UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
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 5, 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 |
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. ☐
Explanatory Note
This Amendment No. 1 to the Current Report on Form 8-K/A (the “Amended 8-K”) amends Item 9.01 of the Current Report on Form 8-K filed earlier on April 5, 2018 (the “Original 8-K”) solely to correct a typographical error on the Condensed Consolidated Statements of Operations contained within the press release furnished as Exhibit 99.1 thereto. The purpose of the correction was to correct the total costs and expenses of Conn’s, Inc. for the three months ended January 31, 2018. The error has been corrected in the press release furnished as Exhibit 99.1 to this Amended 8-K. Other than including the corrections to Exhibit 99.1, no other modifications have been made to the Original 8-K.
Item 2.02. Results of Operations and Financial Condition.
On April 5, 2018, Conn’s, Inc. issued a press release announcing its fourth quarter and full year fiscal 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 into 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: | April 5, 2018 | 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 Year 2018 Financial Results
Achieves Full-Year Profitability
Record Yield and Lower Charge-Offs Drive Highest Credit Spread in Three Years
60+ Delinquency Rate Declines 80 Basis Points Y-O-Y; Second Consecutive Quarter of Y-O-Y Decline
Strong Retail Operating Margin Supported by Record Retail Gross Margin
Platform Built to Support Compelling Retail Growth Opportunity
THE WOODLANDS, Texas, April 5, 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 January 31, 2018.
“Conn’s fiscal year 2018 financial results demonstrate the successful execution of the Company’s turnaround strategies and, as expected, a return to full-year profitability. Credit segment performance improved throughout the fiscal year as a result of higher finance charges, stronger portfolio fundamentals, controlled expenses, and lower borrowing costs. Conn’s retail segment ended the year with record retail gross margins. I am encouraged by the platform we have created and the positive momentum underway at Conn’s,” stated Norm Miller, Conn’s Chairman and Chief Executive Officer.
For the fourth quarter of fiscal year 2018, Conn’s credit spread of 560 basis points was the highest level in the past three years driven by both year-over-year improvement in interest income and fee yield and year-over-year reduction in the percentage of bad debt charge-offs. Credit quality has improved as the Company's 60+ delinquency rate declined year-over-year for the second consecutive quarter. Originations continue to benefit from higher yields and enhanced underwriting, and Conn’s credit segment is on a clear path towards even better financial performance as the portfolio seasons.
“Conn's unmatched value proposition, combining a differentiated credit offering and compelling retail experience, provides the Company with a significant opportunity to profitably grow retail sales and become a national retailer. As we look to fiscal year 2019, we will leverage the successful platform we have built to continue improving our credit spread, while dedicating more of our focus to driving retail growth,” concluded Mr. Miller.
Fourth Quarter Results
For the fourth quarter of fiscal year 2018, net income was $3.2 million or $0.10 per diluted share compared to a net loss for the fourth quarter of fiscal year 2017 of $0.1 million or $0.00 per diluted share. On a non-GAAP basis, adjusted net income for the fourth quarter of fiscal year 2018 was $17.9 million or $0.56 per diluted share, which excludes the impact of the Tax Cut and Jobs Act (the "Tax Act"), costs associated with a facility relocation, and contingency reserves related to legal matters. This compares to adjusted net income for the fourth quarter of fiscal year 2017 of $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 indirect tax audit reserve, executive management transition costs and certain non-recurring discrete tax items.
Retail Segment Fourth Quarter Results
Total retail revenues were $334.5 million for the fourth quarter of fiscal year 2018 compared to $356.2 million for the fourth quarter of fiscal year 2017, a decrease of $21.7 million. The 6.1% decrease in retail revenue was primarily driven by a decrease in same store sales of 8.0%, partially offset by new store growth. Sales for the three months ended January 31, 2018 were impacted negatively by the transition of our lease-to-own partner and general consumer softness along the Mexico border. For the fourth quarter of fiscal year 2018, retail segment operating income was $48.6 million. On a non-GAAP basis, adjusted retail segment operating income was $50.8 million which excludes costs associated with a facility closure and contingency reserves related to legal matters.
