10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C.  20549 

FORM 10-Q

(Mark One) 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2019

 or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 001-34956

CONN’S, INC.

(Exact name of registrant as specified in its charter)

Delaware	06-1672840
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
2445 Technology Forest Blvd., Suite 800, The Woodlands, TX	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)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	CONN	NASDAQ Global Select Market

Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ý  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	ý
Non-accelerated filer	o	Smaller reporting company	o
		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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o  No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 29, 2019: 

Class	Outstanding
Common stock, $0.01 par value per share	28,903,361

CONN’S, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE FISCAL QUARTER ENDED JULY 31, 2019

TABLE OF CONTENTS

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statement of Shareholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
	Exhibit Index	46
	Signature	47

This Quarterly Report on Form 10-Q includes our trademarks such as “Conn’s,” “Conn’s HomePlus,” “YE$ YOU’RE APPROVED,” “YES Money,” “YE$ Money,” “YES Lease,” “YE$ Lease,” “$i Estas Aprobado,” and our logos, which are protected under applicable intellectual property laws and are the property of Conn’s, Inc. This report also contains trademarks, service marks, trade names and copyrights of other companies, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Quarterly Report may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names.

References to “we,” “our,” “us,” “the Company,” “Conn’s” or “CONN” refer to Conn’s, Inc. and, as apparent from the context, its consolidated bankruptcy-remote variable-interest entities (“VIEs”), and its wholly-owned subsidiaries.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONN’S, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and dollars in thousands, except per share amounts)

	July 31, 2019			January 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	7,563		$	5,912
Restricted cash (includes VIE balances of $66,444 and $57,475, respectively)	68,219			59,025
Customer accounts receivable, net of allowances (includes VIE balances of $273,685 and $324,064, respectively)	664,980			652,769
Other accounts receivable	67,056			67,078
Inventories	213,513			220,034
Income taxes receivable	763			407
Prepaid expenses and other current assets	9,948			9,169
Total current assets	1,032,042			1,014,394
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $365,180 and $230,901, respectively)	653,831			686,344
Property and equipment, net	174,225			148,983
Operating lease right-of-use assets	248,707			—
Deferred income taxes	25,612			27,535
Other assets	11,808			7,651
Total assets	$	2,146,225		$	1,884,907
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of debt and finance lease obligations (includes VIE balances of $1,945 and $53,635, respectively)	$	2,558		$	54,109
Accounts payable	73,205			71,118
Accrued compensation and related expenses	21,737			27,052
Accrued expenses	59,664			54,381
Operating lease liability - current	33,398			—
Income taxes payable	4,308			8,902
Deferred revenues and other credits	11,229			22,006
Total current liabilities	206,099			237,568
Deferred rent	—			93,127
Operating lease liability - non current	331,010			—
Long-term debt and finance lease obligations (includes VIE balances of $554,636 and $407,993, respectively)	945,981			901,222
Other long-term liabilities	26,400			33,015
Total liabilities	1,509,490			1,264,932
Commitments and contingencies
Stockholders’ equity:
Preferred stock ($0.01 par value, 1,000,000 shares authorized; none issued or outstanding)	—			—
Common stock ($0.01 par value, 100,000,000 shares authorized; 32,000,548 and 31,788,162 shares issued, respectively)	320			318
Treasury stock (at cost; 1,874,846 shares and 0 shares, respectively)	(34,344		)	—
Additional paid-in capital	116,645			111,185
Retained earnings	554,114			508,472
Total stockholders’ equity	636,735			619,975
Total liabilities and stockholders’ equity	$	2,146,225		$	1,884,907

See notes to condensed consolidated financial statements.

1

CONN’S, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited and dollars in thousands, except per share amounts)

	Three Months Ended   July 31,				Six Months Ended   July 31,
	2019		2018		2019			2018
Revenues:
Product sales	$	274,578	$	267,179	$	509,023		$	516,493
Repair service agreement commissions	27,647		25,662		51,671			48,525
Service revenues	3,837		3,472		7,347			7,051
Total net sales	306,062		296,313		568,041			572,069
Finance charges and other revenues	94,997		88,307		186,530			170,938
Total revenues	401,059		384,620		754,571			743,007
Costs and expenses:
Cost of goods sold	182,065		173,627		339,293			340,216
Selling, general and administrative expense	127,484		120,690		245,398			235,568
Provision for bad debts	49,736		50,751		89,782			94,907
Charges and credits	—		300		(695		)	300
Total costs and expenses	359,285		345,368		673,778			670,991
Operating income	41,774		39,252		80,793			72,016
Interest expense	14,396		15,566		28,893			32,386
Loss on extinguishment of debt	—		1,367		—			1,773
Income before income taxes	27,378		22,319		51,900			37,857
Provision for income taxes	7,404		5,308		12,417			8,114
Net income	$	19,974	$	17,011	$	39,483		$	29,743
Income per share:
Basic	$	0.64	$	0.54	$	1.25		$	0.94
Diluted	$	0.62	$	0.53	$	1.23		$	0.92
Weighted average common shares outstanding:
Basic	31,442,909		31,652,017		31,660,320			31,597,225
Diluted	31,958,704		32,242,463		32,198,024			32,210,759

See notes to condensed consolidated financial statements.

2

CONN’S, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited and in thousands, except for number of shares)

				Additional Paid-in Capital
	Common Stock						Retained Earnings		Treasury Stock
	Shares	Amount							Shares		Amount			Total
Balance January 31, 2019	31,788,162	$	318	$	111,185		$	508,472	—		$	—		$	619,975
Adoption of ASU 2016-02	—	—		—			6,159		—		—			6,159
Exercise of options and vesting of restricted stock, net of withholding tax	136,206	1		(1,241		)	—		—		—			(1,240		)
Issuance of common stock under Employee Stock Purchase Plan	12,158	—		198			—		—		—			198
Stock-based compensation	—	—		3,217			—		—		—			3,217
Net income	—	—		—			19,509		—		—			19,509
Balance April 30, 2019	31,936,526	$	319	$	113,359		$	534,140	—		$	—		$	647,818
Exercise of options and vesting of restricted stock, net of withholding tax	51,384	1		(327		)	—		—		—			(326		)
Issuance of common stock under Employee Stock Purchase Plan	12,638	—		194			—		—		—			194
Stock-based compensation	—	—		3,419			—		—		—			3,419
Common stock repurchase	—	—		—			—		(1,874,846	)	(34,344		)	(34,344		)
Net income	—	—		—			19,974		—		—			19,974
Balance July 31, 2019	32,000,548	$	320	$	116,645		$	554,114	(1,874,846	)	$	(34,344	)	$	636,735

				Additional Paid-in Capital
	Common Stock						Retained Earnings		Treasury Stock
	Shares	Amount							Shares	Amount		Total
Balance January 31, 2018	31,435,775	$	314	$	101,087		$	433,667	—	$	—	$	535,068
Adoption of ASU 2014-09	—	—		—			957		—	—		957
Exercise of options and vesting of restricted stock, net of withholding tax	143,021	2		(1,850		)	—		—	—		(1,848		)
Issuance of common stock under Employee Stock Purchase Plan	8,031	—		226			—		—	—		226
Stock-based compensation	—	—		2,520			—		—	—		2,520
Net income	—	—		—			12,732		—	—		12,732
Balance April 30, 2018	31,586,827	$	316	$	101,983		$	447,356	—	$	—	$	549,655
Exercise of options and vesting of restricted stock, net of withholding tax	100,018	1		(274		)	—		—	—		(273		)
Issuance of common stock under Employee Stock Purchase Plan	7,569	—		213			—		—	—		213
Stock-based compensation	—	—		3,042			—		—	—		3,042
Net income	—	—		—			17,011		—	—		17,011
Balance July 31, 2018	31,694,414	$	317	$	104,964		$	464,367	—	$	—	$	569,648

See notes to condensed consolidated financial statements.

3

CONN’S, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

	Six Months Ended July 31,
	2019			2018
Cash flows from operating activities:
Net income	$	39,483		$	29,743
Adjustments to reconcile net income to net cash from operating activities:
Depreciation	17,682			15,434
Amortization of right-of-use asset	13,763			—
Amortization of debt issuance costs	4,210			6,382
Provision for bad debts and uncollectible interest	116,272			118,765
Stock-based compensation expense	6,636			5,562
Charges, net of credits, for facility relocations	(680		)	—
Deferred income taxes	475			(1,776		)
Tenant improvement allowances received from landlords	14,254			4,362
Change in operating assets and liabilities:
Customer accounts receivable	(95,829		)	(100,331		)
Other accounts receivables	(17,356		)	(14,679		)
Inventories	6,521			16,167
Other assets	(5,818		)	17,359
Accounts payable	763			11,091
Accrued expenses	(7,368		)	22,910
Operating leases	(626		)	—
Income taxes	(4,810		)	31,868
Deferred revenues and other credits	1,872			(7,205		)
Net cash provided by operating activities	89,444			155,652
Cash flows from investing activities:
Purchases of property and equipment	(33,330		)	(12,166		)
Net cash used in investing activities	(33,330		)	(12,166		)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	381,790			—
Payments on asset-backed notes	(234,162		)	(481,883		)
Borrowings from revolving credit facility	778,166			839,236
Payments on revolving credit facility	(881,166		)	(655,036		)
Borrowings from warehouse facility	—			173,286
Payments on warehouse facility	(51,561		)	(52,226		)
Payments of debt issuance costs and amendment fees	(3,492		)	(3,539		)
Proceeds from stock issued under employee benefit plans	597			834
Tax payments associated with equity-based compensation transactions	(1,781		)	(2,516		)
Payment from extinguishment of debt	—			(1,177		)
Purchase of treasury stock	(33,019		)	—
Other	(641		)	(531		)
Net cash used in financing activities	(45,269		)	(183,552		)
Net change in cash, cash equivalents and restricted cash	10,845			(40,066		)
Cash, cash equivalents and restricted cash, beginning of period	64,937			96,158
Cash, cash equivalents and restricted cash, end of period	$	75,782		$	56,092
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new finance lease liabilities	$	968		$	—
Right-of-use assets obtained in exchange for new operating lease liabilities	$	53,974		$	—
Property and equipment purchases not yet paid	$	14,241		$	4,363
Share repurchases not yet settled	$	1,325		$	—
Supplemental cash flow data:
Cash interest paid	$	21,559		$	25,505
Cash income taxes paid, net	$	16,859		$	(21,969	)

See notes to condensed consolidated financial statements.

4

CONN’S, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.     Summary of Significant Accounting Policies

Business. Conn’s, Inc., a Delaware corporation, is a holding company with no independent assets or operations other than its investments in its subsidiaries. References to “we,” “our,” “us,” “the Company,” “Conn’s” or “CONN” refer to Conn’s, Inc. and, as apparent from the context, its subsidiaries. Conn’s is a leading specialty retailer that offers a broad selection of quality, branded durable consumer goods and related services in addition to proprietary credit solutions for its core credit-constrained consumers. We operate an integrated and scalable business through our retail stores and website. Our complementary product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points. Our credit offering provides financing solutions to a large, under-served population of credit-constrained consumers who typically have limited credit alternatives.

We operate two reportable segments: retail and credit. Our retail stores bear the “Conn’s HomePlus” name with all of our stores providing the same products and services to a common customer group. Our stores follow the same procedures and methods in managing their operations. Our retail business and credit business are operated independently from each other. The credit segment is dedicated to providing short- and medium-term financing to our retail customers. The retail segment is not involved in credit approval decisions or collection efforts. Our management evaluates performance and allocates resources based on the operating results of the retail and credit segments.

Basis of Presentation. The accompanying unaudited Condensed Consolidated Financial Statements of Conn’s, Inc. and its wholly-owned subsidiaries, including its Variable Interest Entities (“VIEs”), have been prepared by management in accordance with U.S. generally accepted accounting principles (“GAAP”) and prevailing industry practice for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated financial position, results of operations and cash flows for these interim periods are not necessarily indicative of the results that may be expected in future periods. The balance sheet at January 31, 2019 has been derived from the audited financial statements at that date. The financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2019 (the “2019 Form 10-K”) filed with the United States Securities and Exchange Commission (the “SEC”) on March 26, 2019.

Fiscal Year. Our fiscal year ends on January 31. References to a fiscal year refer to the calendar year in which the fiscal year ends.

Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of Conn’s, Inc. and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. 

Variable Interest Entities. VIEs are consolidated if the Company is the primary beneficiary. The primary beneficiary of a VIE is the party that has (i) the power to direct the activities that most significantly impact the performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

We securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. We retain the servicing of the securitized portfolio and have a variable interest in each corresponding VIE by holding the residual equity. We have determined that we are the primary beneficiary of each respective VIE because (i) our servicing responsibilities for the securitized portfolio give us the power to direct the activities that most significantly impact the performance of the VIE and (ii) our variable interest in the VIE gives us the obligation to absorb losses and the right to receive residual returns that potentially could be significant. As a result, we consolidate the respective VIEs within our Condensed Consolidated Financial Statements.

Refer to Note 4, Debt and Financing Lease Obligations, and Note 7, Variable Interest Entities, for additional information.

Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ, even significantly, from these estimates. Management evaluates its estimates and related assumptions regularly, including those related to the allowance for doubtful accounts and allowances for no-interest option credit programs, which are particularly sensitive given the size of our customer portfolio balance.

Cash and Cash Equivalents. As of July 31, 2019 and January 31, 2019, cash and cash equivalents included cash, credit card deposits in transit, and highly liquid debt instruments purchased with a maturity date of three months or less. Credit card deposits in transit included in cash and cash equivalents were $2.3 million and $2.5 million as of July 31, 2019 and January 31, 2019, respectively. 

5

CONN’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Cash. The restricted cash balance as of July 31, 2019 and January 31, 2019 includes $53.7 million and $45.3 million, respectively, of cash we collected as servicer on the securitized receivables that was subsequently remitted to the VIEs and $12.7 million and $12.2 million, respectively, of cash held by the VIEs as additional collateral for the asset-backed notes.

Customer Accounts Receivable. Customer accounts receivable reported in the Condensed Consolidated Balance Sheet includes total receivables managed, including both those transferred to the VIEs and those not transferred to the VIEs. Customer accounts receivable are recognized at the time the customer takes possession of the product. Based on contractual terms, we record the amount of principal and accrued interest on customer receivables that is expected to be collected within the next twelve months in current assets with the remaining balance in long-term assets on the Condensed Consolidated Balance Sheet. Customer accounts receivable include the net of unamortized deferred fees charged to customers and origination costs. Customer receivables are considered delinquent if a payment has not been received on the scheduled due date. Accounts that are delinquent more than 209 days as of the end of a month are charged-off against the allowance for doubtful accounts along with interest accrued subsequent to the last payment.

In an effort to mitigate losses on our accounts receivable, we may make loan modifications to a borrower experiencing financial difficulty. In our role as servicer, we may also make modifications to loans held by the VIEs. The loan modifications are intended to maximize net cash flow after expenses and avoid the need to exercise legal remedies available to us. We may extend or “re-age” a portion of our customer accounts, which involves modifying the payment terms to defer a portion of the cash payments due. Our re-aging of customer accounts does not change the interest rate or the total principal amount due from the customer and typically does not reduce the monthly contractual payments. To a much lesser extent, we may provide the customer the ability to refinance their account, which typically does not change the interest rate or the total principal amount due from the customer but does reduce the monthly contractual payments and extend the term. We consider accounts that have been re-aged in excess of three months or refinanced as Troubled Debt Restructurings (“TDR” or “Restructured Accounts”).

Interest Income on Customer Accounts Receivable.Interest income, which includes interest income and amortization of deferred fees and origination costs, is recorded using the interest method and is reflected in finance charges and other revenues. Typically, interest income is recorded until the customer account is paid off or charged-off and we provide an allowance for estimated uncollectible interest. Any contractual interest income received from customers in excess of the interest income calculated using the interest method is recorded as deferred revenue on our balance sheets. At July 31, 2019 and January 31, 2019, there was $11.6 million and $11.2 million, respectively, of deferred interest included in deferred revenues and other credits and other long-term liabilities. The deferred interest will ultimately be brought into income as the accounts pay off or charge-off.

We offer a 12-month no-interest option program. If the customer is delinquent in making a scheduled monthly payment or does not repay the principal in full by the end of the no-interest option program period (grace periods are provided), the account does not qualify for the no-interest provision and none of the interest earned is waived. Interest income is recognized based on estimated accrued interest earned to date on all no-interest option finance programs with an offsetting reserve for those customers expected to satisfy the requirements of the program based on our historical experience.

We recognize interest income on TDR accounts using the interest income method, which requires reporting interest income equal to the increase in the net carrying amount of the loan attributable to the passage of time. Cash proceeds and other adjustments are applied to the net carrying amount such that it equals the present value of expected future cash flows.

We place accounts in non-accrual status when legally required. Payments received on non-accrual loans are applied to principal and reduce the balance of the loan. At July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable in non-accrual status was $14.6 million and $13.9 million, respectively. At July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable that were past due 90 days or more and still accruing interest totaled $95.4 million and $106.5 million, respectively. At July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable in a bankruptcy status that were less than 60 days past due of $12.1 million and $12.0 million, respectively, were included within the customer receivables balance carried in non-accrual status.

Allowance for Doubtful Accounts. The determination of the amount of the allowance for bad debts is, by nature, highly complex and subjective. Future events that are inherently uncertain could result in material changes to the level of the allowance for bad debts. General economic conditions, changes to state or federal regulations and a variety of other factors that affect the ability of borrowers to service their debts or our ability to collect will impact the future performance of the portfolio.   

We establish an allowance for doubtful accounts, including estimated uncollectible interest, to cover probable and estimable losses on our customer accounts receivable resulting from the failure of customers to make contractual payments. Our customer accounts receivable portfolio balance consists of a large number of relatively small, homogeneous accounts. None of our accounts are large enough to warrant individual evaluation for impairment.

We record an allowance for doubtful accounts on our non-TDR customer accounts receivable that we expect to charge-off over the next 12 months based on historical gross charge-off rates over the last 24 months. We incorporate an adjustment to historical gross charge-off rates for a scaled factor of the year-over-year change in six month average first payment default rates and the

6

CONN’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

year-over-year change in the balance of customer accounts receivable that are 60 days or more past due.  In addition to adjusted historical gross charge-off rates, estimates of post-charge-off recoveries, including cash payments from customers, amounts realized from the repossession of the products financed, sales tax recoveries from taxing jurisdictions, and payments received under credit insurance and repair service agreement (“RSA”) policies are also considered.               

Qualitative adjustments are made to the allowance for bad debts when, based on management’s judgment, there are internal or external factors impacting probable incurred losses not taken into account by the quantitative calculations. These qualitative considerations are based on the following factors: changes in lending policies and procedures, changes in economic and business conditions, changes in the nature and volume of the portfolio, changes in lending management, changes in credit quality statistics, changes in concentrations of credit, and other internal or external factor changes. We utilize an economic qualitative adjustment based on changes in unemployment rates if current unemployment rates in our markets are worse than they were on average over the last 24 months.  We also qualitatively limit the impact of changes in first payment default rates and changes in delinquency when those changes result in a decrease to the allowance for bad debts based on a measure of the dispersion of historical charge-off rates.

We determine allowances for those accounts that are TDR based on the discounted present value of cash flows expected to be collected over the life of those accounts based primarily on the performance of TDR loans over the last 24 months. The cash flows are discounted based on the weighted-average effective interest rate of the TDR accounts. The excess of the carrying amount over the discounted cash flow amount is recorded as an allowance for loss on those accounts.

Debt Issuance Costs. Costs that are direct and incremental to debt issuance are deferred and amortized to interest expense using the effective interest method over the expected life of the debt. All other costs related to debt issuance are expensed as incurred. We present debt issuance costs associated with long-term debt as a reduction of the carrying amount of the debt. Unamortized costs related to the Revolving Credit Facility, as defined in Note 4, Debt and Financing Lease Obligations, are included in other assets on our Condensed Consolidated Balance Sheet and were $5.2 million and $6.1 million as of July 31, 2019 and January 31, 2019, respectively.

Income Taxes. For the six months ended July 31, 2019 and 2018, we utilized the estimated annual effective tax rate based on our estimated fiscal year 2020 and 2019 pre-tax income, respectively, in determining income tax expense.

Provision for income taxes for interim periods is based on an estimated annual income tax rate, adjusted for discrete tax items. As a result, our interim effective tax rates may vary significantly from the statutory tax rate and the annual effective tax rate.

For the six months ended July 31, 2019 and 2018, the effective tax rate was 23.9% and 21.4%, respectively. The primary factor affecting the increase in our effective tax rate for the six months ended July 31, 2019 was a decrease in deductible compensation expense compared to the prior year period.

Stock-based Compensation. Stock-based compensation expense is recorded, net of estimated forfeitures, for share-based compensation awards over the requisite service period using the straight-line method. An adjustment is made to compensation cost for any difference between the estimated forfeitures and the actual forfeitures related to the awards. For equity-classified share-based compensation awards, expense is recognized based on the grant-date fair value. For stock option grants, we use the Black-Scholes model to determine fair value. For grants of restricted stock units (“RSUs”), the fair value of the grant is the market value of our stock at the date of issuance. For grants of performance-based restricted stock units (“PSUs”), the fair value of the grant is the market value of our stock at the date of issuance adjusted for a market condition, a performance condition and a service condition.

The following table sets forth the RSUs, stock options and PSUs granted during the three and six months ended July 31, 2019 and 2018: 

	Three Months Ended   July 31,				Six Months Ended   July 31,
	2019		2018		2019		2018
RSUs (1)	100,365		69,478		103,794		149,889
Stock Options (2)	—		—		—		620,166
PSUs (3)	33,894		—		33,894		—
Total stock awards granted	134,259		69,478		137,688		770,055
Aggregate grant date fair value (in thousands)	$	2,774	$	1,673	$	2,845	$	17,184

(1) The majority of RSUs issued during the three and six months ended July 31, 2019 and 2018 are scheduled to vest ratably over periods of three to four years from the date of grant.

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(2) The weighted-average assumptions for the option awards granted during the six months ended July 31, 2018 included expected volatility of 68.0%, an expected term of 6.5 years and risk-free interest rate of 2.67%. No dividend yield was included in the weighted-average assumptions for the option awards granted during the six months ended July 31, 2018.

(3) The PSUs issued during the three months ended July 31, 2019 will vest, if at all, upon certification, after the Company’s fiscal year 2022 by the Compensation Committee, of the satisfaction of certain performance conditions.

For the three months ended July 31, 2019 and 2018, stock-based compensation expense was $3.4 million and $3.1 million, respectively. For the six months ended July 31, 2019 and 2018, stock-based compensation expense was $6.6 million and $5.6 million, respectively.

Earnings per Share. Basic earnings per share for a particular period is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effects of any stock options, RSUs and PSUs, which are calculated using the treasury-stock method. The following table sets forth the shares outstanding for the earnings per share calculations: 

	Three Months Ended   July 31,		Six Months Ended   July 31,
	2019	2018	2019	2018
Weighted-average common shares outstanding - Basic	31,442,909	31,652,017	31,660,320	31,597,225
Dilutive effect of stock options, PSUs and RSUs	515,795	590,446	537,704	613,534
Weighted-average common shares outstanding - Diluted	31,958,704	32,242,463	32,198,024	32,210,759

For the three months ended July 31, 2019 and 2018, the weighted-average number of stock options and RSUs not included in the calculation due to their anti-dilutive effect, was 927,969 and 624,291, respectively. For the six months ended July 31, 2019 and 2018, the weighted-average number of stock options and RSUs not included in the calculation due to their anti-dilutive effect, was 892,098 and 497,224, respectively.

As the performance conditions pursuant to the Company’s PSU agreements have not been met in full, 228,477 PSUs are not included in the computation of diluted EPS for the three and six months ended July 31, 2019 and 400,834 PSUs are not included in the computation of diluted EPS for the three and six months ended July 31, 2018.

Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to subjectivity associated with the inputs to fair value measurements as follows:  

• Level 1 – Inputs represent unadjusted quoted prices in active markets for identical assets or liabilities.

• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (for example, quoted market prices for similar assets or liabilities in active markets or quoted market prices for identical assets or liabilities in markets not considered to be active, inputs other than quoted prices that are observable for the asset or liability, or market-corroborated inputs).

• Level 3 – Inputs that are not observable from objective sources such as our internally developed assumptions used in pricing an asset or liability (for example, an estimate of future cash flows used in our internally developed present value of future cash flows model that underlies the fair-value measurement).

In determining fair value, we use observable market data when available, or models that incorporate observable market data. When we are required to measure fair value and there is not a market-observable price for the asset or liability or for a similar asset or liability, we use the cost or income approach depending on the quality of information available to support management’s assumptions. The cost approach is based on management’s best estimate of the current asset replacement cost. The income approach is based on management’s best assumptions regarding expectations of future net cash flows and discounts the expected cash flows using a commensurate risk-adjusted discount rate. Such evaluations involve significant judgment, and the results are based on expected future events or conditions such as sales prices, economic and regulatory climates, and other factors, most of which are often outside of management’s control. However, we believe assumptions used reflect a market participant’s view of long-term prices, costs, and other factors and are consistent with assumptions used in our business plans and investment decisions.

In arriving at fair-value estimates, we use relevant observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement is characterized based on the lowest level of input that is significant to the fair-value measurement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of cash and cash equivalents, restricted cash and accounts payable approximate their carrying amounts because of the short maturity of these instruments. The fair value of customer accounts receivable, determined using a Level 3 discounted cash flow analysis, approximates their carrying value, net of the allowance for doubtful accounts. The fair value of our Revolving Credit Facility approximates carrying value based on the current borrowing rate for similar types of borrowing arrangements. At July 31, 2019, the fair value of the Senior Notes outstanding, which was determined using Level 1 inputs, was $230.2 million as compared to the carrying value of $227.0 million, excluding the impact of the related discount. At July 31, 2019, the fair value of the asset-backed notes approximates their carrying value and was determined using Level 2 inputs based on inactive trading activity.

Deferred Revenue. Deferred revenue related to contracts with customers consists of deferred customer deposits and deferred RSA administration fees. During the three and six months ended July 31, 2019, we recognized $1.0 million and $1.4 million of revenue for customer deposits deferred as of the beginning of the period. During the three and six months ended July 31, 2019, we recognized $1.3 million and $2.5 million of revenue for RSA administrative fees deferred as of January 31, 2019.

Recent Accounting Pronouncements Adopted. In February 2016 the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for most leases. Effective February 1, 2019, the Company adopted ASU 2016-02 using the modified retrospective approach. For most leases, a liability was recorded on the balance sheet based on the present value of future lease obligations with a corresponding right-of-use asset. Primarily for those leases currently classified by us as operating leases, we recognize a single lease cost on a straight line basis. Other leases are required to be accounted for as financing arrangements similar to how we previously accounted for capital leases. Upon adoption we elected a package of practical expedients permitted under the transition guidance within the new standard. The practical expedients adopted allowed us to carry forward the historical lease classification, allowed us to not separate and allocate the consideration paid between lease and non-lease components included within a contract and allowed us to carry forward our accounting treatment for land easements on existing agreements. We also adopted an optional transition method finalized by the FASB in July 2018 that waives the requirement to apply this ASU in the comparative periods presented within the financial statements in the year of adoption. Therefore, results for reporting periods beginning after February 1, 2019 are presented under ASC Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting policies under ASC Topic 840.

Additionally, we have elected the short-term policy election for the Company for any lease that, at the commencement date, has a lease term of twelve months or less. We will not recognize a lease liability or right-of-use asset on the balance sheet for any of our short-term leases. Rather, the short-term lease payments will be recognized as an expense on a straight-line basis over the lease term. The current period short-term lease expense reasonably reflects our short-term lease commitments.

The cumulative effect of the changes made to the Company’s Condensed Consolidated Balance Sheet as a result of the adoption of ASC 842 were as follows (in thousands):

	Impact of Adoption of ASC 842
(in thousands)	Balance at January 31, 2019		Adjustments due to ASC 842			Balance at February 1, 2019
Assets
Current assets (1)	$	1,014,394	$	(2,983	)	$	1,011,411
Operating lease right-of-use assets (2)	—		227,421			227,421
Deferred income taxes (3)	27,535		(1,447		)	26,088
Liabilities
Current liabilities (4)	237,568		(12,426		)	225,142
Operating lease liability - current (5)	—		29,815			29,815
Deferred rent (4)	93,127		(93,127		)	—
Operating lease liability - non-current (5)	—		300,170			300,170
Other long-term liabilities (3)	33,015		(7,606		)	25,409
Stockholder’s equity (3)	619,975		6,159			626,134

(1) Reclassification of the $3.0 million January 31, 2019 balance of accounts receivable for tenant improvement allowances to a reduction in the operating lease liability.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) The operating lease right-of-use assets represent the present value of the lease liability offset by the full value of deferred rent and tenant improvement allowances received from the lessor which had not been utilized as of the date of adoption.

(3) A net cumulative-effect adjustment to increase retained earnings by $6.2 million to recognize the $7.6 million January 31, 2019 balance of deferred gains which resulted from sale and operating leaseback transactions made at off-market terms offset by the $1.4 million impact on our deferred tax asset related to the sale-leaseback transactions.

(4) Reclassification of the full value of deferred rent and tenant improvement allowances received from lessors, which were previously recorded as liabilities as they had not been utilized as of the date of adoption, to a reduction of the operating lease right-of-use assets.

(5) The operating lease liability represents the $340.5 million present value of future operating lease obligations as of January 31, 2019, offset by $10.5 million of accounts receivable for tenant improvement allowances.

Recent Accounting Pronouncements Yet To Be Adopted. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The standard will become effective for us in the first quarter of fiscal year 2021 and early adoption was permitted beginning in the first quarter of fiscal year 2020. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2019-04 requires that the current estimate of recoveries are included in the allowance for credit losses. We have formed a cross-functional working group comprised of individuals from various functional areas including credit, finance, accounting, and information technology. While we are currently evaluating the likely impact the adoption of this ASU will have on our Consolidated Financial Statements, the adoption of ASU 2016-13 will result in a material increase in the allowance for loan losses as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio.

2.    Customer Accounts Receivable

Customer accounts receivable consisted of the following:

(in thousands)	July 31, 2019			January 31, 2019
Customer accounts receivable portfolio balance	$	1,557,920		$	1,589,828
Deferred fees and origination costs, net	(15,742		)	(16,579		)
Allowance for no-interest option credit programs	(15,866		)	(19,257		)
Allowance for uncollectible interest	(15,213		)	(15,555		)
Carrying value of customer accounts receivable	1,511,099			1,538,437
Allowance for bad debts	(192,288		)	(199,324		)
Carrying value of customer accounts receivable, net of allowance for bad debts	1,318,811			1,339,113
Short-term portion of customer accounts receivable, net	(664,980		)	(652,769		)
Long-term customer accounts receivable, net	$	653,831		$	686,344

	Carrying Value
(in thousands)	July 31, 2019		January 31, 2019
Customer accounts receivable 60+ days past due (1)	$	132,187	$	146,188
Re-aged customer accounts receivable (2)(3)	389,591		395,576
Restructured customer accounts receivable (4)	190,654		183,641

(1) As of July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable past due one day or greater was $420.5 million and $420.9 million, respectively. These amounts include the 60+ days past due balances shown above.

(2) The re-aged carrying value as of July 31, 2019 and January 31, 2019 includes $86.0 million and $92.4 million in carrying value that are both 60+ days past due and re-aged.

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(3) The re-aged carrying value as of July 31, 2019 and January 31, 2019 includes $15.9 million and $26.5 million in first time re-ages related to customers within FEMA-designated Hurricane Harvey disaster areas.

(4) The restructured carrying value as of July 31, 2019 and January 31, 2019 includes $44.3 million and $43.9 million in carrying value that are both 60+ days past due and restructured.

The following presents the activity in our allowance for doubtful accounts and uncollectible interest for customer accounts receivable: 

	Six Months Ended July 31, 2019									Six Months Ended July 31, 2018
(in thousands)	Customer Accounts Receivable			Restructured Accounts			Total			Customer Accounts Receivable			Restructured Accounts			Total
Allowance at beginning of period	$	147,123		$	67,756		$	214,879		$	148,856		$	54,716		$	203,572
Provision (1)	79,062			37,067			116,129			85,117			33,146			118,263
Principal charge-offs (2)	(80,330		)	(30,267		)	(110,597		)	(82,124		)	(25,264		)	(107,388		)
Interest charge-offs	(18,479		)	(6,963		)	(25,442		)	(16,161		)	(4,972		)	(21,133		)
Recoveries (2)	9,102			3,430			12,532			7,873			2,422			10,295
Allowance at end of period	$	136,478		$	71,023		$	207,501		$	143,561		$	60,048		$	203,609
Average total customer portfolio balance	$	1,360,643		$	192,212		$	1,552,855		$	1,340,360		$	162,951		$	1,503,311

(1) Includes provision for uncollectible interest, which is included in finance charges and other revenues.

(2) Charge-offs include the principal amount of losses (excluding accrued and unpaid interest). Recoveries include the principal amount collected during the period for previously charged-off balances. Net charge-offs are calculated as the net of principal charge-offs and recoveries.

3.     Finance Charges and Other Revenues

Finance charges and other revenues consisted of the following:

	Three Months Ended   July 31,				Six Months Ended   July 31,
(in thousands)	2019		2018		2019		2018
Interest income and fees	$	85,204	$	80,435	$	169,221	$	156,781
Insurance income	9,590		7,774		16,904		14,045
Other revenues	203		98		405		112
Total finance charges and other revenues	$	94,997	$	88,307	$	186,530	$	170,938

Interest income and fees and insurance income are derived from the credit segment operations, whereas other revenues are derived from the retail segment operations. Insurance income is comprised of sales commissions from third-party insurance companies that are recognized when coverage is sold and retrospective income paid by the insurance carrier if insurance claims are less than earned premiums.

