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): April 4, 2017
Conn’s, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 1-34956 | 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 or former address, 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))
Item 2.02. Results of Operations and Financial Condition.
On April 4, 2017, Conn’s, Inc. issued a press release announcing its fourth quarter and full year fiscal 2017 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, Item 7.01 or Exhibits 99.1 or 99.2 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* | Press release of Conn's, Inc. dated April 4, 2017. |
* 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: | April 4, 2017 | By: | /s/ Lee A. Wright |
Name: | Lee A. Wright | ||
Title: | Executive Vice President and Chief Financial Officer | ||
Exhibit 99.1
Conn's, Inc. Reports Fourth Quarter Fiscal 2017 Financial Results
Differentiated Business Model Drives Strong Retail Performance
New Lending Program Fully Implemented in Texas and Louisiana
Record Fourth Quarter Retail Gross Margin and Controlled SG&A Drive Strong Retail Operating Margin
Conn’s Expects to Return to Full Year Profitability in Fiscal 2018
THE WOODLANDS, Texas, April 4, 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 fourth quarter ended January 31, 2017.
“Fiscal 2017 was a transitional year, focused on creating a strong credit platform to improve Conn’s near-term results and support the pursuit of the Company’s long-term growth strategy. While much of our focus during fiscal 2017 was on turning around the credit operation, Conn’s retail business performed well. The Company has created a differentiated and valuable retail experience by offering customers a large selection of brand name, top-of-the-line products, leading customer service and affordable credit programs. Our credit operation continues to benefit from the structural changes we are making to increase yield, reduce losses and improve credit segment profitability. During the fourth quarter, all originations in Texas were under the new direct loan program, and in early March, we fully implemented our direct loan program in Louisiana. Over 80% of current originations now have a weighted average interest rate of over 28%, compared to almost 22% in September,” commented Norm Miller, Conn's Chairman, Chief Executive Officer and President.
“Conn’s retail business had a strong fourth quarter, despite the approximately 1,000 basis points impact underwriting refinements made earlier this fiscal year had on same store sales. We do not believe there was any material negative impact on retail or credit trends in the fourth quarter as a result of October’s implementation of the direct loan program in Texas. Favorable mix within product categories and lower warehouse, delivery, and transportation costs improved retail gross margin 280 basis points compared to the fiscal 2016 fourth quarter, and 140 basis points from the fiscal 2017 third quarter. Retail operating margins in the 2017 fourth quarter were 15.7%, compared to 11.9% for the same period last fiscal year, as a result of record quarterly gross margins and a 6.7% decline in SG&A expenses. Conn’s fourth quarter retail results demonstrate the resiliency of our unique operating model to recent challenges many retailers are experiencing. We are excited about our recently announced partnership with Progressive Leasing and the opportunity to significantly expand Conn’s lease-to-own sales.
“Finance charges and other income in the fiscal 2017 fourth quarter was the second highest quarterly result Conn’s has recorded. Interest income and fee yield increased 150 basis points from the third quarter, primarily due to the implementation of the Texas direct loan program. Interest income and fee yield is expected to increase further as more accounts are originated at higher APRs. During the remainder of this fiscal year, we intend to implement similar direct loan credit offerings in three additional states. Overall credit results continued to be impacted by slower growth, changes in credit strategy, and the performance of accounts originated under prior underwriting standards. As expected, a cohort of late stage delinquency went to charge-off in the fourth quarter, which impacted the fourth quarter’s provision rate. Additionally, charge-off and provision may remain elevated in early fiscal 2018 as legacy accounts either mature or charge-off. We are optimistic overall credit results will improve throughout fiscal 2018, as these legacy accounts leave the portfolio and are replaced with accounts benefiting from tighter underwriting and higher yields.
“Over the past 12 months we have assembled a strong leadership team with significant credit and retail experience. We have created a roadmap to turn around our near-term financial results, while creating a sustainable and profitable business platform that appropriately balances credit risk with retail growth. We remain confident our turnaround strategies are taking hold and are encouraged by the direction we are headed. While we still have more hard work in front of us, we expect financial results to continue improving throughout fiscal 2018 and beyond. Based on our current outlook, we expect to return to full year profitability in fiscal 2018.”
