditures while we assess capital availability for growth in the credit portfolio, store remodels and new store ~~openings.~~openings, partially offset by the increase in restricted cash balances associated with our VIE’s securitization facility. We estimate that our total capital expenditures for fiscal 2011 will be approximately $5$3 million to ~~$10~~$5 million, based on our current ~~plans, which could change based on capital availability.~~plans.

Net cash used in financing activities ~~increased~~decreased from ~~$15.6~~$42.7 million used during the ~~six~~nine months ended ~~July~~October 31, 2009, to ~~$26.7~~$34.2 million used during the ~~six~~nine months ended ~~July~~October 31, 2010. During the ~~six~~nine months ended ~~July~~October 31, 2010, we used net cash flows from ~~customer accounts receivable collections, net income and a tax refund, net of other working capital changes,~~operating activities to pay down amounts owed under our financing ~~facilities.~~facilities and fund increased cash reserve requirements under our securitization program. Additionally, we paid approximately ~~$5.0~~$9.6 million in deferred financing costs, primarily related to the credit facility amendments we completed during the ~~period.~~period and the new financing transactions discussed above.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest rates under our expanded asset-based revolving credit facility are variable and ~~are determined,~~bear interest at ~~our option, as the base rate, which is the prime rate plus the base rate margin, which ranges from 3.25% to 3.75%, or~~ LIBOR plus ~~the LIBOR margin, which ranges~~a spread ranging from ~~3.25%~~375 basis points to ~~3.75%. Interest rates under our securitization program’s variable funding note facility are variable and are determined~~400 basis points, based on a leverage ratio (defined as total liabilities to tangible net worth). Our new $100 million second-lien term loan bears interest at the ~~commercial paper rate~~greater of LIBOR or 3.0%, plus a spread of ~~2.50%.~~1150 basis points. Accordingly, changes in ~~the prime rate, the commercial paper rate or~~ LIBOR ~~which are affected by changes in interest rates generally,~~ will affect the interest rate on, and therefore our costs under, these credit facilities.

Since January 31, 2010, the securitization program’s variable rate debt has decreased from $196.4 million, or 56.7% of its total debt, to $170.0 million, or 53.1% of its total debt. As a result, a 100 basis point increase in interest rates on the variable rate debt would increase borrowing costs $1.7 million over a 12-month period, based on the balance outstanding at July 31, 2010.

~~Since January 31, 2010, the~~ balance outstanding under our asset-based revolving credit facility has increased from $105.5 million to ~~$109.4~~$127.1 million at ~~July~~October 31, 2010. As of November 30, 2010, the balance under our asset-based revolving credit facility increased to $273.8 million. Additionally, since January 31, 2010, the notional balance of interest swaps used to fix the rate on a portion of asset-based revolving credit facility balance has decreased from $40 million to $25 million at ~~July~~October 31, 2010. As a result, as of November 30, 2010, a 100 basis point increase in interest rates on the asset-based revolving credit facility would increase our borrowing costs by ~~$0.8~~$2.5 million over a 12-month period, based on the balance outstanding at ~~July 31,~~November 30, 2010, ~~after~~a fter considering the impact of the interest rate swaps. Because LIBOR is more than 100 basis points below the minimum 3.0% rate under the term loan, a 100 basis point change in LIBOR would not impact the current anticipated interest expense under that loan.

Item 4. Controls and Procedures

Based on management's evaluation (with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO)), as of the end of the period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

For the quarter ended ~~July~~October 31, 2010, there have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

On June 7, 2010, the judge in the Texas State District Court of Harris County, Texas, signed an Order confirming the terms and conditions of the Rule 11 Settlement Agreement between us and the Texas Attorney General, fully and finally resolving the litigation filed against us by the Texas Attorney General, which alleged unlawful and deceptive practices in violation of the Texas Deceptive Trade Practices-Consumer Protection Act. Under the terms of the Settlement and the Order we did not admit, and continue to deny, any wrongdoing. As part of the Order confirming the settlement agreement, we made two cash payments, one in the amount of $2.5 million on December 17, 2009 and a second payment in the amount of $2.0 million on February 18, 2010, to the Texas ~~Attorney~~Attorne y General for distribution to consumers as restitution for claims our ~~custome rs~~customers have. We also paid $250,000 to the Texas Attorney General for its attorney’s fees, and agreed to and did donate $100,000 to the University of Houston Law Center for its use in its consumer protection programs.

We are involved in routine litigation and claims incidental to our business from time to time, and, as required, have accrued our estimate of the probable costs for the resolution of these matters. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings. However, the results of these proceedings cannot be predicted with certainty, and changes in facts and circumstances could impact our estimate of reserves for litigation.

Item 1A. Risk Factors

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.

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 and a second-lien term loan that together provide ~~$530.0~~$475.0 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.commitments. Our asset-based revolving credit facility currently is a ~~$210.0~~$375.0 million facility. ~~At July 31,~~As of November 30, 2010 we had $276.0 million outstanding under our ~~revolving credit facility, we had the ability to borrow $188.2 million, of which we had drawn $109.4 million and had outstanding~~asset-based lone, including standby letters of credit issued. We also had $94.0 million, after $6.0 million original issue discount, outstanding under our second lien term loan, leaving us with total borrowing capacity of ~~$21.7 million.~~$99.0 million, subject to borrowing base and covenant limitations.

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:

●

~~conditions~~·

Conditions in the securities and finance markets generally;

●

~~our~~·

Our credit rating or the credit rating of any securities we may issue;

●

~~economic~~·

Economic conditions;

●

~~conditions~~·

Conditions in the markets for securitized instruments, or other debt or equity instruments;

●

~~the~~·

The credit quality and performance of our customer receivables;

●

~~our~~·

Our overall sales performance and profitability;

●

~~our~~·

Our ability to obtain financial support for required credit enhancement;

●

~~our~~·

Our ability to adequately service our financial instruments;

●

~~the~~·

The absence of any material downgrading or withdrawal of ratings given to our securities previously issued in securitization;

●

~~our~~·

Our ability to meet debt covenant requirements; and

●

~~prevailing~~·

Prevailing interest rates.

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 collateral to raise funds through securitization programs. In addition, we have in the past completed amendments to our existing credit facilities and our recently terminated 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 revolving credit facility upon the occurrence of a default. If availability under the borrowing base calculations of our revolving credit ~~facility~~facil ity is reduced, or otherwise becomes unavailable, or we are unable to arrange substitute financing ~~fa cilities~~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 asset-based revolving credit facility and the revolving portion of our asset-backed securitization facilities both mature in August 2011. We are discussing various options to renew or replace our existing credit facilities, including exploring opportunities to raise capital in various debt and equity capital markets.

If we are unable to renew or replace our existing credit facilities in the future, we would be required to reduce, or possibly cease, offering customer credit which could 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 and the term loan, we will have certain obligations, including maintaining certain financial 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 are in compliance with the covenants in our existing facilities, 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.

