Form 8-K CONNS INC For: Dec 07

December 7, 2017 9:11 AM


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K 
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): December 7, 2017
Conn's, Inc.
(Exact name of registrant as specified in its charter)

Delaware
001-34956
06-1672840
(State or other jurisdiction of
incorporation)
(Commission File Number)
(IRS Employer Identification No.)

4055 Technology Forest Blvd., Suite 210
The Woodlands, Texas
77381
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code:  (936) 230-5899
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o






Item 2.02. Results of Operations and Financial Condition.
On December 7, 2017, Conn's, Inc. (the "Company") issued a press release reporting its third quarter fiscal year 2018 financial results. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
None of the information contained in Item 2.02 or Exhibit 99.1 of this Form 8-K shall be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and none of it shall be incorporated by reference in any filing under the Securities Act of 1933, as amended. Furthermore, this report will not be deemed an admission as to the materiality of any information in the report that is required to be disclosed solely by Regulation FD.

Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No.        Description                                        
99.1*

* Filed herewith





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
CONN'S, INC.
Date:
December 7, 2017
By:
/s/ Lee A. Wright
 
 
Name:
Lee A. Wright
 
 
Title:
Executive Vice President and Chief Financial Officer





Exhibit 99.1
connshomepluslogoa13.jpg

Conn's, Inc. Reports Third Quarter Fiscal Year 2018 Financial Results
Second Consecutive Quarter of Profitability
Record Yield Drives Highest Spread in 11 Quarters
Direct Loan Program Successfully Implemented in Two Additional States
60+ Delinquency Rate Declined 110 Basis Points Year-Over-Year; First Year-Over-Year Decline in Four Years
Retail Platform Well Positioned for Planned New Store Growth in Fiscal Year 2019

THE WOODLANDS, Texas, December 7, 2017 - Conn's, Inc. (NASDAQ: CONN), a specialty retailer of furniture and mattresses, home appliances, consumer electronics and home office products, and provider of consumer credit, today announced its financial results for the third quarter ended October 31, 2017.
“Our third quarter results demonstrate the continued success of Conn’s transformation, as we benefited from a record net yield, a widening credit spread, and strong retail gross margins, despite the impact Hurricane Harvey had on many of our communities,” stated Norm Miller, Conn’s Chairman and Chief Executive Officer.
Conn’s achieved a record net yield of 19.8%, and our credit spread increased to 460 basis points in the third quarter of fiscal year 2018, which was the highest level in the past 11 quarters. During the third quarter, new direct loan programs were successfully implemented in Oklahoma and Tennessee. As a result, approximately 90% of current originations are now at higher rates and the average APR on total originations for the month of October was 27.9%, compared to 21.4% in July of last fiscal year.
During the third quarter of fiscal year 2018, the company’s 60+ delinquency rate fell year-over-year for the first time in four years. This represents a significant milestone, and based on the performance of originations since June of last fiscal year, we anticipate credit segment profitability will continue to improve as newer accounts become a larger percentage of the portfolio.
“Retail performance remains solid and Conn’s achieved record third quarter retail gross margins, which helped produce another quarter of strong retail operating income. With improving credit trends, we are increasingly confident that the investments we have made in the credit platform can support profitable growth. For fiscal year 2019 we are planning to open five to nine new stores, all in existing states which will allow us to leverage our current infrastructure. I am encouraged by the successful transformation underway at Conn’s, and the long-term opportunities to create sustainable growth and profitability,” concluded Mr. Miller.