Retail Segment Fourth Quarter Results (on a year-over-year basis unless otherwise noted)
Total retail revenues were $356.2 million for the fourth quarter of fiscal year 2017, a decrease of $20.7 million, or 5.5% from the fourth quarter of fiscal year 2016, primarily resulting from the decline in same store sales partially offset by new store openings. Sales were negatively impacted by underwriting changes made in the fourth quarter of fiscal year 2016 and during fiscal year 2017. For the fourth quarter of fiscal year 2017, retail segment operating income was $56.1 million, and adjusted retail segment
1
operating income was $57.2 million after excluding net charges of $1.1 million primarily associated with an adjustment to our sales tax reserve.
The following table presents net sales and changes in net sales by category:
Three Months Ended January 31, | Same store | ||||||||||||||||||||||
(dollars in thousands) | 2017 | % of Total | 2016 | % of Total | Change | % Change | % change | ||||||||||||||||
Furniture and mattress | $ | 111,289 | 31.3 | % | $ | 115,669 | 30.7 | % | $ | (4,380 | ) | (3.8 | )% | (9.2 | )% | ||||||||
Home appliance | 83,723 | 23.5 | 88,838 | 23.6 | (5,115 | ) | (5.8 | ) | (9.7 | ) | |||||||||||||
Consumer electronics | 96,415 | 27.1 | 100,634 | 26.7 | (4,219 | ) | (4.2 | ) | (6.4 | ) | |||||||||||||
Home office | 25,483 | 7.2 | 30,332 | 8.1 | (4,849 | ) | (16.0 | ) | (18.4 | ) | |||||||||||||
Other | 5,018 | 1.4 | 5,174 | 1.4 | (156 | ) | (3.0 | ) | (8.5 | ) | |||||||||||||
Product sales | 321,928 | 90.5 | 340,647 | 90.5 | (18,719 | ) | (5.5 | ) | (9.3 | ) | |||||||||||||
Repair service agreement commissions | 30,766 | 8.6 | 32,140 | 8.5 | (1,374 | ) | (4.3 | ) | (6.0 | ) | |||||||||||||
Service revenues | 3,203 | 0.9 | 3,743 | 1.0 | (540 | ) | (14.4 | ) | |||||||||||||||
Total net sales | $ | 355,897 | 100.0 | % | $ | 376,530 | 100.0 | % | $ | (20,633 | ) | (5.5 | )% | (8.9 | )% | ||||||||
The following provides a summary of items influencing Conn's product category performance during the fourth quarter of fiscal 2017, compared to the prior-year period:
• | Furniture unit volume decreased 18.4%, partially offset by a 9.1% increase in average selling price; |
• | Mattress unit volume decreased 13.5%, partially offset by an 11.9% increase in average selling price; |
• | Home appliance unit volume decreased 6.9% and average selling price decreased 3.0%; |
• | Consumer electronic unit volume decreased 9.7%, partially offset by a 3.6% increase in average selling price; and |
• | Home office unit volume decreased 13.6% and average selling price decreased 5.5%. |
Credit Segment Fourth Quarter Results (on a year-over-year basis unless otherwise noted)
Credit revenues decreased 4.1% to $76.6 million. The decrease in credit revenue was the result of both lower credit insurance commissions due to higher claim volumes in Louisiana after the floods and lower origination volume and the lower yield rate of 16.5%, which was 40 basis points lower than the prior year quarter. The total customer portfolio balance was $1.6 billion at January 31, 2017, declining 2.0%, or $31.4 million from January 31, 2016.
Provision for bad debts for the fourth quarter of fiscal year 2017 was $72.1 million, an increase of $7.6 million from the same prior-year period. The increase was primarily driven by an $11.5 million increase in charge-offs, net of recoveries, offset by a $3.9 million decrease in the provision related to the change in the allowance for bad debts.
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 our Form 10-K for the year ended January 31, 2017, to be filed with the Securities and Exchange Commission.