During the three months ended July 31, 2019 and 2018, interest income and fees reflected provisions for uncollectible interest of $14.4 million and $12.4 million, respectively. The amount included in interest income and fees related to TDR accounts for the three months ended July 31, 2019 and 2018 were $8.6 million and $6.5 million, respectively. During the six months ended July 31, 2019 and 2018, interest income and fees reflected provisions for uncollectible interest of $26.7 million and $23.9 million, respectively. The amount included in interest income and fees related to TDR accounts for the six months ended July 31, 2019 and 2018 were $16.7 million and $12.3 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.     Debt and Financing Lease Obligations

Debt and financing lease obligations consisted of the following:

(in thousands)	July 31, 2019			January 31, 2019
Revolving Credit Facility	$	163,500		$	266,500
Senior Notes	227,000			227,000
2017-B VIE Asset-backed Class B Notes	29,001			98,297
2017-B VIE Asset-backed Class C Notes	78,640			78,640
2018-A VIE Asset-backed Class A Notes	61,415			105,971
2018-A VIE Asset-backed Class B Notes	37,038			63,908
2018-A VIE Asset-backed Class C Notes	37,038			63,908
2019-A VIE Asset-backed Class A Notes	187,959			—
2019-A VIE Asset-backed Class B Notes	64,750			—
2019-A VIE Asset-backed Class C Notes	62,510			—
Warehouse Notes	2,074			53,635
Financing lease obligations	5,402			5,075
Total debt and financing lease obligations	956,327			962,934
Less:
Discount on debt	(1,684		)	(1,966		)
Deferred debt issuance costs	(6,104		)	(5,637		)
Current maturities of long-term debt and financing lease obligations	(2,558		)	(54,109		)
Long-term debt and financing lease obligations	$	945,981		$	901,222

Senior Notes. On July 1, 2014, we issued $250.0 million of unsecured Senior Notes due July 2022 bearing interest at 7.25% (the “Senior Notes”), pursuant to an indenture dated July 1, 2014 (as amended, the “Indenture”), among Conn’s, Inc., its subsidiary guarantors (the “Guarantors”) and U.S. Bank National Association, as trustee. The effective interest rate of the Senior Notes after giving effect to the discount and issuance costs is 7.8%.

The Indenture restricts the Company’s and certain of its subsidiaries’ ability to: (i) incur indebtedness; (ii) pay dividends or make other distributions in respect of, or repurchase or redeem, our capital stock (“restricted payments”); (iii) prepay, redeem or repurchase debt that is junior in right of payment to the notes; (iv) make loans and certain investments; (v) sell assets; (vi) incur liens; (vii) enter into transactions with affiliates; and (viii) consolidate, merge or sell all or substantially all of our assets. These covenants are subject to a number of important exceptions and qualifications. During any time when the Senior Notes are rated investment grade by either of Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services and no default (as defined in the Indenture) has occurred and is continuing, many of such covenants will be suspended and we will cease to be subject to such covenants during such period. As of July 31, 2019, $213.8 millionwould have been free from the restricted payments covenant contained in the Indenture. Events of default under the Indenture include customary events, such as a cross-acceleration provision in the event that we fail to make payment of other indebtedness prior to the expiration of any applicable grace period or upon acceleration of indebtedness prior to its stated maturity date in an amount exceeding$25.0 million, as well as in the event a judgment is entered against us in excess of $25.0 million that is not discharged, bonded or insured.

Asset-backed Notes.From time to time, we securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. In turn, the VIEs issue asset-backed notes secured by the transferred customer accounts receivables and restricted cash held by the VIEs.

Under the terms of the securitization transactions, all cash collections and other cash proceeds of the customer receivables go first to the servicer and the holders of issued notes, and then to us as the holder of non-issued notes, if any, and residual equity. We retain the servicing of the securitized portfolios and receive a monthly fee of 4.75%(annualized) based on the outstanding balance of the securitized receivables. In addition, we, rather than the VIEs, retain all credit insurance income together with certain recoveries related to credit insurance and RSAs on charge-offs of the securitized receivables, which are reflected as a reduction to net charge-offs on a consolidated basis.

The asset-backed notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act of 1933, as amended. If an event of default were to occur under the indenture that governs the respective asset-backed notes, the payment of the outstanding amounts may be accelerated, in which event the cash proceeds

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of the receivables that otherwise might be released to the residual equity holder would instead be directed entirely toward repayment of the asset-backed notes, or if the receivables are liquidated, all liquidation proceeds could be directed solely to repayment of the asset-backed notes as governed by the respective terms of the asset-backed notes. The holders of the asset-backed notes have no recourse to assets outside of the VIEs. Events of default include, but are not limited to, failure to make required payments on the asset-backed notes or specified bankruptcy-related events.

The asset-backed notes outstanding as of July 31, 2019 consisted of the following:

(dollars in thousands)
Asset-Backed Notes	Original Principal Amount		Original Net Proceeds (1)		Current Principal Amount		Issuance Date	Maturity Date	Contractual Interest Rate	Effective Interest Rate (2)
2017-B Class B Notes	$	132,180	$	131,281	$	29,001	12/20/2017	4/15/2021	4.52%	5.30%
2017-B Class C Notes	78,640		77,843		78,640		12/20/2017	11/15/2022	5.95%	6.35%
2018-A Class A Notes	219,200		217,832		61,415		8/15/2018	1/17/2023	3.25%	4.82%
2018-A Class B Notes	69,550		69,020		37,038		8/15/2018	1/17/2023	4.65%	5.60%
2018-A Class C Notes	69,550		68,850		37,038		8/15/2018	1/17/2023	6.02%	6.97%
2019-A Class A Notes	254,530		253,026		187,959		4/24/2019	10/16/2023	3.40%	4.71%
2019-A Class B Notes	64,750		64,276		64,750		4/24/2019	10/16/2023	4.36%	5.17%
2019-A Class C Notes	62,510		61,898		62,510		4/24/2019	10/16/2023	5.29%	6.18%
Warehouse Notes	121,060		118,972		2,074		7/16/2018	1/15/2020	Index + 2.50% (3)	6.43%
Total	$	1,071,970	$	1,062,998	$	560,425

(1) After giving effect to debt issuance costs.

(2) For the six months ended July 31, 2019, and inclusive of the impact of changes in timing of actual and expected cash flows.

(3) The rate on the Warehouse Notes is defined as the applicable index plus a 2.50% fixed margin.

On April 24, 2019, the Company completed the issuance and sale of asset-backed notes at a face amount of $381.8 million secured by the transferred customer accounts receivables and restricted cash held by a VIE, which resulted in net proceeds to us of $379.2 million, net of debt issuance costs. Net proceeds from the offering were used to repay indebtedness under the Company’s Revolving Credit Facility, as defined below, and for other general corporate purposes. The asset-backed notes mature on October 16, 2023 and consist of $254.5 million of 3.40% Series 2019-A, Class A Asset Backed Fixed Rate Notes, $64.8 million of 4.36% Series 2019-A, Class B Asset Backed Fixed Rate Notes and $62.5 million of 5.29%, Series 2019-A, Class C Asset Backed Fixed Rate Notes.

Revolving Credit Facility.On May 23, 2018, Conn’s, Inc. and certain of its subsidiaries (the “Borrowers”) entered into a Fourth Amendment to the Fourth Amended and Restated Loan and Security Agreement (the “Fourth Amendment”), dated as of October 30, 2015, with certain lenders, which provides for a $650.0 million asset-based revolving credit facility (the “Revolving Credit Facility”) under which credit availability is subject to a borrowing base and a maturity date of May 23, 2022.

Loans under the Revolving Credit Facility bear interest, at our option, at a rate equal to LIBOR plus the applicable margin ranging from 2.50% to 3.25% per annum (depending on a pricing grid determined by our total leverage ratio) or the alternate base rate plus a margin ranging from 1.50% to 2.25% per annum (depending on a pricing grid determined by our total leverage ratio). The alternate base rate is the greatest of the prime rate announced by Bank of America, N.A., the federal funds rate plus 0.5%, or LIBOR for a 30-day interest period plus 1.0%. We also pay an unused fee on the portion of the commitments that is available for future borrowings or letters of credit at a rate ranging from 0.25% to 0.50% per annum, depending on the average outstanding balance and letters of credit of the Revolving Credit Facility in the immediately preceding quarter. The weighted-average interest rate on borrowings outstanding and including unused line fees under the Revolving Credit Facility was 6.5% for the six months ended July 31, 2019.

The Revolving Credit Facility provides funding based on a borrowing base calculation that includes customer accounts receivable and inventory, and provides for a $40.0 million sub-facility for letters of credit to support obligations incurred in the ordinary course of business. The obligations under the Revolving Credit Facility are secured by substantially all assets of the Company, excluding the assets of the VIEs. As of July 31, 2019, we had immediately available borrowing capacity of $403.0 million under our Revolving Credit Facility, net of standby letters of credit issued of $2.5 million. We also had $81.0 million that may become available under our Revolving Credit Facility if we grow the balance of eligible customer receivables and total eligible inventory balances.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Revolving Credit Facility places restrictions on our ability to incur additional indebtedness, grant liens on assets, make distributions on equity interests, dispose of assets, make loans, pay other indebtedness, engage in mergers, and other matters. The Revolving Credit Facility restricts our ability to make dividends and distributions unless no event of default exists and a liquidity test is satisfied. Subsidiaries of the Company may pay dividends and make distributions to the Company and other obligors under the Revolving Credit Facility without restriction. As of July 31, 2019, we were restricted from making distributions, including repayments of the Senior Notes or other distributions, in excess of $266.4 millionas a result of the Revolving Credit Facility distribution and payment restrictions. The Revolving Credit Facility contains customary default provisions, which, if triggered, could result in acceleration of all amounts outstanding under the Revolving Credit Facility.

Debt Covenants. We were in compliance with our debt covenants, as amended, at July 31, 2019. A summary of the significant financial covenants that govern our Revolving Credit Facility, as amended, compared to our actual compliance status at July 31, 2019 is presented below: 

	Actual	Required Minimum/ Maximum
Interest Coverage Ratio for the quarter must equal or exceed (minimum)	4.69:1.00	1.00:1.00
Interest Coverage Ratio for the trailing two quarters must equal or exceed (minimum)	4.38:1.00	1.50:1.00
Leverage Ratio must not exceed (maximum)	1.90:1.00	4.00:1.00
ABS Excluded Leverage Ratio must not exceed (maximum)	1.12:1.00	2.00:1.00
Capital Expenditures, net, must not exceed (maximum)	$27.3 million	$100.0 million

All capitalized terms in the above table are defined by the Revolving Credit Facility and may or may not match directly to the financial statement captions in this document. The covenants are calculated quarterly, except for capital expenditures, which is calculated for a period of four consecutive fiscal quarters, as of the end of each fiscal quarter.

5.     Leases

We lease most of our current store locations and certain of our facilities and operating equipment under operating leases. The fixed, non-cancelable terms of our real estate leases are generally five to 15 years and generally include renewal options that allow us to extend the term beyond the initial non-cancelable term. However, prior to the expiration of the existing contract, the Company will typically renegotiate any lease contracts as opposed to continuing in the current lease under the renewal terms. As such, the lease renewal options are not recognized as part of the right-of-use assets and liabilities. Most of the real estate leases require payment of real estate taxes, insurance and certain common area maintenance costs in addition to future minimum lease payments. Equipment leases generally provide for initial lease terms of three to five years and provide for a purchase right at the end of the lease term at the then fair market value of the equipment.

Certain operating leases contain tenant allowance provisions, which obligate the landlord to remit cash to us as an incentive to enter into the lease agreement. We record the full amount to be remitted by the landlord as a reduction to the operating lease right-of-use assets upon commencement of the lease and amortize the balance on a straight-line basis over the life of the lease.

Supplemental lease information is summarized below:

(in thousands)	Balance sheet classification	July 31, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	248,707
Finance lease assets	Property and equipment, net	5,993
Total leased assets		254,700
Liabilities
Operating (1)	Operating lease liability - current	$	44,804
Finance	Current maturities of debt and finance lease obligations	613
Operating	Operating lease liability - non current	331,010
Finance	Long-term debt and finance lease obligations	4,789
Total lease liabilities		$	381,216

(1) Represents the gross operating lease liability before tenant improvement allowances. As of July 31, 2019 we had $11.4 million of tenant improvement allowances to be remitted by the landlord.

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Lease Cost		Three Months Ended July 31, 2019		Six Months Ended July 31, 2019
(in thousands)	Income statement classification
Operating lease costs (1)	Selling, general and administrative expense	$	14,587	$	28,515

(1) Includes short-term and variable lease costs, which are not significant.

Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Additional details regarding the Company’s leasing activities as a lessee are presented below:

Other Information	Six Months Ended   July 31, 2019
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	33,408
Weighted-average remaining lease term (in years)
Finance leases	11.4
Operating leases	7.3
Weighted-average discount rate
Finance leases	6.1		%
Operating leases (1)	8.5		%

(1)  Upon adoption of ASC 842, discount rates for existing operating leases were established as of February 1, 2019.

The following table presents a summary of our minimum contractual commitments and obligations as of July 31, 2019:

	Operating Leases		Finance Leases		Total
(in thousands)
2020	$	74,187	$	925	$	75,112
2021	73,119		889		74,008
2022	72,213		763		72,976
2023	68,284		731		69,015
2024	61,316		771		62,087
Thereafter	157,042		3,576		160,618
Total undiscounted cash flows	506,161		7,655		513,816
Less: Interest	130,347		2,253		132,600
Total lease liabilities	$	375,814	$	5,402	$	381,216

6.     Contingencies

Securities Litigation. On April 2, 2018, MicroCapital Fund, LP, MicroCapital Fund, Ltd., and MicroCapital LLC (collectively, “MicroCapital”) filed a lawsuit against us and certain of our former executive officers in the U.S. District Court for the Southern District of Texas, Cause No. 4:18-CV-01020 (the “MicroCapital Action”).  The plaintiffs in this action allege that the defendants made false and misleading statements or failed to disclose material facts about our credit and underwriting practices, accounting and internal controls.  Plaintiffs allege violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, Texas and Connecticut common law fraud, and Texas common law negligent misrepresentation against all defendants; as well as violations of section 20A of the Securities Exchange Act of 1934; and Connecticut common law negligent misrepresentation against certain defendants arising from plaintiffs’ purchase of Conn’s, Inc. securities between April 3, 2013 and February 20, 2014.  The complaint does not specify the amount of damages sought.

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The Court previously had stayed the MicroCapital Action pending resolution of other outstanding litigation (In re Conn’s Inc. Sec. Litig., Cause No. 14-CV-00548 (S.D. Tex.) (the “Consolidated Securities Action”)), which was settled in October 2018. After that settlement, the stay was lifted, and the defendants filed a motion to dismiss plaintiff’s complaint in the MicroCapital Action on November 6, 2018. Briefing on the motion to dismiss was completed on January 16, 2019. On July 26, 2019, the magistrate judge to which defendants’ motion to dismiss had been assigned issued a report and recommendation, recommending that defendants’ motion to dismiss the complaint be granted in part and denied in part.  Both parties filed timely objections to that report and recommendation on August 9, 2019.  Those objections currently are pending before the Court.

We intend to vigorously defend our interests in the MicroCapital Action. It is not possible at this time to predict the timing or outcome of this litigation, and we cannot reasonably estimate the possible loss or range of possible loss from these claims.

Derivative Litigation. On December 1, 2014, an alleged shareholder, purportedly on behalf of the Company, filed a derivative shareholder lawsuit against us and certain of our current and former directors and former executive officers in the U.S. District Court for the Southern District of Texas, captioned as Robert Hack, derivatively on behalf of Conn’s, Inc., v. Theodore M. Wright (former executive officer and former director), Bob L. Martin, Jon E.M. Jacoby (former director), Kelly M. Malson, Douglas H. Martin, David Schofman, Scott L. Thompson (former director), Brian Taylor (former executive officer) and Michael J. Poppe (former executive officer) and Conn’s, Inc., Case No. 4:14-cv-03442 (the “Original Derivative Action”). The complaint asserts claims for breach of fiduciary duty, unjust enrichment, gross mismanagement, and insider trading based on substantially similar factual allegations as those asserted in the Consolidated Securities Action. The plaintiff seeks unspecified damages against these persons and does not request any damages from us. Setting forth substantially similar claims against the same defendants, on February 25, 2015, an additional federal derivative action, captioned 95250 Canada LTEE, derivatively on Behalf of Conn’s, Inc. v. Wright et al., Cause No. 4:15-cv-00521, was filed in the U.S. District Court for the Southern District of Texas, which has been consolidated with the Original Derivative Action.

The Court previously approved a stipulation among the parties to stay the Original Derivative Action pending resolution of the Consolidated Securities Action. The stay was lifted on November 1, 2018, and the defendants filed a motion to dismiss plaintiff’s complaint. Briefing on the motion to dismiss was completed December 3, 2018. The Court’s ruling is pending. The parties are currently engaging in discovery.

Another derivative action was filed on January 27, 2015, captioned as Richard A. Dohn v. Wright, et al., Cause No. 2015-04405, in the 281st Judicial District Court, Harris County, Texas. This action makes substantially similar allegations to the Original Derivative Action against the same defendants. We received a copy of the proposed amended petition on October 12, 2018, but the amended proposed petition has not yet been filed. The parties jointly requested a stay on this case pending resolution of the Original Derivative Action. This case remains stayed until at least June 27, 2019.

Prior to filing a lawsuit, an alleged shareholder, Robert J. Casey II (“Casey”), submitted a demand under Delaware law, which our Board of Directors refused. On May 19, 2016, Casey, purportedly on behalf of the Company, filed a lawsuit against us and certain of our current and former directors and former executive officers in the 55th Judicial District Court, Harris County, Texas, captioned as Casey, derivatively on behalf of Conn’s, Inc., v. Theodore M. Wright (former executive officer and former director), Michael J. Poppe (former executive officer), Brian Taylor (former executive officer), Bob L. Martin, Jon E.M. Jacoby (former director), Kelly M. Malson, Douglas H. Martin, David Schofman, Scott L. Thompson (former director) and William E. Saunders Jr., and Conn’s, Inc., Cause No. 2016-33135. The complaint asserts claims for breach of fiduciary duties and unjust enrichment based on substantially similar factual allegations as those asserted in the Original Derivative Action. The complaint does not specify the amount of damages sought. No further activity has occurred in this case since the Final Order and Judgment was entered in the Consolidated Securities Action.

Other than Casey, none of the plaintiffs in the other derivative actions made a demand on our Board of Directors prior to filing their respective lawsuits. The defendants in the derivative actions intend to vigorously defend against these claims. It is not possible at this time to predict the timing or outcome of any of this litigation, and we cannot reasonably estimate the possible loss or range of possible loss from these claims.

Regulatory Matters. On July 15, 2019, we reached a settlement with the SEC relating to the previously disclosed SEC investigation commenced in November 2014 into the Company’s underwriting policies and bad debt provisions from July 31, 2012 to July 31, 2014. In connection with the settlement process, on July 15, 2019, the SEC filed a civil complaint and agreed judgment against the Company and a former officer in the U.S. District Court for the Southern District of Texas.

Without admitting or denying the allegations in the SEC’s complaint, the Company consented to entry of a final judgment pursuant to which it paid a civil monetary penalty of $1.1 million to the SEC.

We are involved in other routine litigation and claims incidental to our business from time to time which, individually or in the aggregate, are not expected to have a material adverse effect on us. As required, we accrue estimates of the probable costs for the resolution of these matters. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. However, the results of these proceedings cannot

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be predicted with certainty, and changes in facts and circumstances could impact our estimate of reserves for litigation. The Company believes that any probable and reasonably estimable loss associated with the foregoing has been adequately reflected in the accompanying financial statements.

7.     Variable Interest Entities

From time to time, we securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. Under the terms of the respective securitization transactions, all cash collections and other cash proceeds of the customer receivables go first to the servicer and the holders of the asset-backed notes, and then to the residual equity holder. We retain the servicing of the securitized portfolio and receive a monthly fee of 4.75% (annualized) based on the outstanding balance of the securitized receivables, and we currently hold all of the residual equity. In addition, we, rather than the VIEs, will retain all credit insurance income together with certain recoveries related to credit insurance and RSAs on charge-offs of the securitized receivables, which will continue to be reflected as a reduction of net charge-offs on a consolidated basis for as long as we consolidate the VIEs.

We consolidate VIEs when we determine that we are the primary beneficiary of these VIEs, we have the power to direct the activities that most significantly impact the performance of the VIEs and our obligation to absorb losses and the right to receive residual returns are significant.

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The following table presents the assets and liabilities held by the VIEs (for legal purposes, the assets and liabilities of the VIEs will remain distinct from Conn’s, Inc.):

(in thousands)	July 31, 2019			January 31, 2019
Assets:
Restricted cash	$	66,444		$	57,475
Due from Conn’s, Inc., net	8,874			5,504
Customer accounts receivable:
Customer accounts receivable	625,436			538,826
Restructured accounts	152,062			135,834
Allowance for uncollectible accounts	(125,142		)	(106,327		)
Allowance for no-interest option credit programs	(7,278		)	(8,047		)
Deferred fees and origination costs	(6,213		)	(5,321		)
Total customer accounts receivable, net	638,865			554,965
Total assets	$	714,183		$	617,944
Liabilities:
Accrued expenses	$	4,465		$	3,939
Other liabilities	5,086			5,513
Short-term debt:
Warehouse Notes	1,945			53,635
Long-term debt:
2017-B Class B Notes	29,001			98,297
2017-B Class C Notes	78,640			78,640
2018-A Class A Notes	61,415			105,971
2018-A Class B Notes	37,038			63,908
2018-A Class C Notes	37,038			63,908
2019-A Class A Notes	187,959			—
2019-A Class B Notes	64,750			—
2019-A Class C Notes	62,510			—
	558,351			410,724
Less: deferred debt issuance costs	(3,715		)	(2,731		)
Total long-term debt	554,636			407,993
Total debt	$	556,581		$	461,628
Total liabilities	$	566,132		$	471,080

The assets of the VIEs serve as collateral for the obligations of the VIEs. The holders of asset-backed notes have no recourse to assets outside of the respective VIEs.

8.Segment Information

Operating segments are defined as components of an enterprise that engage in business activities and for which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker to make decisions about how to allocate resources and assess performance. We are a leading specialty retailer and offer a broad selection of quality, branded durable consumer goods and related services in addition to a proprietary credit solution for our core credit-constrained consumers. We have two operating segments: (i) retail and (ii) credit. Our operating segments complement one another. The retail segment operates primarily through our stores and website. Our retail segment product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points. Our credit segment offers affordable financing solutions to a large, under-served population of credit-constrained consumers who typically have limited credit alternatives. Our operating segments provide customers the opportunity to comparison shop across brands with confidence in our competitive prices as well as affordable monthly payment options, next day delivery and installation

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in the majority of our markets, and product repair service. The operating segments follow the same accounting policies used in our Condensed Consolidated Financial Statements.

We evaluate a segment’s performance based upon operating income before taxes. Selling, general and administrative expenses (“SG&A”) includes the direct expenses of the retail and credit operations, allocated overhead expenses, and a charge to the credit segment to reimburse the retail segment for expenses it incurs related to occupancy, personnel, advertising and other direct costs of the retail segment, which benefit the credit operations by sourcing credit customers and collecting payments. The reimbursement received by the retail segment from the credit segment is calculated using an annual rate of 2.5% times the average outstanding portfolio balance for each applicable period.

As of July 31, 2019, we operated retail stores in 14 states with no operations outside of the United States. No single customer accounts for more than 10% of our total revenues.

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Financial information by segment is presented in the following tables:

	Three Months Ended July 31, 2019								Three Months Ended July 31, 2018
(in thousands)	Retail			Credit			Total		Retail		Credit			Total
Revenues:
Furniture and mattress	$	99,455		$	—		$	99,455	$	97,066	$	—		$	97,066
Home appliance	99,356			—			99,356		91,471		—			91,471
Consumer electronics	53,692			—			53,692		55,654		—			55,654
Home office	17,883			—			17,883		19,289		—			19,289
Other	4,192			—			4,192		3,699		—			3,699
Product sales	274,578			—			274,578		267,179		—			267,179
Repair service agreement commissions	27,647			—			27,647		25,662		—			25,662
Service revenues	3,837			—			3,837		3,472		—			3,472
Total net sales	306,062			—			306,062		296,313		—			296,313
Finance charges and other revenues	203			94,794			94,997		98		88,209			88,307
Total revenues	306,265			94,794			401,059		296,411		88,209			384,620
Costs and expenses:
Cost of goods sold	182,065			—			182,065		173,627		—			173,627
Selling, general and administrative expense (1)	88,147			39,337			127,484		83,003		37,687			120,690
Provision for bad debts	(19		)	49,755			49,736		243		50,508			50,751
Charges and credits	—			—			—		300		—			300
Total costs and expenses	270,193			89,092			359,285		257,173		88,195			345,368
Operating income	36,072			5,702			41,774		39,238		14			39,252
Interest expense	—			14,396			14,396		—		15,566			15,566
Loss on extinguishment of debt	—			—			—		—		1,367			1,367
Income (loss) before income taxes	$	36,072		$	(8,694	)	$	27,378	$	39,238	$	(16,919	)	$	22,319

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	Six Months Ended July 31, 2019									Six Months Ended July 31, 2018
(in thousands)	Retail			Credit			Total			Retail		Credit			Total
Revenues:
Furniture and mattress	$	187,819		$	—		$	187,819		$	194,086	$	—		$	194,086
Home appliance	176,646			—			176,646			169,494		—			169,494
Consumer electronics	103,341			—			103,341			107,956		—			107,956
Home office	33,589			—			33,589			37,599		—			37,599
Other	7,628			—			7,628			7,358		—			7,358
Product sales	509,023			—			509,023			516,493		—			516,493
Repair service agreement commissions	51,671			—			51,671			48,525		—			48,525
Service revenues	7,347			—			7,347			7,051		—			7,051
Total net sales	568,041			—			568,041			572,069		—			572,069
Finance charges and other revenues	405			186,125			186,530			112		170,826			170,938
Total revenues	568,446			186,125			754,571			572,181		170,826			743,007
Costs and expenses:
Cost of goods sold	339,293			—			339,293			340,216		—			340,216
Selling, general and administrative expense (1)	167,769			77,629			245,398			160,755		74,813			235,568
Provision for bad debts	110			89,672			89,782			503		94,404			94,907
Charges and credits	(695		)	—			(695		)	300		—			300
Total costs and expenses	506,477			167,301			673,778			501,774		169,217			670,991
Operating income	61,969			18,824			80,793			70,407		1,609			72,016
Interest expense	—			28,893			28,893			—		32,386			32,386
Loss on extinguishment of debt	—			—			—			—		1,773			1,773
Income (loss) before income taxes	$	61,969		$	(10,069	)	$	51,900		$	70,407	$	(32,550	)	$	37,857
	July 31, 2019									July 31, 2018
(in thousands)	Retail			Credit			Total			Retail		Credit			Total
Total assets	$	699,382		$	1,446,843		$	2,146,225		$	416,166	$	1,380,335		$	1,796,501

(1) For the three months ended July 31, 2019 and 2018, the amount of corporate overhead allocated to each segment reflected in SG&A was $9.7 million and $9.3 million, respectively. For the three months ended July 31, 2019 and 2018, the amount of reimbursement made to the retail segment by the credit segment was $9.7 million and $9.4 million, respectively. For the six months ended July 31, 2019 and 2018, the amount of corporate overhead allocated to each segment reflected in SG&A was $17.6 million and $17.6 million, respectively. For the six months ended July 31, 2019 and 2018, the amount of reimbursement made to the retail segment by the credit segment was $19.4 million and $18.8 million, respectively.

9. Guarantor Financial Information

Conn’s, Inc. is a holding company with no independent assets or operations other than its investments in its subsidiaries. The Senior Notes, which were issued by Conn’s, Inc., are fully and unconditionally guaranteed on a joint and several senior unsecured basis by the Guarantors. As of July 31, 2019 and January 31, 2019, the direct or indirect subsidiaries of Conn’s, Inc. that were not Guarantors (the “Non-Guarantor Subsidiaries”) were the VIEs and minor subsidiaries. There are no restrictions under the Indenture on the ability of any of the Guarantors to transfer funds to Conn’s, Inc. in the form of dividends or distributions.

The following financial information presents the Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Income, and Condensed Consolidated Statement of Cash Flows for Conn’s, Inc. (the issuer of the Senior Notes), the Guarantors, and the Non-Guarantor Subsidiaries, together with certain eliminations. Investments in subsidiaries are accounted for by the parent company using the equity method for purposes of this presentation. Results of operations of subsidiaries are therefore reflected in the parent company’s investment accounts and operations. The condensed consolidated financial information includes financial data for:

(i) Conn’s, Inc. (on a parent-only basis),

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(ii) Guarantors,

(iii) Non-Guarantor Subsidiaries, and

(iv) the parent company and the subsidiaries on a consolidated basis at July 31, 2019 and January 31, 2019 (after the elimination of intercompany balances and transactions).

Condensed Consolidated Balance Sheet as of July 31, 2019:

(in thousands)	Conn’s, Inc.		Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	7,563	$	—	$	—		$	7,563
Restricted cash	—		1,775		66,444		—			68,219
Customer accounts receivable, net of allowances	—		391,295		273,685		—			664,980
Other accounts receivable	—		67,056		—		—			67,056
Inventories	—		213,513		—		—			213,513
Other current assets	—		9,935		8,874		(8,098		)	10,711
Total current assets	—		691,137		349,003		(8,098		)	1,032,042
Investment in and advances to subsidiaries	834,864		148,049		—		(982,913		)	—
Long-term portion of customer accounts receivable, net of allowances	—		288,651		365,180		—			653,831
Property and equipment, net	—		174,225		—		—			174,225
Operating lease right-of-use assets	—		248,707		—		—			248,707
Deferred income taxes	25,612		—		—		—			25,612
Other assets	—		11,808		—		—			11,808
Total assets	$	860,476	$	1,562,577	$	714,183	$	(991,011	)	$	2,146,225
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of debt and financing lease obligations	$	—	$	613	$	1,945	$	—		$	2,558
Accounts payable	—		73,205		—		—			73,205
Accrued expenses	686		83,754		4,465		(3,196		)	85,709
Operating lease liability - current	—		33,398		—		—			33,398
Other current liabilities	—		13,783		2,346		(4,900		)	11,229
Total current liabilities	686		204,753		8,756		(8,096		)	206,099
Operating lease liability - non current	—		331,010		—		—			331,010
Long-term debt and financing lease obligations	223,055		168,290		554,636		—			945,981
Other long-term liabilities	—		23,660		2,740		—			26,400
Total liabilities	223,741		727,713		566,132		(8,096		)	1,509,490
Total stockholders’ equity	636,735		834,864		148,051		(982,915		)	636,735
Total liabilities and stockholders’ equity	$	860,476	$	1,562,577	$	714,183	$	(991,011	)	$	2,146,225

Deferred income taxes related to tax attributes of the Guarantors and Non-Guarantor Subsidiaries are reflected under Conn’s, Inc.

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Condensed Consolidated Balance Sheet as of January 31, 2019:

(in thousands)	Conn’s, Inc.		Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	5,912	$	—	$	—		$	5,912
Restricted cash	—		1,550		57,475		—			59,025
Customer accounts receivable, net of allowances	—		328,705		324,064		—			652,769
Other accounts receivable	—		67,078		—		—			67,078
Inventories	—		220,034		—		—			220,034
Other current assets	—		12,344		5,504		(8,272		)	9,576
Total current assets	—		635,623		387,043		(8,272		)	1,014,394
Investment in and advances to subsidiaries	815,524		146,864		—		(962,388		)	—
Long-term portion of customer accounts receivable, net of allowances	—		455,443		230,901		—			686,344
Property and equipment, net	—		148,983		—		—			148,983
Deferred income taxes	27,535		—		—		—			27,535
Other assets	—		7,651		—		—			7,651
Total assets	$	843,059	$	1,394,564	$	617,944	$	(970,660	)	$	1,884,907
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of debt and financing lease obligations	$	—	$	474	$	53,635	$	—		$	54,109
Accounts payable	—		71,118		—		—			71,118
Accrued expenses	686		88,478		3,939		(2,768		)	90,335
Other current liabilities	—		24,918		2,592		(5,504		)	22,006
Total current liabilities	686		184,988		60,166		(8,272		)	237,568
Deferred rent	—		93,127		—		—			93,127
Long-term debt and financing lease obligations	222,398		270,831		407,993		—			901,222
Other long-term liabilities	—		30,094		2,921		—			33,015
Total liabilities	223,084		579,040		471,080		(8,272		)	1,264,932
Total stockholders’ equity	619,975		815,524		146,864		(962,388		)	619,975
Total liabilities and stockholders’ equity	$	843,059	$	1,394,564	$	617,944	$	(970,660	)	$	1,884,907

Deferred income taxes related to tax attributes of the Guarantor Subsidiaries and Non-Guarantor Subsidiaries are reflected under Conn’s, Inc.