1



Third Quarter Results
Net income for the third quarter of fiscal year 2018 was $1.6 million, or $0.05 per diluted share, compared to a net loss for the third quarter of fiscal year 2017 of $3.8 million, or $0.12 per diluted share. On a non-GAAP basis, adjusted net income for the third quarter of fiscal year 2018 was $5.6 million, or $0.18 per diluted share, which excludes a loss from the write-off of previously capitalized costs for a software project that was abandoned during the third quarter of fiscal year 2018 related to the implementation of a new point of sale system that began in fiscal year 2013 and a loss from extinguishment of debt related to the early redemption of our 2016-A Notes. This compares to adjusted net loss for the third quarter of fiscal year 2017 of $2.5 million, or $0.08 per diluted share, which excludes costs associated with store and facility closures, impairments from disposals, legal and professional fees related to our securities-related litigation and severance costs due to changes in the executive management team. The impairments from disposals included the write-off of leasehold improvements for one store we relocated prior to the end of the useful life of the leasehold improvements and incurred costs for a terminated store project prior to starting construction.
Retail Segment Third Quarter Results
Total retail revenues were $291.9 million for the third quarter of fiscal year 2018 compared to $308.4 million for the third quarter of fiscal year 2017, a decrease of 5.3%. The decrease in retail revenue was primarily driven by a decrease in same store sales of 7.0%, partially offset by new store growth. Sales for the three months ended October 31, 2017 were impacted negatively by general softness in consumer spending. For the third quarter of fiscal year 2018, retail segment operating income was $29.6 million and, on a non-GAAP basis, adjusted retail segment operating income was $35.4 million, which excludes a loss from the write-off of previously capitalized costs for a software project that was abandoned during the third quarter of fiscal year 2018 related to the implementation of a new point of sale system that began in fiscal year 2013.
The following table presents net sales and changes in net sales by category:
 
Three Months Ended October 31,
 
 
 
%
 
Same store
(dollars in thousands)
2017
 
% of Total
 
2016
 
% of Total
 
Change
 
Change
 
% change
Furniture and mattress
$
97,146

 
33.3
%
 
$
98,898

 
32.1
%
 
$
(1,752
)
 
(1.8
)%
 
(6.1
)%
Home appliance
83,837

 
28.7

 
$
85,785

 
27.8

 
$
(1,948
)
 
(2.3
)
 
(3.3
)
Consumer electronics
58,062

 
19.9

 
65,670

 
21.3

 
(7,608
)
 
(11.6
)
 
(10.7
)
Home office
20,295

 
7.0

 
22,747

 
7.5

 
(2,452
)
 
(10.8
)
 
(8.1
)
Other
4,446

 
1.5

 
4,956

 
1.6

 
(510
)
 
(10.3
)
 
(11.1
)
Product sales
263,786

 
90.4

 
278,056

 
90.3

 
(14,270
)
 
(5.1
)
 
(6.6
)
Repair service agreement commissions
24,488

 
8.4

 
26,354

 
8.5

 
(1,866
)
 
(7.1
)
 
(10.1
)
Service revenues
3,534

 
1.2

 
3,623

 
1.2

 
(89
)
 
(2.5
)
 
 

Total net sales
291,808

 
100.0
%
 
308,033

 
100.0
%
 
(16,225
)
 
(5.3
)
 
(7.0
)%
The following provides a summary of items impacting the performance of our product categories during the third quarter of fiscal year 2018 compared to the third quarter of fiscal year 2017:
Furniture unit volume decreased 12.5%, partially offset by a 9.3% increase in average selling price;
Mattress unit volume decreased 15.1%, partially offset by a 4.5% increase in average selling price;
Home appliance unit volume decreased 5.0%, partially offset by a 1.8% increase in average selling price;
Consumer electronic unit volume decreased 11.9%, partially offset by a 1.5% increase in average sales price; and
Home office unit volume decreased 20.4%, partially offset by a 15.5% increase in average selling price.
Credit Segment Third Quarter Results
Credit revenues were $81.3 million for the third quarter of fiscal year 2018 compared to $68.4 million for the third quarter of fiscal year 2017, an increase of 18.8%. The increase in credit revenue was primarily the result of increased originations of our higher-yielding direct loan product, which contributed to the increase in the portfolio yield rate to 19.8% from 15.0%, partially offset by the impact of a 3.7% decline in the average balance of the customer receivables portfolio. Credit revenues for the third quarter of fiscal year 2018 also reflect a decline in insurance income primarily due to a decrease in retrospective commissions as a result of higher claim volumes related to Hurricane Harvey. The total customer portfolio balance was $1.49 billion at October 31, 2017 compared to $1.53 billion at October 31, 2016, a decrease of 3.0%.