Fourth Quarter Net Income Results
For the fourth quarter of fiscal year 2017, we reported a net loss of $0.1 million or $0.00 per diluted share compared to net income for the fourth quarter of fiscal year 2016 of $1.1 million or $0.03 per diluted share. On a non-GAAP basis, adjusted net income for the quarter of fiscal year 2017 was $1.5 million or $0.05 per diluted share, which excludes credits from legal and professional fees associated with securities-related litigation, an adjustment to our sales tax audit reserve, executive management transition costs and certain non-recurring discrete tax items. This compares to adjusted net income for the fourth quarter of fiscal year 2016 of $3.5 million or $0.11 per diluted share, which excludes legal and professional fees related to the exploration of strategic alternatives and securities-related litigation, sales tax audit reserves, and executive management transition costs.
Store Update
During the fourth quarter of fiscal year 2017, the Company opened no new stores. During fiscal year 2017, we opened 10 new stores. We currently plan to open three new stores during fiscal year 2018, two of which were opened in North Carolina in February.
2
Liquidity and Capital Resources
As of January 31, 2017, the Company had $161.5 million of immediately available borrowing capacity under its $810 million revolving credit facility, with an additional $465.8 million that could become available upon increases in eligible inventory and customer receivable balances under the borrowing base.
On March 31, 2017, the Company executed an amendment to its revolving credit facility, which, among other things, extended the maturity by one year to October 30, 2019, adjusted certain financial covenants and definitions, and reduced the size by $60 million from $810 million to $750 million. Refer to Note 19. Subsequent Events of Form 10-K for the year ended January 31, 2017 for additional details.
Outlook and Guidance
The following are the Company's expectations for the business for the first quarter of fiscal year 2018:
• | Change in same store sales down mid-teens; |
• | Retail gross margin between 37.5% and 38.0% of total net retail sales; |
• | Selling, general and administrative expenses between 30.5% and 32.0% of total revenues; |
• | Provision for bad debts between $56.0 million and $60.0 million; |
• | Finance charges and other revenues between $74.0 million and $78.0 million; and |
• | Interest expense between $22.5 million and $24.0 million. |
Conference Call Information
We will host a conference call on April 4, 2017, at 10 a.m. CT / 11 a.m. ET, to discuss our fourth quarter fiscal 2017 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 fourth quarter fiscal 2017 conference call presentation will be available at ir.conns.com.
Replay of the telephonic call can be accessed through April 11, 2017 by dialing 855-859-2056 or 404-537-3406 and Conference ID: 92161046.
About Conn's, Inc.
Conn's is a specialty retailer currently operating over 110 retail locations in Alabama, Arizona, Colorado, Georgia, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee and Texas. 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; |
• | 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 rent-to-own payment plans.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements include information concerning the Company's future financial performance, business strategy, plans, goals and objectives. Statements containing the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "project," "should," or the negative of such terms or other similar expressions are generally forward-looking in nature and not historical facts. 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 the Company's ability to achieve the results either expressed or implied by the Company's forward-looking statements including, but not limited to: general economic conditions impacting the Company's customers or potential customers; the Company's ability to execute periodic securitizations of future originated customer loans including the sale of any remaining residual equity on favorable terms; the Company's ability to continue existing customer financing programs or to offer new customer financing programs; changes in the delinquency status of the Company's credit portfolio; unfavorable developments in ongoing litigation; increased regulatory oversight; higher than anticipated net charge-offs in the credit portfolio; the success of the Company's planned opening of new stores; technological and market developments and sales trends for the Company's major