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CONN’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Statement of Income for the Three Months Ended July 31, 2019:

(in thousands)	Conn’s, Inc.			Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	306,062	$	—	$	—		$	306,062
Finance charges and other revenues	—			43,327		51,670		—			94,997
Servicing fee revenue	—			8,865		—		(8,865		)	—
Total revenues	—			358,254		51,670		(8,865		)	401,059
Costs and expenses:
Cost of goods sold	—			182,065		—		—			182,065
Selling, general and administrative expense	—			125,549		10,800		(8,865		)	127,484
Provision for bad debts	—			20,355		29,381		—			49,736
Total costs and expenses	—			327,969		40,181		(8,865		)	359,285
Operating income	—			30,285		11,489		—			41,774
Interest expense	4,443			1,337		8,616		—			14,396
Income (loss) before income taxes	(4,443		)	28,948		2,873		—			27,378
Provision (benefit) for income taxes	(1,218		)	7,979		643		—			7,404
Net income (loss)	(3,225		)	20,969		2,230		—			19,974
Income from consolidated subsidiaries	23,199			2,230		—		(25,429		)	—
Consolidated net income	$	19,974		$	23,199	$	2,230	$	(25,429	)	$	19,974

Condensed Consolidated Statement of Income for the Three Months Ended July 31, 2018:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	296,313		$	—		$	—		$	296,313
Finance charges and other revenues	—			56,653			31,654			—			88,307
Servicing fee revenue	—			3,035			—			(3,035		)	—
Total revenues	—			356,001			31,654			(3,035		)	384,620
Costs and expenses:
Cost of goods sold	—			173,627			—			—			173,627
Selling, general and administrative expense	—			115,515			8,210			(3,035		)	120,690
Provision for bad debts	—			29,868			20,883			—			50,751
Charges and credits	—			300			—			—			300
Total costs and expenses	—			319,310			29,093			(3,035		)	345,368
Operating income	—			36,691			2,561			—			39,252
Interest expense	4,448			3,733			7,385			—			15,566
Loss on extinguishment of debt	—			142			1,225			—			1,367
Income (loss) before income taxes	(4,448		)	32,816			(6,049		)	—			22,319
Provision (benefit) for income taxes	(1,058		)	7,805			(1,439		)	—			5,308
Net income (loss)	(3,390		)	25,011			(4,610		)	—			17,011
Income (loss) from consolidated subsidiaries	20,401			(4,610		)	—			(15,791		)	—
Consolidated net income (loss)	$	17,011		$	20,401		$	(4,610	)	$	(15,791	)	$	17,011

24

CONN’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Statement of Income for the Six Months Ended July 31, 2019:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	568,041		$	—	$	—		$	568,041
Finance charges and other revenues	—			107,352			79,178		—			186,530
Servicing fee revenue	—			17,698			—		(17,698		)	—
Total revenues	—			693,091			79,178		(17,698		)	754,571
Costs and expenses:
Cost of goods sold	—			339,293			—		—			339,293
Selling, general and administrative expense	—			245,005			18,091		(17,698		)	245,398
Provision for bad debts	—			44,339			45,443		—			89,782
Charges and credits	—			(695		)	—		—			(695		)
Total costs and expenses	—			627,942			63,534		(17,698		)	673,778
Operating income	—			65,149			15,644		—			80,793
Interest expense	8,886			5,924			14,083		—			28,893
Income (loss) before income taxes	(8,886		)	59,225			1,561		—			51,900
Provision (benefit) for income taxes	(2,126		)	14,169			374		—			12,417
Net income (loss)	(6,760		)	45,056			1,187		—			39,483
Income from consolidated subsidiaries	46,243			1,187			—		(47,430		)	—
Consolidated net income	$	39,483		$	46,243		$	1,187	$	(47,430	)	$	39,483

Condensed Consolidated Statement of Income for the Six Months Ended July 31, 2018:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	572,069		$	—		$	—		$	572,069
Finance charges and other revenues	—			102,308			68,630			—			170,938
Servicing fee revenue	—			19,781			—			(19,781		)	—
Total revenues	—			694,158			68,630			(19,781		)	743,007
Costs and expenses:
Cost of goods sold	—			340,216			—			—			340,216
Selling, general and administrative expense	—			235,308			20,041			(19,781		)	235,568
Provision for bad debts	—			36,876			58,031			—			94,907
Charges and credits	—			300			—			—			300
Total costs and expenses	—			612,700			78,072			(19,781		)	670,991
Operating income (loss)	—			81,458			(9,442		)	—			72,016
Interest expense	8,891			6,766			16,729			—			32,386
Loss on extinguishment of debt	—			142			1,631			—			1,773
Income (loss) before income taxes	(8,891		)	74,550			(27,802		)	—			37,857
Provision (benefit) for income taxes	(1,906		)	15,979			(5,959		)	—			8,114
Net income (loss)	(6,985		)	58,571			(21,843		)	—			29,743
Income (loss) from consolidated subsidiaries	36,728			(21,843		)	—			(14,885		)	—
Consolidated net income (loss)	$	29,743		$	36,728		$	(21,843	)	$	(14,885	)	$	29,743

25

CONN’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Statement of Cash Flows for the Six Months Ended July 31, 2019:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(597	)	$	173,701		$	(83,660	)	$	—		$	89,444
Cash flows from investing activities:
Purchase of customer accounts receivables	—			—			(379,200		)	379,200			—
Sale of customer accounts receivables	—			—			379,200			(379,200		)	—
Purchase of property and equipment	—			(33,330		)	—			—			(33,330		)
Investment in subsidiary	—			(33,019		)	—			33,019			—
Net cash used in investing activities	—			(66,349		)	—			33,019			(33,330		)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	—			—			381,790			—			381,790
Payments on asset-backed notes	—			—			(234,162		)	—			(234,162		)
Borrowings from revolving credit facility	—			778,166			—			—			778,166
Contribution from subsidiary	33,019			—			—			(33,019		)	—
Payments on revolving credit facility	—			(881,166		)	—			—			(881,166		)
Payments of debt issuance costs and amendment fees	—			(55		)	(3,437		)	—			(3,492		)
Payments on warehouse facility	—			—			(51,561		)	—			(51,561		)
Proceeds from stock issued under employee benefit plans	597			—			—			—			597
Tax payments associated with equity-based compensation transactions	—			(1,781		)	—			—			(1,781		)
Purchase of treasury stock	(33,019		)	—			—			—			(33,019		)
Other	—			(641		)	—			—			(641		)
Net cash provided by (used in) financing activities	597			(105,477		)	92,630			(33,019		)	(45,269		)
Net change in cash, cash equivalents and restricted cash	—			1,875			8,970			—			10,845
Cash, cash equivalents and restricted cash, beginning of period	—			7,462			57,475			—			64,937
Cash, cash equivalents and restricted cash, end of period	$	—		$	9,337		$	66,445		$	—		$	75,782

26

CONN’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Statement of Cash Flows for the Six Months Ended July 31, 2018:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(834	)	$	(33	)	$	156,519		$	—		$	155,652
Cash flows from investing activities:
Purchase of customer accounts receivables	—			—			(170,144		)	170,144			—
Sale of customer accounts receivables	—			—			170,144			(170,144		)	—
Purchase of property and equipment	—			(12,166		)	—			—			(12,166		)
Net cash used in investing activities	—			(12,166		)	—			—			(12,166		)
Cash flows from financing activities:
Payments on asset-backed notes	—			(169,803		)	(312,080		)	—			(481,883		)
Borrowings from revolving credit facility	—			839,236			—			—			839,236
Payments on revolving credit facility	—			(655,036		)	—			—			(655,036		)
Borrowings from warehouse facility	—			—			173,286			—			173,286
Payments of debt issuance costs and amendment fees	—			(2,825		)	(714		)	—			(3,539		)
Payments on warehouse facility	—			—			(52,226		)	—			(52,226		)
Proceeds from stock issued under employee benefit plans	834			—			—			—			834
Tax payments associated with equity-based compensation transactions	—			(2,516		)	—			—			(2,516		)
Payments from extinguishment of debt	—			(1,177		)	—			—			(1,177		)
Other	—			(531		)	—			—			(531		)
Net cash provided by (used in) financing activities	834			7,348			(191,734		)	—			(183,552		)
Net change in cash, cash equivalents and restricted cash	—			(4,851		)	(35,215		)	—			(40,066		)
Cash, cash equivalents and restricted cash, beginning of period	—			10,836			85,322			—			96,158
Cash, cash equivalents and restricted cash, end of period	$	—		$	5,985		$	50,107		$	—		$	56,092

27

CONN’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Stockholders’ Equity

Share Repurchases

On May 30, 2019, we entered into a stock repurchase program, effective as of May 31, 2019, pursuant to which we may repurchase up to $75.0 million of our outstanding common stock. The program will remain effective for one year, unless extended by the Board of Directors. During the three months ended July 31, 2019, we repurchased 1,874,846 shares of our common stock at an average weighted cost per share of $18.30 for an aggregate amount of $34.3 million.

11.     Subsequent Events

For the period August 1, 2019 through August 29, 2019, we repurchased an additional 1,207,690 shares of our common stock for $23.6 million at an average price of $19.56 per share. The total shares repurchased through August 29, 2019 under the plan in aggregate is 3,082,536 shares for $57.9 million at an average price of $18.79 per share.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  

Forward-Looking Statements

This report 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; the expected timing and amount of our share repurchases; 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, 2019 (the “2019 Form 10-K”) 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 report. 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.

The Company makes available in the investor relations section of its website at ir.conns.com updated monthly reports to the holders of its asset-backed notes. This information reflects the performance of the securitized portfolio only, in contrast to the financial statements contained herein, which reflect the performance of all of the Company’s outstanding receivables, including those originated subsequent to those included in the securitized portfolio. The website and the information contained on our website is not incorporated in this Quarterly Report on Form 10-Q or any other document filed with the SEC.

Overview

We encourage you to read this Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the accompanying Condensed Consolidated Financial Statements and related notes. Our fiscal year ends on January 31. References to a fiscal year refer to the calendar year in which the fiscal year ends.

Executive Summary

Total revenues were $401.1 million for the three months ended July 31, 2019 compared to $384.6 million for the three months ended July 31, 2018, an increase of $16.4 million or 4.3%. Retail revenues were $306.3 million for the three months ended July 31, 2019 compared to $296.4 million for the three months ended July 31, 2018, an increase of $9.9 million or 3.3%. The increase in retail revenue was primarily driven by new store growth, partially offset by a decrease in same store sales of 2.3%. The decrease in same store sales was driven by a decrease of 9.3% in markets impacted by Hurricane Harvey, partially offset by an increase of 0.4% in markets not impacted by Hurricane Harvey. Same store sales include e-commerce sales. We believe the decrease in same store sales in markets impacted by Hurricane Harvey was primarily a result of the impact of rebuilding efforts during the three months ended July 31, 2018. Credit revenues were $94.8 million for the three months ended July 31, 2019 compared to $88.2 million for the three months ended July 31, 2018, an increase of $6.6 million or 7.5%. The increase in credit revenue resulted from the origination of our higher-yielding direct loan product, which resulted in an increase in the portfolio yield rate to 21.9% from 21.3% for the comparative period in fiscal year 2019, and from a 3.0% increase in the average outstanding balance of the customer accounts receivable portfolio. In addition, insurance income contributed to an increase in credit revenue over the prior year period primarily due to an increase in insurance retrospective income for the three months ended July 31, 2019.

Retail gross margin for the three months ended July 31, 2019 was 40.5%, a decrease of 90 basis points from the 41.4% reported for the three months ended July 31, 2018. The decrease in retail gross margin was primarily driven by higher margins realized in the comparative three months ended July 31, 2018 due to the one-time benefit of increases in appliance retail pricing related to tariff adjustments and the associated forward purchases of inventory, coupled with increased logistics costs to help support future

29

growth in the three months ended July 31, 2019. The decrease was partially offset by an increase in retrospective income on our repair service agreements (“RSAs”) during the three months ended July 31, 2019.

Selling, general and administrative expense (“SG&A”) for the three months ended July 31, 2019 was $127.5 million compared to $120.7 million for the three months ended July 31, 2018, an increase of $6.8 million or 5.6%. The SG&A increase in the retail segment was primarily due to increases in new store occupancy costs and compensation costs period over period offset by a decrease in advertising expense. The SG&A increase in the credit segment was primarily due to an increase in general operational expenses and third-party legal expenses related to collection efforts on charged off accounts.

Provision for bad debts decreased to $49.7 million for the three months ended July 31, 2019 from $50.8 million for the three months ended July 31, 2018, a decrease of $1.1 million. The decrease was primarily driven by lower net charge offs of $1.6 million for the three months ended July 31, 2019 compared to the three months ended July 31, 2018, partially offset by a larger increase in the allowance for bad debts for the three months ended July 31, 2019 compared to the three months ended July 31, 2018. The larger increase in the allowance for bad debts was primarily driven by the year-over-year increase in the carrying value of the customer accounts receivable portfolio from July 31, 2018.

Interest expense decreased to $14.4 million for the three months ended July 31, 2019, compared to $15.6 million for the three months ended July 31, 2018, a decrease of $1.2 million. The decrease was driven by a lower weighted average cost of borrowing.

Net income for the three months ended July 31, 2019 was $20.0 million or $0.62 per diluted share, compared to $17.0 million, or $0.53 per diluted share, for the three months ended July 31, 2018.

Company Initiatives

In the second quarter of fiscal year 2020, we delivered strong credit segment performance, driven by higher yields, better portfolio performance and lower borrowing costs.  Retail operating margins remained strong, demonstrating our differentiated business model, improved product mix, and emphasis on disciplined cost management. We delivered the following financial and operational results in the second quarter of fiscal year 2020:

• Achieved earnings per diluted share of $0.62 for the three months ended July 31, 2019, an increase of 17.0% compared to $0.53 for the three months ended July 31, 2018;

• Recorded an increase in same store sales of 0.4% in non-hurricane Harvey markets;

• Recorded retail gross margin of 40.5% representing our fifth consecutive quarter above our target retail gross margin of 40%;

• Recorded an increase in e-commerce sales of 467% compared to the second quarter of fiscal year 2019;

• Recorded record second quarter yield on our customer receivables portfolio of 21.9% as a result of the continued seasoning of loans originated under our higher-yielding direct loan program;

• Increased our credit spread, which is the difference between net yield and charge-offs as a percentage of our average customer accounts receivable portfolio balance, to 8.9% for the three months ended July 31, 2019 from 7.5% for the three months ended July 31, 2018;

• Reduced interest expense as a result of our deleveraging efforts combined with the continued successful execution of our asset-backed securitization program, which led to a 7.5% reduction in interest expense compared to the second quarter of fiscal year 2019; and

• Repurchased $34.4 million or approximately 1.9 million shares of the Company’s common stock at an average share price of $18.30.

We believe that we have laid the foundation to execute our long-term growth strategy and prudently manage financial and operational risk while maximizing shareholder value. We remain focused on the following strategic priorities for fiscal year 2020:

• Increase net income by improving performance across our core operational and financial metrics: same store sales, retail margin, portfolio yield, charge-off rate, and interest expense;

• Open 14 new stores in our current geographic footprint to leverage our existing infrastructure;

• Continue to refine and enhance our underwriting platform;

• Mitigate increases in our interest expense;

• Optimize our mix of quality, branded products and gain efficiencies in our warehouse, delivery and transportation operations to increase our retail gross margin;

• Continue to grow our lease-to-own sales;

30

• Continue to grow our e-commerce sales;

• Maintain disciplined oversight of our SG&A;

• Ensure that the Company has the leadership and human capital pipeline and capability to drive results and meet present and future business objectives as the Company continues to expand its retail store base; and

• Leverage technology and shared services to drive efficient, effective and scalable processes.

Outlook

The broad appeal of the Conn’s value proposition to our geographically diverse core demographic, unit economics of our business and current retail real estate market conditions provide us ample opportunity for continued expansion. Our brand recognition and long history in our core markets give us the opportunity to further penetrate our existing footprint, particularly as we leverage existing marketing spend, logistics infrastructure, and service footprint. There are also many markets in the United States with demographic characteristics similar to those in our existing footprint, which provides substantial opportunities for future growth. We plan to continue to improve our operating results by leveraging our existing infrastructure and seeking to continually optimize the efficiency of our marketing, merchandising, distribution and credit operations. As we expand in existing markets and penetrate new markets, we expect to increase our purchase volumes, achieve distribution efficiencies and strengthen our relationships with our key vendors. Over time, we also expect our increased store base and higher net sales to further leverage our existing corporate and regional infrastructure.

Results of Operations 

The following tables present certain financial and other information, on a condensed consolidated basis: 

Consolidated:	Three Months Ended   July 31,							Six Months Ended   July 31,
(in thousands)	2019		2018		Change			2019			2018		Change
Revenues:
Total net sales	$	306,062	$	296,313	$	9,749		$	568,041		$	572,069	$	(4,028	)
Finance charges and other revenues	94,997		88,307		6,690			186,530			170,938		15,592
Total revenues	401,059		384,620		16,439			754,571			743,007		11,564
Costs and expenses:
Cost of goods sold	182,065		173,627		8,438			339,293			340,216		(923		)
Selling, general and administrative expense	127,484		120,690		6,794			245,398			235,568		9,830
Provision for bad debts	49,736		50,751		(1,015		)	89,782			94,907		(5,125		)
Charges and credits	—		300		(300		)	(695		)	300		(995		)
Total costs and expenses	359,285		345,368		13,917			673,778			670,991		2,787
Operating income	41,774		39,252		2,522			80,793			72,016		8,777
Interest expense	14,396		15,566		(1,170		)	28,893			32,386		(3,493		)
Loss on extinguishment of debt	—		1,367		(1,367		)	—			1,773		(1,773		)
Income before income taxes	27,378		22,319		5,059			51,900			37,857		14,043
Provision for income taxes	7,404		5,308		2,096			12,417			8,114		4,303
Net income	$	19,974	$	17,011	$	2,963		$	39,483		$	29,743	$	9,740

31

Supplementary Operating Segment Information

Operating segments are defined as components of an enterprise that engage in business activities and for which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker to make decisions about how to allocate resources and assess performance. We are a leading specialty retailer and offer a broad selection of quality, branded durable consumer goods and related services in addition to a proprietary credit solution for our core credit-constrained consumers. We have two operating segments: (i) retail and (ii) credit. Our operating segments complement one another. The retail segment operates primarily through our stores and website and its product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points. Our credit segment offers affordable financing solutions to a large, under-served population of credit-constrained consumers who typically have limited credit alternatives. Our operating segments provide customers the opportunity to comparison shop across brands with confidence in our competitive prices as well as affordable monthly payment options, next day delivery and installation in the majority of our markets, and product repair service. We believe our large, attractively merchandised retail stores and credit solutions offer a distinctive value proposition compared to other retailers that target our core customer demographic. The operating segments follow the same accounting policies used in our Condensed Consolidated Financial Statements.

We evaluate a segment’s performance based upon operating income. SG&A includes the direct expenses of the retail and credit operations, allocated corporate overhead expenses, and a charge to the credit segment to reimburse the retail segment for expenses it incurs related to occupancy, personnel, advertising and other direct costs of the retail segment which benefit the credit operations by sourcing credit customers and collecting payments. The reimbursement received by the retail segment from the credit segment is calculated using an annual rate of 2.5% multiplied by the average outstanding portfolio balance for each applicable period.

The following table represents total revenues, costs and expenses, operating income and loss before taxes attributable to these operating segments for the periods indicated:

Retail Segment:	Three Months Ended   July 31,								Six Months Ended   July 31,
(dollars in thousands)	2019			2018		Change			2019			2018		Change
Revenues:
Product sales	$	274,578		$	267,179	$	7,399		$	509,023		$	516,493	$	(7,470	)
Repair service agreement commissions	27,647			25,662		1,985			51,671			48,525		3,146
Service revenues	3,837			3,472		365			7,347			7,051		296
Total net sales	306,062			296,313		9,749			568,041			572,069		(4,028		)
Finance charges and other	203			98		105			405			112		293
Total revenues	306,265			296,411		9,854			568,446			572,181		(3,735		)
Costs and expenses:
Cost of goods sold	182,065			173,627		8,438			339,293			340,216		(923		)
Selling, general and administrative expense (1)	88,147			83,003		5,144			167,769			160,755		7,014
Provision for bad debts	(19		)	243		(262		)	110			503		(393		)
Charges and credits	—			300		(300		)	(695		)	300		(995		)
Total costs and expenses	270,193			257,173		13,020			506,477			501,774		4,703
Operating income	$	36,072		$	39,238	$	(3,166	)	$	61,969		$	70,407	$	(8,438	)
Number of stores:
Beginning of period	127			118					123			116
Opened	4			—					8			2
End of period	131			118					131			118

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Credit Segment:	Three Months Ended   July 31,									Six Months Ended   July 31,
(in thousands)	2019			2018			Change			2019			2018			Change
Revenues:
Finance charges and other revenues	$	94,794		$	88,209		$	6,585		$	186,125		$	170,826		$	15,299
Costs and expenses:
Selling, general and administrative expense (1)	39,337			37,687			1,650			77,629			74,813			2,816
Provision for bad debts	49,755			50,508			(753		)	89,672			94,404			(4,732		)
Total costs and expenses	89,092			88,195			897			167,301			169,217			(1,916		)
Operating income	5,702			14			5,688			18,824			1,609			17,215
Interest expense	14,396			15,566			(1,170		)	28,893			32,386			(3,493		)
Loss on extinguishment of debt	—			1,367			(1,367		)	—			1,773			(1,773		)
Loss before income taxes	$	(8,694	)	$	(16,919	)	$	8,225		$	(10,069	)	$	(32,550	)	$	22,481

(1) For the three months ended July 31, 2019 and 2018, the amount of overhead allocated to each segment reflected in SG&A was $9.7 million and $9.3 million, respectively. For the three months ended July 31, 2019 and 2018, the amount of reimbursement made to the retail segment by the credit segment was $9.7 million and $9.4 million, respectively. For the six months ended July 31, 2019 and 2018, the amount of corporate overhead allocated to each segment reflected in SG&A was $17.6 million and $17.6 million, respectively. For the six months ended July 31, 2019 and 2018, the amount of reimbursement made to the retail segment by the credit segment was $19.4 million and $18.8 million, respectively.

Three months ended July 31, 2019 compared to three months ended July 31, 2018

Revenues. The following table provides an analysis of retail net sales by product category in each period, including repair service agreement (“RSA”) commissions and service revenues, expressed both in dollar amounts and as a percent of total net sales:

	Three Months Ended July 31,											%		Same Store
(dollars in thousands)	2019		% of Total		2018		% of Total		Change			Change		% Change
Furniture and mattress	$	99,455	32.5	%	$	97,066	32.8	%	$	2,389		2.5	%	—
Home appliance	99,356		32.5		91,471		30.9		7,885			8.6		3.4
Consumer electronics	53,692		17.5		55,654		18.8		(1,962		)	(3.5	)	(12.2	)
Home office	17,883		5.8		19,289		6.5		(1,406		)	(7.3	)	(11.2	)
Other	4,192		1.4		3,699		1.2		493			13.3		6.3
Product sales	274,578		89.7		267,179		90.2		7,399			2.8		(2.1	)
Repair service agreement commissions (1)	27,647		9.0		25,662		8.6		1,985			7.7		(3.6	)
Service revenues	3,837		1.3		3,472		1.2		365			10.5
Total net sales	$	306,062	100.0	%	$	296,313	100.0	%	$	9,749		3.3	%	(2.3	)%

(1) The total change in sales of RSA commissions includes retrospective commissions, which are not reflected in the change in same store sales.

The increase in product sales for the three months ended July 31, 2019 was primarily due to new store growth, partially offset by a decrease in same store sales of 2.3%. The decrease in same store sales was driven by a decrease of 9.3% in markets impacted by Hurricane Harvey, partially offset by an increase of 0.4% in markets not impacted by Hurricane Harvey. We believe the decrease in same store sales in markets impacted by Hurricane Harvey was primarily a result of the impact of rebuilding efforts during the three months ended July 31, 2018.

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The following table provides the change of the components of finance charges and other revenues:

	Three Months Ended   July 31,
(in thousands)	2019		2018		Change
Interest income and fees	$	85,204	$	80,435	$	4,769
Insurance income	9,590		7,774		1,816
Other revenues	203		98		105
Finance charges and other revenues	$	94,997	$	88,307	$	6,690

The increase in interest income and fees resulted from an increase in the yield rate to 21.9% for the three months ended July 31, 2019 from 21.3% for the three months ended July 31, 2018, an increase of 60 basis points, and from an increase of 3.0% in the average balance of the customer accounts receivable portfolio. The increase in the yield rate resulted from the origination of our higher-yielding direct loan product, which represented approximately 75% of our originations for the three months ended July 31, 2019. In addition, insurance income contributed to an increase in credit revenue over the prior year period primarily due to an increase in insurance retrospective income for the three months ended July 31, 2019.

The following table provides key portfolio performance information: 

	Three Months Ended   July 31,
(dollars in thousands)	2019			2018			Change
Interest income and fees	$	85,204		$	80,435		$	4,769
Net charge-offs	(50,005		)	(51,642		)	1,637
Interest expense	(14,396		)	(15,566		)	1,170
Net portfolio income	$	20,803		$	13,227		$	7,576
Average outstanding portfolio balance	$	1,542,849		$	1,497,635		$	45,214
Interest income and fee yield (annualized)	21.9		%	21.3		%
Net charge-off % (annualized)	13.0		%	13.8		%

Retail Gross Margin

	Three Months Ended   July 31,
(dollars in thousands)	2019			2018			Change
Retail total net sales	$	306,062		$	296,313		$	9,749
Cost of goods sold	182,065			173,627			8,438
Retail gross margin	$	123,997		$	122,686		$	1,311
Retail gross margin percentage	40.5		%	41.4		%

The decrease in retail gross margin was primarily driven by higher margins realized in the comparative three months ended July 31, 2018 due to the one-time benefit of increases in appliance retail pricing related to tariff adjustments and the associated forward purchases of inventory, coupled with increased logistics costs to help support future growth in the three months ended July 31, 2019. The decrease was partially offset by an increase in retrospective income on our RSAs during the three months ended July 31, 2019.

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Selling, General and Administrative Expense

	Three Months Ended   July 31,
(dollars in thousands)	2019			2018			Change
Retail segment	$	88,147		$	83,003		$	5,144
Credit segment	39,337			37,687			1,650
Selling, general and administrative expense - Consolidated	$	127,484		$	120,690		$	6,794
Selling, general and administrative expense as a percent of total revenues	31.8		%	31.4		%

The SG&A increase in the retail segment was primarily due to increases in new store occupancy costs and compensation costs offset by a decrease in advertising expense. The SG&A increase in the credit segment was primarily due to an increase in general operational expenses and third-party legal expenses related to collection efforts on charged off accounts. As a percent of average total customer portfolio balance (annualized), SG&A for the credit segment for the three months ended July 31, 2019 increased 10 basis points as compared to the three months ended July 31, 2018.

Provision for Bad Debts

	Three Months Ended   July 31,
(dollars in thousands)	2019			2018			Change
Retail segment	$	(19	)	$	243		$	(262	)
Credit segment	49,755			50,508			(753		)
Provision for bad debts - Consolidated	$	49,736		$	50,751		$	(1,015	)
Provision for bad debts - Credit segment, as a percent of average outstanding portfolio balance (annualized)	12.9		%	13.5		%

The provision for bad debts decreased to $49.7 million for the three months ended July 31, 2019 from $50.8 million for the three months ended July 31, 2018, a decrease of $1.1 million. The decrease was driven by lower net charge-offs of $1.6 million for the three months ended July 31, 2019 compared to the three months ended July 31, 2018, partially offset by a larger increase in the allowance for bad debts for the three months ended July 31, 2019. The larger increase in the allowance for bad debts was primarily driven by the year-over-year increase in the carrying value of the customer accounts receivable portfolio from July 31, 2018.

Charges and Credits

During the three months ended July 31, 2018, we incurred $0.3 million in costs associated with a contingency reserve related to a regulatory matter.

Interest Expense

Interest expense decreased to $14.4 million for the three months ended July 31, 2019 from $15.6 million for the three months ended July 31, 2018, a decrease of $1.2 million. The decrease was driven by a lower weighted average cost of borrowing.

Loss on Extinguishment of Debt

During the three months ended July 31, 2018, we recorded a $1.4 million loss on extinguishment of debt related to the retirement of our Series 2017-A Class B and Class C Notes (the “2017-A Redeemed Notes”) and associated call premiums.

Provision for Income Taxes

	Three Months Ended   July 31,
(dollars in thousands)	2019			2018			Change
Provision for income taxes	$	7,404		$	5,308		$	2,096
Effective tax rate	27.0		%	23.8		%

The increase in income tax expense for the three months ended July 31, 2019 compared to the three months ended July 31, 2018 was primarily driven by an increase in pre-tax earnings and an increase in the effective tax rate. The primary factor affecting the increase in our effective tax rate for the three months ended July 31, 2019 was a decrease in deductible compensation expense compared to the prior year period.

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Six months ended July 31, 2019 compared to six months ended July 31, 2018

Revenues. The following table provides an analysis of retail net sales by product category in each period, including RSA commissions and service revenues, expressed both in dollar amounts and as a percent of total net sales:

	Six Months Ended July 31,											%		Same Store
(dollars in thousands)	2019		% of Total		2018		% of Total		Change			Change		% Change
Furniture and mattress	$	187,819	33.1	%	$	194,086	33.9	%	$	(6,267	)	(3.2	)%	(5.3	)%
Home appliance	176,646		31.1		169,494		29.6		7,152			4.2		0.2
Consumer electronics	103,341		18.2		107,956		18.9		(4,615		)	(4.3	)	(10.4	)
Home office	33,589		5.9		37,599		6.6		(4,010		)	(10.7	)	(13.5	)
Other	7,628		1.3		7,358		1.3		270			3.7		(1.4	)
Product sales	509,023		89.6		516,493		90.3		(7,470		)	(1.4	)	(5.1	)
Repair service agreement commissions (1)	51,671		9.1		48,525		8.5		3,146			6.5		(6.2	)
Service revenues	7,347		1.3		7,051		1.2		296			4.2
Total net sales	$	568,041	100.0	%	$	572,069	100.0	%	$	(4,028	)	(0.7	)%	(5.2	)%

(1) The total change in sales of RSA commissions includes retrospective commissions, which are not reflected in the change in same store sales.

The decrease in product sales for the six months ended July 31, 2019 was due to a decrease in same store sales partially offset by new store growth. The decrease in same store sales was 11.9% in markets impacted by Hurricane Harvey and 2.5% in markets not impacted by Hurricane Harvey. We believe the decrease in same store sales in markets impacted by Hurricane Harvey was primarily a result of the impact of rebuilding efforts during the six months ended July 31, 2018. We also believe same store sales were negatively impacted, primarily in the first fiscal quarter of fiscal year 2020, by a greater-than-expected shift towards online applications, which exhibit higher credit risk and lower approval rates, disruption in the transition to our new e-commerce platform to support our full omnichannel offering and the delay in federal tax refunds.

The following table provides the change of the components of finance charges and other revenues:

	Six Months Ended   July 31,
(in thousands)	2019		2018		Change
Interest income and fees	$	169,221	$	156,781	$	12,440
Insurance income	16,904		14,045		2,859
Other revenues	405		112		293
Finance charges and other revenues	$	186,530	$	170,938	$	15,592

The increase in interest income and fees resulted from an increase in the yield rate to 22.0% for the six months ended July 31, 2019 from 21.0% for the six months ended July 31, 2018, an increase of 100 basis points, and from an increase of 3.3% in the average balance of the customer accounts receivable portfolio. The increase in the yield rate resulted from the origination of our higher-yielding direct loan product, which represented approximately 76% of our originations for the six months ended July 31, 2019. In addition, insurance income contributed to an increase in credit revenue over the prior year period primarily due to an increase in insurance retrospective income for the six months ended July 31, 2019.

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The following table provides key portfolio performance information: 

	Six Months Ended   July 31,
(dollars in thousands)	2019			2018			Change
Interest income and fees	$	169,221		$	156,781		$	12,440
Net charge-offs	(98,066		)	(97,093		)	(973		)
Interest expense	(28,893		)	(32,386		)	3,493
Net portfolio income	$	42,262		$	27,302		$	14,960
Average outstanding portfolio balance	$	1,552,856		$	1,503,311		$	49,545
Interest income and fee yield (annualized)	22.0		%	21.0		%
Net charge-off % (annualized)	12.6		%	12.9		%

Retail Gross Margin

	Six Months Ended   July 31,
(dollars in thousands)	2019			2018			Change
Retail total net sales	$	568,041		$	572,069		$	(4,028	)
Cost of goods sold	339,293			340,216			(923		)
Retail gross margin	$	228,748		$	231,853		$	(3,105	)
Retail gross margin percentage	40.3		%	40.5		%

The decrease in retail gross margin was primarily driven by higher margins realized in the comparative six months ended July 31, 2018 due to the one-time benefit of increases in appliance retail pricing related to tariff adjustments and the associated forward purchases of inventory, coupled with increased logistics costs to help support future growth in the six months ended July 31, 2019. The decrease was partially offset by an increase in retrospective income on our RSAs during the six months ended July 31, 2019.