2



Provision for bad debts was $56.3 million for the third quarter of fiscal year 2018 compared to $51.3 million for the third quarter of fiscal year 2017, an increase of $5.0 million. The most significant reasons for the increase in the provision for bad debts for the three months ended October 31, 2017 compared to the three months ended October 31, 2016 were:
i.
growth in the customer receivables portfolio in the three months ended October 31, 2017 compared to a decline in the three months ended October 31, 2016;
ii.
higher net-charge offs in the three months ended October 31, 2017 compared to the three months ended October 31, 2016; and
iii.
an increase in the qualitative reserve related to Hurricane Harvey of $1.1 million; partially offset by
iv.
a decrease in our estimated TDR loss rate as a result of improvements in TDR delinquency rates.
Additional information on the credit portfolio and its performance may be found in the Customer Receivable Portfolio Statistics table included within this press release and in the Company's Form 10-Q for the quarter ended October 31, 2017, to be filed with the Securities and Exchange Commission.
Store Update
During fiscal year 2018, the Company has opened three new Conn's HomePlus® stores, two of which were opened during the first quarter of fiscal year 2018 in North Carolina, and one of which was opened during the second quarter of fiscal year 2018 in Virginia, bringing the total store count to 116 in 14 states. The Company does not intend to open any additional stores in fiscal year 2018. The Company currently plans to open between five and nine stores in fiscal year 2019, all in existing states to leverage current infrastructure.
Liquidity and Capital Resources
As of October 31, 2017, the Company had $110.5 million of immediately available borrowing capacity under its $750.0 million revolving credit facility, with an additional $284.8 million that may become available under the Company's revolving credit facility if the Company grows the balance of eligible customer receivables and eligible inventory balances under the borrowing base. The Company also had $12.7 million of unrestricted cash available for use.
Outlook and Guidance
The following are the Company's expectations for the business for the fourth quarter of fiscal year 2018:
Change in same store sales down mid single digits;
Retail gross margin between 39.0% and 39.5% of total retail net sales;
Selling, general and administrative expenses between 27.0% and 29.0% of total revenues;
Provision for bad debts between $55.0 million and $59.5 million;
Finance charges and other revenues between $86.0 million and $90.0 million; and
Interest expense between $19.0 million and $20.5 million.

Conference Call Information
The Company will host a conference call on December 7, 2017 at 10 a.m. CT / 11 a.m. ET to discuss its third quarter fiscal 2018 financial results. Participants can join the call by dialing 877-754-5302 or 678-894-3020. The conference call will also be broadcast simultaneously via webcast on a listen-only basis. A link to the earnings release, webcast and third quarter fiscal 2018 conference call presentation will be available at ir.conns.com.
Replay of the telephonic call can be accessed through December 14, 2017 by dialing 855-859-2056 or 404-537-3406 and Conference ID: 5182279. A link to the earnings release and webcast will be available at ir.conns.com.
About Conn's, Inc.
Conn's is a specialty retailer currently operating 116 retail locations in Alabama, Arizona, Colorado, Georgia, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia. The Company's primary product categories include:
Furniture and mattress, including furniture and related accessories for the living room, dining room and bedroom, as well as both traditional and specialty mattresses;
Home appliance, including refrigerators, freezers, washers, dryers, dishwashers and ranges;

3



Consumer electronics, including LED, OLED, Ultra HD, and internet-ready televisions, Blu-ray players, home theater and portable audio equipment; and
Home office, including computers, printers and accessories.
Additionally, Conn's offers a variety of products on a seasonal basis. Unlike many of its competitors, Conn's provides flexible in-house credit options for its customers in addition to third-party financing programs and third-party lease-to-own payment plans.
This press release contains forward-looking statements within the meaning of the federal securities laws, including but not limited to, the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Such forward-looking statements include information concerning our future financial performance, business strategy, plans, goals and objectives. Statements containing the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "project," "should," “predict,” “will,” “potential,” or the negative of such terms or other similar expressions are generally forward-looking in nature and not historical facts. Such forward-looking statements are based on our current expectations. We can give no assurance that such statements will prove to be correct, and actual results may differ materially. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by our forward-looking statements including, but not limited to: general economic conditions impacting our customers or potential customers; our ability to execute periodic securitizations of future originated customer loans on favorable terms; our ability to continue existing customer financing programs or to offer new customer financing programs; changes in the delinquency status of our credit portfolio; unfavorable developments in ongoing litigation; increased regulatory oversight; higher than anticipated net charge-offs in the credit portfolio; the success of our planned opening of new stores; technological and market developments and sales trends for our major product offerings; our ability to manage effectively the selection of our major product offerings; our ability to protect against cyber-attacks or data security breaches and to protect the integrity and security of individually identifiable data of our customers and employees; our ability to fund our operations, capital expenditures, debt repayment and expansion from cash flows from operations, borrowings from our revolving credit facility, and proceeds from accessing debt or equity markets; and other risks detailed in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended January 31, 2017 and other reports filed with the SEC. If one or more of these or other risks or uncertainties materialize (or the consequences of such a development changes), or should our underlying assumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We disclaim any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise, or to provide periodic updates or guidance. All forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.
CONN-G
S.M. Berger & Company
Andrew Berger (216) 464-6400