3
product offerings; the Company's ability to protect against cyber-attacks or data security breaches and to protect the integrity and security of individually identifiable data of the Company's customers and employees; the Company's ability to fund its operations, capital expenditures, debt repayment and expansion from cash flows from operations, borrowings from the Company's revolving credit facility, and proceeds from accessing debt or equity markets; the ability to continue the repurchase program; and the other risks detailed in the Company's most recent SEC reports, including but not limited to, the Company's Annual Report on Form 10-K and the Company's Quarterly Reports on Forms 10-Q and 10-Q/A and Current Reports on Form 8-K. 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. 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)
(in thousands, except per share amounts)
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | |||||||||||||||
Total net sales | $ | 355,897 | $ | 376,530 | $ | 1,314,471 | $ | 1,322,589 | |||||||
Finance charges and other revenues | 76,908 | 80,289 | 282,377 | 290,589 | |||||||||||
Total revenues | 432,805 | 456,819 | 1,596,848 | 1,613,178 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of goods sold | 217,373 | 240,631 | 823,082 | 833,126 | |||||||||||
Selling, general and administrative expense | 113,346 | 121,940 | 460,896 | 436,115 | |||||||||||
Provision for bad debts | 72,316 | 64,780 | 242,294 | 222,177 | |||||||||||
Charges and credits | 1,070 | 3,872 | 6,478 | 8,044 | |||||||||||
Total costs and expenses | 404,105 | 431,223 | 1,532,750 | 1,499,462 | |||||||||||
Operating income | 28,700 | 25,596 | 64,098 | 113,716 | |||||||||||
Interest expense | 25,111 | 23,921 | 98,615 | 63,106 | |||||||||||
Loss on extinguishment of debt | — | — | — | 1,367 | |||||||||||
Income (loss) before income taxes | 3,589 | 1,675 | (34,517 | ) | 49,243 | ||||||||||
Provision (benefit) for income taxes | 3,663 | 614 | (8,955 | ) | 18,388 | ||||||||||
Net income (loss) | $ | (74 | ) | $ | 1,061 | $ | (25,562 | ) | $ | 30,855 | |||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | — | $ | 0.03 | $ | (0.83 | ) | $ | 0.88 | ||||||
Diluted | $ | — | $ | 0.03 | $ | (0.83 | ) | $ | 0.87 | ||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 30,883 | 31,847 | 30,776 | 35,084 | |||||||||||
Diluted | 30,883 | 32,195 | 30,776 | 35,557 | |||||||||||
5
CONN'S, INC. AND SUBSIDIARIES
CONDENSED RETAIL SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | |||||||||||||||
Product sales | $ | 321,928 | $ | 340,647 | $ | 1,186,197 | $ | 1,199,134 | |||||||
Repair service agreement commissions | 30,766 | 32,140 | 113,615 | 109,730 | |||||||||||
Service revenues | 3,203 | 3,743 | 14,659 | 13,725 | |||||||||||
Total net sales | 355,897 | 376,530 | 1,314,471 | 1,322,589 | |||||||||||
Other revenues | 301 | 415 | 1,569 | 1,639 | |||||||||||
Total revenues | 356,198 | 376,945 | 1,316,040 | 1,324,228 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of goods sold | 217,373 | 240,631 | 823,082 | 833,126 | |||||||||||
Selling, general and administrative expense | 81,480 | 87,300 | 326,078 | 313,694 | |||||||||||
Provision for bad debts | 179 | 278 | 990 | 791 | |||||||||||
Charges and credits | 1,070 | 3,872 | 6,478 | 8,044 | |||||||||||
Total costs and expenses | 300,102 | 332,081 | 1,156,628 | 1,155,655 | |||||||||||
Operating income | $ | 56,096 | $ | 44,864 | $ | 159,412 | $ | 168,573 | |||||||
Retail gross margin | 38.9 | % | 36.1 | % | 37.4 | % | 37.0 | % | |||||||
Selling, general and administrative expense as percent of revenues | 22.9 | % | 23.2 | % | 24.8 | % | 23.7 | % | |||||||
