Document


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


Exhibit 99.1
https://cdn.kscope.io/5bc9779968ad9ead3de7a155ab67f795-connshomepluslogoa14.jpg
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:

1



 
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
)%


7



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.

11