In addition, the interest rates on our revolving credit ~~facility and the 2002 Series A program under our asset-backed securitization~~ facility fluctuate upon or down based upon the LIBOR rate, the prime rate of our administrative agent or the federal funds rate. The interest rate on our term loan will fluctuate up or down based upon the LIBOR rate, with a floor on the LIBOR rate used in ~~the case~~computing interest of ~~the revolving credit facility and the commercial paper rate in the case of the 2002 Series A program.~~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, we intend to reinstate our new store opening program. New stores are not likely to be profitable on an operating basis during the first three to ~~six~~nine 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:

●

~~the~~·

The availability of additional financial resources;

●

~~the~~·

The availability of favorable sites in existing adjacent and new markets at price levels consistent with our business plan;

●

~~competition~~·

Competition in existing, adjacent and new markets;

●

~~competitive~~·

Competitive conditions, consumer tastes and discretionary spending patterns in adjacent and new markets that are different from those in our existing markets;

●

a·

A lack of consumer demand for our products or financing programs at levels that can support new store growth;

●

~~inability~~·

Inability to make customer financing programs available that allow consumer to purchase products at levels that can support new store growth;

●

~~limitations~~·

Limitations created by covenants and conditions under our revolving credit facility and ~~asset-backed securitization program;~~term loan;

●

an·

The substantial outlay of financial resources required to open new stores and the possibility that we may recognize little or no related benefit;

The inability to identify suitable sites and to negotiate acceptable leases for these sites;

An inability or unwillingness of vendors to supply product on a timely basis at competitive prices;

●

~~the~~·

The failure to open enough stores in new markets to achieve a sufficient market presence and realize the benefits of leveraging our advertising and our distribution system;

●

~~unfamiliarity~~·

Unfamiliarity with local real estate markets and demographics in adjacent and new markets;

●

~~problems~~·

Problems in adapting our distribution and other operational and management systems to an expanded network of stores;

●

~~difficulties~~·

Difficulties associated with the hiring, training and retention of additional skilled personnel, including store managers; and

●

~~higher~~·

Higher costs for print, radio and television advertising.

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~~c hallenges 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” sales. 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.~~programs to customers with a broad range of credit worthiness. 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~~unempl oyment 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~~incr ease 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 revolving credit facility 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~~October 31, 2010, ~~18.4%~~18.7% 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~~we ll 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~~model&# 8217;s intended use. In particular, models are less dependable when the ~~econo mic~~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 “Management’s discussion and analysis of financial condition and results of operations” and elsewhere in this report, 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.~~sale s. These factors led to a net operating loss in the second half of fiscal ~~201 0,~~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,~~term loan, 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~~i nto our current and contemplated markets, and new competitors may enter our ~~c urrent~~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:

●

~~expansion~~·

Expansion by our existing competitors or entry by new competitors into markets where we currently operate;

●

~~entering~~·

Entering the television market as the decreased size of flat-panel televisions allows new entrants to display and sell these product more easily;

●

~~lower~~·

Lower pricing;

●

~~aggressive~~·

Aggressive advertising and marketing;

●

~~extension~~·

Extension of credit to customers on terms more favorable than we offer;

●

~~larger~~·

Larger store size, which may result in greater operational efficiencies, or innovative store formats; and

●

~~adoption~~·

Adoption of improved retail sales methods.

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~~widesprea d consumer acceptance or will be supplanted by alternative products and ~~techn ologies~~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~~nine 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~~red uce 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 LED and 3-D televisions, Blu-ray and DVD players and 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 19.5% 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~~mai ntain 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~~nu mber of limited distribution items. In addition, we rely heavily on a ~~relativ ely~~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~~October 31, 2010, we had ~~$62.1~~$41.1 million in accounts payable and ~~$99.1~~$83.7 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~~three quarters of fiscal 2011 was -4.6%, -5.2%, -9.3%, -31.7%, -19.7%, -6.4% and ~~–6.4%~~-16.3%, 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~~·

Changes in competition, such as pricing pressure, and the opening of new stores by competitors in our markets;

●

~~general~~·

General economic conditions;

●

~~new~~·

New product introductions;

●

~~consumer~~·

Consumer trends;

●

~~changes~~·

Changes in our merchandise mix;

●

~~changes~~·

Changes in the relative sales price points of our major product categories;

●

~~ability~~·

Ability to offer credit programs attractive to our customers;

●

~~the~~·

The impact of any new stores on our existing stores, including potential decreases in existing stores’ sales as a result of opening new stores;

●

~~weather~~·

Weather conditions in our markets;

●

~~timing~~·

Timing of promotional events;

●

~~timing,~~·

Timing, location and participants of major sporting events;

●

~~reduction~~·

Reduction in new store openings;

●

~~the~~·

The percentage of our stores that are mature stores;

●

~~the~~·

The locations of our stores and the traffic drawn to those areas:

●

~~how~~·

How often we update our stores; and

●

~~our~~·

Our ability to execute our business strategy effectively.

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~~shor tfall in expected net sales, combined with our significant additional ~~expense s~~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~~fu ture laws or regulations, including regulations that may be applicable to us under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which ~~is expected to be~~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 and results of operations.

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 ~~substan tial~~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~~Any changes to our operations as a result of 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,~~2009 , we ~~consented~~agreed to certain ~~changes~~modifications 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 ~~April~~November 1, 2010, Stephens, Inc. and The Stephens Group, LLC, two of our stockholders and their affiliated entities beneficially owned approximately ~~23.35%~~23.8% and ~~25.66%~~26.0%, respectively, of our common stock and their interests may conflict with the will or interests of our other equityholders. While Stephens Inc. and its affiliates hold their ~~23.35%~~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 ~~at such time~~upon expiration Stephens Inc. 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~~electin g directors and approving mergers or other business combination transactions.

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 ~~collecti on~~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~~o il and gas industries, which can be very volatile. Additionally, because of ~~f ears~~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:

●

~~power~~·

Power loss, computer systems failures and Internet, telecommunications or data network failures;

●

~~operator~~·

Operator negligence or improper operation by, or supervision of, employees;

●

~~physical~~·

Physical and electronic loss of data or security breaches, misappropriation and similar events;

●

~~computer~~·

Computer viruses;

●

~~intentional~~·

Intentional acts of vandalism and similar events; and

●

~~hurricanes,~~·

Hurricanes, fires, floods and other natural disasters.

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 oro r the third parties on which we rely, and such failures or interruptions ~~coul d~~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~~chan ges in statutory premium rates, commission rates, adverse claims experience ~~a nd~~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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 5. Other Information

There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors since we last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A.

On August 25, 2010, the Securities and Exchange Commission (SEC) adopted amendments to the federal proxy rules, including a new “proxy access” rule which will require public companies to include information in the company’s proxy materials about, and enable shareholders to vote for, director candidates nominated by shareholders or groups of shareholders that meet specified stock ownership criteria. The SEC adopted the proxy access rule in response to ongoing concerns about whether public company boards of directors are sufficiently focused on shareholder interests, and the desire of some public company shareholders to use the director nomination process as a tool for increasing board accountability and influencing corporate policy. The SEC&# 8217;s authority to adopt the proxy access rule was confirmed in the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act.

The key provisions of the proxy access rule, to be codified as new Exchange Act Rule 14a-11, and related federal proxy rule amendments, are summarized below.

The proxy access rule will take effect 60 days from publication in the Federal Register. Accordingly, the rule will be effective for the 2011 proxy season.

Item 6. Exhibits

The exhibits required to be furnished pursuant to Item 6 of Form 10-Q are listed in the Exhibit Index filed herewith, which Exhibit Index is incorporated herein by reference.