Selling, General and Administrative Expense

	Six Months Ended   July 31,
(dollars in thousands)	2019			2018			Change
Retail segment	$	167,769		$	160,755		$	7,014
Credit segment	77,629			74,813			2,816
Selling, general and administrative expense - Consolidated	$	245,398		$	235,568		$	9,830
Selling, general and administrative expense as a percent of total revenues	32.5		%	31.7		%

The SG&A increase in the retail segment was primarily due to increases in new store occupancy costs and compensation costs offset by a decrease in advertising expense. The SG&A increase in the credit segment was primarily due to an increase in general operational expenses, occupancy costs and third-party legal expenses related to collection efforts on charged off accounts. As a percent of average total customer portfolio balance (annualized), SG&A for the credit segment for the six months ended July 31, 2019 remained flat as compared to the six months ended July 31, 2018.

Provision for Bad Debts

	Six Months Ended   July 31,
(dollars in thousands)	2019			2018			Change
Retail segment	$	110		$	503		$	(393	)
Credit segment	89,672			94,404			(4,732		)
Provision for bad debts - Consolidated	$	89,782		$	94,907		$	(5,125	)
Provision for bad debts - Credit segment, as a percent of average outstanding portfolio balance (annualized)	11.5		%	12.6		%

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The provision for bad debts decreased to $89.8 million for the six months ended July 31, 2019 from $94.9 million for the six months ended July 31, 2018, a decrease of $5.1 million. The decrease was driven by a greater decrease in the allowance for bad debts during six months ended July 31, 2019 compared to the six months ended July 31, 2018, partially offset by a year-over-year increase in net charge-offs of $1.0 million, which was primarily driven by an increase in the average balance of the customer receivable portfolio. The decrease in the allowance for bad debts as of six months ended July 31, 2019 was primarily driven by a year-over-year decrease in the incurred loss rate as of the six months ended July 31, 2019 compared to the six months ended July 31, 2018.

Charges and Credits

During the six months ended July 31, 2019, we recognized a $0.7 million gain from increased sublease income related to the consolidation of our corporate headquarters. During the six months ended July 31, 2018, we incurred $0.3 million in costs associated with a contingency reserve related to a regulatory matter. 

Interest Expense

Interest expense decreased to $28.9 million for the six months ended July 31, 2019 from $32.4 million for the six months ended July 31, 2018, a decrease of $3.5 million. The decrease was driven by a lower weighted average cost of borrowing and a lower average outstanding balance of debt.

Loss on Extinguishment of Debt

During the six months ended July 31, 2018, we recorded a $1.7 million loss on extinguishment of debt related to the retirement of our Series 2016-B Class B Notes (the “2016-B Redeemed Notes”) and 2017-A Redeemed Notes and associated call premiums.

Provision for Income Taxes

	Six Months Ended   July 31,
(dollars in thousands)	2019			2018			Change
Provision for income taxes	$	12,417		$	8,114		$	4,303
Effective tax rate	23.9		%	21.4		%

The increase in income tax expense for the six months ended July 31, 2019 compared to the six months ended July 31, 2018 was primarily driven by an increase in pre-tax earnings and an increase in the effective tax rate. The primary factor affecting the increase in our effective tax rate for the six months ended July 31, 2019 was a decrease in deductible compensation expense compared to the prior year period.

Customer Accounts Receivable Portfolio

We provide in-house financing to individual consumers on a short- and medium-term basis (contractual terms generally range from 12 to 36 months) for the purchase of durable products for the home. A significant portion of our customer credit portfolio is due from customers that are considered higher-risk, subprime borrowers. Our financing is executed using contracts that require fixed monthly payments over fixed terms. We maintain a secured interest in the product financed. If a payment is delayed, missed or paid only in part, the account becomes delinquent. Our collection personnel attempt to contact a customer once their account becomes delinquent. Our loan contracts generally reflect an interest rate of between 18% and 30%. We have implemented our direct consumer loan program across all Texas, Louisiana, Tennessee and Oklahoma locations. The states of Texas, Louisiana, Tennessee and Oklahoma represented approximately 76% of our originations during the six months ended July 31, 2019, which have a maximum equivalent interest rate of up to 27% in Oklahoma, up to 30% in Texas and Tennessee, and up to 36% in Louisiana under our direct consumer loan programs. In states where regulations do not generally limit the interest rate charged, our loan contracts generally reflect an interest rate of 29.99%. These states represented 12% of our originations during the six months ended July 31, 2019.

We offer qualified customers a 12-month no-interest option finance program. If the customer is delinquent in making a scheduled monthly payment or does not repay the principal in full by the end of the no-interest option program period (grace periods are provided), the account does not qualify for the no-interest provision and none of the interest earned is waived.

We regularly extend or “re-age” a portion of our delinquent customer accounts as a part of our normal collection procedures to protect our investment. Generally, extensions are granted to customers who have experienced a financial difficulty (such as the temporary loss of employment), which is subsequently resolved, and when the customer indicates a willingness and ability to resume making monthly payments. These re-ages involve modifying the payment terms to defer a portion of the cash payments currently required of the debtor to help the debtor improve his or her financial condition and eventually be able to pay the account balance. Our re-aging of customer accounts does not change the interest rate or the total principal amount due from the customer and typically does not reduce the monthly contractual payments. We may also charge the customer an extension fee, which

38

approximates the interest owed for the time period the contract was past due. Our re-age programs consist of extensions and two payment updates, which include unilateral extensions to customers who make two full payments in three calendar months in certain states. Re-ages are not granted to debtors who demonstrate a lack of intent or ability to service the obligation or have reached our limits for account re-aging. To a much lesser extent, we may provide the customer the ability to re-age their obligation by refinancing the account, which typically does not change the interest rate or the total principal amount due from the customer but does reduce the monthly contractual payments and extends the term. Under these options, as with extensions, the customer must resolve the reason for delinquency and show a willingness and ability to resume making contractual monthly payments.

The following tables present, for comparison purposes, information about our managed portfolio (information reflects on a combined basis the securitized receivables transferred to the VIEs and receivables not transferred to the VIEs): 

	As of July 31,
	2019			2018
Weighted average credit score of outstanding balances (1)	594			594
Average outstanding customer balance	$	2,711		$	2,503
Balances 60+ days past due as a percentage of total customer portfolio carrying value (2)(3)	8.7		%	8.7		%
Re-aged balance as a percentage of total customer portfolio carrying value (2)(3)(4)	25.8		%	24.9		%
Carrying value of account balances re-aged more than six months (in thousands) (3)	$	97,510		$	83,496
Allowance for bad debts and uncollectible interest as a percentage of total customer accounts receivable portfolio balance	13.3		%	13.5		%
Percent of total customer accounts receivable portfolio balance represented by no-interest option receivables	23.7		%	20.9		%

	Three Months Ended   July 31,						Six Months Ended   July 31,
	2019			2018			2019			2018
Total applications processed (5)	311,062			295,564			569,849			579,050
Weighted average origination credit score of sales financed (1)	609			610			609			609
Percent of total applications approved and utilized	28.0		%	31.4		%	27.8		%	30.9		%
Average income of credit customer at origination	$	45,700		$	43,700		$	45,500		$	43,700
Percent of retail sales paid for by:
In-house financing, including down payments received	68.8		%	70.5		%	68.5		%	70.3		%
Third-party financing	17.7		%	16.4		%	16.9		%	15.7		%
Third-party lease-to-own option	6.5		%	6.4		%	7.3		%	6.9		%
	93.0		%	93.3		%	92.7		%	92.9		%

(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) Carrying value reflects the total customer accounts receivable portfolio balance, net of deferred fees and origination costs, the allowance for no-interest option credit programs and the allowance for uncollectible interest.

(4) First time re-ages related to customers affected by Hurricane Harvey within FEMA-designated disaster areas included in the re-aged balance as ofJuly 31, 2019 and July 31, 2018 were 1.1% and 2.8%, respectively, of the total customer portfolio carrying value.

(5) The total applications processed during the three and six months ended July 31, 2018, we believe, reflect the impact of the rebuilding efforts following Hurricane Harvey.

Our customer portfolio balance and related allowance for uncollectible accounts are segregated between customer accounts receivable and restructured accounts. Customer accounts receivable include all accounts for which the payment term has not been cumulatively extended over three months or refinanced. Restructured accounts include all accounts for which payment term has been re-aged in excess of three months or refinanced.

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For customer accounts receivable (excluding restructured accounts), the allowance for uncollectible accounts as a percentage of the total customer accounts receivable portfolio balance decreased to 10.0% as of July 31, 2019 from 10.7% as of July 31, 2018. This decrease is primarily driven by an increase in customer recoveries, as well as a reduction in the non-TDR loss rate. The percentage of the carrying value of non-restructured accounts greater than 60 days past due decreased 10 basis points over the prior year period to 6.7% as of July 31, 2019 from 6.8% as of July 31, 2018.

For restructured accounts, the allowance for uncollectible accounts as a percentage of the portfolio balance was 36.2% as of July 31, 2019 as compared to 35.4% as of July 31, 2018.

The percent of bad debt charge-offs, net of recoveries, to average outstanding portfolio balance was 13.0% for the three months ended July 31, 2019 compared to 13.8% for the three months ended July 31, 2018. The decrease was primarily due to the seasoningof loans originated with tighter underwriting standards,improved collections execution, improvements in recoveries due to enhancements in our collections program and an increase in our average outstanding portfolio balance.

As of July 31, 2019 and 2018, balances under no-interest programs included within customer receivables were $368.6 million and $315.1 million, respectively.

Liquidity and Capital Resources

We require liquidity and capital resources to finance our operations and future growth as we add new stores to our operations, which in turn requires additional working capital for increased customer receivables and inventory. We generally finance our operations through a combination of cash flow generated from operations, the use of our Revolving Credit Facility, and through periodic securitizations of originated customer receivables. We plan to execute periodic securitizations of future originated customer receivables.

We believe, based on our current projections, that we have sufficient sources of liquidity to fund our operations, store expansion and renovation activities, and capital expenditures for at least the next 12 months.

Operating cash flows.  For the six months ended July 31, 2019, net cash provided by operating activities was $89.4 million compared to $155.7 million for the six months ended July 31, 2018. The decrease in net cash provided by operating activities was primarily driven by a decrease in cash provided by working capital and the collection of an income tax refund of $34.5 million during the six months ended July 31, 2018 offset by an increase in net income when adjusted for non-cash activity.

Investing cash flows.  For the six months ended July 31, 2019, net cash used in investing activities was $33.3 million compared to $12.2 million for the six months ended July 31, 2018. The change was primarily the result of higher capital expenditures due to investments in new stores, renovations and expansions of select existing stores, a new distribution center and technology investments we are making to support long-term growth.

Financing cash flows.  For the six months ended July 31, 2019, net cash used in financing activities was $45.3 million compared to net cash used in financing activities of $183.6 million for the six months ended July 31, 2018. During the six months ended July 31, 2019, we issued 2019-A VIE asset-backed notes resulting in net proceeds to us of approximately $379.2 million, net of transaction costs, which were used to pay down the entire balance of the Company’s Revolving Credit Facility outstanding at the time of issuance and for other general corporate purposes. Cash collections from the securitized receivables were used to make payments on the asset-backed notes of approximately $285.7 million during the six months ended July 31, 2019 compared to approximately $534.1 million in the comparable prior year period. During the period ended July 31, 2019, net payments under our Revolving Credit Facility were $103.0 million as compared to net borrowings of $184.2 million during the period ended July 31, 2018.

During the six months ended July 31, 2018, the issuance of additional funding under the Warehouse Notes resulted in net proceeds of $169.7 million, net of transaction costs and restricted cash. The proceeds from the Warehouse Notes were used to early retire the 2016-B Redeemed Notes.

Share Repurchase Program. On May 30, 2019, we entered into a stock repurchase program, effective as of May 31, 2019, pursuant to which we may repurchase up to $75.0 million of our outstanding common stock. The program will remain effective for one year, unless extended by the Board of Directors. During the three months ended July 31, 2019, we repurchased 1,874,846 shares of our common stock at an average weighted cost per share of $18.30 for an aggregate amount of $34.3 million.

Senior Notes. On July 1, 2014, we issued $250.0 million of the unsecured Senior Notes due July 2022 bearing interest at 7.25% (the “Senior Notes”), pursuant to an indenture dated July 1, 2014 (as amended, the “Indenture”), among Conn’s, Inc., its subsidiary guarantors (the “Guarantors”) and U.S. Bank National Association, as trustee. The effective interest rate of the Senior Notes after giving effect to the discount and issuance costs is 7.8%.

The Indenture restricts the Company’s and certain of its subsidiaries’ ability to: (i) incur indebtedness; (ii) pay dividends or make other distributions in respect of, or repurchase or redeem, our capital stock (“restricted payments”); (iii) prepay, redeem or repurchase debt that is junior in right of payment to the notes; (iv) make loans and certain investments; (v) sell assets; (vi) incur liens; (vii)

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enter into transactions with affiliates; and (viii) consolidate, merge or sell all or substantially all of our assets. These covenants are subject to a number of important exceptions and qualifications. During any time when the Senior Notes are rated investment grade by either of Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services and no default (as defined in the Indenture) has occurred and is continuing, many of such covenants will be suspended and we will cease to be subject to such covenants during such period. As of July 31, 2019, $213.8 millionwould have been free from the restricted payments covenant contained in the Indenture. Events of default under the Indenture include customary events, such as a cross-acceleration provision in the event that we fail to make payment of other indebtedness prior to the expiration of any applicable grace period or upon acceleration of indebtedness prior to its stated maturity date in an amount exceeding$25.0 million, as well as in the event a judgment is entered against us in excess of $25.0 million that is not discharged, bonded or insured.

Asset-backed Notes. From time to time, we securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. In turn, the VIEs issue asset-backed notes secured by the transferred customer accounts receivables and restricted cash held by the VIEs.

Under the terms of the securitization transactions, all cash collections and other cash proceeds of the customer receivables go first to the servicer and the holders of issued notes, and then to us as the holder of non-issued notes, if any, and residual equity. We retain the servicing of the securitized portfolios and receive a monthly fee of 4.75%(annualized) based on the outstanding balance of the securitized receivables. In addition, we, rather than the VIEs, retain all credit insurance income together with certain recoveries related to credit insurance and RSAs on charge-offs of the securitized receivables, which are reflected as a reduction to net charge-offs on a consolidated basis.

The asset-backed notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act of 1933, as amended. If an event of default were to occur under the indenture that governs the respective asset-backed notes, the payment of the outstanding amounts may be accelerated, in which event the cash proceeds of the receivables that otherwise might be released to the residual equity holder would instead be directed entirely toward repayment of the asset-backed notes, or if the receivables are liquidated, all liquidation proceeds could be directed solely to repayment of the asset-backed notes as governed by the respective terms of the asset-backed notes. The holders of the asset-backed notes have no recourse to assets outside of the VIEs. Events of default include, but are not limited to, failure to make required payments on the asset-backed notes or specified bankruptcy-related events.

The asset-backed notes outstanding as of July 31, 2019 consisted of the following:

Asset-Backed Notes	Original Principal Amount		Original Net Proceeds (1)		Current Principal Amount		Issuance Date	Maturity Date	Contractual Interest Rate	Effective Interest Rate (2)
2017-B Class B Notes	$	132,180	$	131,281	$	29,001	12/20/2017	4/15/2021	4.52%	5.30%
2017-B Class C Notes	78,640		77,843		78,640		12/20/2017	11/15/2022	5.95%	6.35%
2018-A Class A Notes	219,200		217,832		61,415		8/15/2018	1/17/2023	3.25%	4.82%
2018-A Class B Notes	69,550		69,020		37,038		8/15/2018	1/17/2023	4.65%	5.60%
2018-A Class C Notes	69,550		68,850		37,038		8/15/2018	1/17/2023	6.02%	6.97%
2019-A Class A Notes	254,530		253,026		187,959		4/24/2019	10/16/2023	3.40%	4.71%
2019-A Class B Notes	64,750		64,276		64,750		4/24/2019	10/16/2023	4.36%	5.17%
2019-A Class C Notes	62,510		61,898		62,510		4/24/2019	10/16/2023	5.29%	6.18%
Warehouse Notes	121,060		118,972		2,074		7/16/2018	1/15/2020	Index + 2.50% (3)	6.43%
Total	$	1,071,970	$	1,062,998	$	560,425

(1) After giving effect to debt issuance costs.

(2) For the six months ended July 31, 2019, and inclusive of the impact of changes in timing of actual and expected cash flows.

(3) The rate on the Warehouse Notes is defined as the applicable index plus a 2.50% fixed margin.

On April 24, 2019, the Company completed the issuance and sale of asset-backed notes at a face amount of $381.8 million secured by the transferred customer accounts receivables and restricted cash held by a VIE, which resulted in net proceeds to us of $379.2 million, net of debt issuance costs. Net proceeds from the offering were used to repay indebtedness under the Company’s Revolving Credit Facility, as defined below, and for other general corporate purposes. The asset-backed notes mature on October 16, 2023 and consist of $254.5 million of 3.40% Series 2019-A, Class A Asset Backed Fixed Rate Notes, $64.8 million of 4.36% Series 2019-A, Class B Asset Backed Fixed Rate Notes and $62.5 million of 5.29%, Series 2019-A, Class C Asset Backed Fixed Rate Notes.

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Revolving Credit Facility.On May 23, 2018, Conn’s, Inc. and certain of its subsidiaries (the “Borrowers”) entered into a Fourth Amendment to the Fourth Amended and Restated Loan and Security Agreement (the “Fourth Amendment”), dated as of October 30, 2015, with certain lenders, which provides for a $650.0 million asset-based revolving credit facility (the “Revolving Credit Facility”) under which credit availability is subject to a borrowing base and a maturity date of May 23, 2022.

Loans under the Revolving Credit Facility bear interest, at our option, at a rate equal to LIBOR plus the applicable margin ranging from 2.50% to 3.25% per annum (depending on a pricing grid determined by our total leverage ratio) or the alternate base rate plus a margin ranging from 1.50% to 2.25% per annum (depending on a pricing grid determined by our total leverage ratio). The alternate base rate is the greatest of the prime rate announced by Bank of America, N.A., the federal funds rate plus 0.5%, or LIBOR for a 30-day interest period plus 1.0%. We also pay an unused fee on the portion of the commitments that is available for future borrowings or letters of credit at a rate ranging from 0.25% to 0.50% per annum, depending on the average outstanding balance and letters of credit of the Revolving Credit Facility in the immediately preceding quarter. The weighted-average interest rate on borrowings outstanding and including unused line fees under the Revolving Credit Facility was 6.5% for the six months ended July 31, 2019.

The Revolving Credit Facility provides funding based on a borrowing base calculation that includes customer accounts receivable and inventory, and provides for a $40.0 million sub-facility for letters of credit to support obligations incurred in the ordinary course of business. The obligations under the Revolving Credit Facility are secured by substantially all assets of the Company, excluding the assets of the VIEs. As of July 31, 2019, we had immediately available borrowing capacity of $403.0 million under our Revolving Credit Facility, net of standby letters of credit issued of $2.5 million. We also had $81.0 million that may become available under our Revolving Credit Facility if we grow the balance of eligible customer receivables and our total eligible inventory balances.

The Revolving Credit Facility places restrictions on our ability to incur additional indebtedness, grant liens on assets, make distributions on equity interests, dispose of assets, make loans, pay other indebtedness, engage in mergers, and other matters. The Revolving Credit Facility restricts our ability to make dividends and distributions unless no event of default exists and a liquidity test is satisfied. Subsidiaries of the Company may pay dividends and make distributions to the Company and other obligors under the Revolving Credit Facility without restriction. As of July 31, 2019, we were restricted from making distributions, including repayments of the Senior Notes or other distributions, in excess of $266.4 millionas a result of the Revolving Credit Facility distribution and payment restrictions. The Revolving Credit Facility contains customary default provisions, which, if triggered, could result in acceleration of all amounts outstanding under the Revolving Credit Facility.

Debt Covenants. We were in compliance with our debt covenants, as amended, at July 31, 2019. A summary of the significant financial covenants that govern our Revolving Credit Facility, as amended, compared to our actual compliance status at July 31, 2019 is presented below: 

	Actual	Required Minimum/ Maximum
Interest Coverage Ratio for the quarter must equal or exceed (minimum)	4.69:1.00	1.00:1.00
Interest Coverage Ratio for the trailing two quarters must equal or exceed (minimum)	4.38:1.00	1.50:1.00
Leverage Ratio must not exceed (maximum)	1.90:1.00	4.00:1.00
ABS Excluded Leverage Ratio must not exceed (maximum)	1.12:1.00	2.00:1.00
Capital Expenditures, net, must not exceed (maximum)	$27.3 million	$100.0 million

All capitalized terms in the above table are defined by the Revolving Credit Facility and may or may not match directly to the financial statement captions in this document. The covenants are calculated quarterly, except for capital expenditures, which is calculated for a period of four consecutive fiscal quarters, as of the end of each fiscal quarter.

Capital expenditures.  We lease the majority of our stores under operating leases and our plans for future store locations anticipate operating leases, but do not exclude store ownership. Our capital expenditures for future new store projects should primarily be for our tenant improvements to the property leased (including any new distribution centers and cross-dock facilities), the cost of which is estimated to be between $1.5 million and $2.5 million per store (before tenant improvement allowances), and for our existing store remodels, estimated to range between $0.3 million and $1.5 million per store remodel (before tenant improvement allowances), depending on store size. In the event we purchase existing properties, our capital expenditures will depend on the particular property and whether it is improved when purchased. We are continuously reviewing new relationships and funding sources and alternatives for new stores, which may include “sale-leaseback” or direct “purchase-lease” programs, as well as other funding sources for our purchase and construction of those projects. If we do not purchase the real property for new stores, our direct cash needs should include only our capital expenditures for tenant improvements to leased properties and our remodel programs for existing stores. We opened eight new stores during the first half of fiscal year 2020 and currently plan to open a total

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of 14 new stores during fiscal year 2020. Additionally, we plan to upgrade several of our facilities and continue to enhance our IT systems during fiscal year 2020. Our anticipated capital expenditures for the remainder of fiscal year 2020 are between $20.0 million and $23.0 million.

Cash Flow

We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of inventory levels, expansion plans, debt service requirements and other operating cash needs. To meet our short- and long-term liquidity requirements, including payment of operating expenses, funding of capital expenditures and repayment of debt, we rely primarily on cash from operations. As of July 31, 2019, beyond cash generated from operations we had (i) immediately available borrowing capacity of $403.0 million under our Revolving Credit Facility, (ii) $81.0 million that may become available under our Revolving Credit Facility if we grow the balance of eligible customer receivables and our total eligible inventory balances and (iii) $7.6 million of cash on hand. However, we have, in the past, sought to raise additional capital.

We expect that, for the next 12 months, cash generated from operations, proceeds from potential accounts receivable securitizations and our Revolving Credit Facility will be sufficient to provide us the ability to fund our operations, provide the increased working capital necessary to support our strategy and fund planned capital expenditures discussed above in Capital expenditures.

We may repurchase or otherwise retire our debt and take other steps to reduce our debt or otherwise improve our financial position. These actions could include open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and opportunistic refinancing of debt. The amount of debt that may be repurchased or otherwise retired, if any, will depend on market conditions, the Company’s cash position, compliance with debt covenant and restrictions and other considerations.

Off-Balance Sheet Liabilities and Other Contractual Obligations

We do not have any off-balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K. The following table presents a summary of our minimum contractual commitments and obligations as of July 31, 2019: 

			Payments due by period
(in thousands)	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5Years
Debt, including estimated interest payments (1):
Revolving Credit Facility (1)	$	186,502	$	8,175	$	178,327	$	—	$	—
Senior Notes	275,697		16,458		259,239		—		—
2017-B Class B Notes (2)	31,243		1,311		29,932		—		—
2017-B Class C Notes (2)	94,061		4,679		9,358		80,024		—
2018-A Class A Notes (2)	70,344		1,996		3,992		64,356		—
2018-A Class B Notes (2)	44,734		1,722		3,445		39,567		—
2018-A Class C Notes (2)	47,001		2,230		4,459		40,312		—
2019-A Class A Notes (2)	219,912		6,391		12,781		200,740		—
2019-A Class B Notes (2)	78,865		2,823		5,646		70,396		—
2019-A Class C Notes (2)	79,045		3,307		6,614		69,124		—
Warehouse Notes (1)	2,123		2,123		—		—		—
Financing lease obligations	7,677		947		1,652		1,502		3,576
Operating leases:
Real estate	520,918		73,247		146,524		132,095		169,052
Equipment	1,643		964		641		38		—
Contractual commitments (3)	142,584		135,134		5,650		1,800		—
Total	$	1,802,349	$	261,507	$	668,260	$	699,954	$	172,628

(1) Estimated interest payments are based on the outstanding balance as of July 31, 2019 and the interest rate in effect at that time.

(2) The payments due by period for the Senior Notes and asset-backed notes were based on their respective maturity dates at their respective fixed annual interest rate. Actual principal and interest payments on the asset-backed notes will reflect actual proceeds from the securitized customer accounts receivables.

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(3) Contractual commitments primarily include commitments to purchase inventory of $117.9 million.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires us to make estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Certain accounting policies are considered “critical accounting policies” because they are particularly dependent on estimates made by us about matters that are inherently uncertain and could have a material impact to our Condensed Consolidated Financial Statements. We base our estimates on historical experience and on other assumptions that we believe are reasonable. As a result, actual results could differ because of the use of estimates. Other than with respect to the additional policy below, the description of critical accounting policies is included in our 2019 Form 10-K, filed with the SEC on March 26, 2019.

Leases

On February 1, 2019, we adopted ASU 2016-02, Leases (Topic 842). We determine if an arrangement is a lease at inception. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We record lease incentives as a reduction to the operating lease right-of-use assets upon commencement of the lease and amortize the balance on a straight-line basis over the life of the lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Rather, the short-term lease payments will be recognized as an expense on a straight-line basis over the lease term. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option. Lease expense is recognized on a straight-line basis over the lease term.

We have made a policy election for all classifications of leases to combine lease and non-lease components and to account for them as a single lease component.

Recent Accounting Pronouncements

The information related to recent accounting pronouncements as set forth in Note 1, Summary of Significant Accounting Policies, of the Condensed Consolidated Financial Statements in Part I, Item 1, of this quarterly report on Form 10-Q is incorporated herein by reference.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in our financial instruments represents the potential loss arising from adverse changes in interest rates. We have not been materially impacted by fluctuations in foreign currency exchange rates, as substantially all of our business is transacted in, and is expected to continue to be transacted in, U.S. dollars or U.S. dollar-based currencies. Our Senior Notes and asset-backed notes bear interest at a fixed rate and would not be affected by interest rate changes.

Loans under the Revolving Credit Facility bear interest, at our option, at a rate of LIBOR plus a margin ranging from 2.50% to 3.25% per annum (depending on a pricing grid determined by our total leverage ratio) or the alternate base rate plus a margin ranging from 1.50% to 2.25% per annum (depending on a pricing grid determined by our total leverage ratio). The alternate base rate is a rate per annum equal to the greatest of the prime rate announced by Bank of America, N.A., the federal funds rate plus 0.5%, or LIBOR for a 30-day interest period plus 1.0%. Accordingly, changes in our quarterly total leverage ratio and LIBOR or the alternate base rate will affect the interest rate on, and therefore our costs under, the Revolving Credit Facility. As of July 31, 2019, the balance outstanding under our Revolving Credit Facility was $163.5 million. A 100 basis point increase in interest rates on the Revolving Credit Facility would increase our borrowing costs by $1.6 million over a 12-month period, based on the outstanding balance at July 31, 2019.

ITEM 4.   CONTROLS AND PROCEDURES 

Based on management’s evaluation (with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”)), as of the end of the period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. 

For the quarter ended July 31, 2019, there have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. 

PART II. OTHER INFORMATION 

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ITEM 1.   LEGAL PROCEEDINGS 

The information set forth in Note 6, Contingencies, of the Condensed Consolidated Financial Statements in Part I, Item 1, of this quarterly report on Form 10-Q is incorporated herein by reference. 

ITEM 1A. RISK FACTORS

As of the date of the filing, there have been no material changes to the risk factors previously disclosed in Part I, Item 1A, of our 2019 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents information with respect to purchases of Conn’s common stock by Conn’s or its affiliates during the quarter ended July 31, 2019.

Period	Total Number of Shares Purchased (in thousands) (1)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Program (in thousands) (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)
May 1 - 31	—	$	—	—	$	—
June 1 - 30	745	$	17.56	745	$	61.9
July 1 - 31	1,130	$	18.79	1,130	$	40.7
Total	1,875			1,875

(1) On May 30, 2019, our Board of Directors approved a stock repurchase program, effective as of May 31, 2019, pursuant to which we may repurchase up to $75.0 million of our outstanding common stock. The program will remain effective for one year, unless extended by the Board of Directors. See Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to share repurchases.

(2) Average price paid per share excludes costs associated with the repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 

None. 

ITEM 4. MINE SAFETY DISCLOSURE 

Not applicable.

ITEM 5.   OTHER INFORMATION

None. 

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ITEM 6. EXHIBITS 

The exhibits filed as part of this report are as follows (exhibits incorporated by reference are set forth with the name of the registrant, the type of report and registration number or last date of the period for which it was filed, and the exhibit number in such filing):

Exhibit Number	Description of Document
3.1	Certificate of Incorporation of Conn’s, Inc. (incorporated herein by reference to Exhibit 3.1 to Conn’s, Inc. registration statement on Form S-1 (File No. 333-109046) as filed with the Securities and Exchange Commission on September 23, 2003)
3.1.1	Certificate of Amendment to the Certificate of Incorporation of Conn’s, Inc. dated June 3, 2004 (incorporated herein by reference to Exhibit 3.1.1 to Form 10-Q for the quarterly period ended April 30, 2004 (File No. 000-50421) as filed with the Securities and Exchange Commission on June 7, 2004)
3.1.2	Certificate of Amendment to the Certificate of Incorporation of Conn’s, Inc. dated May 30, 2012 (incorporated herein by reference to Exhibit 3.1.2 to Form 10-Q for the quarterly period ended April 30, 2012 (File No. 001-34956) as filed with the Securities and Exchange Commission on June 5, 2012)
3.1.3	Certificate of Correction to the Certificate of Amendment to Conn’s, Inc. Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1.3 to Form 10-K for the annual period ended January 31, 2014 (File No. 001-34956) as filed with the Securities and Exchange Commission on March 27, 2014)
3.1.4	Certificate of Amendment to the Certificate of Incorporation of Conn’s, Inc. as filed on May 29, 2014 (incorporated herein by reference to Exhibit 3.1.4 to Conn’s, Inc. Form 10-Q for the quarterly period ended April 30, 2014 (File No. 001-34956) as filed with the Securities and Exchange Commission on June 2, 2014)
3.2	Second Amended and Restated Bylaws of Conn’s, Inc. effective as of November 27, 2018 (incorporated herein by reference to exhibit 3.2 to Form 10-Q for the quarterly period ended October 31, 2018 (File No. 001-34956) as filed with the Securities and Exchange Commission on December 4, 2018)
10.1*	Executive Severance Agreement by and between Rodney Lastinger and Conn’s Inc., dated as of June 3, 2019
31.1	Rule 13a-14(a)/15d-14(a) Certification (Chief Executive Officer) (filed herewith)
31.2	Rule 13a-14(d)/15d-14(d) Certification (Chief Financial Officer) (filed herewith)
32.1	Section 1350 Certification (Chief Executive Officer and Chief Financial Officer) (furnished herewith)
101	The following financial information from our Quarterly Report on Form 10-Q for the second quarter of fiscal year 2020, filed with the SEC on September 3, 2019, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets at July 31, 2019 and January 31, 2019, (ii) the Condensed Consolidated Statements of Income for the three and six months ended July 31, 2019 and 2018, (iii) the Condensed Consolidated Statements of Shareholders Equity for the periods ended July 31, 2019 and 2018, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended July 31, 2019 and 2018 and (v) the notes to the Condensed Consolidated Financial Statements.

*Filed herewith

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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 thereunto duly authorized. 

CONN’S, INC.
Date:	September 3, 2019
By:	/s/ George L. Bchara
	George L. Bchara
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer and duly authorized to sign this report on behalf of the registrant)

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EX-10.1

EXHIBIT 10.1

EXECUTIVE SEVERANCE AGREEMENT

THIS EXECUTIVE SEVERANCE AGREEMENT (this “Agreement”) is made as of June 3, 2019 (the “Effective Date” shall be the date of the Executive’s commencement of employment), by and between Conn’s, Inc., a Delaware corporation with its principal offices at 2445 Technology Forest Blvd, The Woodlands, Texas 77381 (“Conn’s”), and Rodney Lastinger, an individual (the “Executive”).

WHEREAS, Executive has agreed to commence employment with Conn’s as its President, Retail, as of the Effective Date;

NOW, THEREFORE, in consideration of the foregoing and in consideration of the mutual promises and agreements contained herein, the parties hereto agree as follows:

1.Term of Agreement. This Agreement will commence on the Effective Date and will continue in effect, unless modified in writing, until Executive’s employment with Conn’s terminates.

2.At-Will Employment. Conn’s and Executive acknowledge that the Executive’s employment shall be at-will, within the meaning of applicable law.

3. Severance Benefits Under This Agreement.

(a)Termination of Employment for Any Reason. The following financial obligations will exist between Conn’s and Executive upon Executive’s termination of employment for any reason:

(i)Conn’s will pay to Executive earned but unpaid Base Salary through the date of termination;

(ii)Conn’s will pay to Executive any annual incentive plan bonus, or other form of incentive compensation, for which the performance measurement period has ended, but which is unpaid at the time of termination;

(iii) Conn’s will pay to Executive any accrued but unpaid vacation;

(iv)Conn’s will pay to Executive any unreimbursed business expenses incurred by the Executive on behalf of Conn’s;

(v)Executive will pay to Conn’s any relocation benefits in accordance with the terms of the Executive’s Offer Letter, which is incorporated herein by reference.

