Document


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): September 4, 2018
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.)

2445 Technology Forest Blvd., Suite 800
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 September 4, 2018, Conn's, Inc. (the "Company") issued a press release reporting its second quarter fiscal year 2019 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*

* Furnished 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:
September 4, 2018
By:
/s/ Lee A. Wright
 
 
Name:
Lee A. Wright
 
 
Title:
Executive Vice President and Chief Financial Officer



Exhibit


Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12441521&doc=3
Conn's, Inc. Reports Second Quarter Fiscal 2019 Financial Results
First Quarter of Positive Same Store Sales in Three Years
Record Retail Gross Margin of 41.4%
Credit Segment Benefitting from Record Quarterly Revenues, Strong Credit Quality, and Lower Funding Costs
Record Second Quarter GAAP Earnings per Diluted Share of $0.53, an Increase of 279% over the Prior Year Period
 
THE WOODLANDS, Texas, September 4, 2018 - 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 quarter ended July 31, 2018.
“We achieved many operating and financial milestones during the second quarter of fiscal year 2019, highlighted by significant growth in earnings to a second quarter record of $0.53 per diluted share. Second quarter financial results were driven primarily by positive same store sales, the contribution of new store growth, record retail gross margin, and continued improvement in credit segment performance. The initiatives to drive retail growth are starting to take hold and second quarter same store sales increased for the first time since the second quarter of fiscal year 2016, while total retail sales were up 3.5% over the prior year period. The momentum in our business is encouraging and we continue to believe fiscal year 2019 will be a strong year,” stated Norm Miller, Conn’s Chairman and Chief Executive Officer.
Second quarter of fiscal year 2019 highlights include:
First quarter of positive same store sales in three years, with total revenues up 3.5% over prior year period
Record retail gross margin of 41.4%
Credit spread of 750 basis points, the best second quarter credit spread in four years
Record quarterly credit segment revenues of $88.2 million
60+ day delinquency rate of 9.0%, representing the fourth consecutive quarter that the rate has declined year-over-year and the first decline from the first quarter rate in seven years
Second consecutive quarter of positive credit segment operating income
Interest expense of $15.6 million, compared to $20.0 million for the same period last fiscal year
GAAP earnings of $0.53 per diluted share, an increase of 279% over prior year period to a second quarter record
Adjusted earnings of $0.57 per diluted share, an increase of 119% over prior year period





1



Second Quarter Results
Net income for the three months ended July 31, 2018 was $17.0 million, or $0.53 per diluted share, compared to net income for the three months ended July 31, 2017 of $4.3 million, or $0.14 per diluted share. On a non-GAAP basis, adjusted net income for the three months ended July 31, 2018 was $18.3 million, or $0.57 per diluted share, which excludes the loss on extinguishment of debt from the early retirement of our Series 2017-A Class B and C Notes and a contingency reserve related to a regulatory matter. This compares to adjusted net income for the three months ended July 31, 2017 of $8.2 million, or $0.26 per diluted share, which excludes charges and credits and the loss from extinguishment of debt related to the early redemption of our Series 2015-A Class B Notes.
Retail Segment Second Quarter Results
Total retail revenues were $296.4 million for the three months ended July 31, 2018 compared to $286.5 million for the three months ended July 31, 2017. The increase of 3.5% was primarily driven by new store growth and an increase in same store sales. For the three months ended July 31, 2018 and 2017, retail segment operating income was $39.2 million and $31.3 million, respectively. On a non-GAAP basis, adjusted retail segment operating income for the three months ended July 31, 2018 was $39.5 million, after excluding a contingency reserve related to a regulatory matter. On a non-GAAP basis, adjusted retail segment operating income for the three months ended July 31, 2017 was $32.8 million, after excluding severance costs related to a change in the executive management team.
The following table presents net sales and changes in net sales by category:
 
Three Months Ended July 31,
 
 
 