Operating margin | 15.7 | % | 11.9 | % | 12.1 | % | 12.7 | % | |||||||
Store count: | |||||||||||||||
Beginning of period | 113 | 101 | 103 | 90 | |||||||||||
Opened | — | 2 | 10 | 15 | |||||||||||
Closed | — | — | — | (2 | ) | ||||||||||
End of period | 113 | 103 | 113 | 103 | |||||||||||
6
CONN'S, INC. AND SUBSIDIARIES
CONDENSED CREDIT SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues– | |||||||||||||||
Finance charges and other revenues | $ | 76,607 | $ | 79,874 | $ | 280,808 | $ | 288,950 | |||||||
Costs and expenses: | |||||||||||||||
Selling, general and administrative expense | 31,866 | 34,640 | 134,818 | 122,421 | |||||||||||
Provision for bad debts | 72,137 | 64,502 | 241,304 | 221,386 | |||||||||||
Total costs and expenses | 104,003 | 99,142 | 376,122 | 343,807 | |||||||||||
Operating loss | (27,396 | ) | (19,268 | ) | (95,314 | ) | (54,857 | ) | |||||||
Interest expense | 25,111 | 23,921 | 98,615 | 63,106 | |||||||||||
Loss on extinguishment of debt | — | — | — | 1,367 | |||||||||||
Loss before income taxes | $ | (52,507 | ) | $ | (43,189 | ) | $ | (193,929 | ) | $ | (119,330 | ) | |||
Selling, general and administrative expense as percent of revenues | 41.6 | % | 43.4 | % | 48.0 | % | 42.4 | % | |||||||
Selling, general and administrative expense as percent of average total customer portfolio balance (annualized) | 8.2 | % | 8.9 | % | 8.7 | % | 8.4 | % | |||||||
Operating margin | (35.8 | )% | (24.1 | )% | (33.9 | )% | (19.0 | )% | |||||||
7
CONN'S, INC. AND SUBSIDIARIES
CUSTOMER RECEIVABLE PORTFOLIO STATISTICS
(unaudited)
(dollars in thousands, except average outstanding customer balance and average income of credit customer)
January 31, | |||||||
2017 | 2016 | ||||||
Weighted average credit score of outstanding balances | 589 | 595 | |||||
Average outstanding customer balance | $ | 2,376 | $ | 2,406 | |||
Balances 60+ days past due as a percentage of total customer portfolio balance(1) | 10.7 | % | 9.9 | % | |||
Re-aged balance as a percentage of total customer portfolio balance(1) | 16.1 | % | 14.5 | % | |||
Account balances re-aged more than six months | $ | 73,903 | $ | 62,288 | |||
Allowance for bad debts as a percentage of total customer portfolio balance | 13.5 | % | 12.0 | % | |||
Percent of total customer portfolio balance represented by no-interest option receivables | 27.1 | % | 37.1 | % | |||
(1) | Accounts that become delinquent after being re-aged are included in both the delinquency and re-aged amounts. |
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Total applications processed | 362,487 | 376,132 | 1,337,850 | 1,287,478 | |||||||||||
Weighted average origination credit score of sales financed | 607 | 614 | 609 | 615 | |||||||||||
Percent of total applications approved and utilized | 32.7 | % | 39.9 | % | 34.5 | % | 42.7 | % | |||||||
Average down payment | 2.6 | % | 2.9 | % | 3.2 | % | 3.3 | % | |||||||
Average income of credit customer at origination | $ | 43,100 | $ | 41,900 | $ | 41,900 | $ | 41,100 | |||||||
Percent of retail sales paid for by: | |||||||||||||||
In-house financing, including down payment received | 68.8 | % | 79.8 | % | 72.0 | % | 81.8 | % | |||||||
Third-party financing | 16.5 | % | 10.2 | % | 15.7 | % | 7.6 | % | |||||||
Third-party rent-to-own option | 9.3 | % | 4.6 | % | 6.3 | % | 4.5 | % | |||||||
94.6 | % | 94.6 | % | 94.0 | % | 93.9 | % | ||||||||
8
CONN'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share amounts)
January 31, | |||||||
2017 | 2016 | ||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 23,566 | $ | 12,254 | |||
Restricted cash | 110,698 | 78,576 | |||||
Customer accounts receivable, net of allowances | 702,162 | 743,931 | |||||
Other accounts receivable | 69,286 | 95,404 | |||||
Inventories | 164,856 | 201,969 | |||||
Income taxes recoverable | 2,150 | 10,774 | |||||
Prepaid expenses and other current assets | 14,955 | 20,092 | |||||
Total current assets | 1,087,673 | 1,163,000 | |||||
Long-term portion of customer accounts receivable, net of allowances | 615,904 | 631,645 | |||||
Property and equipment, net | 159,202 | 151,483 | |||||