(b)Termination Without Cause, or Voluntary Termination by the Executive for Good Reason, not in Connection with a Change of Control. Except as otherwise provided in Section 3(c), and subject to Executive’s execution and non-revocation of a release of claims pursuant to Section 3(d), if (x) Conn’s terminates Executive’s employment other than (A) for Cause or (B) as a result of Executive’s death or Disability, or (y) Executive voluntarily terminates his employment for Good Reason, Conn’s will pay Executive the following amounts and provide the following benefits:

(i) Executive shall continue to receive his Base Salary for the twelve

(12) month period (the “Severance Period”) following such termination, payable in accordance with Conn’s normal payroll practices.

(ii)During the Severance Period, Executive shall receive continued coverage under Conn’s medical, dental, life, disability, and other employee welfare benefit plans in which executive officers of Conn’s are eligible to participate, to the extent Executive is eligible under the terms of such plans immediately prior to Executive’s termination. For purposes of clarity, during the term of this Agreement Conn’s shall provide Executive coverage under a major medical plan. Conn’s obligation to provide the foregoing benefits shall terminate upon Executive’s becoming eligible for comparable employee welfare benefits under a plan or arrangement provided by a new employer. Executive agrees to promptly notify Conn’s of any such employment and the material terms of any employee welfare benefits offered to Executive in connection with such employment.

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(c)Termination in Connection with a Change of Control. If, during the two (2) year period that begins on the date that is one (1) year prior to a Change of Control and ends on the date that is one (1) year following a Change of Control, Conn’s (or its successor) terminates Executive’s employment other than (A) for Cause or (B) as a result of Executive’s death or Disability, or Executive voluntarily terminates his employment for Good Reason, then, subject to Executive’s execution and non-revocation of a release of claims pursuant to Section 3(d), Conn’s will pay the following amounts and provide the following benefits:

(i)A lump-sum cash payment in an amount equal to two (2) times the Executive’s Base Salary, which, subject to Section 16, shall be payable not later than sixty (60) days following (A) Executive’s termination (if Executive’s employment terminates on or after the date of the Change of Control), or (B) the date of the Change of Control (if Executive’s employment terminates during the one-year period prior to the date of the Change of Control); provided, however, that if the Change of Control is not a “change in control event,” within the meaning of Treasury Regulations issued under Section 409A of the Code, then such amount shall be paid in monthly installments over a period of two years, rather than a lump sum payment. Notwithstanding the provisions of Section 3(c)(i)(B), the amount payable to Executive under this Section 3(c)(i) shall be reduced by the payments, if any, received by Executive pursuant to Section 3(b)(i).

(ii)Conn’s will offer the Executive and any eligible family members the opportunity to elect to continue medical and dental coverage pursuant to COBRA. The Executive will be responsible for paying the required monthly premium for that coverage, but Conn’s will pay the Executive a lump sum cash stipend equal to 12 times the portion of the monthly premium that would have been paid by Conn’s for the same level of health and dental coverage the Executive had in effect immediately prior to his termination if the Executive were actively employed by Conn’s, and the Executive may, but is not required to, choose to use the stipend for the payment of COBRA premiums for any COBRA coverage that the Executive or eligible family members may elect. Conn’s will pay the stipend to the Executive within sixty (60) days after Executive’s termination of employment, or such later

date required under Section 16, whether or not the Executive or any eligible family member elects COBRA coverage, whether or not the Executive continues COBRA coverage for the maximum period permitted by law, and whether or not the Executive receives medical or dental coverage from another employer while the Executive is receiving COBRA continuation coverage. Payment of the stipend will not in any way extend or modify the Executive’s continuation coverage rights under COBRA or any similar continuation coverage law.

(iii) All awards held by the Executive under the 2016 Omnibus Incentive Plan shall immediately vest and if applicable, continue to be exercisable during the 12-month period following the date of termination as if Executive had remained an employee of Conn’s.

The terms of this Section 3(c) are continuing in nature and shall survive until the one (1) year anniversary of the earlier of Executive’s termination of employment or termination of this Agreement.

(d)Waiver and Release. Executive’s rights to any payments under 3(b) or 3(c) of this Agreement are contingent on Executive signing and returning, within 21 days following the date of termination (or, if permitted by Conn’s, within 45 days following the date of termination), an executed release of claims in a form prescribed by Conn’s, and not revoking such release within seven (7) days thereafter. Any amounts payable under Section 3(b)(i), 3(c)(i) and 3(c)(ii) shall be delayed until such conditions have been satisfied; provided, however, that if the period during which Executive may consider whether to execute or revoke such a release of claims begins in one calendar year and ends in a subsequent calendar year, all payments under Section 3(b) or 3(c) that otherwise would be payable in the first of such calendar years shall be paid in the subsequent calendar year in accordance with Section 409A of the Code.

4.Attorneys' Fees, Costs and Expenses. Conn’s will reimburse Executive for the reasonable attorney’s fees, costs, and expenses incurred by the Executive in connection with any claim made or action brought by Executive to enforce his rights hereunder, provided such action is not decided in favor of Conn’s.

5. Potential Limitation on Payments.

(a)Anything in this Agreement to the contrary notwithstanding, if it is determined that

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any payment or distribution by Conn’s to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 5) (all such payments and benefits, including the payments and benefits under Section 5 hereof, being hereinafter referred to as the “Total Payments”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively the “Excise Tax”), then the Total Payments will be reduced, in the order specified in Section 5(b), to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax, but only if the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal,

state, and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state, and local income taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).

(b) The Total Payments will be reduced in the following order:

(i) reduction of any cash severance payments otherwise payable to the Executive that are exempt from Section 409A of the Code; (ii) reduction of any other cash payments or benefits otherwise payable to the Executive that are exempt from Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code; (iii) reduction of any other payments or benefits otherwise payable to the Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to any acceleration of vesting and payments with respect to any equity award that are exempt from Section 409A of the Code; and (iv) reduction of any payments attributable to any acceleration of vesting or payments with respect to any equity award that are exempt from Section 409A of the Code, in each case beginning with payments that would otherwise be made last in time.

(c)Subject to the provisions of Section 5(d) hereof, all determinations required to be made under this Section 5, including whether and when Total Payments should be reduced, the amount of such Total Payments, Excise Taxes, and all other related determinations, as well as all assumptions to be utilized in arriving at such determinations, will be made by a nationally recognized certified public accounting firm as may be designated by Conn’s, subject to Executive’s approval which will not be unreasonably withheld (the “Accounting Firm”). All fees and expenses of the Accounting Firm will be borne solely by Conn’s. Any determination by the Accounting Firm will be binding upon Conn’s and the Executive.

(d)As a result of uncertainty in the application of Section 280G and Section 4999 of the Code at the time of the initial calculation by the Accounting Firm hereunder, it is possible that the cash severance payment made by Conn’s will have been less than Conn’s should have paid pursuant to Section 5 hereof (the amount of any such deficiency, the “Underpayment”), or more than Conn’s should have paid pursuant to Section 5 hereof (the amount of any such overage, the “Overpayment”). In the event of an Underpayment, Conn’s will pay the Executive the amount of such Underpayment (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) not later than five business days after the amount of such Underpayment is subsequently determined, provided, however, such Underpayment will not be paid later than the end of the calendar year following the calendar year in which the Executive remitted the related taxes. In the event of an Overpayment, the amount of such Overpayment will be paid to Conn’s by the Executive not later than five business days after the amount of such

Overpayment is subsequently determined (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of the Code).

6.Certain Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

(a)“Affiliate” shall mean, with respect to a person, any other person controlling, controlled by, or under common control with the first person.

(b)“Base Salary” shall mean Executive’s annual base salary, as approved by the Compensation Committee of the Board, and effective as of the date immediately prior to the Executive’s termination of employment.

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(c) “Board” shall mean the Board of Directors of Conn’s.

(d)“Cause” shall mean (i) behavior of Executive which is adverse to Conn’s interests, (ii) Executive’s dishonesty, criminal charge or conviction, grossly negligent misconduct, willful misconduct, acts of bad faith, neglect of duty, or (iii) material breach of this Agreement.

(e) “Change of Control” means the occurrence of any of the following events:

(i)Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Act”)) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of Conn’s representing thirty-five percent (35%) or more of the total voting power represented by Conn’s then outstanding voting securities;

(ii)A change in the composition of the Board occurring within a twelve- month period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” will mean directors who either (A) are directors of Conn’s as of the effective date of this Agreement, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to Conn’s);

(iii)The consummation of a merger or consolidation of Conn’s with any other entity or corporation, other than a merger or consolidation that would result in the voting securities of Conn’s outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or such surviving entity’s parent) at least fifty percent (50%) of the total voting power represented by the voting securities of Conn’s or such surviving entity or such surviving entity’s parent outstanding immediately after such merger or consolidation; or

(iv) The sale, lease, exchange or other transfer, directly or indirectly, of

(A) all or substantially all of the assets of Conn’s (in one transaction or in a series

of related transactions), or (B) one of the significant operating divisions of Conn’s, including the Retail and Credit Divisions.

(f)“Confidential Information” shall mean information: (i) disclosed to or known by the Executive as a consequence of or through his employment with Conn’s, (ii) not generally known outside Conn’s, and (iii) which relates to any aspect of Conn’s or its business, research, or development. “Confidential Information” includes, but is not limited to Conn’s trade secrets, proprietary information, business plans, marketing plans, methodologies, computer code and programs, formulas, processes, compilations of information, results of research, proposals, reports, records, financial information, compensation and benefit information, cost and pricing information, customer lists and contact information, supplier lists and contact information, vendor lists and contact information, and information provided to Conn’s by a third party under restrictions against disclosure or use by Conn’s or others; provided, however, that the term “Confidential Information” does not include information that (a) at the time it was received by Executive was generally available to the public, (b) prior to its use by Executive, becomes generally available to the public through no act or failure of Executive, (c) is received by Executive from a person or entity other than Conn’s or an Affiliate of Conn’s who is not under an obligation of confidence with respect to such information, or (d) was generally known by Executive by virtue of his experience and know-how gained prior to employment with Conn’s.

(g)“Control” and correlative terms shall mean the power, whether by contract, equity ownership, or otherwise, to direct the policies or management of a person.

(h)“Copyright Works” shall mean materials for which copyright protection may be obtained including, but not limited to literary works (including all written material), computer programs, artistic and graphic works (including designs, graphs, drawings, blueprints, and other works), recordings, models, photographs, slides, motion pictures, and audio-visual works, regardless of the form or manner in which documented or recorded.

(i)“Disability” shall mean Executive’s permanent disability (A) as determined in accordance with the disability insurance that Conn’s may then have in effect, if any, or

(B)if no such insurance is in effect, shall mean that Executive is subject to a medical determination that he, because

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of a medically determinable disease, injury, or other mental or physical disability, is unable to perform substantially all of his then regular duties, and that such disability is determined or reasonably expected to last at least twelve (12) months, based on then-available medical information.

(j)“Good Reason” shall mean, (A) without Executive’s express written consent, the material diminution of the Executive’s title, duties, authority, or responsibilities, relative to Executive’s duties, authority, or responsibilities as in effect immediately prior to such reduction, or the assignment to Executive of such reduced duties, authority, or responsibilities, (B) without Executive’s express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Executive immediately prior to such reduction, (C) a material reduction of Executive’s Base Salary or annual bonus opportunity, each as in effect as of the Effective Date, (D) a material reduction in the kind or level of employee benefits, including additional bonus opportunities, to which the Executive was entitled

immediately prior to such reduction with the result that the Executive’s overall benefits package is significantly reduced, (E) for purposes of Section 3(c) only, the failure of Conn’s to obtain the assumption of this Agreement by any successors contemplated in Section 9 below, or (F) for purposes of Section 3(c) only, the transfer of Executive’s principal place of employment to a location that is more than one-hundred (100) miles from Executive’s principal place of employment immediately prior to the Change of Control, or

(G) any act or set of facts or circumstances that would, under case law or statute, constitute a constructive termination of Executive. Executive may terminate his employment for Good Reason only if (1) Executive provides written notice to Conn’s of the occurrence of the Good Reason event (as described above) within thirty (30) days after Executive knows or reasonably should know of the circumstances constituting Good Reason, which notice shall specifically identify the circumstances which Executive believes constitute Good Reason; (2) Conn’s fails to correct the circumstances constituting Good Reason within thirty (30) days after such notice; and (3) Executive resigns for Good Reason within thirty

(30) days after the expiration of the correction period described in clause (2) hereof.

(k)“Person” shall mean an individual, partnership, corporation, limited liability company, trust, or unincorporated organization, or a government or agency or political subdivision thereof.

(l)“Work Product” shall mean all methods, analyses, reports, plans, computer files and all similar or related information which (i) relate to Conn’s or any of its Affiliates and (ii) are conceived, developed, or made by Executive in the course of his employment by Conn’s.

7.Non-Disclosure, Non-Competition, and Non-Solicitation. Executive and Conn’s acknowledge and agree that during and solely as a result of his employment by Conn’s, Conn’s has provided and will continue to provide Confidential Information and special training to Executive to allow Executive to fulfill his obligations as an executive of a publicly-held company and under this Agreement. In consideration of the special and unique opportunities afforded to Executive by Conn’s as a result of Executive’s employment, as outlined in the previous sentence, Executive hereby agrees as follows:

(a)Executive agrees that Executive will not, except as Conn’s may otherwise consent or direct in writing, reveal or disclose, sell, use, lecture upon, publish, or otherwise disclose to any third party any Confidential Information of Conn’s or any of its Affiliates, or authorize anyone else to do these things at any time either during or subsequent to Executive’s employment with Conn’s. This Section 7(a) shall continue in full force and effect after termination of Executive’s employment for any reason. Executive’s obligations under this Section 7(a) with respect to any specific Confidential Information shall cease only when that specific portion of the Confidential Information becomes publicly known, other than as a result of disclosure by Executive, in its entirety and without combining portions of such information obtained separately. It is understood that such Confidential Information of Conn’s and any of its Affiliates includes matters that Executive conceives or develops, as well as matters Executive learns from other executives of Conn’s and any of its Affiliates. Notwithstanding anything herein to the contrary, nothing in this Agreement shall (i) prohibit the Executive from making reports of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of

1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal law or regulation, or (ii) require notification or prior approval by Conn’s of any reporting described in clause (i) above.

(b)Executive agrees that for the duration of this Agreement, and for a period of twelve (12) months following Executive’s termination of employment for any reason other than in connection with a Change of Control

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(as described in Section 3(c)), Executive shall not (other than for the benefit of Conn’s or any of its Affiliates pursuant to this Agreement) compete with Conn’s or any of its Affiliates by engaging in the conception, design, development, production, marketing, or servicing of any product or service that is substantially similar to the products or services which Conn’s or any of its Affiliates provides, and that he will not work for, assist, loan money, extend credit, or become affiliated with as an individual, owner, partner, director, officer, stockholder, employee, advisor, independent contractor, joint venturer, consultant, agent, representative, salesman, or any other competitive capacity, either directly or indirectly, any individual or business which offers or performs services, or offers or provides products substantially similar to the services and products provided by Conn’s or any of its Affiliates. The scope of the restrictions of this Section 7(b) are nationwide, given Executive’s nationwide responsibilities. The restrictions of this Section 7(b) shall not be violated by the ownership of no more than 1% of the outstanding securities of any company whose equity securities are traded on a national securities exchange, including the NASDAQ Global Select Market.

(c)Executive agrees that for the duration of this Agreement, and for a period of twelve (12) months following Executive’s termination of employment for any reason, Executive shall not either directly or indirectly, on his behalf or on behalf of others, solicit, attempt to hire, or hire any person employed by Conn’s and any of its Affiliates to work for Executive or for another entity, firm, corporation, or individual.

(d)Executive acknowledges that Conn’s has taken reasonable steps to maintain the confidentiality of its Confidential Information and the ownership of its Work Product and Copyright Works, which is extremely valuable to Conn’s and provides Conn’s with a competitive advantage in its market. Executive further acknowledges that Conn’s would suffer irreparable harm if Executive were to use or enable others to use such knowledge, information, and business acumen in competition with Conn’s. Executive acknowledges the necessity of the restrictive covenants set forth herein to: protect Conn’s legitimate interests in Conn’s Confidential Information; protect Conn’s customer relations and the goodwill with customers and suppliers that Conn’s has established at its substantial investment; and protect Conn’s as a result of providing Executive with specialized knowledge, training, and insight regarding Conn’s operations as a publicly-held company. Executive further agrees and acknowledges that these restrictive covenants are reasonably limited as to time, geographic area, and scope of activities to be restricted and that such promises do not impose a greater restraint on Executive than is necessary to protect the goodwill, Confidential Information, and other legitimate business interests of Conn’s. Executive agrees that any breach of this Section 7 cannot be remedied solely by money damages, and that in addition to any other remedies Conn’s may have, Conn’s is entitled to obtain injunctive relief against Executive without the requirement of posting bond or other security. Nothing herein, however, shall be construed as limiting Conn’s right to pursue any other available remedy at law or in equity, including recovery of damages and termination of this Agreement.

(e)Executive acknowledges that all writings, records, and other documents and things comprising, containing, describing, discussing, explaining, or evidencing any Confidential Information, Work Product, and/or Copyright Works of Conn’s, any Affiliate of Conn’s, or any third party with which Conn’s has a confidential relationship, is the property of Conn’s or such Affiliate. All property belonging to Conn’s in Executive’s custody or possession that has been obtained or prepared in the course of Executive’s employment with Conn’s shall be the exclusive property of Conn’s, shall not be copied and/or removed from the premises of Conn’s, except in pursuit of the business of Conn’s, and shall be delivered to Conn’s, along with all copies or reproductions of same, upon notification of the termination of Executive’s employment or at any other time requested by Conn’s. Conn’s shall have the right to retain, access, and inspect all property of any kind in Executive’s office, work area, and on the premises of Conn’s upon termination of Executive’s employment and at any time during Executive’s employment, to ensure compliance with the terms of this Agreement.

The terms of this Section 7 are continuing in nature and shall survive the termination or expiration of this Agreement.

8.Notices. All notices and other communications under this Agreement shall be in writing and shall be delivered personally or by facsimile or electronic delivery, given by hand delivery to the other party, sent by overnight courier or sent by registered or certified mail, return receipt requested, postage prepaid, to:

If to Executive:    Rodney Lastinger

2445 Technology Forest Blvd The Woodlands, Texas 77381

If to Conn’s:        Conn’s, Inc.

2445 Technology Forest Blvd. The Woodlands, Texas 77381

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Attn: Office of the General Counsel

9.Assignment. Conn’s shall require any successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to a controlling interest in the business, assets, or equity of Conn’s (or, if applicable, a material division of Conn’s, including the Retail or Credit division) to assume and agree to perform this Agreement in the same manner and to the same extent that Conn’s would be required to perform if no such succession had taken place. This Agreement is a personal employment contract and the rights, obligations, and interests of Executive under this Agreement may not be sold, assigned, transferred, pledged, or hypothecated by Executive.

10.Binding Agreement. Executive understands that his obligations under this Agreement are binding upon Executive’s heirs, successors, personal representatives, and legal representatives.

11.Arbitration. Except for any controversy or claim relating to Section 7 of this Agreement, any controversy or claim arising out of or relating to this Agreement or the breach of

any provision of this Agreement, including the arbitrability of any controversy or claim, shall be settled by arbitration administered by the American Arbitration Association (“AAA”) under its National Rules for the Resolution of Employment Disputes and the Optional Rules for Emergency Measures of Protection of the AAA, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Any provisional remedy, which would be available from a court of law, shall be available from the arbitrator to the parties to this Agreement pending arbitration. Arbitration of disputes is mandatory and in lieu of any and all civil causes of action and lawsuits either party may have against the other arising out of Executive’s employment with Conn’s. Civil discovery shall be permitted for the production of documents and taking of depositions. The arbitrator(s) shall be guided by the Texas Rules of Civil Procedure in allowing discovery and all issues regarding compliance with discovery requests shall be decided by the arbitrator(s). The Federal Arbitration Act shall govern this Section 11. This Agreement shall in all other respects be governed and interpreted by the laws of the State of Texas, excluding any conflicts or choice of law rule or principles that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The arbitration shall be conducted in the city of Conn’s corporate offices by one neutral arbitrator chosen by AAA according to its National Rules for the Resolution of Employment Disputes if the amount of the claim is one million dollars ($1,000,000.00) or less and by three neutral arbitrators chosen by AAA in the same manner if the amount of the claim is more than one million dollars ($1,000,000.00). Neither party nor the arbitrator(s) may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of both parties unless compelled to do so either by judicial process or to enforce an arbitration award rendered pursuant to this Section 11. All fees and expenses of the arbitration shall be borne by the parties equally.

12.Waiver. No waiver by either party to this Agreement of any right to enforce any term or condition of this Agreement, or of any breach of this Agreement, shall be deemed a waiver of such right in the future or of any other right or remedy available under this Agreement.

13.Severability. If any provision of this Agreement as applied to either party or to any circumstances shall be adjudged by a court of competent jurisdiction or arbitrator to be void or unenforceable, the same shall in no way affect any other provision of this Agreement or the validity or enforceability of this Agreement. If any court or arbitrator construes any of the provisions of Section 7 of this Agreement, or any part thereof, to be unreasonable because of the duration of such provision or the geographic or other scope thereof, such court or arbitrator shall reduce the duration or restrict the geographic or other scope of such provision or enforce such provision to the maximum extent possible as so reduced or restricted.

14.Entire Agreement; Amendment. This Agreement shall constitute the entire agreement between the parties with respect to the subject matter hereof. This Agreement replaces and supersedes any and all existing agreements entered into between Executive and Conn’s, whether oral or written, regarding the subject matter of this Agreement, except that this Agreement shall modify and supersede any equity award agreement between Executive and Conn’s under the 2016 Omnibus Incentive Plan as expressly set forth herein. The terms of this Agreement shall prevail to the extent of any conflict between the terms of this Agreement and any equity award agreement between Executive and Conn’s under the Conn’s 2016 Omnibus Incentive Plan. This Agreement may not be amended or modified other than by a written agreement executed by the parties to this Agreement or their respective successors and legal representatives.

15.Understand Agreement. Executive represents and warrants that he has (i) read and understood each and every provision of this Agreement, (ii) been given the opportunity to obtain advice from legal counsel of choice, if necessary and desired, to interpret any and all provisions of this Agreement, and (iii) freely and voluntarily entered into this Agreement.

16.Section 409A of the Code. This Agreement is intended to comply with the requirements of Section 409A of the Code, and shall be interpreted and construed consistently with such intent. The payments to Executive pursuant to this

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Agreement are also intended to be exempt from Section 409A of the Code to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and for such purposes, each payment to Executive under this Agreement shall be considered a separate payment. In the event the terms of this Agreement would subject Executive to taxes or penalties under Section 409A of the Code (“409A Penalties”), Conn’s and Executive shall cooperate diligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extent possible; provided, however, that in no event shall Conn’s be responsible for any 409A Penalties that arise in connection with any amounts payable under this Agreement. To the extent any amounts under this Agreement are payable by reference to Executive’s “termination of employment,” such term and similar terms shall be deemed to refer to Executive’s “separation from service,” within the meaning of Section 409A of the Code. Notwithstanding any other provision in this Agreement, to the extent any payment hereunder constitutes nonqualified deferred compensation, within the meaning of Section 409A, and Executive is a specified employee (within the meaning of Section 409A of the Code) as of the date of Executive’s separation from service, each such payment that is payable upon Executive’s separation from service and would have been paid prior to the six-month anniversary of Executive’s separation from service, shall be delayed until the earlier to occur of (i) the first day of the seventh month following Executive’s separation from service or (ii) the date of Executive’s death. Any reimbursement payable to Executive pursuant to this Agreement shall be conditioned on the submission by Executive of all expense reports reasonably required by Employer under any applicable expense reimbursement policy, and shall be paid to Executive in accordance with Conn’s expense reimbursement policy, but in no event later than the last day of the calendar year following the calendar year in which Executive incurred the reimbursable expense. Any amount of expenses eligible for reimbursement, or in-kind benefit provided, during a calendar year shall not affect the amount of expenses eligible for reimbursement, or in-kind benefit to be provided, during any other calendar year. The right to any reimbursement or in-kind benefit pursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit.

17.Recoupment. (a) Any portion of the payments, equity grants, equity vesting, including those under the 2016 Omnibus Incentive Plan, Conn’s annual performance bonus opportunity, and benefits provided under this Agreement, as well as any other payments and benefits which you receive pursuant to a Company plan or other arrangement, shall be subject to recoupment and clawback to the extent necessary to comply with the requirements of the Dodd- Frank Wall Street Reform and Consumer Protection Act, any Securities and Exchange Commission rule, or any policy that may be adopted by the Company’s Board of Directors, as amended from time to time. Executive agrees to fully cooperate with Conn’s in assuring compliance with such policies and provisions of applicable law.

(b) In addition, the payments outlined in Section 17(a), as well as any sign-on bonus paid to Executive, shall be subject to recoupment and clawback in the event of Executive’s termination for Cause.

18.Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas and is performable in the city of Conn’s corporate offices.

19.Professional/Personal. Membership by Executive on corporate and civic boards should be accepted only after consideration of conflict of interest and consultation with the Chairman of the Board.

20.Titles; Pronouns and Plurals. The titles to the sections of this Agreement are inserted for convenience of reference only and should not be deemed a part hereof or affect the construction or interpretation of any provision hereof. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine, or neuter forms, and the singular form of nouns, pronouns, and verbs shall include the plural and vice versa.

[Signature Page Follows]

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IN WITNESS THEREOF, the parties have executed this Agreement as of the date first written above.

CONN’S, INC.

By:/s/ Mark Prior

Name:Mark Prior

Title:General Counsel

Date:June 3, 2019

Executive: Rodney Lastinger

Signature:/s/ Rodney Lastinger

Print Name:Rodney Lastinger

Date:May 30, 2019

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Norman L. Miller, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Conn's, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Norman L. Miller

Norman L. Miller

Chairman of the Board, Chief Executive Officer and President

(Principal Executive Officer)

Date: September 3, 2019

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, George L. Bchara, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Conn's, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ George L. Bchara

George L. Bchara

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: September 3, 2019

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Conn's, Inc. (the "Company") on Form 10-Q for the period ended July 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Norman L. Miller, Chairman of the Board, Chief Executive Officer and President of the Company, and George L. Bchara, Executive Vice President and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Norman L. Miller

Norman L. Miller

Chairman of the Board, Chief Executive Officer and President

(Principal Executive Officer)

/s/ George L. Bchara

George L. Bchara

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: September 3, 2019

A signed original of this written statement required by Section 906 has been provided to Conn's, Inc. and will be retained by Conn's, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.  The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

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Leases - Narrative (Details) $ in Millions	Jul. 31, 2019 USD ($)
Lessee, Lease, Description [Line Items]
Accounts receivable for tenant improvement allowances	$ 11.4
Land, Buildings and Improvements [Member] | Minimum [Member]
Lessee, Lease, Description [Line Items]
Lessee, operating lease, term of contract	5 years
Land, Buildings and Improvements [Member] | Maximum [Member]
Lessee, Lease, Description [Line Items]
Lessee, operating lease, term of contract	15 years
Equipment [Member] | Minimum [Member]
Lessee, Lease, Description [Line Items]
Lessee, operating lease, term of contract	3 years
Equipment [Member] | Maximum [Member]
Lessee, Lease, Description [Line Items]
Lessee, operating lease, term of contract	5 years

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jul. 31, 2019	Jul. 31, 2018
Revenues:
Other Income	$ 94,997	$ 88,307	$ 186,530	$ 170,938
Total revenues	401,059	384,620	754,571	743,007
Total Net Sales	306,062	296,313	568,041	572,069
Costs and expenses:
Cost of goods sold	182,065	173,627	339,293	340,216
Selling, general and administrative expense	127,484	120,690	245,398	235,568
Provision for bad debts	49,736	50,751	89,782	94,907
Charges and credits	0	300	(695)	300
Total costs and expenses	359,285	345,368	673,778	670,991
Operating income	41,774	39,252	80,793	72,016
Interest expense	14,396	15,566	28,893	32,386
Loss on extinguishment of debt	0	1,367	0	1,773
Income before income taxes	27,378	22,319	51,900	37,857
Provision for income taxes	7,404	5,308	12,417	8,114
Net income	$ 19,974	$ 17,011	$ 39,483	$ 29,743
Income per share:
Basic (in dollars per share)	$ 0.64	$ 0.54	$ 1.25	$ 0.94
Diluted (in dollars per share)	$ 0.62	$ 0.53	$ 1.23	$ 0.92
Weighted average common shares outstanding:
Basic (in shares)	31,442,909	31,652,017	31,660,320	31,597,225
Diluted (in shares)	31,958,704	32,242,463	32,198,024	32,210,759
Product [Member]
Revenues:
Total revenues	$ 274,578	$ 267,179	$ 509,023	$ 516,493
RSA Commission [Member]
Revenues:
Total revenues	27,647	25,662	51,671	48,525
Service [Member]
Revenues:
Total revenues	$ 3,837	$ 3,472	$ 7,347	$ 7,051

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Debt and Financing Lease Obligations - Senior Notes (Details) - USD ($)	Jul. 31, 2019	Jul. 01, 2014
Debt Instrument [Line Items]
Original principal amount	$ 1,071,970,000
Senior Notes [Member] | Senior Unsecured Notes Due July 2022 [Member]
Debt Instrument [Line Items]
Original principal amount		$ 250,000,000
Interest rate on notes (in hundredths)		7.25%
Effective interest rate		7.80%
Restrictions on payment of dividends, amount free from restriction	213,800,000
Trigger amount under indenture		$ 25,000,000
Line of Credit [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Restrictions on payment of dividends, amount free from restriction	$ 266,400,000

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Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jul. 31, 2019	Jul. 31, 2019	Jul. 31, 2018	Apr. 30, 2019	Feb. 01, 2019	Jan. 31, 2019	Apr. 30, 2018	Feb. 01, 2018	Jan. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Assets, Current	$ 1,032,042	$ 1,032,042			$ 1,011,411	$ 1,014,394
Operating lease, right-of-use asset	248,707	248,707			227,421	0
Deferred income taxes	25,612	25,612			26,088	27,535
Current liabilities	206,099	206,099			225,142	237,568
Operating lease liability - current	33,398	33,398			29,815	0
Deferred rent	0	0			0	93,127
Operating lease liability - non current	331,010	331,010			300,170	0
Other long-term liabilities	26,400	26,400			25,409	33,015
Stockholders' equity	636,735	636,735	$ 569,648	$ 647,818	626,134	619,975	$ 549,655		$ 535,068
Adoption of ASU 2016-02					6,159			$ 957
Total lease liabilities	375,814	375,814
Accounts receivable for tenant improvement allowances	11,400	11,400
Deferred revenue	11,600	11,600				11,200
Other accounts receivable	67,056	67,056				67,078
Net cash provided by (used in) financing activities		(45,269)	(183,552)
Payment for debt extinguishment		0	1,177
Customer Deposits [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred revenue, revenue recognized	1,000	1,400
RSA Administration Fees [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred revenue, revenue recognized	1,300		2,500
Accounting Standards Update 2016-02 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Assets, Current					(2,983)
Operating lease, right-of-use asset					227,421
Deferred income taxes					(1,400)
Current liabilities					(12,426)
Operating lease liability - current					29,815
Deferred rent					(93,127)
Operating lease liability - non current					300,170
Other long-term liabilities					(7,606)
Stockholders' equity					6,159
Sale and leaseback transaction, deferred gain, gross					7,600
Total lease liabilities					340,500
Accounts receivable for tenant improvement allowances					10,500
Retained Earnings [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity	$ 554,114	$ 554,114	$ 464,367	$ 534,140		$ 508,472	$ 447,356		$ 433,667
Adoption of ASU 2016-02					6,159			$ 957
Retained Earnings [Member] | Accounting Standards Update 2016-02 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Adoption of ASU 2016-02					$ 6,200

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Customer Accounts Receivable

6 Months Ended

Jul. 31, 2019

Receivables [Abstract]

Customer Accounts Receivable

Customer Accounts Receivable

Customer accounts receivable consisted of the following:

(in thousands)	July 31, 2019			January 31, 2019
Customer accounts receivable portfolio balance	$	1,557,920		$	1,589,828
Deferred fees and origination costs, net	(15,742		)	(16,579		)
Allowance for no-interest option credit programs	(15,866		)	(19,257		)
Allowance for uncollectible interest	(15,213		)	(15,555		)
Carrying value of customer accounts receivable	1,511,099			1,538,437
Allowance for bad debts	(192,288		)	(199,324		)
Carrying value of customer accounts receivable, net of allowance for bad debts	1,318,811			1,339,113
Short-term portion of customer accounts receivable, net	(664,980		)	(652,769		)
Long-term customer accounts receivable, net	$	653,831		$	686,344

	Carrying Value
(in thousands)	July 31, 2019		January 31, 2019
Customer accounts receivable 60+ days past due (1)	$	132,187	$	146,188
Re-aged customer accounts receivable (2)(3)	389,591		395,576
Restructured customer accounts receivable (4)	190,654		183,641

(1) As of July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable past due one day or greater was $420.5 million and $420.9 million, respectively. These amounts include the 60+ days past due balances shown above.

(2) The re-aged carrying value as of July 31, 2019 and January 31, 2019 includes $86.0 million and $92.4 million in carrying value that are both 60+ days past due and re-aged.