%
 
Same Store
(dollars in thousands)
2018
 
% of Total
 
2017
 
% of Total
 
Change
 
Change
 
% Change
Furniture and mattress (1)
$
97,066

 
32.8
%
 
$
95,297

 
33.3
%
 
$
1,769

 
1.9
 %
 
(2.3
)%
Home appliance
91,471

 
30.9

 
89,085

 
31.1

 
2,386

 
2.7

 
0.4

Consumer electronics (1)
55,654

 
18.8

 
52,946

 
18.5

 
2,708

 
5.1

 
5.3

Home office (1) 
19,289

 
6.5

 
17,862

 
6.2

 
1,427

 
8.0

 
8.5

Other
3,699

 
1.2

 
4,403

 
1.5

 
(704
)
 
(16.0
)
 
(18.2
)
Product sales
267,179

 
90.2

 
259,593

 
90.6

 
7,586

 
2.9

 
0.6

Repair service agreement commissions (2)
25,662

 
8.6

 
23,519

 
8.2

 
2,143

 
9.1

 
(1.9
)
Service revenues
3,472

 
1.2

 
3,301

 
1.2

 
171

 
5.2

 


Total net sales
$
296,313

 
100.0
%
 
$
286,413

 
100.0
%
 
$
9,900

 
3.5
 %
 
0.3
 %
(1)
During the three months ended July 31, 2017, we reclassified certain products from the consumer electronics and home office product categories into the furniture and mattress product category. Net sales of these products reflected in the consumer electronics and home office product categories for the three months ended July 31, 2017 were $2.6 million and $0.8 million, respectively. The change in same store sales reflects the current product classification for both periods presented.
(2)
The total change in sales of repair service agreement commissions includes retrospective commissions, which are not reflected in the change in same store sales.
The following provides a summary of the same store sales performance of our product categories during the three months ended July 31, 2018 as compared to the three months ended July 31, 2017:
Furniture unit volume decreased 4.3%, partially offset by a 2.5% increase in average selling price;
Mattress unit volume decreased 13.8%, partially offset by a 11.8% increase in average selling price;
Home appliance average selling price increased 7.4%, partially offset by a 6.5% decrease in unit volume;
Consumer electronic unit volume increased 2.2% and average sales price increased 3.0%; and
Home office unit volume increased 13.7%, partially offset by a 4.5% decrease in average selling price.