5458

10.12.5	Amendment No. 2 to Second Amended and Restated Note Purchase Agreement dated August 10, 2009 by and between Conn Funding II. L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2009 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 27, 2009).

10.12.6	Amendment No. 3 to Second Amended and Restated Note Purchase Agreement dated August 10, 2009 by and between Conn Funding II. L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.2 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on February 12, 2010).

10.12.7	Amendment No. 4 to Second Amended and Restated Note Purchase Agreement dated August 10, 2009 by and between Conn Funding II. L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.2 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on March 4, 2010).

10.12.8	Amendment No. 5 to Second Amended and Restated Note Purchase Agreement dated August 10, 2009 by and between Conn Funding II. L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.1 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on March 12, 2010).

10.12.9	Amendment No. 6 to Second Amended and Restated Note Purchase Agreement dated August 10, 2009 by and between Conn Funding II. L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.1 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on March 16, 2010).

10.12.10	Amendment No. 7 to Second Amended and Restated Note Purchase Agreement dated August 9, 2010 by and among Conn Funding II. L.P., as Issuer, Conn Appliances, Inc., Three Pillars Funding, LLC, JPMorgan Chase Bank, N.A., Jupiter Securitization Company, LLC (as successor by merger to Park Avenue Receivables Company, LLC) and SunTrust Robinson Humphrey, Inc. ~~(filed herewith)~~(incorporated herein by reference to Exhibit 10.12.10 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2010 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 26, 2010).

10.13	Servicing Agreement dated September 1, 2002, by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank Minnesota, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).


10.13.1	First Amendment to Servicing Agreement dated June 24, 2005, by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended ~~October~~July 31, 2005 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 30, 2005).

10.13.2	Second Amendment to Servicing Agreement dated November 28, 2005, by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14.2 to Conn’s, Inc. Form 10-Q for the quarterly period ended October 31, 2005 (File No. 000-50421) as filed with the Securities and Exchange Commission on December 1, 2005).

10.13.3	Third Amendment to Servicing Agreement dated May 16, 2006, by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14.3 to Conn’s, Inc. Form 10-Q for the quarterly period ended ~~October~~July 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on September 15, 2006).

10.13.4	Fourth Amendment to Servicing Agreement dated August 1, 2006, by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.14.4 to Conn’s, Inc. Form 10-Q for the quarterly period ended ~~October~~July 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on September 15, 2006).

10.13.5	Sixth Amendment to Servicing Agreement dated November 29, 2010 by and among Conn Funding II, L.P., as Issuer, CAI, L.P., as Servicer, and Wells Fargo Bank, National Association, as Trustee (filed herewith).

10.14	Form of Executive Employment Agreement (incorporated herein by reference to Exhibit 10.15 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on October 29, 2003).t

10.14.1	First Amendment to Executive Employment Agreement between Conn’s, Inc. and Thomas J. Frank, Sr., Approved by the stockholders May 26, 2005 (incorporated herein by reference to Exhibit 10.15.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended ~~October~~July 31, 2005 (file No. 000-50421) as filed with the Securities and Exchange Commission on August 30, 2005).t

10.14.2	Executive Retirement Agreement between Conn’s, Inc. and Thomas J. Frank, Sr., approved by the Board of Directors June 2, 2009 (incorporated herein by reference to Exhibit 10.14.2 to Conn’s, Inc. Form 10-Q for the quarterly period ended April 30, 2009 (file No. 000-50421) as filed with the Securities and Exchange Commission on June 4, 2009).t.

10.14.3	Non-Executive Employment Agreement between Conn’s, Inc. and Thomas J. Frank, Sr., approved by the Board of Directors June 19, 2009 (incorporated herein by reference to Exhibit 10.14.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2009 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 27, 2009).t

10.15	Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.16 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).t

10.16	Description of Compensation Payable to Non-Employee Directors (incorporated herein by reference to Form 8-K (file no. 000-50421) filed with the Securities and Exchange Commission on June 2, 2005).t

10.17	Dealer Agreement between Conn Appliances, Inc. and Voyager Service Programs, Inc. effective as of January 1, 1998 (incorporated herein by reference to Exhibit 10.19 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).


10.17.1	Amendment #1 to Dealer Agreement by and among Conn Appliances, Inc., CAI, L.P., Federal Warranty Service Corporation and Voyager Service Programs, Inc. effective as of July 1, 2005 (incorporated herein by reference to Exhibit 10.19.1 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).

10.17.2	Amendment #2 to Dealer Agreement by and among Conn Appliances, Inc., CAI, L.P., Federal Warranty Service Corporation and Voyager Service Programs, Inc. effective as of July 1, 2005 (incorporated herein by reference to Exhibit 10.19.2 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).

10.17.3	Amendment #3 to Dealer Agreement by and among Conn Appliances, Inc., CAI, L.P., Federal Warranty Service Corporation and Voyager Service Programs, Inc. effective as of July 1, 2005 (incorporated herein by reference to Exhibit 10.19.3 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).

10.17.4	Amendment #4 to Dealer Agreement by and among Conn Appliances, Inc., CAI, L.P., Federal Warranty Service Corporation and Voyager Service Programs, Inc. effective as of July 1, 2005 (incorporated herein by reference to Exhibit 10.19.4 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).

10.17.5	Amendment #5 to Dealer Agreement by and among Conn Appliances, Inc., CAI, L.P., Federal Warranty Service Corporation and Voyager Service Programs, Inc. effective as of April 7, 2007 (incorporated herein by reference to Exhibit 10.18.5 to Conn’s, Inc. Form 10-Q for the quarterly period ended ~~October~~July 31, 2007 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 30, 2007).

10.18	Service Expense Reimbursement Agreement between Affiliates Insurance Agency, Inc. and American Bankers Life Assurance Company of Florida, American Bankers Insurance Company Ranchers & Farmers County Mutual Insurance Company, Voyager Life Insurance Company and Voyager Property and Casualty Insurance Company effective July 1, 1998 (incorporated herein by reference to Exhibit 10.20 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).

10.18.1	First Amendment to Service Expense Reimbursement Agreement by and among CAI, L.P., Affiliates Insurance Agency, Inc., American Bankers Life Assurance Company of Florida, Voyager Property & Casualty Insurance Company, American Bankers Life Assurance Company of Florida, American Bankers Insurance Company of Florida and American Bankers General Agency, Inc. effective July 1, 2005 (incorporated herein by reference to Exhibit 10.20.1 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).

10.18.2	Seventh Amendment to Service Expense Reimbursement Agreement by and among Conn Appliances, Inc., American Bankers Life Assurance Company of Florida, American Bankers Insurance Company of Florida, American Reliable Insurance Company and Reliable Lloyds Insurance Company effective May 1, 2009 (incorporated herein by reference to Exhibit 10.14.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2009 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 27, 2009).

10.19	Service Expense Reimbursement Agreement between CAI Credit Insurance Agency, Inc. and American Bankers Life Assurance Company of Florida, American Bankers Insurance Company Ranchers & Farmers County Mutual Insurance Company, Voyager Life Insurance Company and Voyager Property and Casualty Insurance Company effective July 1, 1998 (incorporated herein by reference to Exhibit 10.21 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).