4



CONN'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands, except per share amounts)
 
Three Months Ended 
 October 31,
 
Nine Months Ended 
 October 31,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Total net sales
$
291,808

 
$
308,033

 
$
857,506

 
$
958,574

Finance charges and other revenues
81,364

 
68,740

 
238,139

 
205,469

Total revenues
373,172

 
376,773

 
1,095,645

 
1,164,043

Costs and expenses:
 
 
 
 
 
 
 
Cost of goods sold
175,591

 
192,374

 
519,847

 
605,709

Selling, general and administrative expenses
114,355

 
114,457

 
332,524

 
347,550

Provision for bad debts
56,512

 
51,564

 
161,891

 
169,978

Charges and credits
5,861

 
1,987

 
11,156

 
5,408

Total costs and expenses
352,319

 
360,382

 
1,025,418

 
1,128,645

Operating income
20,853

 
16,391

 
70,227

 
35,398

Interest expense
18,095

 
23,470

 
62,142

 
73,504

Loss on extinguishment of debt
461

 

 
2,907

 

Income (loss) before income taxes
2,297

 
(7,079
)
 
5,178

 
(38,106
)
Provision (benefit) for income taxes
728

 
(3,264
)
 
1,916

 
(12,618
)
Net income (loss)
$
1,569

 
$
(3,815
)
 
$
3,262

 
$
(25,488
)
Income (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.05

 
$
(0.12
)
 
$
0.10

 
$
(0.83
)
Diluted
$
0.05

 
$
(0.12
)
 
$
0.10

 
$
(0.83
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
31,292,913

 
30,816,319

 
31,121,177

 
30,736,636

Diluted
31,764,594

 
30,816,319

 
31,457,420

 
30,736,636



5



CONN'S, INC. AND SUBSIDIARIES
CONDENSED RETAIL SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)
 
Three Months Ended 
 October 31,
 
Nine Months Ended 
 October 31,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Product sales
$
263,786

 
$
278,056

 
$
774,741

 
$
864,269

Repair service agreement commissions
24,488

 
26,354

 
72,703

 
82,849

Service revenues
3,534

 
3,623

 
10,062

 
11,456

Total net sales
291,808

 
308,033

 
857,506

 
958,574

Other revenues
95

 
337

 
267

 
1,268

Total revenues
291,903

 
308,370

 
857,773

 
959,842

Costs and expenses:
 
 
 
 
 
 
 
Cost of goods sold
175,591

 
192,374

 
519,847

 
605,709

Selling, general and administrative expenses
80,676

 
79,777

 
233,290

 
244,598

Provision for bad debts
189

 
286

 
584

 
811

Charges and credits
5,861

 
1,987

 
11,156

 
5,408

Total costs and expenses
262,317

 
274,424

 
764,877

 
856,526

Operating income
$
29,586

 
$
33,946

 
$
92,896

 
$
103,316

Retail gross margin
39.8
%
 
37.5
%
 
39.4
%
 
36.8
%
Selling, general and administrative expense as percent of revenues
27.6
%
 
25.9
%
 
27.2
%
 
25.5
%
Operating margin
10.1
%
 
11.0
%
 
10.8
%
 
10.8
%
Store count:
 
 
 
 
 
 
 
Beginning of period
116

 
112

 
113

 
103

Opened

 
1

 
3

 
10

End of period
116

 
113

 
116

 
113



6



CONN'S, INC. AND SUBSIDIARIES
CONDENSED CREDIT SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)
 
Three Months Ended 
 October 31,
 
Nine Months Ended 
 October 31,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Finance charges and other revenues
$
81,269

 
$
68,403

 
$
237,872

 
$
204,201

Costs and expenses:
 