2



Credit Segment Second Quarter Results
Credit revenues were $88.2 million for the three months ended July 31, 2018 compared to $80.1 million for the three months ended July 31, 2017. The 10.1% increase in credit revenue was primarily due to the origination of our higher-yielding direct loan product, which resulted in an increase in the portfolio yield rate to 21.3% from 18.7%, and a 1.5% increase in the average balance of the customer receivable portfolio. The total customer portfolio balance was $1.51 billion at July 31, 2018 compared to $1.48 billion at July 31, 2017, an increase of 1.9%.
Provision for bad debts was $50.5 million for the three months ended July 31, 2018 compared to $49.3 million for the three months ended July 31, 2017, an increase of $1.2 million. The change reflects a greater decrease in the allowance for bad debts during the three months ended July 31, 2017 as compared to the three months ended July 31, 2018, partially offset by a year-over-year reduction in net charge-offs of $3.0 million.
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 July 31, 2018, to be filed with the Securities and Exchange Commission.
Store Update
The Company opened two new Conn's HomePlus® stores in Texas during the first half of fiscal year 2019. In August, the Company opened one additional store in Virginia, bringing the total store count to 119 in 14 states. During fiscal year 2019, the Company plans to open a total of seven to nine new stores in existing states to leverage current infrastructure.
Liquidity and Capital Resources
As of July 31, 2018, the Company had $366.6 million of immediately available borrowing capacity under its $650.0 million revolving credit facility, with an additional $19.4 million that may become available under the Company's revolving credit facility if the Company grows the balance of eligible customer receivables and our total eligible inventory balances under the borrowing base. The Company also had $4.4 million of unrestricted cash available for use.
Outlook and Guidance
The following are the Company's expectations for the business for the third quarter of fiscal year 2019:
Change in same store sales between negative 5% and 0%:
Markets not impacted by Hurricane Harvey between negative 2% and positive 2%; and
Markets impacted by Hurricane Harvey between negative 12% and negative 5%;
Retail gross margin between 40.5% and 41.0% of total retail net sales;
Selling, general and administrative expenses between 30.5% and 32.5% of total revenues;
Provision for bad debts between $44.0 million and $48.0 million;
Finance charges and other revenues between $90.5 million and $94.5 million; and
Interest expense between $16.5 million and $17.5 million.
Conference Call Information
The Company will host a conference call on September 4, 2018 at 10 a.m. CT / 11 a.m. ET to discuss its three months ended July 31, 2018 financial results. Participants can join the call by dialing 877-451-6152 or 201-389-0879. The conference call will also be broadcast simultaneously via webcast on a listen-only basis. A link to the earnings release, webcast and the second quarter fiscal year 2019 conference call presentation will be available at ir.conns.com.
Replay of the telephonic call can be accessed through September 11, 2018 by dialing 844-512-2921 or 412-317-6671 and Conference ID: 13682980.
About Conn's, Inc.
Conn's HomePlus is a specialty retailer currently operating 119 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, QLED, 4K Ultra HD, and smart televisions, Blu-ray players, home theaters, portable audio equipment, and gaming products;
Home office, including computers, printers and accessories.
Additionally, Conn's HomePlus offers a variety of products on a seasonal basis. Unlike many of its competitors, Conn's HomePlus 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, 2018, Part II, Item 1A, Risk Factors, in our Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2018 to be filed with the SEC 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 July 31,
 
Six Months Ended July 31,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Total net sales
$
296,313

 
$
286,413

 
$
572,069

 
$
565,698

Finance charges and other revenues
88,307

 
80,234

 
170,938

 
156,775

Total revenues
384,620

 
366,647

 
743,007

 
722,473

Costs and expenses:
 
 
 
 
 
 
 
Cost of goods sold
173,627

 
172,306

 
340,216

 
344,256

Selling, general and administrative expense
120,690

 
111,632

 
235,568

 
218,169

Provision for bad debts
50,751

 
49,449

 
94,907

 
105,379

Charges and credits
300

 
4,068

 
300

 
5,295

Total costs and expenses
345,368

 
337,455

 
670,991

 
673,099

Operating income
39,252

 
29,192

 
72,016

 
49,374

Interest expense
15,566

 
20,039

 
32,386

 
44,047

Loss on extinguishment of debt
1,367

 
2,097

 
1,773

 
2,446

Income before income taxes
22,319

 
7,056

 
37,857

 
2,881

Provision for income taxes
5,308

 
2,783

 
8,114

 
1,188

Net income
$
17,011

 
$
4,273

 
$
29,743

 
$
1,693

Income per share:
 
 
 
 
 
 
 
Basic
$
0.54

 
$
0.14

 
$
0.94

 
$
0.05

Diluted
$
0.53

 
$
0.14

 
$
0.92

 
$
0.05

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
31,652,017

 
31,093,746

 
31,597,225

 
31,033,880

Diluted
32,242,463

 
31,434,501

 
32,210,759

 
31,292,305



5



CONN'S, INC. AND SUBSIDIARIES
CONDENSED RETAIL SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Product sales
$
267,179

 
$
259,593

 
$
516,493

 
$
510,955

Repair service agreement commissions
25,662

 
23,519

 
48,525

 
48,215

Service revenues
3,472

 
3,301

 
7,051

 
6,528

Total net sales
296,313

 
286,413

 
572,069

 
565,698

Other revenues
98

 
92

 
112

 
172

Total revenues
296,411

 
286,505

 
572,181

 
565,870

Costs and expenses:
 
 
 
 
 
 
 