10.19.1	First Amendment to Service Expense Reimbursement Agreement by and among CAI Credit Insurance Agency, Inc., American Bankers Life Assurance Company of Florida, Voyager Property & Casualty Insurance Company, American Bankers Life Assurance Company of Florida, American Bankers Insurance Company of Florida, American Reliable Insurance Company, and American Bankers General Agency, Inc. effective July 1, 2005 (incorporated herein by reference to Exhibit 10.21.1 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).

10.19.2	Fourth Amendment to Service Expense Reimbursement Agreement by and among CAI Credit Insurance Agency, Inc., American Bankers Life Assurance Company of Florida, American Bankers Insurance Company of Florida and American Reliable Insurance Company effective May 1, 2009 (incorporated herein by reference to Exhibit 10.14.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2009 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 27, 2009).

10.20	Consolidated Addendum and Amendment to Service Expense Reimbursement Agreements by and among Certain Member Companies of Assurant Solutions, CAI Credit Insurance Agency, Inc. and Affiliates Insurance Agency, Inc. effective April 1, 2004 (incorporated herein by reference to Exhibit 10.22 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on March 30, 2006).

10.21	Series 2006-A Supplement to Base Indenture, dated August 1, 2006, by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.23 to Conn’s, Inc. Form 10-Q for the quarterly period ended ~~October~~July 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on September 15, 2006).

10.22	Retailer Program agreement by and between GE Money bank and Conn Appliances, Inc. effective April 16, 2009 ~~(filed herewith)~~(incorporated herein by reference to Exhibit 10.22 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2010 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 26, 2010).

10.23	Agreement by and between Conn Appliances, Inc. and The Rental Store, Inc. effective July 1, 2010 (incorporated herein by reference to Exhibit 10.23 to Conn’s, Inc. Form 10-Q for the quarterly period ended July 31, 2010 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 26, 2010).

10.24	Term Loan and Security Agreement, dated November 30, 2010, among Conn’s, Inc., as parent and guarantor, Conn Appliances, Inc., Conn Credit I, LP, and Conn Credit Corporation, Inc., the financial institutions party to this Agreement from time to time as lenders, GA Capital, LLC, as Administrative Agent and Collateral Agent for the Lenders and Wells Fargo Credit, Inc., as Syndication Agent (filed herewith).

10.25	Continuing Guaranty dated November 30, 2010 executed by Conn’s, Inc., CAI Holding Co., CAI Credit Insurance Agency, Inc., Conn Lending, LLC, and CAIAIR, Inc., each a Guarantor in favor of GA Capital, LLC, in its capacity as agent (filed herewith).

10.26	Security Agreement dated November 30, 2010 entered into and executed by Conn’s, Inc., CAI Holding Co., CAI Credit Insurance Agency, Inc., Conn Lending, LLC, and CAIAIR, Inc., collectively, and GA Capital, LLC, in its capacity as Agent (filed herewith).

10.27	Receivables Purchase Agreement dated November 30, 2010 by and between Conn Funding, II, LP and Conn Credit I, LP (filed herewith).

10.28	Trustee Acknowledgement dated November 30, 2010 between Conn Funding II, LP, as Issuer, and Wells Fargo Bank, National Association, as Trustee (filed herewith).

10.29	Assignment dated November 30, 2010 between Conn Funding II, LP, as Seller, and Conn Credit I, LP, as Purchaser (filed herewith).

11.1	Statement re: computation of earnings per share is included under Note 1 to the financial statements.

12.1	Statement of computation of Ratio of Earnings to Fixed Charges ~~(filed herewith).~~

21	~~Subsidiaries of Conn's, Inc.~~ (filed herewith).

31.1	Rule 13a-14(a)/15d-14(a) Certification (Chief Executive Officer) (filed herewith).

31.2	Rule 13a-14(a)/15d-14(a) Certification (Chief Financial Officer) (filed herewith).

32.1	Section 1350 Certification (Chief Executive Officer and Chief Financial Officer) (furnished herewith).

99.1	Subcertification by Chairman of the Board in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Executive Officer) (filed herewith).

99.2	Subcertification by President – Retail Division in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Executive Officer) (filed herewith).

99.3	Subcertification by President – Credit Division in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Executive Officer) (filed herewith).

99.4	Subcertification by Senior Vice President of Finance in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Financial Officer) (filed herewith).

99.5	Subcertification by Treasurer in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Financial Officer) (filed herewith).

6267

~~99.5~~99.6	Subcertification by Secretary in support of Rule 13a-14(a)/15d-14(a) Certification (Chief Financial Officer) (filed herewith).

~~99.6~~99.7	Subcertification of Chairman of the Board, Chief Operating Officer, Treasurer and Secretary in support of Section 1350 Certifications (Chief Executive Officer and Chief Financial Officer) (furnished herewith).

t	Management contract or compensatory plan or arrangement.

	Six Months Ended				Nine Months Ended
	July 31,				October 31,
	2009		2010		2009		2010

Common stock outstanding, net of treasury stock, beginning of period		22,444,240		22,471,350		22,444,240		22,471,350
Weighted average common stock issued to employee stock purchase plan		6,247		8,008		9,189		12,549
Shares used in computing basic earnings per share		22,450,487		22,479,358		22,453,429		22,483,899
Dilutive effect of stock options, net of assumed repurchase of treasury stock		224,085		3,241		204,729		2,606
Shares used in computing diluted earnings per share		22,674,572		22,482,599		22,658,158		22,486,505

	Selling, general, and administrative							Interest Expense
	As Presented		Reclass			As Adjusted		As Presented		Reclass		As Adjusted
FY 2009
Quarter ending 4/30/2008	$	60,436	$	(84	)	$	60,352	$	5,486	$	84	$	5,570
Quarter ending 7/31/2008		62,968		(91	)		62,877		5,130		91		5,221
Quarter ending 10/31/2008		62,472		(507	)		61,965		6,783		507		7,290
Quarter ending 1/31/2009		68,296		(340	)		67,956		6,198		340		6,538
Total Fiscal Year 2009	$	254,172	$	(1,022	)	$	253,150	$	23,597	$	1,022	$	24,619

FY 2010
Quarter ending 4/30/2009	$	62,738	$	(350	)	$	62,388	$	5,004	$	350	$	5,354
Quarter ending 7/31/2009		64,979		(348	)		64,631		5,341		348		5,689
Quarter ending 10/31/2009		65,661		(353	)		65,308		5,295		353		5,648
Quarter ending 1/31/2010		62,564		(363	)		62,201		4,931		363		5,294
Total Fiscal Year 2010	$	255,942	$	(1,414	)	$	254,528	$	20,571	$	1,414	$	21,985

FY 2011
Quarter ending 4/30/2010	$	60,743	$	(998	)	$	59,745	$	4,785	$	998	$	5,783
Quarter ending 7/31/2010		63,478		(854	)		62,624		5,875		854		6,729
Quarter ending 10/31/2010		56,507		-			56,507		7,722		-		7,722
Year to Date Fiscal Year 2011	$	180,728	$	(1,852	)	$	178,876	$	18,382	$	1,852	$	20,234