(3) The re-aged carrying value as of July 31, 2019 and January 31, 2019 includes $15.9 million and $26.5 million in first time re-ages related to customers within FEMA-designated Hurricane Harvey disaster areas.

(4) The restructured carrying value as of July 31, 2019 and January 31, 2019 includes $44.3 million and $43.9 million in carrying value that are both 60+ days past due and restructured.

The following presents the activity in our allowance for doubtful accounts and uncollectible interest for customer accounts receivable: 

	Six Months Ended July 31, 2019									Six Months Ended July 31, 2018
(in thousands)	Customer Accounts Receivable			Restructured Accounts			Total			Customer Accounts Receivable			Restructured Accounts			Total
Allowance at beginning of period	$	147,123		$	67,756		$	214,879		$	148,856		$	54,716		$	203,572
Provision (1)	79,062			37,067			116,129			85,117			33,146			118,263
Principal charge-offs (2)	(80,330		)	(30,267		)	(110,597		)	(82,124		)	(25,264		)	(107,388		)
Interest charge-offs	(18,479		)	(6,963		)	(25,442		)	(16,161		)	(4,972		)	(21,133		)
Recoveries (2)	9,102			3,430			12,532			7,873			2,422			10,295
Allowance at end of period	$	136,478		$	71,023		$	207,501		$	143,561		$	60,048		$	203,609
Average total customer portfolio balance	$	1,360,643		$	192,212		$	1,552,855		$	1,340,360		$	162,951		$	1,503,311

(1) Includes provision for uncollectible interest, which is included in finance charges and other revenues.

(2) Charge-offs include the principal amount of losses (excluding accrued and unpaid interest). Recoveries include the principal amount collected during the period for previously charged-off balances. Net charge-offs are calculated as the net of principal charge-offs and recoveries.

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Variable Interest Entity

6 Months Ended

Jul. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entity

Variable Interest Entities

From time to time, we securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. Under the terms of the respective securitization transactions, all cash collections and other cash proceeds of the customer receivables go first to the servicer and the holders of the asset-backed notes, and then to the residual equity holder. We retain the servicing of the securitized portfolio and receive a monthly fee of 4.75% (annualized) based on the outstanding balance of the securitized receivables, and we currently hold all of the residual equity. In addition, we, rather than the VIEs, will retain all credit insurance income together with certain recoveries related to credit insurance and RSAs on charge-offs of the securitized receivables, which will continue to be reflected as a reduction of net charge-offs on a consolidated basis for as long as we consolidate the VIEs.

We consolidate VIEs when we determine that we are the primary beneficiary of these VIEs, we have the power to direct the activities that most significantly impact the performance of the VIEs and our obligation to absorb losses and the right to receive residual returns are significant.

The following table presents the assets and liabilities held by the VIEs (for legal purposes, the assets and liabilities of the VIEs will remain distinct from Conn’s, Inc.):

(in thousands)	July 31, 2019			January 31, 2019
Assets:
Restricted cash	$	66,444		$	57,475
Due from Conn’s, Inc., net	8,874			5,504
Customer accounts receivable:
Customer accounts receivable	625,436			538,826
Restructured accounts	152,062			135,834
Allowance for uncollectible accounts	(125,142		)	(106,327		)
Allowance for no-interest option credit programs	(7,278		)	(8,047		)
Deferred fees and origination costs	(6,213		)	(5,321		)
Total customer accounts receivable, net	638,865			554,965
Total assets	$	714,183		$	617,944
Liabilities:
Accrued expenses	$	4,465		$	3,939
Other liabilities	5,086			5,513
Short-term debt:
Warehouse Notes	1,945			53,635
Long-term debt:
2017-B Class B Notes	29,001			98,297
2017-B Class C Notes	78,640			78,640
2018-A Class A Notes	61,415			105,971
2018-A Class B Notes	37,038			63,908
2018-A Class C Notes	37,038			63,908
2019-A Class A Notes	187,959			—
2019-A Class B Notes	64,750			—
2019-A Class C Notes	62,510			—
	558,351			410,724
Less: deferred debt issuance costs	(3,715		)	(2,731		)
Total long-term debt	554,636			407,993
Total debt	$	556,581		$	461,628
Total liabilities	$	566,132		$	471,080

The assets of the VIEs serve as collateral for the obligations of the VIEs. The holders of asset-backed notes have no recourse to assets outside of the respective VIEs.

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Subsequent Events

6 Months Ended

Jul. 31, 2019

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

For the period August 1, 2019 through August 29, 2019, we repurchased an additional 1,207,690 shares of our common stock for $23.6 million at an average price of $19.56 per share. The total shares repurchased through August 29, 2019 under the plan in aggregate is 3,082,536 shares for $57.9 million at an average price of $18.79 per share.

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Subsequent Events (Details) - USD ($)	1 Months Ended	3 Months Ended
	Aug. 31, 2019	Sep. 03, 2019	Jul. 31, 2019
Subsequent Event [Line Items]
Stock repurchased (in shares)			1,874,846
Stock repurchased			$ 34,300,000
Stock repurchased (in dollars per shares)			$ 18.30
Subsequent Event
Subsequent Event [Line Items]
Stock repurchased (in shares)	1,207,690	3,082,536
Stock repurchased	$ 23,600,000	$ 57,900,000.0
Stock repurchased (in dollars per shares)	$ 19.56	$ 18.79

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Guarantor Financial Information (Condensed Consolidated Statement of Operations) (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jul. 31, 2019	Apr. 30, 2019	Jul. 31, 2018	Apr. 30, 2018	Jul. 31, 2019	Jul. 31, 2018
Revenues:
Total Net Sales	$ 306,062		$ 296,313		$ 568,041	$ 572,069
Other Income	94,997		88,307		186,530	170,938
Servicing fee revenue	0		0		0	0
Total revenues	401,059		384,620		754,571	743,007
Costs and expenses:
Cost of goods sold	182,065		173,627		339,293	340,216
Selling, general and administrative expense	127,484		120,690		245,398	235,568
Provision for bad debts	49,736		50,751		89,782	94,907
Charges and credits	0		300		(695)	300
Total costs and expenses	359,285		345,368		673,778	670,991
Operating income	41,774		39,252		80,793	72,016
Interest expense	14,396		15,566		28,893	32,386
Loss on extinguishment of debt	0		1,367		0	1,773
Income before income taxes	27,378		22,319		51,900	37,857
Provision for income taxes	7,404		5,308		12,417	8,114
Net income	19,974	$ 19,509	17,011	$ 12,732	39,483	29,743
Income from consolidated subsidiaries	0		0		0	0
Consolidated net income (loss)	19,974		17,011		39,483	29,743
Eliminations
Revenues:
Total Net Sales	0		0		0	0
Other Income	0		0		0	0
Servicing fee revenue	(8,865)		(3,035)		(17,698)	(19,781)
Total revenues	(8,865)		(3,035)		(17,698)	(19,781)
Costs and expenses:
Cost of goods sold	0		0		0	0
Selling, general and administrative expense	(8,865)		(3,035)		(17,698)	(19,781)
Provision for bad debts	0		0		0	0
Charges and credits			0		0	0
Total costs and expenses	(8,865)		(3,035)		(17,698)	(19,781)
Operating income	0		0		0	0
Interest expense	0		0		0	0
Loss on extinguishment of debt			0			0
Income before income taxes	0		0		0	0
Provision for income taxes	0		0		0	0
Net income	0		0		0	0
Income from consolidated subsidiaries	(25,429)		(15,791)		(47,430)	(14,885)
Consolidated net income (loss)	(25,429)		(15,791)		(47,430)	(14,885)
Conn’s, Inc.
Revenues:
Total Net Sales	0		0		0	0
Other Income	0		0		0	0
Servicing fee revenue	0		0		0	0
Total revenues	0		0		0	0
Costs and expenses:
Cost of goods sold	0		0		0	0
Selling, general and administrative expense	0		0		0	0
Provision for bad debts	0		0		0	0
Charges and credits			0		0	0
Total costs and expenses	0		0		0	0
Operating income	0		0		0	0
Interest expense	4,443		4,448		8,886	8,891
Loss on extinguishment of debt			0			0
Income before income taxes	(4,443)		(4,448)		(8,886)	(8,891)
Provision for income taxes	(1,218)		(1,058)		(2,126)	(1,906)
Net income	(3,225)		(3,390)		(6,760)	(6,985)
Income from consolidated subsidiaries	23,199		20,401		46,243	36,728
Consolidated net income (loss)	19,974		17,011		39,483	29,743
Guarantors
Revenues:
Total Net Sales	306,062		296,313		568,041	572,069
Other Income	43,327		56,653		107,352	102,308
Servicing fee revenue	8,865		3,035		17,698	19,781
Total revenues	358,254		356,001		693,091	694,158
Costs and expenses:
Cost of goods sold	182,065		173,627		339,293	340,216
Selling, general and administrative expense	125,549		115,515		245,005	235,308
Provision for bad debts	20,355		29,868		44,339	36,876
Charges and credits			300		(695)	300
Total costs and expenses	327,969		319,310		627,942	612,700
Operating income	30,285		36,691		65,149	81,458
Interest expense	1,337		3,733		5,924	6,766
Loss on extinguishment of debt			(142)			(142)
Income before income taxes	28,948		32,816		59,225	74,550
Provision for income taxes	7,979		7,805		14,169	15,979
Net income	20,969		25,011		45,056	58,571
Income from consolidated subsidiaries	2,230		(4,610)		1,187	(21,843)
Consolidated net income (loss)	23,199		20,401		46,243	36,728
Non-Guarantor Subsidiaries
Revenues:
Total Net Sales	0		0		0	0
Other Income	51,670		31,654		79,178	68,630
Servicing fee revenue	0		0		0	0
Total revenues	51,670		31,654		79,178	68,630
Costs and expenses:
Cost of goods sold	0		0		0	0
Selling, general and administrative expense	10,800		8,210		18,091	20,041
Provision for bad debts	29,381		20,883		45,443	58,031
Charges and credits			0		0	0
Total costs and expenses	40,181		29,093		63,534	78,072
Operating income	11,489		2,561		15,644	(9,442)
Interest expense	8,616		7,385		14,083	16,729
Loss on extinguishment of debt			(1,225)			(1,631)
Income before income taxes	2,873		(6,049)		1,561	(27,802)
Provision for income taxes	643		(1,439)		374	(5,959)
Net income	2,230		(4,610)		1,187	(21,843)
Income from consolidated subsidiaries	0		0		0	0
Consolidated net income (loss)	$ 2,230		$ (4,610)		$ 1,187	$ (21,843)

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Variable Interest Entity - Additional Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2019	Jan. 31, 2019
Variable Interest Entity [Line Items]
Long-term debt	$ 560,425
Asset-backed Securities [Member]
Variable Interest Entity [Line Items]
Monthly fee percentage on outstanding balance	4.75%
2018-A VIE Class A Notes [Member]
Variable Interest Entity [Line Items]
Long-term debt	$ 61,415
2018-A VIE Class A Notes [Member] | Secured Debt [Member]
Variable Interest Entity [Line Items]
Long-term debt	$ 61,415	$ 105,971

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Leases - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jul. 31, 2019	Jul. 31, 2019
Leases [Abstract]
Operating lease costs	$ 14,587	$ 28,515

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Finance Charges and Other Revenue (Tables)

6 Months Ended

Jul. 31, 2019

Supplemental Disclosure of Finance Charges and Other Revenue [Abstract]

Schedule of finance charges and other revenues

Finance charges and other revenues consisted of the following:

	Three Months Ended   July 31,				Six Months Ended   July 31,
(in thousands)	2019		2018		2019		2018
Interest income and fees	$	85,204	$	80,435	$	169,221	$	156,781
Insurance income	9,590		7,774		16,904		14,045
Other revenues	203		98		405		112
Total finance charges and other revenues	$	94,997	$	88,307	$	186,530	$	170,938

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Segment Reporting (Tables)

6 Months Ended

Jul. 31, 2019

Segment Reporting [Abstract]

Financial information by segment

Financial information by segment is presented in the following tables:

	Three Months Ended July 31, 2019								Three Months Ended July 31, 2018
(in thousands)	Retail			Credit			Total		Retail		Credit			Total
Revenues:
Furniture and mattress	$	99,455		$	—		$	99,455	$	97,066	$	—		$	97,066
Home appliance	99,356			—			99,356		91,471		—			91,471
Consumer electronics	53,692			—			53,692		55,654		—			55,654
Home office	17,883			—			17,883		19,289		—			19,289
Other	4,192			—			4,192		3,699		—			3,699
Product sales	274,578			—			274,578		267,179		—			267,179
Repair service agreement commissions	27,647			—			27,647		25,662		—			25,662
Service revenues	3,837			—			3,837		3,472		—			3,472
Total net sales	306,062			—			306,062		296,313		—			296,313
Finance charges and other revenues	203			94,794			94,997		98		88,209			88,307
Total revenues	306,265			94,794			401,059		296,411		88,209			384,620
Costs and expenses:
Cost of goods sold	182,065			—			182,065		173,627		—			173,627
Selling, general and administrative expense (1)	88,147			39,337			127,484		83,003		37,687			120,690
Provision for bad debts	(19		)	49,755			49,736		243		50,508			50,751
Charges and credits	—			—			—		300		—			300
Total costs and expenses	270,193			89,092			359,285		257,173		88,195			345,368
Operating income	36,072			5,702			41,774		39,238		14			39,252
Interest expense	—			14,396			14,396		—		15,566			15,566
Loss on extinguishment of debt	—			—			—		—		1,367			1,367
Income (loss) before income taxes	$	36,072		$	(8,694	)	$	27,378	$	39,238	$	(16,919	)	$	22,319

	Six Months Ended July 31, 2019									Six Months Ended July 31, 2018
(in thousands)	Retail			Credit			Total			Retail		Credit			Total
Revenues:
Furniture and mattress	$	187,819		$	—		$	187,819		$	194,086	$	—		$	194,086
Home appliance	176,646			—			176,646			169,494		—			169,494
Consumer electronics	103,341			—			103,341			107,956		—			107,956
Home office	33,589			—			33,589			37,599		—			37,599
Other	7,628			—			7,628			7,358		—			7,358
Product sales	509,023			—			509,023			516,493		—			516,493
Repair service agreement commissions	51,671			—			51,671			48,525		—			48,525
Service revenues	7,347			—			7,347			7,051		—			7,051
Total net sales	568,041			—			568,041			572,069		—			572,069
Finance charges and other revenues	405			186,125			186,530			112		170,826			170,938
Total revenues	568,446			186,125			754,571			572,181		170,826			743,007
Costs and expenses:
Cost of goods sold	339,293			—			339,293			340,216		—			340,216
Selling, general and administrative expense (1)	167,769			77,629			245,398			160,755		74,813			235,568
Provision for bad debts	110			89,672			89,782			503		94,404			94,907
Charges and credits	(695		)	—			(695		)	300		—			300
Total costs and expenses	506,477			167,301			673,778			501,774		169,217			670,991
Operating income	61,969			18,824			80,793			70,407		1,609			72,016
Interest expense	—			28,893			28,893			—		32,386			32,386
Loss on extinguishment of debt	—			—			—			—		1,773			1,773
Income (loss) before income taxes	$	61,969		$	(10,069	)	$	51,900		$	70,407	$	(32,550	)	$	37,857
	July 31, 2019									July 31, 2018
(in thousands)	Retail			Credit			Total			Retail		Credit			Total
Total assets	$	699,382		$	1,446,843		$	2,146,225		$	416,166	$	1,380,335		$	1,796,501

(1) For the three months ended July 31, 2019 and 2018, the amount of corporate overhead allocated to each segment reflected in SG&A was $9.7 million and $9.3 million, respectively. For the three months ended July 31, 2019 and 2018, the amount of reimbursement made to the retail segment by the credit segment was $9.7 million and $9.4 million, respectively. For the six months ended July 31, 2019 and 2018, the amount of corporate overhead allocated to each segment reflected in SG&A was $17.6 million and $17.6 million, respectively. For the six months ended July 31, 2019 and 2018, the amount of reimbursement made to the retail segment by the credit segment was $19.4 million and $18.8 million, respectively.

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Summary of Significant Accounting Policies - Earnings per Share (Details) - shares	3 Months Ended		6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jul. 31, 2019	Jul. 31, 2018
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Weighted average common shares outstanding - Basic (in shares)	31,442,909	31,652,017	31,660,320	31,597,225
Dilutive effect of stock options, RSUs and PSUs (in shares)	515,795	590,446	537,704	613,534
Weighted average common shares outstanding - Diluted (in shares)	31,958,704	32,242,463	32,198,024	32,210,759
Weighted average number of stock options and restricted stock units not included in the calculation of the dilutive effect of stock options and restricted stock units (in shares)	927,969	624,291	892,098	497,224
Phantom Share Units (PSUs) [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Not Issued			228,477	400,834

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Variable Interest Entity (Details) - USD ($) $ in Thousands	Jul. 31, 2019	Jan. 31, 2019	Jul. 31, 2018	Jan. 31, 2018
Assets:
Restricted cash	$ 68,219	$ 59,025
Customer accounts receivable:
Restructured accounts	190,654	183,641
Allowance for uncollectible accounts	(207,501)	(214,879)	$ (203,609)	$ (203,572)
Allowance for no-interest option credit programs	15,866	19,257
Total customer accounts receivable, net	1,318,811	1,339,113
Total assets	2,146,225	1,884,907	$ 1,796,501
Liabilities:
Total long-term debt	560,425
Long-term debt	945,981	901,222
Less: deferred debt issuance costs	(6,104)	(5,637)
Total liabilities	1,509,490	1,264,932
2017-B Class B Notes [Member]
Liabilities:
Total long-term debt	29,001
2017-B Class C Notes [Member]
Liabilities:
Total long-term debt	78,640
2018-A VIE Class A Notes [Member]
Liabilities:
Total long-term debt	61,415
2018-A VIE Class B Notes [Member]
Liabilities:
Total long-term debt	37,038
2018-A VIE Class C Notes [Member]
Liabilities:
Total long-term debt	37,038
Warehouse Notes [Member]
Liabilities:
Total long-term debt	2,074	53,635
2019-A VIE Class A Notes [Member]
Liabilities:
Total long-term debt	187,959
2019-A VIE Class B Notes [Member]
Liabilities:
Total long-term debt	64,750
2019-A VIE Class C Notes [Member]
Liabilities:
Total long-term debt	62,510
Secured Debt [Member] | 2017-B Class B Notes [Member]
Liabilities:
Total long-term debt	29,001	98,297
Secured Debt [Member] | 2017-B Class C Notes [Member]
Liabilities:
Total long-term debt	78,640	78,640
Secured Debt [Member] | 2018-A VIE Class A Notes [Member]
Liabilities:
Total long-term debt	61,415	105,971
Secured Debt [Member] | 2018-A VIE Class B Notes [Member]
Liabilities:
Total long-term debt	37,038	63,908
Secured Debt [Member] | 2018-A VIE Class C Notes [Member]
Liabilities:
Total long-term debt	37,038	63,908
Secured Debt [Member] | 2019-A VIE Class A Notes [Member]
Liabilities:
Total long-term debt	187,959	0
Secured Debt [Member] | 2019-A VIE Class B Notes [Member]
Liabilities:
Total long-term debt	64,750	0
Secured Debt [Member] | 2019-A VIE Class C Notes [Member]
Liabilities:
Total long-term debt	62,510	0
Variable Interest Entity [Member]
Assets:
Restricted cash	66,444	57,475
Due from Conn’s, Inc., net	8,874	5,504
Customer accounts receivable:
Customer accounts receivable	625,436	538,826
Restructured accounts	152,062	135,834
Allowance for uncollectible accounts	(125,142)	(106,327)
Allowance for no-interest option credit programs	7,278	8,047
Allowance for bad debts	(6,213)	(5,321)
Total customer accounts receivable, net	638,865	554,965
Total assets	714,183	617,944
Liabilities:
Accrued expenses	4,465	3,939
Other liabilities	5,086	5,513
Total long-term debt	554,636	407,993
Debt, Long-term and Short-term, Combined Amount	556,581	461,628
Long-term debt	558,351	410,724
Less: deferred debt issuance costs	(3,715)	(2,731)
Total liabilities	566,132	471,080
Variable Interest Entity [Member] | Warehouse Notes [Member]
Liabilities:
Short-term Debt	$ 1,945	$ 53,635

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Leases - Other Information (Details) $ in Thousands	6 Months Ended
	Jul. 31, 2019 USD ($)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$ 33,408
Weighted-average remaining lease term (in years)
Finance leases	11 years 4 months 10 days
Operating leases	7 years 3 months 4 days
Weighted-average discount rate
Finance leases	6.10%
Operating Leases	8.50%

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Guarantor Financial Information (Condensed Consolidated Statement of Cash Flows) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018
Condensed Cash Flow Statements, Captions [Line Items]
Net cash provided by (used in) operating activities	$ 89,444	$ 155,652
Cash flows from investing activities:
Purchase of customer accounts receivables	0	0
Sale of customer accounts receivables	0	0
Purchases of property and equipment	(33,330)	(12,166)
Investment in subsidiary	0
Net cash used in investing activities	(33,330)	(12,166)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	381,790	0
Payments on asset-backed notes	(234,162)	(481,883)
Borrowings from revolving credit facility	778,166	839,236
Contribution to (from) subsidiary	0
Payments on revolving credit facility	(881,166)	(655,036)
Borrowings from warehouse facility	0	173,286
Payments of debt issuance costs and amendment fees	(3,492)	(3,539)
Payments on warehouse facility	(51,561)	(52,226)
Proceeds from stock issued under employee benefit plans	597	834
Tax payments associated with equity-based compensation transactions	(1,781)	(2,516)
Payment from extinguishment of debt	0	(1,177)
Payments for Repurchase of Common Stock	(33,019)	0
Other	(641)	(531)
Net cash used in financing activities	(45,269)	(183,552)
Net change in cash, cash equivalents and restricted cash	10,845	(40,066)
Cash, cash equivalents and restricted cash, beginning of period	64,937	96,158
Cash, cash equivalents and restricted cash, end of period	75,782	56,092
Eliminations
Condensed Cash Flow Statements, Captions [Line Items]
Net cash provided by (used in) operating activities	0	0
Cash flows from investing activities:
Purchase of customer accounts receivables	(379,200)	170,144
Sale of customer accounts receivables	(379,200)	(170,144)
Purchases of property and equipment	0	0
Investment in subsidiary	33,019
Net cash used in investing activities	33,019	0
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	0
Payments on asset-backed notes	0	0
Borrowings from revolving credit facility	0	0
Contribution to (from) subsidiary	(33,019)
Payments on revolving credit facility	0	0
Borrowings from warehouse facility		0
Payments of debt issuance costs and amendment fees	0	0
Payments on warehouse facility	0	0
Proceeds from stock issued under employee benefit plans	0	0
Tax payments associated with equity-based compensation transactions	0	0
Payment from extinguishment of debt		0
Payments for Repurchase of Common Stock	0
Other	0	0
Net cash used in financing activities	(33,019)	0
Net change in cash, cash equivalents and restricted cash	0	0
Cash, cash equivalents and restricted cash, beginning of period	0	0
Cash, cash equivalents and restricted cash, end of period	0	0
Conn’s, Inc.
Condensed Cash Flow Statements, Captions [Line Items]
Net cash provided by (used in) operating activities	(597)	(834)
Cash flows from investing activities:
Purchase of customer accounts receivables	0	0
Sale of customer accounts receivables	0	0
Purchases of property and equipment	0	0
Investment in subsidiary	0
Net cash used in investing activities	0	0
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	0
Payments on asset-backed notes	0	0
Borrowings from revolving credit facility	0	0
Contribution to (from) subsidiary	33,019
Payments on revolving credit facility	0	0
Borrowings from warehouse facility		0
Payments of debt issuance costs and amendment fees	0	0
Payments on warehouse facility	0	0
Proceeds from stock issued under employee benefit plans	597	834
Tax payments associated with equity-based compensation transactions	0	0
Payment from extinguishment of debt		0
Payments for Repurchase of Common Stock	(33,019)
Other	0	0
Net cash used in financing activities	597	834
Net change in cash, cash equivalents and restricted cash	0	0
Cash, cash equivalents and restricted cash, beginning of period	0	0
Cash, cash equivalents and restricted cash, end of period	0	0
Guarantors
Condensed Cash Flow Statements, Captions [Line Items]
Net cash provided by (used in) operating activities	173,701	(33)
Cash flows from investing activities:
Purchase of customer accounts receivables	0	0
Sale of customer accounts receivables	0	0
Purchases of property and equipment	33,330	(12,166)
Investment in subsidiary	(33,019)
Net cash used in investing activities	(66,349)	(12,166)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	0
Payments on asset-backed notes	0	(169,803)
Borrowings from revolving credit facility	778,166	839,236
Contribution to (from) subsidiary	0
Payments on revolving credit facility	(881,166)	(655,036)
Borrowings from warehouse facility		0
Payments of debt issuance costs and amendment fees	(55)	(2,825)
Payments on warehouse facility	0	0
Proceeds from stock issued under employee benefit plans	0	0
Tax payments associated with equity-based compensation transactions	(1,781)	(2,516)
Payment from extinguishment of debt		(1,177)
Payments for Repurchase of Common Stock	0
Other	(641)	(531)
Net cash used in financing activities	(105,477)	7,348
Net change in cash, cash equivalents and restricted cash	1,875	(4,851)
Cash, cash equivalents and restricted cash, beginning of period	7,462	10,836
Cash, cash equivalents and restricted cash, end of period	9,337	5,985
Non-Guarantor Subsidiaries
Condensed Cash Flow Statements, Captions [Line Items]
Net cash provided by (used in) operating activities	(83,660)	156,519
Cash flows from investing activities:
Purchase of customer accounts receivables	(379,200)	(170,144)
Sale of customer accounts receivables	379,200	170,144
Purchases of property and equipment	0	0
Investment in subsidiary	0
Net cash used in investing activities	0	0
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	381,790
Payments on asset-backed notes	(234,162)	(312,080)
Borrowings from revolving credit facility	0	0
Contribution to (from) subsidiary	0
Payments on revolving credit facility	0	0
Borrowings from warehouse facility		173,286
Payments of debt issuance costs and amendment fees	(3,437)	(714)
Payments on warehouse facility	(51,561)	(52,226)
Proceeds from stock issued under employee benefit plans	0	0
Tax payments associated with equity-based compensation transactions	0	0
Payment from extinguishment of debt		0
Payments for Repurchase of Common Stock	0
Other	0	0
Net cash used in financing activities	92,630	(191,734)
Net change in cash, cash equivalents and restricted cash	8,970	(35,215)
Cash, cash equivalents and restricted cash, beginning of period	57,475	85,322
Cash, cash equivalents and restricted cash, end of period	$ 66,445	$ 50,107

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Summary of Significant Accounting Policies - Stock-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jul. 31, 2019	Jul. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock awards granted (in shares)	134,259	69,478	137,688	770,055
Aggregate grant date fair value	$ 2,774	$ 1,673	$ 2,845	$ 17,184
Dividend yield				0.00%
Stock-based compensation expense	$ 3,400	$ 3,100	$ 6,636	$ 5,562
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
(RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs and PSUs (in shares)	100,365	69,478	103,794	149,889
Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Options (in shares)	0	0	0	620,166
Expected volatility rate				68.00%
Expected term				6 years 6 months
Risk free interest rate				2.67%
Phantom Share Units (PSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs and PSUs (in shares)	33,894	0	33,894	0

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Customer Accounts Receivable (Tables)

6 Months Ended

Jul. 31, 2019

Receivables [Abstract]

Allowance for doubtful accounts and uncollectible interest for customer receivables

Customer accounts receivable consisted of the following:

(in thousands)	July 31, 2019			January 31, 2019
Customer accounts receivable portfolio balance	$	1,557,920		$	1,589,828
Deferred fees and origination costs, net	(15,742		)	(16,579		)
Allowance for no-interest option credit programs	(15,866		)	(19,257		)
Allowance for uncollectible interest	(15,213		)	(15,555		)
Carrying value of customer accounts receivable	1,511,099			1,538,437
Allowance for bad debts	(192,288		)	(199,324		)
Carrying value of customer accounts receivable, net of allowance for bad debts	1,318,811			1,339,113
Short-term portion of customer accounts receivable, net	(664,980		)	(652,769		)
Long-term customer accounts receivable, net	$	653,831		$	686,344

	Carrying Value
(in thousands)	July 31, 2019		January 31, 2019
Customer accounts receivable 60+ days past due (1)	$	132,187	$	146,188
Re-aged customer accounts receivable (2)(3)	389,591		395,576
Restructured customer accounts receivable (4)	190,654		183,641

(1) As of July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable past due one day or greater was $420.5 million and $420.9 million, respectively. These amounts include the 60+ days past due balances shown above.

(2) The re-aged carrying value as of July 31, 2019 and January 31, 2019 includes $86.0 million and $92.4 million in carrying value that are both 60+ days past due and re-aged.

(3) The re-aged carrying value as of July 31, 2019 and January 31, 2019 includes $15.9 million and $26.5 million in first time re-ages related to customers within FEMA-designated Hurricane Harvey disaster areas.

(4) The restructured carrying value as of July 31, 2019 and January 31, 2019 includes $44.3 million and $43.9 million in carrying value that are both 60+ days past due and restructured.

Activity in the allowance for doubtful accounts and uncollectible interest for customer receivables

The following presents the activity in our allowance for doubtful accounts and uncollectible interest for customer accounts receivable: 

	Six Months Ended July 31, 2019									Six Months Ended July 31, 2018
(in thousands)	Customer Accounts Receivable			Restructured Accounts			Total			Customer Accounts Receivable			Restructured Accounts			Total
Allowance at beginning of period	$	147,123		$	67,756		$	214,879		$	148,856		$	54,716		$	203,572
Provision (1)	79,062			37,067			116,129			85,117			33,146			118,263
Principal charge-offs (2)	(80,330		)	(30,267		)	(110,597		)	(82,124		)	(25,264		)	(107,388		)
Interest charge-offs	(18,479		)	(6,963		)	(25,442		)	(16,161		)	(4,972		)	(21,133		)
Recoveries (2)	9,102			3,430			12,532			7,873			2,422			10,295
Allowance at end of period	$	136,478		$	71,023		$	207,501		$	143,561		$	60,048		$	203,609
Average total customer portfolio balance	$	1,360,643		$	192,212		$	1,552,855		$	1,340,360		$	162,951		$	1,503,311

(1) Includes provision for uncollectible interest, which is included in finance charges and other revenues.

(2) Charge-offs include the principal amount of losses (excluding accrued and unpaid interest). Recoveries include the principal amount collected during the period for previously charged-off balances. Net charge-offs are calculated as the net of principal charge-offs and recoveries.