Cost of goods sold
173,627

 
172,306

 
340,216

 
344,256

Selling, general and administrative expense
83,003

 
78,667

 
160,755

 
152,614

Provision for bad debts
243

 
165

 
503

 
395

Charges and credits
300

 
4,068

 
300

 
5,295

Total costs and expenses
257,173

 
255,206

 
501,774

 
502,560

Operating income
$
39,238

 
$
31,299

 
$
70,407

 
$
63,310

Retail gross margin
41.4
%
 
39.8
%
 
40.5
%
 
39.1
%
Selling, general and administrative expense as percent of revenues
28.0
%
 
27.5
%
 
28.1
%
 
27.0
%
Operating margin
13.2
%
 
10.9
%
 
12.3
%
 
11.2
%
Store count:
 
 
 
 
 
 
 
Beginning of period
118

 
115

 
116

 
113

Opened

 
1

 
2

 
3

End of period
118

 
116

 
118

 
116



6



CONN'S, INC. AND SUBSIDIARIES
CONDENSED CREDIT SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Finance charges and other revenues
$
88,209

 
$
80,142

 
$
170,826

 
$
156,603

Costs and expenses:
 
 
 
 
 
 
 
Selling, general and administrative expense
37,687

 
32,965

 
74,813

 
65,555

Provision for bad debts
50,508

 
49,284

 
94,404

 
104,984

Total costs and expenses
88,195

 
82,249

 
169,217

 
170,539

Operating income (loss)
14

 
(2,107
)
 
1,609

 
(13,936
)
Interest expense
15,566

 
20,039

 
32,386

 
44,047

Loss on extinguishment of debt
1,367

 
2,097

 
1,773

 
2,446

Loss before income taxes
$
(16,919
)
 
$
(24,243
)
 
$
(32,550
)
 
$
(60,429
)
Selling, general and administrative expense as percent of revenues
42.7
%
 
41.1
 %
 
43.8
%
 
41.9
 %
Selling, general and administrative expense as percent of average total customer portfolio balance (annualized)
10.1
%
 
8.9
 %
 
10.0
%
 
8.8
 %
Operating margin
%
 
(2.6
)%
 
0.9
%
 
(8.9
)%


7



CONN'S, INC. AND SUBSIDIARIES
CUSTOMER RECEIVABLE PORTFOLIO STATISTICS
(unaudited)
 
As of July 31,
 
2018
 
2017
Weighted average credit score of outstanding balances(1)
594

 
589

Average outstanding customer balance
$
2,503

 
$
2,375

Balances 60+ days past due as a percentage of total customer portfolio balance(2)
9.0
%
 
10.4
%
Re-aged balance as a percentage of total customer portfolio balance(2)(3)
24.3
%
 
16.0
%
Account balances re-aged more than six months (in thousands)
$
84,148

 
$
75,694

Allowance for bad debts as a percentage of total customer portfolio balance
13.5
%
 
13.7
%
Percent of total customer portfolio balance represented by no-interest option receivables
20.9
%
 
24.1
%
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2018
 
2017
 
2018
 
2017
Total applications processed
295,564

 
297,587

 
579,050

 
587,914

Weighted average origination credit score of sales financed(1)
610

 
609

 
609

 
608

Percent of total applications approved and utilized
31.4
%
 
32.8
%
 
30.9
%
 
32.1
%
Average down payment
2.6
%
 
3.0
%
 
2.8
%
 
3.3
%
Average income of credit customer at origination
$
43,700

 
$
42,300

 
$
43,700

 
$
42,200

Percent of retail sales paid for by:
 

 
 

 
 

 
 

In-house financing, including down payment received
70.5
%
 
72.6
%
 
70.3
%
 
71.6
%
Third-party financing
16.4
%
 
17.2
%
 
15.7
%
 
16.2
%
Third-party lease-to-own option
6.4
%
 
3.8
%
 
6.9
%
 
5.7
%
 
93.3
%
 
93.6
%
 
92.9
%
 
93.5
%

(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 re-aged balance as a percentage of total customer portfolio as of July 31, 2018 includes $41.6 million, or 2.8%, in first time re-ages related to customers affected by Hurricane Harvey within FEMA-designated disaster areas.