					Net Credit								Net Credit								Net Credit								Net Credit
	Average Balances				Charge-offs (2)				Average Balances				Charge-offs (2)				Average Balances				Charge-offs (2)				Average Balances				Charge-offs (2)
	Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended				Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
	July 31,				July 31,				July 31,				July 31,				October 31,				October 31,				October 31,				October 31,
	2009		2010		2009		2010		2009		2010		2009		2010		2009		2010		2009		2010		2009		2010		2009		2010
Primary portfolio:
Installment	$	556,386	$	537,333					$	552,956	$	541,023					$	562,511	$	538,799					$	555,885	$	539,903
Revolving		31,467		34,306						33,479		36,627						33,405		30,159						33,674		34,470
Subtotal		587,853		571,639	$	4,485	$	6,240		586,435		577,650	$	8,401	$	12,393		595,916		568,958	$	5,860	$	6,967		589,559		574,373	$	14,261	$	19,344
Secondary portfolio:
Installment		154,225		130,958		1,915		2,008		156,983		132,814		3,604		4,100		149,614		126,370		2,236		2,512		154,456		130,449		5,840		6,628
Total receivables managed	$	742,078	$	702,597	$	6,400	$	8,248	$	743,418	$	710,464	$	12,005	$	16,493	$	745,530	$	695,328	$	8,096	$	9,479	$	744,015	$	704,822	$	20,101	$	25,972

Receivables transferred to
the VIE	$	569,494	$	483,008	$	5,843	$	5,928	$	593,048	$	494,080	$	11,092	$	12,004	$	524,136	$	458,253	$	6,978	$	6,630	$	570,136	$	481,199	$	18,069	$	18,635
Receivables not transferred to
the VIE		172,584		219,589		557		2,320		150,370		216,384		913		4,489		221,394		237,075		1,118		2,849		173,879		223,623		2,032		7,337
Total receivables managed	$	742,078	$	702,597	$	6,400	$	8,248	$	743,418	$	710,464	$	12,005	$	16,493	$	745,530	$	695,328	$	8,096	$	9,479	$	744,015	$	704,822	$	20,101	$	25,972

	January 31,		July 31,		January 31,		October 31,
	2010		2010		2010		2010


Asset-based revolving credit facility	$	105,498	$	109,400	$	105,498	$	127,100
2002 Series A Variable Funding Note		196,400		170,000		196,400		165,200
2006 Series A Notes		150,000		150,000		150,000		135,000
Unsecured revolving line of credit for $10 million maturing in September 2010		-		-
Unsecured revolving line of credit for $10 million; matured in September 2010						-		-
Other long-term debt		406		337		406		297
Total debt		452,304		429,737		452,304		427,597
Less current portion of debt		64,055		122,664		64,055		7,665
Long-term debt	$	388,249	$	307,073	$	388,249	$	419,932

																																	Amount of
																																	Gain or (Loss)
																										Amount of							Recognized in
																										Gain or (Loss)						Location of	Income on
																			Amount of							Reclassified						Gain or (Loss)	Derivative
																			Gain or (Loss)						Location of	from						Recognized in	(Ineffective
																			Recognized						Gain or (Loss)	Accumulated						Income on	Portion
																			in OCI on						Reclassified	OCI into						Derivative	and Amount
																			Derivative						from	Income						(Ineffective	Excluded from
																			(Effective						Accumulated	(Effective						Portion	Effectiveness
Derivatives in	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain or (Loss) Reclassified from Accumulated OCI into	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)						Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)				Portion)						OCI into	Portion)						and Amount	Testing)
Cash Flow	Six Months Ended						Income	Six Months Ended						Excluded from	Six Months Ended				Three Months Ended						Income	Three Months Ended						Excluded from	Three Months Ended
Hedging	July 31,			July 31,			(Effective	July 31,			July 31,			Effectiveness	July 31,		July 31,		October 31,			October 31,			(Effective	October 31,			October 31,			Effectiveness	October 31,		October 31,
Relationships	2009			2010			Portion)	2009			2010			Testing)	2009		2010		2009			2010			Portion)	2009			2010			Testing)	2009		2010
Interest Rate							Interest income/							Interest income/											Interest income/							Interest income/
Contracts	$	(150	)	$	(63	)	(expense)	$	(92	)	$	(170	)	(expense)	$	-	$	-	$	(63	)	$	(36	)	(expense)	$	(107	)	$	(75	)	(expense)	$	-	$	-

Total	$	(150	)	$	(63	)		$	(92	)	$	(170	)		$	-	$	-	$	(63	)	$	(36	)		$	(107	)	$	(75	)		$	-	$	-

	Three			Six
	Months			Months
	ended			ended

Net income	$	5,224		$	16,580
Adjustment of fair value of interest rate swaps, net of tax of $37 and $81		(69	)		(150	)
Total comprehensive income	$	5,155		$	16,430

	Three Months Ended						Nine Months
	October 31,						ended
	2009			2010			October 31, 2009

Net income (loss)	$	(14,372	)	$	(5,094	)	$	2,208
Adjustment of fair value of interest rate swaps,
net of tax of $34, $19 and $116		(63	)		36			(213	)
Total comprehensive income (loss)	$	(14,435	)	$	(5,058	)	$	1,995

	Total Outstanding Balance														Total Outstanding Balance
	of Customer Receivables						60 Days Past Due (1)				Reaged (1)				of Customer Receivables						60 Days Past Due (1)				Reaged (1)
	January 31,			July 31,			January 31,		July 31,		January 31,		July 31,		January 31,			October 31,			January 31,		October 31,		January 31,		October 31,
	2010			2010			2010		2010		2010		2010		2010			2010			2010		2010		2010		2010
Primary portfolio:
Installment	$	555,573		$	543,327		$	46,758	$	41,232	$	93,219	$	85,748	$	555,573		$	528,981		$	46,758	$	43,057	$	93,219	$	85,199
Revolving		41,787			32,325			2,017		1,868		1,819		1,613		41,787			27,935			2,017		1,815		1,819		1,529
Subtotal		597,360			575,652			48,775		43,100		95,038		87,361		597,360			556,916			48,775		44,872		95,038		86,728
Secondary portfolio:
Installment		138,681			130,687			24,616		20,544		49,135		42,465		138,681			120,078			24,616		20,062		49,135		39,537
Total receivables managed		736,041			706,339		$	73,391	$	63,644	$	144,173	$	129,826		736,041			676,994		$	73,391	$	64,934	$	144,173	$	126,265
Allowance for uncollectible accounts		(35,802	)		(34,346	)										(35,802	)		(34,084	)
Allowances for promotional credit programs		(13,594	)		(10,548	)										(13,594	)		(9,689	)
Current portion of customer accounts
receivable, net		368,304			355,861											368,304			344,482
Long-term customer accounts
receivable, net	$	318,341		$	305,584										$	318,341		$	288,739

Receivables transferred to the VIE	$	521,919		$	479,576		$	59,840	$	48,542	$	122,521	$	103,267	$	521,919		$	434,089		$	59,840	$	47,594	$	122,521	$	96,754
Receivables not transferred to the VIE		214,122			226,763			13,551		15,102		21,652		26,559		214,122			242,905			13,551		17,340		21,652		29,511
Total receivables managed	$	736,041		$	706,339		$	73,391	$	63,644	$	144,173	$	129,826	$	736,041		$	676,994		$	73,391	$	64,934	$	144,173	$	126,265