Deferred income taxes | 71,442 | 70,219 | |||||
Other assets | 6,913 | 8,953 | |||||
Total assets | $ | 1,941,134 | $ | 2,025,300 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Current maturities of capital lease obligations | $ | 849 | $ | 799 | |||
Accounts payable | 101,612 | 86,797 | |||||
Accrued expenses | 39,781 | 39,374 | |||||
Other current liabilities | 25,139 | 19,155 | |||||
Total current liabilities | 167,381 | 146,125 | |||||
Deferred rent | 87,957 | 74,559 | |||||
Long-term debt and capital lease obligations | 1,144,393 | 1,248,879 | |||||
Other long-term liabilities | 23,613 | 17,456 | |||||
Total liabilities | 1,423,344 | 1,487,019 | |||||
Stockholders' equity | 517,790 | 538,281 | |||||
Total liabilities and stockholders' equity | $ | 1,941,134 | $ | 2,025,300 | |||
9
CONN'S, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS
(unaudited)
(dollars in thousands)
RETAIL SEGMENT OPERATING INCOME, AS ADJUSTED
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Retail segment operating income, as reported | $ | 56,096 | $ | 44,864 | $ | 159,412 | $ | 168,573 | |||||||
Adjustments: | |||||||||||||||
Store and facility closure costs | 135 | — | 1,089 | 637 | |||||||||||
Legal and professional fees related to the exploration of strategic alternative and securities-related litigation | (646 | ) | 947 | 101 | 3,153 | ||||||||||
Sales tax audit reserve | 1,434 | 2,748 | 1,434 | 2,748 | |||||||||||
Executive management transition costs | — | 177 | 234 | 1,506 | |||||||||||
Loss from retirement of leasehold improvements | 6 | — | 1,986 | — | |||||||||||
Employee severance | 141 | — | 1,634 | — | |||||||||||
Retail segment operating income, as adjusted | $ | 57,166 | $ | 48,736 | $ | 165,890 | $ | 176,617 | |||||||
Retail segment total revenues | $ | 356,198 | $ | 376,945 | $ | 1,316,040 | $ | 1,324,228 | |||||||
Operating margin: | |||||||||||||||
As reported | 15.7 | % | 11.9 | % | 12.1 | % | 12.7 | % | |||||||
As adjusted | 16.0 | % | 12.9 | % | 12.6 | % | 13.3 | % | |||||||
NET INCOME, AS ADJUSTED, AND DILUTED EARNINGS PER SHARE AS ADJUSTED
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income, as reported | $ | (74 | ) | $ | 1,061 | $ | (25,562 | ) | $ | 30,855 | |||||
Adjustments: | |||||||||||||||
Changes in estimates | — | — | 13,168 | — | |||||||||||
Store and facility closure costs | 135 | — | 1,089 | 637 | |||||||||||
Legal and professional fees related to the exploration of strategic alternative and securities-related litigation | (646 | ) | 947 | 101 | 3,153 | ||||||||||
Sales tax audit reserve | 1,434 | 2,748 | 1,434 | 2,748 | |||||||||||
Executive management transition costs | — | 177 | 234 | 1,506 | |||||||||||
Loss from retirement of leasehold improvements | 6 | — | 1,986 | — | |||||||||||
Employee severance | 141 | — | 1,634 | — | |||||||||||
Discrete tax item | 932 | — | 932 | — | |||||||||||
Loss on extinguishment of debt | — | — | — | 1,367 | |||||||||||
Tax impact of adjustments | (387 | ) | (1,421 | ) | (1,678 | ) | (3,510 | ) | |||||||
Net income, as adjusted | $ | 1,541 | $ | 3,512 | $ | (6,662 | ) | $ | 36,756 | ||||||
Weighted average common shares outstanding - Diluted | 30,883 | 32,195 | 30,776 | 35,557 | |||||||||||
Earnings per share: | |||||||||||||||
As reported | $ | — | $ | 0.03 | $ | (0.83 | ) | $ | 0.87 | ||||||
As adjusted | $ | 0.05 | $ | 0.11 | $ | (0.22 | ) | $ | 1.03 | ||||||
10
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 also provide retail segment adjusted operating income, retail adjusted operating margin, adjusted net income, and adjusted earnings per diluted share. These non-GAAP financial measures are not meant to be considered as a substitute for comparable GAAP measures but should be considered in addition to results presented in accordance with GAAP, and 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 greater transparency with respect to key metrics we use in our financial and operational decision making, and (2) they are used by some of its institutional investors and the analyst community to help them analyze our operating results.
11