8



CONN'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
 
July 31,
2018
 
January 31,
2018
Assets
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
4,435

 
$
9,286

Restricted cash
51,657

 
86,872

Customer accounts receivable, net of allowances
622,009

 
636,825

Other accounts receivable
87,797

 
71,186

Inventories
195,728

 
211,894

Income taxes recoverable
704

 
32,362

Prepaid expenses and other current assets
13,831

 
31,592

Total current assets
976,161

 
1,080,017

Long-term portion of customer accounts receivable, net of allowances
647,494

 
650,608

Property and equipment, net
142,631

 
143,152

Deferred income taxes
23,086

 
21,565

Other assets
7,129

 
5,457

Total assets
$
1,796,501

 
$
1,900,799

Liabilities and Stockholders' Equity
 
 
 
Current liabilities:
 
 
 
Current maturities of debt and capital lease obligations
$
1,149

 
$
907

Accounts payable
85,001

 
71,617

Accrued expenses
93,070

 
66,173

Other current liabilities
22,763

 
25,414

Total current liabilities
201,983

 
164,111

Deferred rent
85,255

 
87,003

Long-term debt and capital lease obligations
916,081

 
1,090,105

Other long-term liabilities
23,535

 
24,512

Total liabilities
1,226,854

 
1,365,731

Stockholders' equity
569,647

 
535,068

Total liabilities and stockholders' equity
$
1,796,501

 
$
1,900,799



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 July 31,
 
Six Months Ended July 31,
 
2018
 
2017
 
2018
 
2017
Retail segment operating income, as reported
$
39,238

 
$
31,299

 
$
70,407

 
$
63,310

Adjustments:
 
 
 
 
 
 
 
Facility closure costs

 
122

 

 
1,349

Securities-related regulatory matter and other legal fees
300

 
34

 
300

 
34

Employee severance

 
1,317

 

 
1,317

Retail segment operating income, as adjusted
$
39,538

 
$
32,772

 
$
70,707

 
$
66,010

Retail segment total revenues
$
296,411

 
$
286,505

 
$
572,181

 
$
565,870

Retail segment operating margin:
 
 
 
 
 
 
 
As reported
13.2
%
 
10.9
%
 
12.3
%
 
11.2
%
As adjusted
13.3
%
 
11.4
%
 
12.4
%
 
11.7
%

NET INCOME, AS ADJUSTED, AND DILUTED INCOME PER SHARE, AS ADJUSTED
 
Three Months Ended July 31,
 
Six Months Ended July 31,
 
2018
 
2017
 
2018
 
2017
Net income, as reported
$
17,011

 
$
4,273

 
$
29,743

 
$
1,693

Adjustments:
 
 
 
 
 
 
 
Facility closure costs

 
122

 

 
1,349

Securities-related regulatory matter and other legal fees
300

 
34

 
300

 
34

Employee severance

 
1,317

 

 
1,317

Indirect tax audit reserve

 
2,595

 

 
2,595

Loss on extinguishment of debt
1,367

 
2,097

 
1,773

 
2,446

Tax impact of adjustments
(397
)
 
(2,232
)
 
(444
)
 
(2,803
)
Net income, as adjusted
$
18,281

 
$
8,206

 
$
31,372

 
$
6,631

Weighted average common shares outstanding - Diluted
32,242,463

 
31,434,501

 
32,210,759

 
31,292,305

Income per share:
 
 
 
 
 
 
 
As reported
$
0.53

 
$
0.14

 
$
0.92

 
$
0.05

As adjusted
$
0.57

 
$
0.26

 
$
0.97

 
$
0.21

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”), the Company also provides 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 greater 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.

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