	Fair Values of Derivative Instruments

	Liability Derivatives
	January 31, 2010			July 31, 2010
	Balance			Balance
	Sheet	Fair		Sheet	Fair
	Location	Value		Location	Value
Derivatives designated as
hedging instruments under
Interest rate contracts	Other liabilities	$	337	Other liabilities	$	240

Total derivatives designated
as hedging instruments		$	337		$	240

Reconciliation of deferred revenues on repair service agreements
	Nine Months Ended
	October 31,
	2009			2010

Balance in deferred revenues at beginning of period	$	7,213		$	7,268
Revenues earned during the period		(5,267	)		(5,289	)
Revenues deferred on sales of new agreements		5,342			4,577
Balance in deferred revenues at end of period	$	7,288		$	6,556

Total claims incurred during the period, excludes selling expenses	$	2,596		$	2,967

	Three Months Ended July 31,																Three Months Ended October 31,
	2009									2010							2009									2010
	Retail			Credit			Total			Retail		Credit			Total		Retail			Credit			Total			Retail			Credit			Total
Revenues
Product sales	$	175,389		$	-		$	175,389		$	166,378	$	-		$	166,378	$	148,463		$	-		$	148,463		$	127,035		$	-		$	127,035
Repair service agreement commissions (net) (a)		11,433			(2,574	)		8,859			11,534		(3,193	)		8,341		10,166			(2,846	)		7,320			9,514			(3,479	)		6,035
Service revenues		6,052						6,052			4,183					4,183		5,599			-			5,599			3,769			-			3,769
Total net sales		192,874			(2,574	)		190,300			182,095		(3,193	)		178,902		164,228			(2,846	)		161,382			140,318			(3,479	)		136,839
Finance charges and other		131			39,997			40,128			216		34,547			34,763		98			36,018			36,116			215			32,804			33,019
Total revenues		193,005			37,423			230,428			182,311		31,354			213,665		164,326			33,172			197,498			140,533			29,325			169,858
Cost and expenses
Cost of goods and parts sold, including
warehousing and occupancy costs		143,558			-			143,558			132,396		-			132,396		123,635			-			123,635			101,188			-			101,188
Selling, general and
administrative expense (b) (c)		49,407			15,572			64,979			46,407		17,071			63,478		50,360			14,947			65,307			41,379			15,128			56,507
Goodwill Impairment																		9,617			-			9,617			-			-			-
Costs related to financing
transactions not completed																		-			-			-			-			2,896			2,896
Provision for bad debts		7			8,019			8,026			207		8,841			9,048		(22	)		12,673			12,651			174			9,198			9,372
Total cost and expenses		192,972			23,591			216,563			179,010		25,912			204,922		183,590			27,620			211,210			142,741			27,222			169,963
Operating income		33			13,832			13,865			3,301		5,442			8,743
Interest expense, net		-			5,342			5,342			-		5,875			5,875
Operating income (loss)																		(19,264	)		5,552			(13,712	)		(2,208	)		2,103			(105	)
Interest expense, net (e)																		-			5,649			5,649			-			7,722			7,722
Other (income) expense, net		(13	)		-			(13	)		12		-			12		(34	)		-			(34	)		(17	)		-			(17	)
Segment income (loss)
before income taxes	$	46		$	8,490		$	8,536		$	3,289	$	(433	)	$	2,856	$	(19,230	)	$	(97	)	$	(19,327	)	$	(2,191	)	$	(5,619	)	$	(7,810	)

	Six Months Ended July 31,																Nine Months Ended October 31,
	2009									2010							2009										2010
	Retail			Credit			Total			Retail		Credit			Total		Retail			Credit				Total			Retail		Credit			Total
Revenues
Product sales	$	360,206		$	-		$	360,206		$	316,743	$	-		$	316,743	$	508,669		$	-			$	508,669		$	443,778	$	-		$	443,778
Repair service agreement commissions (net) (a)		23,520			(4,871	)		18,649			22,458		(6,200	)		16,258		33,685			(7,717	)			25,968			31,972		(9,679	)		22,293
Service revenues		11,596						11,596			8,940					8,940		17,195			-				17,195			12,709		-			12,709
Total net sales		395,322			(4,871	)		390,451			348,141		(6,200	)		341,941		559,549			(7,717	)			551,832			488,459		(9,679	)		478,780
Finance charges and other		246			79,582			79,828			466		68,777			69,243		345			115,600				115,945			681		101,581			102,262
Total revenues		395,568			74,711			470,279			348,607		62,577			411,184		559,894			107,883				667,777			489,140		91,902			581,042
Cost and expenses
Cost of goods and parts sold, including
warehousing and occupancy costs		292,015			-			292,015			248,925		-			248,925		415,650			-				415,650			350,113		-			350,113
Selling, general and
administrative expense (b) (d)		96,303			31,414			127,717			89,604		34,617			124,221		146,569			45,757				192,326			130,984		47,892			178,876
Goodwill impairment																		9,617			-				9,617			-		-			-
Costs related to financing																							��
transactions not completed																		-			-				-			-		2,896			2,896
Provision for bad debts		66			13,604			13,670			293		15,029			15,322		43			26,278				26,321			467		24,227			24,694
Total cost and expenses		388,384			45,018			433,402			338,822		49,646			388,468		571,879			72,035				643,914			481,564		75,015			556,579
Operating income		7,184			29,693			36,877			9,785		12,931			22,716
Interest expense, net		-			10,346			10,346			-		10,660			10,660
Operating income (loss)																		(11,985	)		35,848				23,863			7,576		16,887			24,463
Interest expense, net (f)																		-			16,692				16,692			-		20,234			20,234
Other (income) expense, net		(21	)		-			(21	)		183		-			183		(54	)		-				(54	)		166		-			166
Segment income before income taxes	$	7,205		$	19,347		$	26,552		$	9,602	$	2,271		$	11,873
Segment income (loss) before income taxes																	$	(11,931	)	$	19,156			$	7,225		$	7,410	$	(3,347	)	$	4,063
Total assets	$	224,370		$	714,900		$	939,270		$	218,688	$	673,649		$	892,337	$	202,243		$	706,253			$	908,496		$	209,528	$	653,821		$	863,349