The following table presents net sales and changes in net sales by category:
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Three Months Ended January 31, | Same Store | ||||||||||||||||||||||
(dollars in thousands) | 2018 | % of Total | 2017 | % of Total | Change | % Change | % Change | ||||||||||||||||
Furniture and mattress | $ | 106,967 | 32.0 | % | $ | 111,289 | 31.3 | % | $ | (4,322 | ) | (3.9 | )% | (5.3 | )% | ||||||||
Home appliance | 84,494 | 25.3 | 83,723 | 23.5 | 771 | 0.9 | (0.1 | ) | |||||||||||||||
Consumer electronics | 81,966 | 24.5 | 96,415 | 27.1 | (14,449 | ) | (15.0 | ) | (16.7 | ) | |||||||||||||
Home office | 25,385 | 7.6 | 25,483 | 7.2 | (98 | ) | (0.4 | ) | (1.3 | ) | |||||||||||||
Other | 4,321 | 1.3 | 5,018 | 1.4 | (697 | ) | (13.9 | ) | (14.8 | ) | |||||||||||||
Product sales | 303,133 | 90.7 | 321,928 | 90.5 | (18,795 | ) | (5.8 | ) | (7.2 | ) | |||||||||||||
Repair service agreement commissions | 27,680 | 8.2 | 30,766 | 8.6 | (3,086 | ) | (10.0 | ) | (13.9 | ) | |||||||||||||
Service revenues | 3,648 | 1.1 | 3,203 | 0.9 | 445 | 13.9 | |||||||||||||||||
Total net sales | $ | 334,461 | 100.0 | % | $ | 355,897 | 100.0 | % | $ | (21,436 | ) | (6.0 | )% | (8.0 | )% | ||||||||
The following provides a summary of the items impacting the performance of our product categories during the fourth quarter of fiscal year 2018, compared to the fourth quarter of fiscal year 2017:
• | Furniture unit volume decreased 11.0%, partially offset by a 9.4% increase in average selling price; |
• | Mattress unit volume decreased 18.6%, partially offset by a 6.3% increase in average selling price; |
• | Home appliance unit volume decreased 0.3%, partially offset by a 0.1% increase in average selling price; |
• | Consumer electronic unit volume decreased 17.1%, partially offset by a 0.5% increase in average selling price; and |
• | Home office unit volume decreased 8.1%, partially offset by a 7.4% increase in average selling price. |
Credit Segment Fourth Quarter Results
Credit revenues were $85.9 million for the fourth quarter of fiscal year 2018 compared to $76.6 million for the fourth quarter of fiscal year 2017. The 12.1% 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 20.5% from 16.5%, partially offset by the impact of a 2.6% decline in the average balance of the customer receivables portfolio. Credit revenues for the fourth 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 $1.5 billion at January 31, 2018, compared to $1.6 billion at January 31, 2017, a decrease of 1.8%.
Provision for bad debts was $54.7 million for the fourth quarter of fiscal year 2018 compared to $72.1 million for the fourth quarter of fiscal year 2017, a decrease of $17.4 million. The most significant reasons for the decrease in the provision for bad debts for the three months ended January 31, 2018 compared to the three months ended January 31, 2017 were:
i. | improvements in the credit quality of the portfolio for the three months ended January 31, 2018 compared to the three months ended January 31, 2017, resulting in a decrease in our estimated non-TDR loss rate; |
ii. | lower net charge-offs for the three months ended January 31, 2018 compared to the three months ended January 31, 2017; |
partially offset by:
iii. | higher growth in the customer receivables portfolio balance for the three months ended January 31, 2018 compared to the three months ended January 31, 2017; and |
iv. | an increase in TDR balances in the three months ended January 31, 2018 compared to the three months ended January 31, 2017. |
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-K for the year ended January 31, 2018, to be filed with the Securities and Exchange Commission.
Store Update
The Company has opened two new Conn's HomePlus® stores in Texas during the first quarter of fiscal year 2019, bringing the total store count to 118 in 14 states. During fiscal year 2019, the Company plans to open between five and nine new stores in existing states to leverage current infrastructure.
2
Liquidity and Capital Resources
As of January 31, 2018, the Company had $207.6 million of immediately available borrowing capacity under its $750 million revolving credit facility, with an additional $462.6 million that may become available upon increases in eligible inventory and customer receivable balances under the borrowing base. The Company also had $9.3 million of unrestricted cash available for use.