 
 
 
 
 
 
Selling, general and administrative expenses
33,679

 
34,680

 
99,234

 
102,952

Provision for bad debts
56,323

 
51,278

 
161,307

 
169,167

Total costs and expenses
90,002

 
85,958

 
260,541

 
272,119

Operating loss
(8,733
)
 
(17,555
)
 
(22,669
)
 
(67,918
)
Interest expense
18,095

 
23,470

 
62,142

 
73,504

Loss on extinguishment of debt
461

 

 
2,907

 

Loss before income taxes
$
(27,289
)
 
$
(41,025
)
 
$
(87,718
)
 
$
(141,422
)
Selling, general and administrative expense as percent of revenues
41.4
 %
 
50.7
 %
 
41.7
 %
 
50.4
 %
Selling, general and administrative expense as percent of average total customer portfolio balance (annualized)
9.1
 %
 
9.0
 %
 
8.9
 %
 
8.9
 %
Operating margin
(10.7
)%
 
(25.7
)%
 
(9.5
)%
 
(33.3
)%


7



CONN'S, INC. AND SUBSIDIARIES
CUSTOMER RECEIVABLE PORTFOLIO STATISTICS
(unaudited)
 
As of October 31,
 
2017
 
2016
Weighted average credit score of outstanding balances (1)
589

 
591

Average outstanding customer balance
$
2,405

 
$
2,354

Balances 60+ days past due as a percentage of total customer portfolio balance (2)(3)
9.9
%
 
11.0
%
Re-aged balance as a percentage of total customer portfolio balance (2)(4)
23.8
%
 
16.0
%
Account balances re-aged more than six months (in thousands)
$
80,516

 
$
73,385

Allowance for bad debts as a percentage of total customer portfolio balance
13.6
%
 
13.3
%
Percent of total customer portfolio balance represented by no-interest option receivables
22.3
%
 
28.3
%
 
Three Months Ended 
 October 31,
 
Nine Months Ended 
 October 31,
 
2017
 
2016
 
2017
 
2016
Total applications processed
321,373

 
326,131

 
909,287

 
975,363

Weighted average origination credit score of sales financed (1)
611

 
610

 
609

 
610

Percent of total applications approved and utilized
29.1
%
 
32.7
%
 
31.1
%
 
35.1
%
Average down payment
2.9
%
 
3.1
%
 
3.2
%
 
3.4
%
Average income of credit customer at origination
$
43,500

 
$
42,200

 
$
42,700

 
$
41,400

Percent of retail sales paid for by:
 
 
 
 
 
 
 
In-house financing, including down payments received
72.0
%
 
72.3
%
 
71.7
%
 
69.8
%
Third-party financing
15.1
%
 
16.4
%
 
15.8
%
 
15.4
%
Third-party lease-to-own options
5.7
%
 
5.2
%
 
5.7
%
 
5.1
%
 
92.8
%
 
93.9
%
 
93.2
%
 
90.3
%

(1)
Credit scores exclude non-scored accounts.
(2)
Accounts that become delinquent after being re-aged are included in both the delinquency and re-aged amounts.
(3)
The balance of 60+ days past due as a percentage of total customer portfolio balance as of October 31, 2017 reflects the impact of first time re-ages related to customers within FEMA-designated Hurricane Harvey disaster areas.
(4)
The re-aged balance as a percentage of total customer portfolio as of October 31, 2017 includes $71.8 million in first time re-ages related to customers within FEMA-designated Hurricane Harvey disaster areas.



8



CONN'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
 
October 31,
2017
 
January 31,
2017
Assets
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
12,742

 
$
23,566

Restricted cash
71,099

 
110,698

Customer accounts receivable, net of allowances
635,700

 
702,162

Other accounts receivable
63,203

 
69,286

Inventories
235,479

 
164,856

Income taxes recoverable
1,194

 
2,150

Prepaid expenses and other current assets
14,721

 
14,955

Total current assets
1,034,138

 
1,087,673

Long-term portion of customer accounts receivable, net of allowances
616,665

 
615,904

Property and equipment, net
144,747

 
159,202

Deferred income taxes
72,554

 
71,442

Other assets
6,285

 
6,913

Total assets
$
1,874,389

 
$
1,941,134

Liabilities and Stockholders' Equity
 
 
 