Credit segment	Three months ended						2010 vs. 2009						Six months ended						2010 vs. 2009						Three months ended						2010 vs. 2009						Nine months ended						2010 vs. 2009
	July 31,						Incr/(Decr)						July 31,						Incr/(Decr)						October 31,						Incr/(Decr)						October 31,						Incr/(Decr)
(in thousands except percentages)	2010			2009			Amount			Pct			2010			2009			Amount			Pct			2010			2009			Amount			Pct			2010			2009			Amount			Pct
Revenues
Product sales	$	0		$	0		$	0			N/A		$	0		$	0		$	0			N/A		$	0		$	0		$	0			N/A		$	0		$	0		$	0			N/A
Repair service agreement
commissions (net) (a)		(3,193	)		(2,574	)		(619	)		24.0			(6,200	)		(4,871	)		(1,329	)		27.3			(3,479	)		(2,846	)		(633	)		22.2			(9,679	)		(7,717	)	��	(1,962	)		25.4
Total net sales		(3,193	)		(2,574	)		(619	)		24.0			(6,200	)		(4,871	)		(1,329	)		27.3			(3,479	)		(2,846	)		(633	)		22.2			(9,679	)		(7,717	)		(1,962	)		25.4
Finance charges and other		34,547			39,997			(5,450	)		(13.6	)		68,777			79,582			(10,805	)		(13.6	)		32,804			36,018			(3,214	)		(8.9	)		101,581			115,600			(14,019	)		(12.1	)
Total revenues		31,354			37,423			(6,069	)		(16.2	)		62,577			74,711			(12,134	)		(16.2	)		29,325			33,172			(3,847	)		(11.6	)		91,902			107,883			(15,981	)		(14.8	)
Cost and expenses
Selling, general and
administrative expense (b)		17,071			15,572			1,499			9.6			34,617			31,414			3,203			10.2			15,128			14,947			181			1.2			47,892			45,757			2,135			4.7
Costs related to financing
transactions not completed																										2,896			-			2,896						2,896			-			2,896
Provision for bad debts		8,841			8,019			822			10.3			15,029			13,604			1,425			10.5			9,198			12,673			(3,475	)		(27.4	)		24,227			26,278			(2,051	)		(7.8	)
Total costs and expenses		25,912			23,591			2,321			9.8			49,646			45,018			4,628			10.3			27,222			27,620			(398	)		(1.4	)		75,015			72,035			2,980			4.1
Operating income		5,442			13,832			(8,390	)		(60.7	)		12,931			29,693			(16,762	)		(56.5	)		2,103			5,552			(3,449	)		(62.1	)		16,887			35,848			(18,961	)		(52.9	)
Operating Margin		17.4	%		37.0	%								20.7	%		39.7	%								7.2	%		16.7	%								18.4	%		33.2	%
Interest expense		5,875			5,342			533			10.0			10,660			10,346			314			3.0			7,722			5,649			2,073			36.7			20,234			16,692			3,542			21.2
Segment Income (loss)
before Income Taxes	$	(433	)	$	8,490		$	(8,923	)		(105.1	)	$	2,271		$	19,347		$	(17,076	)		(88.3	)
before income taxes																									$	(5,619	)	$	(97	)	$	(5,522	)		5692.8		$	(3,347	)	$	19,156		$	(22,503	)		(117.5	)

					Change									Change
(Dollars in Millions)	2010		2009		$			%		2010		2009		$			%
Net sales	$	178.9	$	190.3		(11.4	)	(6.0	)	$	136.9	$	161.4		(24.5	)	(15.2	)
Finance charges and other		34.8		40.1		(5.3	)	(13.2	)		33.0		36.1		(3.1	)	(8.6	)
Revenues	$	213.7	$	230.4		(16.7	)	(7.2	)
Total Revenues										$	169.9	$	197.5		(27.6	)	(14.0	)

	As reported	Required Minimum/ Maximum
Issuer interest must exceed required minimum	$85.1 million	$69.1 million
Gross loss rate must be lower than required maximum (a)	5.3%	10.0%
Serviced portfolio gross loss rate must be lower than required maximum (b)	5.0%	10.0%
Net portfolio yield must exceed required minimum (a)	6.1%	2.0%
Serviced portfolio net portfolio yield must exceed required minimum (b)	7.6%	2.0%
Payment rate must exceed required minimum (a)	6.2%	3.0%
Serviced portfolio payment rate must exceed required minimum (a)	5.20%	4.75%
Consolidated net worth must exceed required minimum	$347.7 million	$259.8 million

	CONN’S, INC.

	By:	~~/s/~~/s/ Michael J. Poppe
		Michael J. Poppe
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer
		and duly authorized to sign this
		report on behalf of the registrant)

Exhibit Number	Description

2	Agreement and Plan of Merger dated January 15, 2003, by and among Conn's, Inc., Conn Appliances, Inc. and Conn's Merger Sub, Inc. (incorporated herein by reference to Exhibit 2 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).

3.1	Certificate of Incorporation of Conn's, Inc. (incorporated herein by reference to Exhibit 3.1 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).

3.1.1	Certificate of Amendment to the Certificate of Incorporation of Conn’s, Inc. dated June 3, 2004 (incorporated herein by reference to Exhibit 3.1.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended April 30, 2004 (File No. 000-50421) as filed with the Securities and Exchange Commission on June 7, 2004).

3.2	Amended and Restated Bylaws of Conn’s, Inc. effective as of June 3, 2008 (incorporated herein by reference to Exhibit 3.2.3 to Conn’s, Inc. Form 10-Q for the quarterly period ended April 30, 2008 (File No. 000-50421) as filed with the Securities and Exchange Commission on June 4, 2008).

4.1	Specimen of certificate for shares of Conn's, Inc.'s common stock (incorporated herein by reference to Exhibit 4.1 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on October 29, 2003).

10.1	Amended and Restated 2003 Incentive Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).t

10.1.1	Amendment to the Conn’s, Inc. Amended and Restated 2003 Incentive Stock Option Plan (incorporated herein by reference to Exhibit 10.1.1 to Conn’s Form 10-Q for the quarterly period ended April 30, 2004 (File No. 000-50421) as filed with the Securities and Exchange Commission on June 7, 2004).t

10.1.2	Form of Stock Option Agreement (incorporated herein by reference to Exhibit 10.1.2 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2005 (File No. 000-50421) as filed with the Securities and Exchange Commission on April 5, 2005).t

10.2	2003 Non-Employee Director Stock Option Plan (incorporated herein by reference to Exhibit 10.2 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046)as filed with the Securities and Exchange Commission on September 23, 2003).t

10.2.1	Form of Stock Option Agreement (incorporated herein by reference to Exhibit 10.2.1 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2005 (File No. 000-50421) as filed with the Securities and Exchange Commission on April 5, 2005).t

10.3	Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.3 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).t

10.4	Conn's 401(k) Retirement Savings Plan (incorporated herein by reference to Exhibit 10.4 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).t

10.5	Shopping Center Lease Agreement dated May 3, 2000, by and between Beaumont Development Group, L.P., f/k/a Fiesta Mart, Inc., as Lessor, and CAI, L.P., as Lessee, for the property located at 3295 College Street, Suite A, Beaumont, Texas (incorporated herein by reference to Exhibit 10.5 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).

10.5.1	First Amendment to Shopping Center Lease Agreement dated September 11, 2001, by and among Beaumont Development Group, L.P., f/k/a Fiesta Mart, Inc., as Lessor, and CAI, L.P., as Lessee, for the property located at 3295 College Street, Suite A, Beaumont, Texas (incorporated herein by reference to Exhibit 10.5.1 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).

10.6	Industrial Real Estate Lease dated June 16, 2000, by and between American National Insurance Company, as Lessor, and CAI, L.P., as Lessee, for the property located at 8550-A Market Street, Houston, Texas (incorporated herein by reference to Exhibit 10.6 to Conn's, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).

10.6.1	First Renewal of Lease dated November 24, 2004, by and between American National Insurance Company, as Lessor, and CAI, L.P., as Lessee, for the property located at 8550-A Market Street, Houston, Texas (incorporated herein by reference to Exhibit 10.6.1 to Conn’s, Inc. Form 10-K for the annual period ended January 31, 2005 (File No. 000-50421) as filed with the Securities and Exchange Commission on April 5, 2005).