Outlook and Guidance
The following are the Company's expectations for the business for the first quarter of fiscal year 2019:
• | Change in same store sales down 3% to 5%; |
• | Retail gross margin between 38.5% and 39.0% of total net retail sales; |
• | Selling, general and administrative expenses between 31.5% and 33.0% of total revenues; |
• | Provision for bad debts between $43.0 million and $47.0 million; |
• | Finance charges and other revenues between $81.0 million and $85.0 million; and |
• | Interest expense between $17.5 million and $18.5 million. |
Conference Call Information
The Company will host a conference call on April 5, 2018, at 10 a.m. CT / 11 a.m. ET, to discuss its fourth quarter fiscal year 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 fourth quarter fiscal year 2018 conference call presentation will be available at ir.conns.com.
Replay of the telephonic call can be accessed through April 12, 2018 by dialing 855-859-2056 or 404-537-3406 and Conference ID: 4981108.
About Conn's, Inc.
Conn's is a specialty retailer currently operating 118 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; |
• | Consumer electronics, including LED, OLED, QLED, 4K Ultra HD, and smart 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,
3
Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended January 31, 2018 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 January 31, | Year Ended January 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Total net sales | $ | 334,461 | $ | 355,897 | $ | 1,191,967 | $ | 1,314,471 | |||||||
Finance charges and other revenues | 85,925 | 76,908 | 324,064 | 282,377 | |||||||||||
Total revenues | 420,386 | 432,805 | 1,516,031 | 1,596,848 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of goods sold | 200,497 | 217,373 | 720,344 | 823,082 | |||||||||||
Selling, general and administrative expense | 117,889 | 113,346 | 450,413 | 460,896 | |||||||||||
Provision for bad debts | 54,984 | 72,316 | 216,875 | 242,294 | |||||||||||
Charges and credits | 2,175 | 1,070 | 13,331 | 6,478 | |||||||||||
Total costs and expenses | 375,545 | 404,105 | 1,400,963 | 1,532,750 | |||||||||||
Operating income | 44,841 | 28,700 | 115,068 | 64,098 | |||||||||||
Interest expense | 18,018 | 25,111 | 80,160 | 98,615 | |||||||||||
Loss on extinguishment of debt | 367 | — | 3,274 | — | |||||||||||
Income (loss) before income taxes | 26,456 | 3,589 | 31,634 | (34,517 | ) | ||||||||||
Provision (benefit) for income taxes | 23,255 | 3,663 | 25,171 | (8,955 | ) | ||||||||||
Net income (loss) | $ | 3,201 | $ | (74 | ) | $ | 6,463 | $ | (25,562 | ) | |||||
Income (loss) per share: | |||||||||||||||
Basic | $ | 0.10 | $ | 0.00 | $ | 0.21 | $ | (0.83 | ) | ||||||
Diluted | $ | 0.10 | $ | 0.00 | $ | 0.20 | $ | (0.83 | ) | ||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 31,403,543 | 30,882,509 | 31,192,439 | 30,776,479 | |||||||||||
Diluted | 32,232,220 | 30,882,509 | 31,777,823 | 30,776,479 | |||||||||||
5
CONN'S, INC. AND SUBSIDIARIES
CONDENSED RETAIL SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Product sales | $ | 303,133 | $ | 321,928 | $ | 1,077,874 | $ | 1,186,197 | |||||||
Repair service agreement commissions | 27,680 | 30,766 | 100,383 | 113,615 | |||||||||||
Service revenues | 3,648 | 3,203 | 13,710 | 14,659 | |||||||||||
Total net sales | 334,461 | 355,897 | 1,191,967 | 1,314,471 | |||||||||||
Other revenues | 74 | 301 | 341 | 1,569 | |||||||||||
Total revenues | 334,535 | 356,198 | 1,192,308 | 1,316,040 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of goods sold | 200,497 | 217,373 | 720,344 | 823,082 | |||||||||||
Selling, general and administrative expense | 83,035 | 81,480 | 316,325 | 326,078 | |||||||||||
Provision for bad debts | 245 | 179 | 829 | 990 | |||||||||||
Charges and credits | 2,175 | 1,070 | 13,331 | 6,478 | |||||||||||
Total costs and expenses | 285,952 | 300,102 | 1,050,829 | 1,156,628 | |||||||||||
Operating income | $ | 48,583 | $ | 56,096 | $ | 141,479 | $ | 159,412 | |||||||