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Variable Interest Entity (Tables)

6 Months Ended

Jul. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of assets and liabilities held by the VIE

The following table presents the assets and liabilities held by the VIEs (for legal purposes, the assets and liabilities of the VIEs will remain distinct from Conn’s, Inc.):

(in thousands)	July 31, 2019			January 31, 2019
Assets:
Restricted cash	$	66,444		$	57,475
Due from Conn’s, Inc., net	8,874			5,504
Customer accounts receivable:
Customer accounts receivable	625,436			538,826
Restructured accounts	152,062			135,834
Allowance for uncollectible accounts	(125,142		)	(106,327		)
Allowance for no-interest option credit programs	(7,278		)	(8,047		)
Deferred fees and origination costs	(6,213		)	(5,321		)
Total customer accounts receivable, net	638,865			554,965
Total assets	$	714,183		$	617,944
Liabilities:
Accrued expenses	$	4,465		$	3,939
Other liabilities	5,086			5,513
Short-term debt:
Warehouse Notes	1,945			53,635
Long-term debt:
2017-B Class B Notes	29,001			98,297
2017-B Class C Notes	78,640			78,640
2018-A Class A Notes	61,415			105,971
2018-A Class B Notes	37,038			63,908
2018-A Class C Notes	37,038			63,908
2019-A Class A Notes	187,959			—
2019-A Class B Notes	64,750			—
2019-A Class C Notes	62,510			—
	558,351			410,724
Less: deferred debt issuance costs	(3,715		)	(2,731		)
Total long-term debt	554,636			407,993
Total debt	$	556,581		$	461,628
Total liabilities	$	566,132		$	471,080

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Debt and Financing Lease Obligations - Asset Backed Notes (Details) - USD ($) $ in Thousands					6 Months Ended
	Apr. 24, 2019	Aug. 15, 2018	Jul. 16, 2018	Dec. 20, 2017	Jul. 31, 2019	Jan. 31, 2019
Debt Instrument [Line Items]
Original Principal Amount					$ 1,071,970
Original Net Proceeds					1,062,998
Current Principal Amount					560,425
2017-B Class B Notes [Member]
Debt Instrument [Line Items]
Original Principal Amount					132,180
Original Net Proceeds				$ 131,281
Current Principal Amount					$ 29,001
Contractual Interest Rate					4.52%
Effective Interest Rate					5.30%
2017-B Class C Notes [Member]
Debt Instrument [Line Items]
Original Principal Amount					$ 78,640
Original Net Proceeds				$ 77,843
Current Principal Amount					$ 78,640
Contractual Interest Rate					5.95%
Effective Interest Rate					6.35%
2018-A VIE Class A Notes [Member]
Debt Instrument [Line Items]
Original Principal Amount					$ 219,200
Original Net Proceeds		$ 217,832
Current Principal Amount					$ 61,415
Contractual Interest Rate					3.25%
Effective Interest Rate					4.82%
2018-A VIE Class B Notes [Member]
Debt Instrument [Line Items]
Original Principal Amount					$ 69,550
Original Net Proceeds		69,020
Current Principal Amount					$ 37,038
Contractual Interest Rate					4.65%
Effective Interest Rate					5.60%
2018-A VIE Class C Notes [Member]
Debt Instrument [Line Items]
Original Principal Amount					$ 69,550
Original Net Proceeds		$ 68,850
Current Principal Amount					$ 37,038
Contractual Interest Rate					6.02%
Effective Interest Rate					6.97%
2019-A VIE Class A Notes [Member]
Debt Instrument [Line Items]
Original Principal Amount	$ 254,500				$ 254,530
Original Net Proceeds	$ 253,026
Current Principal Amount					$ 187,959
Contractual Interest Rate	3.40%				3.40%
Effective Interest Rate					4.71%
2019-A VIE Class B Notes [Member]
Debt Instrument [Line Items]
Original Principal Amount	$ 64,800				$ 64,750
Original Net Proceeds	$ 64,276
Current Principal Amount					$ 64,750
Contractual Interest Rate	4.36%				4.36%
Effective Interest Rate					5.17%
2019-A VIE Class C Notes [Member]
Debt Instrument [Line Items]
Original Principal Amount	$ 62,500				$ 62,510
Original Net Proceeds	$ 61,898
Current Principal Amount					$ 62,510
Contractual Interest Rate	5.29%				5.29%
Effective Interest Rate					6.18%
Warehouse Notes [Member]
Debt Instrument [Line Items]
Original Principal Amount					$ 121,060
Original Net Proceeds			$ 118,972
Current Principal Amount					$ 2,074	$ 53,635
Contractual Interest Rate					2.50%
Effective Interest Rate					6.43%
2019-A VIE Class A, B, And C Notes [Member]
Debt Instrument [Line Items]
Original Principal Amount	$ 381,800
Original Net Proceeds	$ 379,200
Asset-backed Securities [Member]
Debt Instrument [Line Items]
Monthly fee percentage on outstanding balance					4.75%

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Customer Accounts Receivable (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jan. 31, 2019
Quantitative information about the receivables portfolio managed [Abstract]
Customer accounts receivable portfolio balance	$ 1,557,920		$ 1,589,828
Carrying value of customer accounts receivable	15,866		19,257
Carrying value of customer accounts receivable	1,511,099		1,538,437
Allowance for Doubtful Accounts Receivable Not Including Interest	(192,288)		(199,324)
Total customer accounts receivable, net	1,318,811		1,339,113
Short-term portion of customer accounts receivable, net	(664,980)		(652,769)
Long-term customer accounts receivable, net	653,831		686,344
Customer accounts receivable 60 days past due	132,187		146,188
Financing Receivable Outstanding Balance Reaged	389,591		395,576
Past due	420,500		420,900
Amounts included within past due and reaged accounts	86,000		92,400
Finance Receivable, Re-Aged	15,900		26,500
Accounts Receivable, Restructured Accounts, Past Due	44,300		43,900
Allowance for doubtful accounts and uncollectible interest for customer receivables [Abstract]
Allowance at beginning of period	214,879	$ 203,572
Provision	116,129	118,263
Principal charge-offs	(110,597)	(107,388)
Interest charge-offs	(25,442)	(21,133)
Recoveries	12,532	10,295
Allowance at end of period	207,501	203,609
Average total customer portfolio balance	1,552,855	1,503,311
Allowance for Doubtful Accounts Receivable Interest	15,213		15,555
Restructured Accounts [Member]
Quantitative information about the receivables portfolio managed [Abstract]
Allowance for bad debts	(15,742)		$ (16,579)
Allowance for doubtful accounts and uncollectible interest for customer receivables [Abstract]
Allowance at beginning of period	67,756	54,716
Provision	37,067	33,146
Principal charge-offs	(30,267)	(25,264)
Interest charge-offs	(6,963)	(4,972)
Recoveries	3,430	2,422
Allowance at end of period	71,023	60,048
Average total customer portfolio balance	192,212	162,951
Customer Accounts Receivable [Member]
Allowance for doubtful accounts and uncollectible interest for customer receivables [Abstract]
Allowance at beginning of period	147,123	148,856
Provision	79,062	85,117
Principal charge-offs	(80,330)	(82,124)
Interest charge-offs	(18,479)	(16,161)
Recoveries	9,102	7,873
Allowance at end of period	136,478	143,561
Average total customer portfolio balance	$ 1,360,643	$ 1,340,360

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Finance Charges and Other Revenue

6 Months Ended

Jul. 31, 2019

Supplemental Disclosure of Finance Charges and Other Revenue [Abstract]

Finance Charges and Other Revenues

Finance Charges and Other Revenues

Finance charges and other revenues consisted of the following:

	Three Months Ended   July 31,				Six Months Ended   July 31,
(in thousands)	2019		2018		2019		2018
Interest income and fees	$	85,204	$	80,435	$	169,221	$	156,781
Insurance income	9,590		7,774		16,904		14,045
Other revenues	203		98		405		112
Total finance charges and other revenues	$	94,997	$	88,307	$	186,530	$	170,938

Interest income and fees and insurance income are derived from the credit segment operations, whereas other revenues are derived from the retail segment operations. Insurance income is comprised of sales commissions from third-party insurance companies that are recognized when coverage is sold and retrospective income paid by the insurance carrier if insurance claims are less than earned premiums.

During the three months ended July 31, 2019 and 2018, interest income and fees reflected provisions for uncollectible interest of $14.4 million and $12.4 million, respectively. The amount included in interest income and fees related to TDR accounts for the three months ended July 31, 2019 and 2018 were $8.6 million and $6.5 million, respectively. During the six months ended July 31, 2019 and 2018, interest income and fees reflected provisions for uncollectible interest of $26.7 million and $23.9 million, respectively. The amount included in interest income and fees related to TDR accounts for the six months ended July 31, 2019 and 2018 were $16.7 million and $12.3 million, respectively.

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Leases - Supplemental Lease Information (Details) - USD ($) $ in Thousands	Jul. 31, 2019	Feb. 01, 2019	Jan. 31, 2019
Assets
Operating lease assets	$ 248,707	$ 227,421	$ 0
Finance lease assets	5,993
Total leased assets	254,700
Liabilities
Operating lease liability - current	44,804
Current maturities of debt and finance lease obligations	613
Operating lease liability - non current	331,010	$ 300,170	$ 0
Long-term debt and finance lease obligations	4,789
Total lease liabilities	$ 381,216

XML

Document and Entity Information - shares	6 Months Ended
	Jul. 31, 2019	Aug. 29, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	CONNS INC
Entity Central Index Key	0001223389
Current Fiscal Year End Date	--01-31
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Document Type	10-Q
Document Period End Date	Jul. 31, 2019
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		28,903,361

XML

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY Statement - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Treasury Stock [Member]
Balance (in shares) at Jan. 31, 2018		31,435,775			0
Balance at Jan. 31, 2018	$ 535,068	$ 314	$ 101,087	$ 433,667	$ 0
Exercise of options and vesting of restricted stock, net of tax (in shares)		143,021
Exercise of options and vesting of restricted stock, net of withholding tax	(1,848)	$ 2	(1,850)
Issuance of common stock under Employee Stock Purchase Plan (in shares)		8,031
Issuance of common stock under Employee Stock Purchase Plan	226		226
Stock-based compensation	2,520		2,520
Net income	12,732			12,732
Balance (in shares) at Apr. 30, 2018		31,586,827			0
Balance at Apr. 30, 2018	549,655	$ 316	101,983	447,356	$ 0
Balance (in shares) at Jan. 31, 2018		31,435,775			0
Balance at Jan. 31, 2018	535,068	$ 314	101,087	433,667	$ 0
Net income	29,743
Balance (in shares) at Jul. 31, 2018		31,694,414			0
Balance at Jul. 31, 2018	569,648	$ 317	104,964	464,367	$ 0
Balance (in shares) at Apr. 30, 2018		31,586,827			0
Balance at Apr. 30, 2018	549,655	$ 316	101,983	447,356	$ 0
Exercise of options and vesting of restricted stock, net of tax (in shares)		100,018
Exercise of options and vesting of restricted stock, net of withholding tax	(273)	$ 1	(274)
Issuance of common stock under Employee Stock Purchase Plan (in shares)		7,569
Issuance of common stock under Employee Stock Purchase Plan	213		213
Stock-based compensation	3,042		3,042
Net income	17,011			17,011
Balance (in shares) at Jul. 31, 2018		31,694,414			0
Balance at Jul. 31, 2018	569,648	$ 317	104,964	464,367	$ 0
Balance (in shares) at Jan. 31, 2019		31,788,162			0
Balance at Jan. 31, 2019	619,975	$ 318	111,185	508,472	$ 0
Exercise of options and vesting of restricted stock, net of tax (in shares)		136,206
Exercise of options and vesting of restricted stock, net of withholding tax	(1,240)	$ 1	(1,241)
Issuance of common stock under Employee Stock Purchase Plan (in shares)		12,158
Issuance of common stock under Employee Stock Purchase Plan	198		198
Stock-based compensation	3,217		3,217
Net income	19,509			19,509
Balance (in shares) at Apr. 30, 2019		31,936,526			0
Balance at Apr. 30, 2019	647,818	$ 319	113,359	534,140	$ 0
Balance (in shares) at Jan. 31, 2019		31,788,162			0
Balance at Jan. 31, 2019	619,975	$ 318	111,185	508,472	$ 0
Net income	39,483
Balance (in shares) at Jul. 31, 2019		32,000,548			(1,874,846.000)
Balance at Jul. 31, 2019	636,735	$ 320	116,645	554,114	$ (34,344)
Balance (in shares) at Apr. 30, 2019		31,936,526			0
Balance at Apr. 30, 2019	647,818	$ 319	113,359	534,140	$ 0
Exercise of options and vesting of restricted stock, net of tax (in shares)		51,384
Exercise of options and vesting of restricted stock, net of withholding tax	(326)	$ 1	(327)
Issuance of common stock under Employee Stock Purchase Plan (in shares)		12,638
Issuance of common stock under Employee Stock Purchase Plan	194		194
Stock-based compensation	3,419		3,419
Stock Repurchased During Period, Shares					(1,874,846)
Stock Repurchased During Period, Value	(34,344)				$ (34,344)
Net income	19,974			19,974
Balance (in shares) at Jul. 31, 2019		32,000,548			(1,874,846.000)
Balance at Jul. 31, 2019	$ 636,735	$ 320	$ 116,645	$ 554,114	$ (34,344)

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Contingencies

6 Months Ended

Jul. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies

Securities Litigation. On April 2, 2018, MicroCapital Fund, LP, MicroCapital Fund, Ltd., and MicroCapital LLC (collectively, “MicroCapital”) filed a lawsuit against us and certain of our former executive officers in the U.S. District Court for the Southern District of Texas, Cause No. 4:18-CV-01020 (the “MicroCapital Action”).  The plaintiffs in this action allege that the defendants made false and misleading statements or failed to disclose material facts about our credit and underwriting practices, accounting and internal controls.  Plaintiffs allege violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, Texas and Connecticut common law fraud, and Texas common law negligent misrepresentation against all defendants; as well as violations of section 20A of the Securities Exchange Act of 1934; and Connecticut common law negligent misrepresentation against certain defendants arising from plaintiffs’ purchase of Conn’s, Inc. securities between April 3, 2013 and February 20, 2014.  The complaint does not specify the amount of damages sought.

The Court previously had stayed the MicroCapital Action pending resolution of other outstanding litigation (In re Conn’s Inc. Sec. Litig., Cause No. 14-CV-00548 (S.D. Tex.) (the “Consolidated Securities Action”)), which was settled in October 2018. After that settlement, the stay was lifted, and the defendants filed a motion to dismiss plaintiff’s complaint in the MicroCapital Action on November 6, 2018. Briefing on the motion to dismiss was completed on January 16, 2019. On July 26, 2019, the magistrate judge to which defendants’ motion to dismiss had been assigned issued a report and recommendation, recommending that defendants’ motion to dismiss the complaint be granted in part and denied in part.  Both parties filed timely objections to that report and recommendation on August 9, 2019.  Those objections currently are pending before the Court.

We intend to vigorously defend our interests in the MicroCapital Action. It is not possible at this time to predict the timing or outcome of this litigation, and we cannot reasonably estimate the possible loss or range of possible loss from these claims.

Derivative Litigation. On December 1, 2014, an alleged shareholder, purportedly on behalf of the Company, filed a derivative shareholder lawsuit against us and certain of our current and former directors and former executive officers in the U.S. District Court for the Southern District of Texas, captioned as Robert Hack, derivatively on behalf of Conn’s, Inc., v. Theodore M. Wright (former executive officer and former director), Bob L. Martin, Jon E.M. Jacoby (former director), Kelly M. Malson, Douglas H. Martin, David Schofman, Scott L. Thompson (former director), Brian Taylor (former executive officer) and Michael J. Poppe (former executive officer) and Conn’s, Inc., Case No. 4:14-cv-03442 (the “Original Derivative Action”). The complaint asserts claims for breach of fiduciary duty, unjust enrichment, gross mismanagement, and insider trading based on substantially similar factual allegations as those asserted in the Consolidated Securities Action. The plaintiff seeks unspecified damages against these persons and does not request any damages from us. Setting forth substantially similar claims against the same defendants, on February 25, 2015, an additional federal derivative action, captioned 95250 Canada LTEE, derivatively on Behalf of Conn’s, Inc. v. Wright et al., Cause No. 4:15-cv-00521, was filed in the U.S. District Court for the Southern District of Texas, which has been consolidated with the Original Derivative Action.

The Court previously approved a stipulation among the parties to stay the Original Derivative Action pending resolution of the Consolidated Securities Action. The stay was lifted on November 1, 2018, and the defendants filed a motion to dismiss plaintiff’s complaint. Briefing on the motion to dismiss was completed December 3, 2018. The Court’s ruling is pending. The parties are currently engaging in discovery.

Another derivative action was filed on January 27, 2015, captioned as Richard A. Dohn v. Wright, et al., Cause No. 2015-04405, in the 281st Judicial District Court, Harris County, Texas. This action makes substantially similar allegations to the Original Derivative Action against the same defendants. We received a copy of the proposed amended petition on October 12, 2018, but the amended proposed petition has not yet been filed. The parties jointly requested a stay on this case pending resolution of the Original Derivative Action. This case remains stayed until at least June 27, 2019.

Prior to filing a lawsuit, an alleged shareholder, Robert J. Casey II (“Casey”), submitted a demand under Delaware law, which our Board of Directors refused. On May 19, 2016, Casey, purportedly on behalf of the Company, filed a lawsuit against us and certain of our current and former directors and former executive officers in the 55th Judicial District Court, Harris County, Texas, captioned as Casey, derivatively on behalf of Conn’s, Inc., v. Theodore M. Wright (former executive officer and former director), Michael J. Poppe (former executive officer), Brian Taylor (former executive officer), Bob L. Martin, Jon E.M. Jacoby (former director), Kelly M. Malson, Douglas H. Martin, David Schofman, Scott L. Thompson (former director) and William E. Saunders Jr., and Conn’s, Inc., Cause No. 2016-33135. The complaint asserts claims for breach of fiduciary duties and unjust enrichment based on substantially similar factual allegations as those asserted in the Original Derivative Action. The complaint does not specify the amount of damages sought. No further activity has occurred in this case since the Final Order and Judgment was entered in the Consolidated Securities Action.

Other than Casey, none of the plaintiffs in the other derivative actions made a demand on our Board of Directors prior to filing their respective lawsuits. The defendants in the derivative actions intend to vigorously defend against these claims. It is not possible at this time to predict the timing or outcome of any of this litigation, and we cannot reasonably estimate the possible loss or range of possible loss from these claims.

Regulatory Matters. On July 15, 2019, we reached a settlement with the SEC relating to the previously disclosed SEC investigation commenced in November 2014 into the Company’s underwriting policies and bad debt provisions from July 31, 2012 to July 31, 2014. In connection with the settlement process, on July 15, 2019, the SEC filed a civil complaint and agreed judgment against the Company and a former officer in the U.S. District Court for the Southern District of Texas.

Without admitting or denying the allegations in the SEC’s complaint, the Company consented to entry of a final judgment pursuant to which it paid a civil monetary penalty of $1.1 million to the SEC.

We are involved in other routine litigation and claims incidental to our business from time to time which, individually or in the aggregate, are not expected to have a material adverse effect on us. As required, we accrue estimates of the probable costs for the resolution of these matters. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. However, the results of these proceedings cannot be predicted with certainty, and changes in facts and circumstances could impact our estimate of reserves for litigation. The Company believes that any probable and reasonably estimable loss associated with the foregoing has been adequately reflected in the accompanying financial statements.

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Stockholders’ Equity

6 Months Ended

Jul. 31, 2019

Stockholders' Equity Note [Abstract]

Stockholders’ Equity

Stockholders’ Equity

Share Repurchases

On May 30, 2019, we entered into a stock repurchase program, effective as of May 31, 2019, pursuant to which we may repurchase up to $75.0 million of our outstanding common stock. The program will remain effective for one year, unless extended by the Board of Directors. During the three months ended July 31, 2019, we repurchased 1,874,846 shares of our common stock at an average weighted cost per share of $18.30 for an aggregate amount of $34.3 million.

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Stockholders’ Equity (Details) - USD ($)	3 Months Ended
	Jul. 31, 2019	May 31, 2019
Stockholders' Equity Note [Abstract]
Authorized amount		$ 75,000,000
Stock repurchased (in shares)	1,874,846
Stock repurchased (in dollars per shares)	$ 18.30
Stock repurchased	$ 34,300,000

XML

Guarantor Financial Information (Condensed Consolidated Balance Sheet) (Details) - USD ($) $ in Thousands	Jul. 31, 2019	Apr. 30, 2019	Feb. 01, 2019	Jan. 31, 2019	Jul. 31, 2018	Apr. 30, 2018	Jan. 31, 2018
Current assets:
Cash and cash equivalents	$ 7,563			$ 5,912
Restricted cash	68,219			59,025
Customer accounts receivable, net of allowances (includes VIE balances of $273,685 and $324,064, respectively)	664,980			652,769
Other accounts receivable	67,056			67,078
Inventories	213,513			220,034
Other current assets	10,711			9,576
Total current assets	1,032,042		$ 1,011,411	1,014,394
Investment in and advances to subsidiaries	0			0
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $365,180 and $230,901, respectively)	653,831			686,344
Property and equipment, net	174,225			148,983
Operating lease assets	248,707		227,421	0
Deferred income taxes	25,612		26,088	27,535
Other assets	11,808			7,651
Total assets	2,146,225			1,884,907	$ 1,796,501
Current liabilities:
Current maturities of long-term debt and capital lease obligations	2,558			54,109
Accounts payable	73,205			71,118
Accrued expenses	85,709			90,335
Operating lease liability - current	33,398		29,815	0
Other current liabilities	11,229			22,006
Total current liabilities	206,099		225,142	237,568
Deferred rent	0		0	93,127
Operating lease liability - non current	331,010		300,170	0
Long-term debt and capital lease obligations	945,981			901,222
Other long-term liabilities	26,400		25,409	33,015
Total liabilities	1,509,490			1,264,932
Stockholders' equity	636,735	$ 647,818	$ 626,134	619,975	$ 569,648	$ 549,655	$ 535,068
Total liabilities and stockholders’ equity	2,146,225			1,884,907
Eliminations
Current assets:
Cash and cash equivalents	0			0
Restricted cash	0			0
Customer accounts receivable, net of allowances (includes VIE balances of $273,685 and $324,064, respectively)	0			0
Other accounts receivable	0			0
Inventories	0			0
Other current assets	(8,098)			(8,272)
Total current assets	(8,098)			(8,272)
Investment in and advances to subsidiaries	(982,913)			(962,388)
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $365,180 and $230,901, respectively)	0			0
Property and equipment, net	0			0
Operating lease assets	0
Deferred income taxes	0			0
Other assets	0			0
Total assets	(991,011)			(970,660)
Current liabilities:
Current maturities of long-term debt and capital lease obligations	0			0
Accounts payable	0			0
Accrued expenses	(3,196)			(2,768)
Operating lease liability - current	0
Other current liabilities	(4,900)			(5,504)
Total current liabilities	(8,096)			(8,272)
Deferred rent				0
Operating lease liability - non current	0
Long-term debt and capital lease obligations	0			0
Other long-term liabilities	0			0
Total liabilities	(8,096)			(8,272)
Stockholders' equity	(982,915)			(962,388)
Total liabilities and stockholders’ equity	(991,011)			(970,660)
Conn’s, Inc.
Current assets:
Cash and cash equivalents	0			0
Restricted cash	0			0
Customer accounts receivable, net of allowances (includes VIE balances of $273,685 and $324,064, respectively)	0			0
Other accounts receivable	0			0
Inventories	0			0
Other current assets	0			0
Total current assets	0			0
Investment in and advances to subsidiaries	834,864			815,524
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $365,180 and $230,901, respectively)	0			0
Property and equipment, net	0			0
Operating lease assets	0
Deferred income taxes	25,612			27,535
Other assets	0			0
Total assets	860,476			843,059
Current liabilities:
Current maturities of long-term debt and capital lease obligations	0			0
Accounts payable	0			0
Accrued expenses	686			686
Operating lease liability - current	0
Other current liabilities	0			0
Total current liabilities	686			686
Deferred rent				0
Operating lease liability - non current	0
Long-term debt and capital lease obligations	223,055			222,398
Other long-term liabilities	0			0
Total liabilities	223,741			223,084
Stockholders' equity	636,735			619,975
Total liabilities and stockholders’ equity	860,476			843,059
Guarantors
Current assets:
Cash and cash equivalents	7,563			5,912
Restricted cash	1,775			1,550
Customer accounts receivable, net of allowances (includes VIE balances of $273,685 and $324,064, respectively)	391,295			328,705
Other accounts receivable	67,056			67,078
Inventories	213,513			220,034
Other current assets	9,935			12,344
Total current assets	691,137			635,623
Investment in and advances to subsidiaries	148,049			146,864
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $365,180 and $230,901, respectively)	288,651			455,443
Property and equipment, net	174,225			148,983
Operating lease assets	248,707
Deferred income taxes	0			0
Other assets	11,808			7,651
Total assets	1,562,577			1,394,564
Current liabilities:
Current maturities of long-term debt and capital lease obligations	613			474
Accounts payable	73,205			71,118
Accrued expenses	83,754			88,478
Operating lease liability - current	33,398
Other current liabilities	13,783			24,918
Total current liabilities	204,753			184,988
Deferred rent				93,127
Operating lease liability - non current	331,010
Long-term debt and capital lease obligations	168,290			270,831
Other long-term liabilities	23,660			30,094
Total liabilities	727,713			579,040
Stockholders' equity	834,864			815,524
Total liabilities and stockholders’ equity	1,562,577			1,394,564
Non-Guarantor Subsidiaries
Current assets:
Cash and cash equivalents	0			0
Restricted cash	66,444			57,475
Customer accounts receivable, net of allowances (includes VIE balances of $273,685 and $324,064, respectively)	273,685			324,064
Other accounts receivable	0			0
Inventories	0			0
Other current assets	8,874			5,504
Total current assets	349,003			387,043
Investment in and advances to subsidiaries	0			0
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $365,180 and $230,901, respectively)	365,180			230,901
Property and equipment, net	0			0
Operating lease assets	0
Deferred income taxes	0			0
Other assets	0			0
Total assets	714,183			617,944
Current liabilities:
Current maturities of long-term debt and capital lease obligations	1,945			53,635
Accounts payable	0			0
Accrued expenses	4,465			3,939
Operating lease liability - current	0
Other current liabilities	2,346			2,592
Total current liabilities	8,756			60,166
Deferred rent				0
Operating lease liability - non current	0
Long-term debt and capital lease obligations	554,636			407,993
Other long-term liabilities	2,740			2,921
Total liabilities	566,132			471,080
Stockholders' equity	148,051			146,864
Total liabilities and stockholders’ equity	$ 714,183			$ 617,944

XML

Contingencies Regulatory Matters (Details) $ in Millions	3 Months Ended
	Jul. 31, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Litigation Settlement, Expense	$ 1.1

XML

Debt and Financing Lease Obligations (Tables)

6 Months Ended

Jul. 31, 2019

Debt Disclosure [Abstract]

Long-term Debt

Debt and financing lease obligations consisted of the following:

(in thousands)	July 31, 2019			January 31, 2019
Revolving Credit Facility	$	163,500		$	266,500
Senior Notes	227,000			227,000
2017-B VIE Asset-backed Class B Notes	29,001			98,297
2017-B VIE Asset-backed Class C Notes	78,640			78,640
2018-A VIE Asset-backed Class A Notes	61,415			105,971
2018-A VIE Asset-backed Class B Notes	37,038			63,908
2018-A VIE Asset-backed Class C Notes	37,038			63,908
2019-A VIE Asset-backed Class A Notes	187,959			—
2019-A VIE Asset-backed Class B Notes	64,750			—
2019-A VIE Asset-backed Class C Notes	62,510			—
Warehouse Notes	2,074			53,635
Financing lease obligations	5,402			5,075
Total debt and financing lease obligations	956,327			962,934
Less:
Discount on debt	(1,684		)	(1,966		)
Deferred debt issuance costs	(6,104		)	(5,637		)
Current maturities of long-term debt and financing lease obligations	(2,558		)	(54,109		)
Long-term debt and financing lease obligations	$	945,981		$	901,222

Schedule of Asset-backed Notes

The asset-backed notes outstanding as of July 31, 2019 consisted of the following:

(dollars in thousands)
Asset-Backed Notes	Original Principal Amount		Original Net Proceeds (1)		Current Principal Amount		Issuance Date	Maturity Date	Contractual Interest Rate	Effective Interest Rate (2)
2017-B Class B Notes	$	132,180	$	131,281	$	29,001	12/20/2017	4/15/2021	4.52%	5.30%
2017-B Class C Notes	78,640		77,843		78,640		12/20/2017	11/15/2022	5.95%	6.35%
2018-A Class A Notes	219,200		217,832		61,415		8/15/2018	1/17/2023	3.25%	4.82%
2018-A Class B Notes	69,550		69,020		37,038		8/15/2018	1/17/2023	4.65%	5.60%
2018-A Class C Notes	69,550		68,850		37,038		8/15/2018	1/17/2023	6.02%	6.97%
2019-A Class A Notes	254,530		253,026		187,959		4/24/2019	10/16/2023	3.40%	4.71%
2019-A Class B Notes	64,750		64,276		64,750		4/24/2019	10/16/2023	4.36%	5.17%
2019-A Class C Notes	62,510		61,898		62,510		4/24/2019	10/16/2023	5.29%	6.18%
Warehouse Notes	121,060		118,972		2,074		7/16/2018	1/15/2020	Index + 2.50% (3)	6.43%
Total	$	1,071,970	$	1,062,998	$	560,425

(1) After giving effect to debt issuance costs.

(2) For the six months ended July 31, 2019, and inclusive of the impact of changes in timing of actual and expected cash flows.

Covenant Compliance

A summary of the significant financial covenants that govern our Revolving Credit Facility, as amended, compared to our actual compliance status at July 31, 2019 is presented below: 

	Actual	Required Minimum/ Maximum
Interest Coverage Ratio for the quarter must equal or exceed (minimum)	4.69:1.00	1.00:1.00
Interest Coverage Ratio for the trailing two quarters must equal or exceed (minimum)	4.38:1.00	1.50:1.00
Leverage Ratio must not exceed (maximum)	1.90:1.00	4.00:1.00
ABS Excluded Leverage Ratio must not exceed (maximum)	1.12:1.00	2.00:1.00
Capital Expenditures, net, must not exceed (maximum)	$27.3 million	$100.0 million

XML

Guarantor Financial Information (Tables)

6 Months Ended

Jul. 31, 2019

Condensed Financial Information Disclosure [Abstract]

Condensed Consolidated Balance Sheet

(in thousands)	Conn’s, Inc.		Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	7,563	$	—	$	—		$	7,563
Restricted cash	—		1,775		66,444		—			68,219
Customer accounts receivable, net of allowances	—		391,295		273,685		—			664,980
Other accounts receivable	—		67,056		—		—			67,056
Inventories	—		213,513		—		—			213,513
Other current assets	—		9,935		8,874		(8,098		)	10,711
Total current assets	—		691,137		349,003		(8,098		)	1,032,042
Investment in and advances to subsidiaries	834,864		148,049		—		(982,913		)	—
Long-term portion of customer accounts receivable, net of allowances	—		288,651		365,180		—			653,831
Property and equipment, net	—		174,225		—		—			174,225
Operating lease right-of-use assets	—		248,707		—		—			248,707
Deferred income taxes	25,612		—		—		—			25,612
Other assets	—		11,808		—		—			11,808
Total assets	$	860,476	$	1,562,577	$	714,183	$	(991,011	)	$	2,146,225
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of debt and financing lease obligations	$	—	$	613	$	1,945	$	—		$	2,558
Accounts payable	—		73,205		—		—			73,205
Accrued expenses	686		83,754		4,465		(3,196		)	85,709
Operating lease liability - current	—		33,398		—		—			33,398
Other current liabilities	—		13,783		2,346		(4,900		)	11,229
Total current liabilities	686		204,753		8,756		(8,096		)	206,099
Operating lease liability - non current	—		331,010		—		—			331,010
Long-term debt and financing lease obligations	223,055		168,290		554,636		—			945,981
Other long-term liabilities	—		23,660		2,740		—			26,400
Total liabilities	223,741		727,713		566,132		(8,096		)	1,509,490
Total stockholders’ equity	636,735		834,864		148,051		(982,915		)	636,735
Total liabilities and stockholders’ equity	$	860,476	$	1,562,577	$	714,183	$	(991,011	)	$	2,146,225

Deferred income taxes related to tax attributes of the Guarantors and Non-Guarantor Subsidiaries are reflected under Conn’s, Inc.