10.7	Lease Agreement dated December 5, 2000, by and between Prologis Development Services, Inc., f/k/a The Northwestern Mutual Life Insurance Company, as Lessor, and CAI, L.P., as Lessee, for the property located at 4810 Eisenhauer Road, Suite 240, San Antonio, Texas (incorporated herein by reference to Exhibit 10.7 to Conn’s, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).

10.7.1	Lease Amendment No. 1 dated November 2, 2001, by and between Prologis Development Services, Inc., f/k/a The Northwestern Mutual Life Insurance Company, as Lessor, and CAI, L.P., as Lessee, for the property located at 4810 Eisenhauer Road, Suite 240, San Antonio, Texas (incorporated herein by reference to Exhibit 10.7.1 to Conn’s, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).

10.8	Lease Agreement dated June 24, 2005, by and between Cabot Properties, Inc. as Lessor, and CAI, L.P., as Lessee, for the property located at 1132 Valwood Parkway, Carrollton, Texas (incorporated herein by reference to Exhibit 99.1 to Conn’s, Inc. Current Report on Form 8-K (file no. 000-50421) as filed with the Securities and Exchange Commission on June 29, 2005).

10.9	Loan and Security Agreement dated August 14, 2008, by and among Conn’s, Inc. and the Borrowers thereunder, the Lenders party thereto, Bank of America, N.A, a national banking association, as Administrative Agent and Joint Book Runner for the Lenders, referred to as Agent, JPMorgan Chase Bank, National Association, as Syndication Agent and Joint Book Runner for the Lenders, and Capital One, N.A., as Co-Documentation Agent (incorporated herein by reference to Exhibit 99.1 to Conn’s Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 20,2008).

10.9.1	Intercreditor Agreement dated August 14, 2008, by and among Bank of America, N.A., as the ABL Agent, Wells Fargo Bank, National Association, as Securitization Trustee, Conn Appliances, Inc. as the Initial Servicer, Conn Credit Corporation, Inc., as a borrower, Conn Credit I, L.P., as a borrower and Bank of America, N.A., as Collateral Agent (incorporated herein by reference to Exhibit 99.5 to Conn’s Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 20,2008).

10.9.2	First Amendment to Loan and Security Agreement dated August 14, 2008, by and among Conn’s, Inc. and the Borrowers thereunder, the Lenders party thereto, Bank of America, N.A, a national banking association, as Administrative Agent and Joint Book Runner for the Lenders, referred to as Agent, JPMorgan Chase Bank, National Association, as Syndication Agent and Joint Book Runner for the Lenders, and Capital One, N.A., as Co-Documentation Agent (incorporated herein by reference to Exhibit 10.1 to Conn’s Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on February 12, 2010).

10.9.3	Second Amendment to Loan and Security Agreement dated August 14, 2008, by and among Conn’s, Inc. and the Borrowers thereunder, the Lenders party thereto, Bank of America, N.A, a national banking association, as Administrative Agent and Joint Book Runner for the Lenders, referred to as Agent, JPMorgan Chase Bank, National Association, as Syndication Agent and Joint Book Runner for the Lenders, and Capital One, N.A., as Co-Documentation Agent (incorporated herein by reference to Exhibit 10.1 to Conn’s Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on March 4, 2010).

10.9.4	Amended and Restated Loan and Security Agreement dated November 30, 2010, by and among Conn’s, Inc. and the Borrowers thereunder, the Lenders party thereto, Bank of America, N.A., a national banking association, as Administrative Agent and Collateral Agent for the Lenders, JPMorgan Chase Bank, National Association, as Co-Syndication Agent, Joint Book Runner and Co-Lead Arranger for the Lenders, Wells Fargo Preferred Capital, Inc., as Co-Syndication Agent for the Lenders, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Book Runner and Co-Lead Arranger for the Lenders, Capital One, N.A., as Co-Documentation Agent for the Lenders, and Regions Business Capital, a division of Regions Bank, as Co-Documentation Agent for the Lenders (filed herewith).

10.9.5	Intercreditor Agreement by and between Bank of America, N.A. in its capacity as administrative agent and collateral agent under the ABL loan documents and GA Capital, LLC in its capacity as administrative agent and collateral agent under the Term Loan Documents and Conn’s, Inc. and Conn Credit I, LP as ABL Borrowers, and Conn Appliances, Inc., Conn Credit I, LP and Conn Credit Corporation, Inc. as Term Loan Borrowers (filed herewith).

10.9.6	Amended and Restated Security Agreement dated November 30, 2010, by and among Conn’s, Inc. and the Existing Grantors thereunder, and Bank of America, N.A., in its capacity as Agent for Lenders (filed herewith).

10.9.7	Amended and Restated Continuing Guaranty dated as of November 30, 20101, by Conn’s, Inc. and the Existing Guarantors thereunder, in favor of Bank of America, N.A., in its capacity as Agent for Lenders (filed herewith).

10.10	Receivables Purchase Agreement dated September 1, 2002, by and among Conn Funding II, L.P., as Purchaser, Conn Appliances, Inc. and CAI, L.P., collectively as Originator and Seller, and Conn Funding I, L.P., as Initial Seller (incorporated herein by reference to Exhibit 10.10 to Conn’s, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).

10.10.1	First Amendment to Receivables Purchase Agreement dated August 1, 2006, by and among Conn Funding II, L.P., as Purchaser, Conn Appliances, Inc. and CAI, L.P., collectively as Originator and Seller (incorporated herein by reference to Exhibit 10.10.1 to Conn’s, Inc. Form 10-Q for the quarterly period ended ~~October~~July 31, 2006 (File No. 000-50421) as filed with the Securities and Exchange Commission on September 15, 2006).

10.11	Base Indenture dated September 1, 2002, by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank Minnesota, National Association, as Trustee (incorporated herein by reference to Exhibit 10.11 to Conn’s, Inc. registration statement on Form S-1 (file no. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003).

10.11.1	First Supplemental Indenture dated October 29, 2004 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.1 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on November 4, 2004).

10.11.2	Second Supplemental Indenture dated August 1, 2006 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.1 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 23, 2006).

10.11.3	Fourth Supplemental Indenture dated August 14, 2008 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.4 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 20, 2008).

10.11.4	Sixth Supplemental Indenture dated November 30, 2010 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (filed herewith).

10.12	Amended and Restated Series 2002-A Supplement dated September 10, 2007, by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.2 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on September 11, 2007).

10.12.1	Supplement No. 1 to Amended and Restated Series 2002-A Supplement dated August 14, 2008, by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.2 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 20, 2008).

10.12.1.1	Supplement No. 2 to Amended and Restated Series 2002-A Supplement dated August 14, 2008, by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.2 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on March 16, 2010).


10.12.2	Amended and Restated Note Purchase Agreement dated September 10, 2007 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.3 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on September 11, 2007).

10.12.3	Second Amended and Restated Note Purchase Agreement dated August 14, 2008 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 99.3 to Conn’s, Inc. Current Report on Form 8-K (File No. 000-50421) as filed with the Securities and Exchange Commission on August 20, 2008).

10.12.4	Amendment No. 1 to Second Amended and Restated Note Purchase Agreement dated August 28, 2008 by and between Conn Funding II, L.P., as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated herein by reference to Exhibit 10.12.4 to Conn’s, Inc. Form 10-Q for the quarterly period ended ~~October~~July 31, 2008 (File No. 000-50421) as filed with the Securities and Exchange Commission on August 28, 2008).