Retail gross margin | 40.1 | % | 38.9 | % | 39.6 | % | 37.4 | % | |||||||
Selling, general and administrative expense as percent of revenues | 24.8 | % | 22.9 | % | 26.5 | % | 24.8 | % | |||||||
Operating margin | 14.5 | % | 15.7 | % | 11.9 | % | 12.1 | % | |||||||
Store count: | |||||||||||||||
Beginning of period | 116 | 113 | 113 | 103 | |||||||||||
Opened | — | — | 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 January 31, | Year Ended January 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Finance charges and other revenues | $ | 85,851 | $ | 76,607 | $ | 323,723 | $ | 280,808 | |||||||
Costs and expenses: | |||||||||||||||
Selling, general and administrative expense | 34,854 | 31,866 | 134,088 | 134,818 | |||||||||||
Provision for bad debts | 54,739 | 72,137 | 216,046 | 241,304 | |||||||||||
Total costs and expenses | 89,593 | 104,003 | 350,134 | 376,122 | |||||||||||
Operating loss | (3,742 | ) | (27,396 | ) | (26,411 | ) | (95,314 | ) | |||||||
Interest expense | 18,018 | 25,111 | 80,160 | 98,615 | |||||||||||
Loss on extinguishment of debt | 367 | — | 3,274 | — | |||||||||||
Loss before income taxes | $ | (22,127 | ) | $ | (52,507 | ) | $ | (109,845 | ) | $ | (193,929 | ) | |||
Selling, general and administrative expense as percent of revenues | 40.6 | % | 41.6 | % | 41.4 | % | 48.0 | % | |||||||
Selling, general and administrative expense as percent of average total customer portfolio balance (annualized) | 9.2 | % | 8.2 | % | 8.9 | % | 8.7 | % | |||||||
Operating margin | (4.4 | )% | (35.8 | )% | (8.2 | )% | (33.9 | )% | |||||||
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CONN'S, INC. AND SUBSIDIARIES
CUSTOMER RECEIVABLE PORTFOLIO STATISTICS
(unaudited)
January 31, | |||||||
2018 | 2017 | ||||||
Weighted average credit score of outstanding balances (1) | 591 | 589 | |||||
Average outstanding customer balance | $ | 2,443 | $ | 2,376 | |||
Balances 60+ days past due as a percentage of total customer portfolio balance(2) | 9.9 | % | 10.7 | % | |||
Re-aged balance as a percentage of total customer portfolio balance(2)(3) | 24.3 | % | 16.1 | % | |||
Account balances re-aged more than six months (in thousands) | $ | 76,165 | $ | 73,903 | |||
Allowance for bad debts as a percentage of total customer portfolio balance | 13.3 | % | 13.5 | % | |||
Percent of total customer portfolio balance represented by no-interest option receivables | 21.2 | % | 27.1 | % | |||
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Total applications processed | 369,522 | 362,487 | 1,278,809 | 1,337,850 | |||||||||||
Weighted average origination credit score of sales financed (1) | 611 | 607 | 610 | 609 | |||||||||||
Percent of total applications approved and utilized | 28.2 | % | 32.7 | % | 30.4 | % | 34.5 | % | |||||||
Average down payment | 2.7 | % | 2.6 | % | 3.0 | % | 3.2 | % | |||||||
Average income of credit customer at origination | $ | 45,200 | $ | 43,100 | $ | 43,400 | $ | 41,900 | |||||||
Percent of retail sales paid for by: | |||||||||||||||
In-house financing, including down payment received | 69.3 | % | 68.8 | % | 71.0 | % | 72.0 | % | |||||||
Third-party financing | 16.7 | % | 16.5 | % | 16.1 | % | 15.7 | % | |||||||
Third-party lease-to-own option | 6.5 | % | 9.3 | % | 5.9 | % | 6.3 | % | |||||||
92.5 | % | 94.6 | % | 93.0 | % | 94.0 | % | ||||||||
(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 January 31, 2018 includes $62.0 million, or 4.1%, 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)
January 31, | |||||||
2018 | 2017 | ||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 9,286 | $ | 23,566 | |||
Restricted cash | 86,872 | 110,698 | |||||
Customer accounts receivable, net of allowances | 636,825 | 702,162 | |||||
Other accounts receivable | 71,186 | 69,286 | |||||
Inventories | 211,894 | 164,856 | |||||
Income taxes recoverable | 32,362 | 2,150 | |||||
Prepaid expenses and other current assets | 31,592 | 14,955 | |||||
Total current assets | 1,080,017 | 1,087,673 | |||||