Current liabilities:
 
 
 
Current maturities of long-term debt and capital lease obligations
$
65,651

 
$
849

Accounts payable
109,738

 
101,612

Accrued expenses
62,403

 
39,781

Other current liabilities
24,531

 
25,139

Total current liabilities
262,323

 
167,381

Deferred rent
87,152

 
87,957

Long-term debt and capital lease obligations
973,278

 
1,144,393

Other long-term liabilities
22,245

 
23,613

Total liabilities
1,344,998

 
1,423,344

Stockholders' equity
529,391

 
517,790

Total liabilities and stockholders' equity
$
1,874,389

 
$
1,941,134



9



CONN'S, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS
(unaudited)
(dollars in thousands, except per share amounts)

RETAIL SEGMENT OPERATING INCOME, AS ADJUSTED
 
Three Months Ended 
 October 31,
 
Nine Months Ended 
 October 31,
 
2017
 
2016
 
2017
 
2016
Retail segment operating income, as reported

$
29,586

 
$
33,946

 
$
92,896

 
$
103,316

Adjustments:
 
 
 
 
 
 
 
Store and facility closure costs

 
954

 
1,349

 
954

Impairments from disposals

 
595

 

 
1,980

Legal and professional fees related to the exploration of strategic alternatives and securities-related litigation

 
158

 
34

 
747

Employee severance

 
280

 
1,317

 
1,493

Indirect tax audit reserve

 

 
2,595

 

Write-off of capitalized software costs

5,861

 

 
5,861

 

Executive management transition costs

 

 

 
234

Retail segment operating income, as adjusted

$
35,447

 
$
35,933

 
$
104,052

 
$
108,724

Retail segment total revenues

291,903

 
308,370

 
857,773

 
959,842

Retail segment operating margin:

 
 
 
 
 
 
 
As reported
10.1
%
 
11.0
%
 
10.8
%
 
10.8
%
As adjusted
12.1
%
 
11.7
%
 
12.1
%
 
11.3
%

NET INCOME (LOSS), AS ADJUSTED, AND DILUTED INCOME (LOSS) PER SHARE, AS ADJUSTED
 
Three Months Ended 
 October 31,
 
Nine Months Ended 
 October 31,
 
2017
 
2016
 
2017
 
2016
Net income (loss), as reported
$
1,569

 
$
(3,815
)
 
$
3,262

 
$
(25,488
)
Adjustments:
 
 
 
 
 
 
 
Changes in estimates

 

 

 
13,168

Store and facility closure costs

 
954

 
1,349

 
954

Impairments from disposals

 
595

 

 
1,980

Legal and professional fees related to the exploration of strategic alternatives and securities-related litigation

 
158

 
34

 
747

Employee severance

 
280

 
1,317

 
1,493

Indirect tax audit reserve

 

 
2,595

 

Write-off of capitalized software costs

5,861

 

 
5,861

 

Executive management transition costs

 

 

 
234

Loss on extinguishment of debt
461

 

 
2,907

 

Tax impact of adjustments
(2,289
)
 
(719
)
 
(5,092
)
 
(6,159
)
Net income (loss), as adjusted
$
5,602

 
$
(2,547
)
 
$
12,233

 
$
(13,071
)
Weighted average common shares outstanding - Diluted
31,764,594

 
30,816,319

 
31,457,420

 
30,736,636

Income (loss) per share:
 
 
 
 
 
 
 
As reported
$
0.05

 
$
(0.12
)
 
$
0.10

 
$
(0.83
)
As adjusted
$
0.18

 
$
(0.08
)
 
$
0.39

 
$
(0.43
)


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Basis for presentation of non-GAAP disclosures:
To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"), we provide the following non-GAAP financial measures: retail segment adjusted operating income, retail segment adjusted operating margin, adjusted net income (loss), and adjusted income (loss) per diluted share. These non-GAAP financial measures are not meant to be considered as a substitute for, or superior to, comparable GAAP measures and should be considered in addition to results presented in accordance with GAAP. They are intended to provide additional insight into our operations and the factors and trends affecting the business. Management believes these non-GAAP financial measures are useful to financial statement readers because (1) they allow for additional transparency with respect to key metrics we use in our financial and operational decision making and (2) they are used by some of our institutional investors and the analyst community to help them analyze our operating results.

11

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