Long-term portion of customer accounts receivable, net of allowances | 650,608 | 615,904 | |||||
Property and equipment, net | 143,152 | 159,202 | |||||
Deferred income taxes | 21,565 | 71,442 | |||||
Other assets | 5,457 | 6,913 | |||||
Total assets | $ | 1,900,799 | $ | 1,941,134 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Current maturities of capital lease obligations | $ | 907 | $ | 849 | |||
Accounts payable | 71,617 | 101,612 | |||||
Accrued expenses | 66,173 | 39,781 | |||||
Other current liabilities | 25,414 | 25,139 | |||||
Total current liabilities | 164,111 | 167,381 | |||||
Deferred rent | 87,003 | 87,957 | |||||
Long-term debt and capital lease obligations | 1,090,105 | 1,144,393 | |||||
Other long-term liabilities | 24,512 | 23,613 | |||||
Total liabilities | 1,365,731 | 1,423,344 | |||||
Stockholders' equity | 535,068 | 517,790 | |||||
Total liabilities and stockholders' equity | $ | 1,900,799 | $ | 1,941,134 | |||
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, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Retail segment operating income, as reported | $ | 48,583 | $ | 56,096 | $ | 141,479 | $ | 159,412 | |||||||
Adjustments: | |||||||||||||||
Store and facility closure and relocation costs | 1,032 | 135 | 2,381 | 1,089 | |||||||||||
Legal and professional fees and related reserves associated with the exploration of strategic alternatives, securities-related litigation and other legal matters | 1,143 | (646 | ) | 1,177 | 101 | ||||||||||
Indirect tax audit reserve | — | 1,434 | 2,595 | 1,434 | |||||||||||
Executive management transition costs | — | — | — | 234 | |||||||||||
Impairment from disposal | — | 6 | — | 1,986 | |||||||||||
Employee severance | — | 141 | 1,317 | 1,634 | |||||||||||
Write-off of capitalized software costs | — | — | 5,861 | — | |||||||||||
Retail segment operating income, as adjusted | $ | 50,758 | $ | 57,166 | $ | 154,810 | $ | 165,890 | |||||||
Retail segment total revenues | $ | 334,535 | $ | 356,198 | $ | 1,192,308 | $ | 1,316,040 | |||||||
Retail segment operating margin: | |||||||||||||||
As reported | 14.5 | % | 15.7 | % | 11.9 | % | 12.1 | % | |||||||
As adjusted | 15.2 | % | 16.0 | % | 13.0 | % | 12.6 | % | |||||||
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NET INCOME (LOSS), AS ADJUSTED, AND DILUTED INCOME (LOSS) PER SHARE, AS ADJUSTED
Three Months Ended January 31, | Year Ended January 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income (loss), as reported | $ | 3,201 | $ | (74 | ) | $ | 6,463 | $ | (25,562 | ) | |||||
Adjustments: | |||||||||||||||
Changes in estimates | — | — | — | 13,168 | |||||||||||
Store and facility closure and relocation costs | 1,032 | 135 | 2,381 | 1,089 | |||||||||||
Legal and professional fees and related reserves associated with the exploration of strategic alternatives, securities-related litigation and other legal matters | 1,143 | (646 | ) | 1,177 | 101 | ||||||||||
Indirect tax audit reserve | — | 1,434 | 2,595 | 1,434 | |||||||||||
Executive management transition costs | — | — | — | 234 | |||||||||||
Impairment from disposal | — | 6 | — | 1,986 | |||||||||||
Employee severance | — | 141 | 1,317 | 1,634 | |||||||||||
Write-off of capitalized software costs | — | — | 5,861 | — | |||||||||||
Impact of Tax Act | 13,068 | — | 13,068 | — | |||||||||||
Discrete tax item | — | 932 | — | 932 | |||||||||||
Loss on extinguishment of debt | 367 | — | 3,274 | — | |||||||||||
Tax impact of adjustments | (894 | ) | (387 | ) | (5,986 | ) | (1,678 | ) | |||||||
Net income (loss), as adjusted | $ | 17,917 | $ | 1,541 | $ | 30,150 | $ | (6,662 | ) | ||||||
Weighted average common shares outstanding - Diluted | 32,232,220 | 30,882,509 | 31,777,823 | 30,776,479 | |||||||||||
Income (loss) per share: | |||||||||||||||
As reported | $ | 0.10 | $ | 0.00 | $ | 0.20 | $ | (0.83 | ) | ||||||
As adjusted | $ | 0.56 | $ | 0.05 | $ | 0.95 | $ | (0.22 | ) | ||||||
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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