Condensed Consolidated Balance Sheet as of January 31, 2019:

(in thousands)	Conn’s, Inc.		Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	5,912	$	—	$	—		$	5,912
Restricted cash	—		1,550		57,475		—			59,025
Customer accounts receivable, net of allowances	—		328,705		324,064		—			652,769
Other accounts receivable	—		67,078		—		—			67,078
Inventories	—		220,034		—		—			220,034
Other current assets	—		12,344		5,504		(8,272		)	9,576
Total current assets	—		635,623		387,043		(8,272		)	1,014,394
Investment in and advances to subsidiaries	815,524		146,864		—		(962,388		)	—
Long-term portion of customer accounts receivable, net of allowances	—		455,443		230,901		—			686,344
Property and equipment, net	—		148,983		—		—			148,983
Deferred income taxes	27,535		—		—		—			27,535
Other assets	—		7,651		—		—			7,651
Total assets	$	843,059	$	1,394,564	$	617,944	$	(970,660	)	$	1,884,907
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of debt and financing lease obligations	$	—	$	474	$	53,635	$	—		$	54,109
Accounts payable	—		71,118		—		—			71,118
Accrued expenses	686		88,478		3,939		(2,768		)	90,335
Other current liabilities	—		24,918		2,592		(5,504		)	22,006
Total current liabilities	686		184,988		60,166		(8,272		)	237,568
Deferred rent	—		93,127		—		—			93,127
Long-term debt and financing lease obligations	222,398		270,831		407,993		—			901,222
Other long-term liabilities	—		30,094		2,921		—			33,015
Total liabilities	223,084		579,040		471,080		(8,272		)	1,264,932
Total stockholders’ equity	619,975		815,524		146,864		(962,388		)	619,975
Total liabilities and stockholders’ equity	$	843,059	$	1,394,564	$	617,944	$	(970,660	)	$	1,884,907

Condensed Consolidated Statement of Operations

Condensed Consolidated Statement of Income for the Three Months Ended July 31, 2019:

(in thousands)	Conn’s, Inc.			Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	306,062	$	—	$	—		$	306,062
Finance charges and other revenues	—			43,327		51,670		—			94,997
Servicing fee revenue	—			8,865		—		(8,865		)	—
Total revenues	—			358,254		51,670		(8,865		)	401,059
Costs and expenses:
Cost of goods sold	—			182,065		—		—			182,065
Selling, general and administrative expense	—			125,549		10,800		(8,865		)	127,484
Provision for bad debts	—			20,355		29,381		—			49,736
Total costs and expenses	—			327,969		40,181		(8,865		)	359,285
Operating income	—			30,285		11,489		—			41,774
Interest expense	4,443			1,337		8,616		—			14,396
Income (loss) before income taxes	(4,443		)	28,948		2,873		—			27,378
Provision (benefit) for income taxes	(1,218		)	7,979		643		—			7,404
Net income (loss)	(3,225		)	20,969		2,230		—			19,974
Income from consolidated subsidiaries	23,199			2,230		—		(25,429		)	—
Consolidated net income	$	19,974		$	23,199	$	2,230	$	(25,429	)	$	19,974

Condensed Consolidated Statement of Income for the Three Months Ended July 31, 2018:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	296,313		$	—		$	—		$	296,313
Finance charges and other revenues	—			56,653			31,654			—			88,307
Servicing fee revenue	—			3,035			—			(3,035		)	—
Total revenues	—			356,001			31,654			(3,035		)	384,620
Costs and expenses:
Cost of goods sold	—			173,627			—			—			173,627
Selling, general and administrative expense	—			115,515			8,210			(3,035		)	120,690
Provision for bad debts	—			29,868			20,883			—			50,751
Charges and credits	—			300			—			—			300
Total costs and expenses	—			319,310			29,093			(3,035		)	345,368
Operating income	—			36,691			2,561			—			39,252
Interest expense	4,448			3,733			7,385			—			15,566
Loss on extinguishment of debt	—			142			1,225			—			1,367
Income (loss) before income taxes	(4,448		)	32,816			(6,049		)	—			22,319
Provision (benefit) for income taxes	(1,058		)	7,805			(1,439		)	—			5,308
Net income (loss)	(3,390		)	25,011			(4,610		)	—			17,011
Income (loss) from consolidated subsidiaries	20,401			(4,610		)	—			(15,791		)	—
Consolidated net income (loss)	$	17,011		$	20,401		$	(4,610	)	$	(15,791	)	$	17,011

Condensed Consolidated Statement of Income for the Six Months Ended July 31, 2019:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	568,041		$	—	$	—		$	568,041
Finance charges and other revenues	—			107,352			79,178		—			186,530
Servicing fee revenue	—			17,698			—		(17,698		)	—
Total revenues	—			693,091			79,178		(17,698		)	754,571
Costs and expenses:
Cost of goods sold	—			339,293			—		—			339,293
Selling, general and administrative expense	—			245,005			18,091		(17,698		)	245,398
Provision for bad debts	—			44,339			45,443		—			89,782
Charges and credits	—			(695		)	—		—			(695		)
Total costs and expenses	—			627,942			63,534		(17,698		)	673,778
Operating income	—			65,149			15,644		—			80,793
Interest expense	8,886			5,924			14,083		—			28,893
Income (loss) before income taxes	(8,886		)	59,225			1,561		—			51,900
Provision (benefit) for income taxes	(2,126		)	14,169			374		—			12,417
Net income (loss)	(6,760		)	45,056			1,187		—			39,483
Income from consolidated subsidiaries	46,243			1,187			—		(47,430		)	—
Consolidated net income	$	39,483		$	46,243		$	1,187	$	(47,430	)	$	39,483

Condensed Consolidated Statement of Income for the Six Months Ended July 31, 2018:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	572,069		$	—		$	—		$	572,069
Finance charges and other revenues	—			102,308			68,630			—			170,938
Servicing fee revenue	—			19,781			—			(19,781		)	—
Total revenues	—			694,158			68,630			(19,781		)	743,007
Costs and expenses:
Cost of goods sold	—			340,216			—			—			340,216
Selling, general and administrative expense	—			235,308			20,041			(19,781		)	235,568
Provision for bad debts	—			36,876			58,031			—			94,907
Charges and credits	—			300			—			—			300
Total costs and expenses	—			612,700			78,072			(19,781		)	670,991
Operating income (loss)	—			81,458			(9,442		)	—			72,016
Interest expense	8,891			6,766			16,729			—			32,386
Loss on extinguishment of debt	—			142			1,631			—			1,773
Income (loss) before income taxes	(8,891		)	74,550			(27,802		)	—			37,857
Provision (benefit) for income taxes	(1,906		)	15,979			(5,959		)	—			8,114
Net income (loss)	(6,985		)	58,571			(21,843		)	—			29,743
Income (loss) from consolidated subsidiaries	36,728			(21,843		)	—			(14,885		)	—
Consolidated net income (loss)	$	29,743		$	36,728		$	(21,843	)	$	(14,885	)	$	29,743

Condensed Consolidated Statement of Cash Flows

Condensed Consolidated Statement of Cash Flows for the Six Months Ended July 31, 2019:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(597	)	$	173,701		$	(83,660	)	$	—		$	89,444
Cash flows from investing activities:
Purchase of customer accounts receivables	—			—			(379,200		)	379,200			—
Sale of customer accounts receivables	—			—			379,200			(379,200		)	—
Purchase of property and equipment	—			(33,330		)	—			—			(33,330		)
Investment in subsidiary	—			(33,019		)	—			33,019			—
Net cash used in investing activities	—			(66,349		)	—			33,019			(33,330		)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	—			—			381,790			—			381,790
Payments on asset-backed notes	—			—			(234,162		)	—			(234,162		)
Borrowings from revolving credit facility	—			778,166			—			—			778,166
Contribution from subsidiary	33,019			—			—			(33,019		)	—
Payments on revolving credit facility	—			(881,166		)	—			—			(881,166		)
Payments of debt issuance costs and amendment fees	—			(55		)	(3,437		)	—			(3,492		)
Payments on warehouse facility	—			—			(51,561		)	—			(51,561		)
Proceeds from stock issued under employee benefit plans	597			—			—			—			597
Tax payments associated with equity-based compensation transactions	—			(1,781		)	—			—			(1,781		)
Purchase of treasury stock	(33,019		)	—			—			—			(33,019		)
Other	—			(641		)	—			—			(641		)
Net cash provided by (used in) financing activities	597			(105,477		)	92,630			(33,019		)	(45,269		)
Net change in cash, cash equivalents and restricted cash	—			1,875			8,970			—			10,845
Cash, cash equivalents and restricted cash, beginning of period	—			7,462			57,475			—			64,937
Cash, cash equivalents and restricted cash, end of period	$	—		$	9,337		$	66,445		$	—		$	75,782

Condensed Consolidated Statement of Cash Flows for the Six Months Ended July 31, 2018:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(834	)	$	(33	)	$	156,519		$	—		$	155,652
Cash flows from investing activities:
Purchase of customer accounts receivables	—			—			(170,144		)	170,144			—
Sale of customer accounts receivables	—			—			170,144			(170,144		)	—
Purchase of property and equipment	—			(12,166		)	—			—			(12,166		)
Net cash used in investing activities	—			(12,166		)	—			—			(12,166		)
Cash flows from financing activities:
Payments on asset-backed notes	—			(169,803		)	(312,080		)	—			(481,883		)
Borrowings from revolving credit facility	—			839,236			—			—			839,236
Payments on revolving credit facility	—			(655,036		)	—			—			(655,036		)
Borrowings from warehouse facility	—			—			173,286			—			173,286
Payments of debt issuance costs and amendment fees	—			(2,825		)	(714		)	—			(3,539		)
Payments on warehouse facility	—			—			(52,226		)	—			(52,226		)
Proceeds from stock issued under employee benefit plans	834			—			—			—			834
Tax payments associated with equity-based compensation transactions	—			(2,516		)	—			—			(2,516		)
Payments from extinguishment of debt	—			(1,177		)	—			—			(1,177		)
Other	—			(531		)	—			—			(531		)
Net cash provided by (used in) financing activities	834			7,348			(191,734		)	—			(183,552		)
Net change in cash, cash equivalents and restricted cash	—			(4,851		)	(35,215		)	—			(40,066		)
Cash, cash equivalents and restricted cash, beginning of period	—			10,836			85,322			—			96,158
Cash, cash equivalents and restricted cash, end of period	$	—		$	5,985		$	50,107		$	—		$	56,092

XML

Debt and Financing Lease Obligations

6 Months Ended

Jul. 31, 2019

Debt Disclosure [Abstract]

Debt and Financing Lease Obligations

Debt and Financing Lease Obligations

Debt and financing lease obligations consisted of the following:

(in thousands)	July 31, 2019			January 31, 2019
Revolving Credit Facility	$	163,500		$	266,500
Senior Notes	227,000			227,000
2017-B VIE Asset-backed Class B Notes	29,001			98,297
2017-B VIE Asset-backed Class C Notes	78,640			78,640
2018-A VIE Asset-backed Class A Notes	61,415			105,971
2018-A VIE Asset-backed Class B Notes	37,038			63,908
2018-A VIE Asset-backed Class C Notes	37,038			63,908
2019-A VIE Asset-backed Class A Notes	187,959			—
2019-A VIE Asset-backed Class B Notes	64,750			—
2019-A VIE Asset-backed Class C Notes	62,510			—
Warehouse Notes	2,074			53,635
Financing lease obligations	5,402			5,075
Total debt and financing lease obligations	956,327			962,934
Less:
Discount on debt	(1,684		)	(1,966		)
Deferred debt issuance costs	(6,104		)	(5,637		)
Current maturities of long-term debt and financing lease obligations	(2,558		)	(54,109		)
Long-term debt and financing lease obligations	$	945,981		$	901,222

Senior Notes. On July 1, 2014, we issued $250.0 million of unsecured Senior Notes due July 2022 bearing interest at 7.25% (the “Senior Notes”), pursuant to an indenture dated July 1, 2014 (as amended, the “Indenture”), among Conn’s, Inc., its subsidiary guarantors (the “Guarantors”) and U.S. Bank National Association, as trustee. The effective interest rate of the Senior Notes after giving effect to the discount and issuance costs is 7.8%.

The Indenture restricts the Company’s and certain of its subsidiaries’ ability to: (i) incur indebtedness; (ii) pay dividends or make other distributions in respect of, or repurchase or redeem, our capital stock (“restricted payments”); (iii) prepay, redeem or repurchase debt that is junior in right of payment to the notes; (iv) make loans and certain investments; (v) sell assets; (vi) incur liens; (vii) enter into transactions with affiliates; and (viii) consolidate, merge or sell all or substantially all of our assets. These covenants are subject to a number of important exceptions and qualifications. During any time when the Senior Notes are rated investment grade by either of Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services and no default (as defined in the Indenture) has occurred and is continuing, many of such covenants will be suspended and we will cease to be subject to such covenants during such period. As of July 31, 2019, $213.8 millionwould have been free from the restricted payments covenant contained in the Indenture. Events of default under the Indenture include customary events, such as a cross-acceleration provision in the event that we fail to make payment of other indebtedness prior to the expiration of any applicable grace period or upon acceleration of indebtedness prior to its stated maturity date in an amount exceeding$25.0 million, as well as in the event a judgment is entered against us in excess of $25.0 million that is not discharged, bonded or insured.

Asset-backed Notes.From time to time, we securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. In turn, the VIEs issue asset-backed notes secured by the transferred customer accounts receivables and restricted cash held by the VIEs.

Under the terms of the securitization transactions, all cash collections and other cash proceeds of the customer receivables go first to the servicer and the holders of issued notes, and then to us as the holder of non-issued notes, if any, and residual equity. We retain the servicing of the securitized portfolios and receive a monthly fee of 4.75%(annualized) based on the outstanding balance of the securitized receivables. In addition, we, rather than the VIEs, retain all credit insurance income together with certain recoveries related to credit insurance and RSAs on charge-offs of the securitized receivables, which are reflected as a reduction to net charge-offs on a consolidated basis.

The asset-backed notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act of 1933, as amended. If an event of default were to occur under the indenture that governs the respective asset-backed notes, the payment of the outstanding amounts may be accelerated, in which event the cash proceeds of the receivables that otherwise might be released to the residual equity holder would instead be directed entirely toward repayment of the asset-backed notes, or if the receivables are liquidated, all liquidation proceeds could be directed solely to repayment of the asset-backed notes as governed by the respective terms of the asset-backed notes. The holders of the asset-backed notes have no recourse to assets outside of the VIEs. Events of default include, but are not limited to, failure to make required payments on the asset-backed notes or specified bankruptcy-related events.

The asset-backed notes outstanding as of July 31, 2019 consisted of the following:

(dollars in thousands)
Asset-Backed Notes	Original Principal Amount		Original Net Proceeds (1)		Current Principal Amount		Issuance Date	Maturity Date	Contractual Interest Rate	Effective Interest Rate (2)
2017-B Class B Notes	$	132,180	$	131,281	$	29,001	12/20/2017	4/15/2021	4.52%	5.30%
2017-B Class C Notes	78,640		77,843		78,640		12/20/2017	11/15/2022	5.95%	6.35%
2018-A Class A Notes	219,200		217,832		61,415		8/15/2018	1/17/2023	3.25%	4.82%
2018-A Class B Notes	69,550		69,020		37,038		8/15/2018	1/17/2023	4.65%	5.60%
2018-A Class C Notes	69,550		68,850		37,038		8/15/2018	1/17/2023	6.02%	6.97%
2019-A Class A Notes	254,530		253,026		187,959		4/24/2019	10/16/2023	3.40%	4.71%
2019-A Class B Notes	64,750		64,276		64,750		4/24/2019	10/16/2023	4.36%	5.17%
2019-A Class C Notes	62,510		61,898		62,510		4/24/2019	10/16/2023	5.29%	6.18%
Warehouse Notes	121,060		118,972		2,074		7/16/2018	1/15/2020	Index + 2.50% (3)	6.43%
Total	$	1,071,970	$	1,062,998	$	560,425

(1) After giving effect to debt issuance costs.

(2) For the six months ended July 31, 2019, and inclusive of the impact of changes in timing of actual and expected cash flows.

(3) The rate on the Warehouse Notes is defined as the applicable index plus a 2.50% fixed margin.

On April 24, 2019, the Company completed the issuance and sale of asset-backed notes at a face amount of $381.8 million secured by the transferred customer accounts receivables and restricted cash held by a VIE, which resulted in net proceeds to us of $379.2 million, net of debt issuance costs. Net proceeds from the offering were used to repay indebtedness under the Company’s Revolving Credit Facility, as defined below, and for other general corporate purposes. The asset-backed notes mature on October 16, 2023 and consist of $254.5 million of 3.40% Series 2019-A, Class A Asset Backed Fixed Rate Notes, $64.8 million of 4.36% Series 2019-A, Class B Asset Backed Fixed Rate Notes and $62.5 million of 5.29%, Series 2019-A, Class C Asset Backed Fixed Rate Notes.

Revolving Credit Facility.On May 23, 2018, Conn’s, Inc. and certain of its subsidiaries (the “Borrowers”) entered into a Fourth Amendment to the Fourth Amended and Restated Loan and Security Agreement (the “Fourth Amendment”), dated as of October 30, 2015, with certain lenders, which provides for a $650.0 million asset-based revolving credit facility (the “Revolving Credit Facility”) under which credit availability is subject to a borrowing base and a maturity date of May 23, 2022.

Loans under the Revolving Credit Facility bear interest, at our option, at a rate equal to LIBOR plus the applicable margin ranging from 2.50% to 3.25% per annum (depending on a pricing grid determined by our total leverage ratio) or the alternate base rate plus a margin ranging from 1.50% to 2.25% per annum (depending on a pricing grid determined by our total leverage ratio). The alternate base rate is the greatest of the prime rate announced by Bank of America, N.A., the federal funds rate plus 0.5%, or LIBOR for a 30-day interest period plus 1.0%. We also pay an unused fee on the portion of the commitments that is available for future borrowings or letters of credit at a rate ranging from 0.25% to 0.50% per annum, depending on the average outstanding balance and letters of credit of the Revolving Credit Facility in the immediately preceding quarter. The weighted-average interest rate on borrowings outstanding and including unused line fees under the Revolving Credit Facility was 6.5% for the six months ended July 31, 2019.

The Revolving Credit Facility provides funding based on a borrowing base calculation that includes customer accounts receivable and inventory, and provides for a $40.0 million sub-facility for letters of credit to support obligations incurred in the ordinary course of business. The obligations under the Revolving Credit Facility are secured by substantially all assets of the Company, excluding the assets of the VIEs. As of July 31, 2019, we had immediately available borrowing capacity of $403.0 million under our Revolving Credit Facility, net of standby letters of credit issued of $2.5 million. We also had $81.0 million that may become available under our Revolving Credit Facility if we grow the balance of eligible customer receivables and total eligible inventory balances.

The Revolving Credit Facility places restrictions on our ability to incur additional indebtedness, grant liens on assets, make distributions on equity interests, dispose of assets, make loans, pay other indebtedness, engage in mergers, and other matters. The Revolving Credit Facility restricts our ability to make dividends and distributions unless no event of default exists and a liquidity test is satisfied. Subsidiaries of the Company may pay dividends and make distributions to the Company and other obligors under the Revolving Credit Facility without restriction. As of July 31, 2019, we were restricted from making distributions, including repayments of the Senior Notes or other distributions, in excess of $266.4 millionas a result of the Revolving Credit Facility distribution and payment restrictions. The Revolving Credit Facility contains customary default provisions, which, if triggered, could result in acceleration of all amounts outstanding under the Revolving Credit Facility.

Debt Covenants. We were in compliance with our debt covenants, as amended, at July 31, 2019. A summary of the significant financial covenants that govern our Revolving Credit Facility, as amended, compared to our actual compliance status at July 31, 2019 is presented below: 

	Actual	Required Minimum/ Maximum
Interest Coverage Ratio for the quarter must equal or exceed (minimum)	4.69:1.00	1.00:1.00
Interest Coverage Ratio for the trailing two quarters must equal or exceed (minimum)	4.38:1.00	1.50:1.00
Leverage Ratio must not exceed (maximum)	1.90:1.00	4.00:1.00
ABS Excluded Leverage Ratio must not exceed (maximum)	1.12:1.00	2.00:1.00
Capital Expenditures, net, must not exceed (maximum)	$27.3 million	$100.0 million

All capitalized terms in the above table are defined by the Revolving Credit Facility and may or may not match directly to the financial statement captions in this document. The covenants are calculated quarterly, except for capital expenditures, which is calculated for a period of four consecutive fiscal quarters, as of the end of each fiscal quarter.

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Segment Reporting

6 Months Ended

Jul. 31, 2019

Segment Reporting [Abstract]

Segment Reporting

Segment Information

Operating segments are defined as components of an enterprise that engage in business activities and for which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker to make decisions about how to allocate resources and assess performance. We are a leading specialty retailer and offer a broad selection of quality, branded durable consumer goods and related services in addition to a proprietary credit solution for our core credit-constrained consumers. We have two operating segments: (i) retail and (ii) credit. Our operating segments complement one another. The retail segment operates primarily through our stores and website. Our retail segment product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points. Our credit segment offers affordable financing solutions to a large, under-served population of credit-constrained consumers who typically have limited credit alternatives. Our operating segments provide customers the opportunity to comparison shop across brands with confidence in our competitive prices as well as affordable monthly payment options, next day delivery and installation in the majority of our markets, and product repair service. The operating segments follow the same accounting policies used in our Condensed Consolidated Financial Statements.

We evaluate a segment’s performance based upon operating income before taxes. Selling, general and administrative expenses (“SG&A”) includes the direct expenses of the retail and credit operations, allocated overhead expenses, and a charge to the credit segment to reimburse the retail segment for expenses it incurs related to occupancy, personnel, advertising and other direct costs of the retail segment, which benefit the credit operations by sourcing credit customers and collecting payments. The reimbursement received by the retail segment from the credit segment is calculated using an annual rate of 2.5% times the average outstanding portfolio balance for each applicable period.

As of July 31, 2019, we operated retail stores in 14 states with no operations outside of the United States. No single customer accounts for more than 10% of our total revenues.

Financial information by segment is presented in the following tables:

	Three Months Ended July 31, 2019								Three Months Ended July 31, 2018
(in thousands)	Retail			Credit			Total		Retail		Credit			Total
Revenues:
Furniture and mattress	$	99,455		$	—		$	99,455	$	97,066	$	—		$	97,066
Home appliance	99,356			—			99,356		91,471		—			91,471
Consumer electronics	53,692			—			53,692		55,654		—			55,654
Home office	17,883			—			17,883		19,289		—			19,289
Other	4,192			—			4,192		3,699		—			3,699
Product sales	274,578			—			274,578		267,179		—			267,179
Repair service agreement commissions	27,647			—			27,647		25,662		—			25,662
Service revenues	3,837			—			3,837		3,472		—			3,472
Total net sales	306,062			—			306,062		296,313		—			296,313
Finance charges and other revenues	203			94,794			94,997		98		88,209			88,307
Total revenues	306,265			94,794			401,059		296,411		88,209			384,620
Costs and expenses:
Cost of goods sold	182,065			—			182,065		173,627		—			173,627
Selling, general and administrative expense (1)	88,147			39,337			127,484		83,003		37,687			120,690
Provision for bad debts	(19		)	49,755			49,736		243		50,508			50,751
Charges and credits	—			—			—		300		—			300
Total costs and expenses	270,193			89,092			359,285		257,173		88,195			345,368
Operating income	36,072			5,702			41,774		39,238		14			39,252
Interest expense	—			14,396			14,396		—		15,566			15,566
Loss on extinguishment of debt	—			—			—		—		1,367			1,367
Income (loss) before income taxes	$	36,072		$	(8,694	)	$	27,378	$	39,238	$	(16,919	)	$	22,319

	Six Months Ended July 31, 2019									Six Months Ended July 31, 2018
(in thousands)	Retail			Credit			Total			Retail		Credit			Total
Revenues:
Furniture and mattress	$	187,819		$	—		$	187,819		$	194,086	$	—		$	194,086
Home appliance	176,646			—			176,646			169,494		—			169,494
Consumer electronics	103,341			—			103,341			107,956		—			107,956
Home office	33,589			—			33,589			37,599		—			37,599
Other	7,628			—			7,628			7,358		—			7,358
Product sales	509,023			—			509,023			516,493		—			516,493
Repair service agreement commissions	51,671			—			51,671			48,525		—			48,525
Service revenues	7,347			—			7,347			7,051		—			7,051
Total net sales	568,041			—			568,041			572,069		—			572,069
Finance charges and other revenues	405			186,125			186,530			112		170,826			170,938
Total revenues	568,446			186,125			754,571			572,181		170,826			743,007
Costs and expenses:
Cost of goods sold	339,293			—			339,293			340,216		—			340,216
Selling, general and administrative expense (1)	167,769			77,629			245,398			160,755		74,813			235,568
Provision for bad debts	110			89,672			89,782			503		94,404			94,907
Charges and credits	(695		)	—			(695		)	300		—			300
Total costs and expenses	506,477			167,301			673,778			501,774		169,217			670,991
Operating income	61,969			18,824			80,793			70,407		1,609			72,016
Interest expense	—			28,893			28,893			—		32,386			32,386
Loss on extinguishment of debt	—			—			—			—		1,773			1,773
Income (loss) before income taxes	$	61,969		$	(10,069	)	$	51,900		$	70,407	$	(32,550	)	$	37,857
	July 31, 2019									July 31, 2018
(in thousands)	Retail			Credit			Total			Retail		Credit			Total
Total assets	$	699,382		$	1,446,843		$	2,146,225		$	416,166	$	1,380,335		$	1,796,501

(1) For the three months ended July 31, 2019 and 2018, the amount of corporate overhead allocated to each segment reflected in SG&A was $9.7 million and $9.3 million, respectively. For the three months ended July 31, 2019 and 2018, the amount of reimbursement made to the retail segment by the credit segment was $9.7 million and $9.4 million, respectively. For the six months ended July 31, 2019 and 2018, the amount of corporate overhead allocated to each segment reflected in SG&A was $17.6 million and $17.6 million, respectively. For the six months ended July 31, 2019 and 2018, the amount of reimbursement made to the retail segment by the credit segment was $19.4 million and $18.8 million, respectively.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jul. 31, 2019

Accounting Policies [Abstract]

Business and Basis of Presentation

Business. Conn’s, Inc., a Delaware corporation, is a holding company with no independent assets or operations other than its investments in its subsidiaries. References to “we,” “our,” “us,” “the Company,” “Conn’s” or “CONN” refer to Conn’s, Inc. and, as apparent from the context, its subsidiaries. Conn’s is a leading specialty retailer that offers a broad selection of quality, branded durable consumer goods and related services in addition to proprietary credit solutions for its core credit-constrained consumers. We operate an integrated and scalable business through our retail stores and website. Our complementary product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points. Our credit offering provides financing solutions to a large, under-served population of credit-constrained consumers who typically have limited credit alternatives.

We operate two reportable segments: retail and credit. Our retail stores bear the “Conn’s HomePlus” name with all of our stores providing the same products and services to a common customer group. Our stores follow the same procedures and methods in managing their operations. Our retail business and credit business are operated independently from each other. The credit segment is dedicated to providing short- and medium-term financing to our retail customers. The retail segment is not involved in credit approval decisions or collection efforts. Our management evaluates performance and allocates resources based on the operating results of the retail and credit segments.

Basis of Presentation. The accompanying unaudited Condensed Consolidated Financial Statements of Conn’s, Inc. and its wholly-owned subsidiaries, including its Variable Interest Entities (“VIEs”), have been prepared by management in accordance with U.S. generally accepted accounting principles (“GAAP”) and prevailing industry practice for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated financial position, results of operations and cash flows for these interim periods are not necessarily indicative of the results that may be expected in future periods. The balance sheet at January 31, 2019 has been derived from the audited financial statements at that date. The financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2019 (the “2019 Form 10-K”) filed with the United States Securities and Exchange Commission (the “SEC”) on March 26, 2019

Fiscal Year

Fiscal Year. Our fiscal year ends on January 31. References to a fiscal year refer to the calendar year in which the fiscal year ends.

Principles of Consolidation

Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of Conn’s, Inc. and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Variable Interest Entity

Variable Interest Entities. VIEs are consolidated if the Company is the primary beneficiary. The primary beneficiary of a VIE is the party that has (i) the power to direct the activities that most significantly impact the performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

We securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. We retain the servicing of the securitized portfolio and have a variable interest in each corresponding VIE by holding the residual equity. We have determined that we are the primary beneficiary of each respective VIE because (i) our servicing responsibilities for the securitized portfolio give us the power to direct the activities that most significantly impact the performance of the VIE and (ii) our variable interest in the VIE gives us the obligation to absorb losses and the right to receive residual returns that potentially could be significant. As a result, we consolidate the respective VIEs within our Condensed Consolidated Financial Statements.

Refer to Note 4, Debt and Financing Lease Obligations, and Note 7, Variable Interest Entities, for additional information.

Use of Estimates

Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ, even significantly, from these estimates. Management evaluates its estimates and related assumptions regularly, including those related to the allowance for doubtful accounts and allowances for no-interest option credit programs, which are particularly sensitive given the size of our customer portfolio balance.

Cash and Cash Equivalents and Restricted Cash

Cash and Cash Equivalents. As of July 31, 2019 and January 31, 2019, cash and cash equivalents included cash, credit card deposits in transit, and highly liquid debt instruments purchased with a maturity date of three months or less. Credit card deposits in transit included in cash and cash equivalents were $2.3 million and $2.5 million as of July 31, 2019 and January 31, 2019, respectively. 

Restricted Cash. The restricted cash balance as of July 31, 2019 and January 31, 2019 includes $53.7 million and $45.3 million, respectively, of cash we collected as servicer on the securitized receivables that was subsequently remitted to the VIEs and $12.7 million and $12.2 million, respectively, of cash held by the VIEs as additional collateral for the asset-backed notes.

Customer Accounts Receivable

Customer Accounts Receivable. Customer accounts receivable reported in the Condensed Consolidated Balance Sheet includes total receivables managed, including both those transferred to the VIEs and those not transferred to the VIEs. Customer accounts receivable are recognized at the time the customer takes possession of the product. Based on contractual terms, we record the amount of principal and accrued interest on customer receivables that is expected to be collected within the next twelve months in current assets with the remaining balance in long-term assets on the Condensed Consolidated Balance Sheet. Customer accounts receivable include the net of unamortized deferred fees charged to customers and origination costs. Customer receivables are considered delinquent if a payment has not been received on the scheduled due date. Accounts that are delinquent more than 209 days as of the end of a month are charged-off against the allowance for doubtful accounts along with interest accrued subsequent to the last payment.

In an effort to mitigate losses on our accounts receivable, we may make loan modifications to a borrower experiencing financial difficulty. In our role as servicer, we may also make modifications to loans held by the VIEs. The loan modifications are intended to maximize net cash flow after expenses and avoid the need to exercise legal remedies available to us. We may extend or “re-age” a portion of our customer accounts, which involves modifying the payment terms to defer a portion of the cash payments due. Our re-aging of customer accounts does not change the interest rate or the total principal amount due from the customer and typically does not reduce the monthly contractual payments. To a much lesser extent, we may provide the customer the ability to refinance their account, which typically does not change the interest rate or the total principal amount due from the customer but does reduce the monthly contractual payments and extend the term. We consider accounts that have been re-aged in excess of three months or refinanced as Troubled Debt Restructurings (“TDR” or “Restructured Accounts”).

Interest Income on Customer Accounts Receivable

Interest Income on Customer Accounts Receivable.Interest income, which includes interest income and amortization of deferred fees and origination costs, is recorded using the interest method and is reflected in finance charges and other revenues. Typically, interest income is recorded until the customer account is paid off or charged-off and we provide an allowance for estimated uncollectible interest. Any contractual interest income received from customers in excess of the interest income calculated using the interest method is recorded as deferred revenue on our balance sheets. At July 31, 2019 and January 31, 2019, there was $11.6 million and $11.2 million, respectively, of deferred interest included in deferred revenues and other credits and other long-term liabilities. The deferred interest will ultimately be brought into income as the accounts pay off or charge-off.

We offer a 12-month no-interest option program. If the customer is delinquent in making a scheduled monthly payment or does not repay the principal in full by the end of the no-interest option program period (grace periods are provided), the account does not qualify for the no-interest provision and none of the interest earned is waived. Interest income is recognized based on estimated accrued interest earned to date on all no-interest option finance programs with an offsetting reserve for those customers expected to satisfy the requirements of the program based on our historical experience.

We recognize interest income on TDR accounts using the interest income method, which requires reporting interest income equal to the increase in the net carrying amount of the loan attributable to the passage of time. Cash proceeds and other adjustments are applied to the net carrying amount such that it equals the present value of expected future cash flows.

We place accounts in non-accrual status when legally required. Payments received on non-accrual loans are applied to principal and reduce the balance of the loan. At July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable in non-accrual status was $14.6 million and $13.9 million, respectively. At July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable that were past due 90 days or more and still accruing interest totaled $95.4 million and $106.5 million, respectively. At July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable in a bankruptcy status that were less than 60 days past due of $12.1 million and $12.0 million, respectively, were included within the customer receivables balance carried in non-accrual status.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts. The determination of the amount of the allowance for bad debts is, by nature, highly complex and subjective. Future events that are inherently uncertain could result in material changes to the level of the allowance for bad debts. General economic conditions, changes to state or federal regulations and a variety of other factors that affect the ability of borrowers to service their debts or our ability to collect will impact the future performance of the portfolio.   

We establish an allowance for doubtful accounts, including estimated uncollectible interest, to cover probable and estimable losses on our customer accounts receivable resulting from the failure of customers to make contractual payments. Our customer accounts receivable portfolio balance consists of a large number of relatively small, homogeneous accounts. None of our accounts are large enough to warrant individual evaluation for impairment.

We record an allowance for doubtful accounts on our non-TDR customer accounts receivable that we expect to charge-off over the next 12 months based on historical gross charge-off rates over the last 24 months. We incorporate an adjustment to historical gross charge-off rates for a scaled factor of the year-over-year change in six month average first payment default rates and the year-over-year change in the balance of customer accounts receivable that are 60 days or more past due.  In addition to adjusted historical gross charge-off rates, estimates of post-charge-off recoveries, including cash payments from customers, amounts realized from the repossession of the products financed, sales tax recoveries from taxing jurisdictions, and payments received under credit insurance and repair service agreement (“RSA”) policies are also considered.               

Qualitative adjustments are made to the allowance for bad debts when, based on management’s judgment, there are internal or external factors impacting probable incurred losses not taken into account by the quantitative calculations. These qualitative considerations are based on the following factors: changes in lending policies and procedures, changes in economic and business conditions, changes in the nature and volume of the portfolio, changes in lending management, changes in credit quality statistics, changes in concentrations of credit, and other internal or external factor changes. We utilize an economic qualitative adjustment based on changes in unemployment rates if current unemployment rates in our markets are worse than they were on average over the last 24 months.  We also qualitatively limit the impact of changes in first payment default rates and changes in delinquency when those changes result in a decrease to the allowance for bad debts based on a measure of the dispersion of historical charge-off rates.

We determine allowances for those accounts that are TDR based on the discounted present value of cash flows expected to be collected over the life of those accounts based primarily on the performance of TDR loans over the last 24 months. The cash flows are discounted based on the weighted-average effective interest rate of the TDR accounts. The excess of the carrying amount over the discounted cash flow amount is recorded as an allowance for loss on those accounts.

Debt Issuance Costs

Debt Issuance Costs. Costs that are direct and incremental to debt issuance are deferred and amortized to interest expense using the effective interest method over the expected life of the debt. All other costs related to debt issuance are expensed as incurred. We present debt issuance costs associated with long-term debt as a reduction of the carrying amount of the debt. Unamortized costs related to the Revolving Credit Facility, as defined in Note 4, Debt and Financing Lease Obligations, are included in other assets on our Condensed Consolidated Balance Sheet and were $5.2 million and $6.1 million as of July 31, 2019 and January 31, 2019, respectively.

Income Taxes

Income Taxes. For the six months ended July 31, 2019 and 2018, we utilized the estimated annual effective tax rate based on our estimated fiscal year 2020 and 2019 pre-tax income, respectively, in determining income tax expense.

Provision for income taxes for interim periods is based on an estimated annual income tax rate, adjusted for discrete tax items. As a result, our interim effective tax rates may vary significantly from the statutory tax rate and the annual effective tax rate.

For the six months ended July 31, 2019 and 2018, the effective tax rate was 23.9% and 21.4%, respectively. The primary factor affecting the increase in our effective tax rate for the six months ended July 31, 2019 w

Share-based Compensation

Stock-based Compensation. Stock-based compensation expense is recorded, net of estimated forfeitures, for share-based compensation awards over the requisite service period using the straight-line method. An adjustment is made to compensation cost for any difference between the estimated forfeitures and the actual forfeitures related to the awards. For equity-classified share-based compensation awards, expense is recognized based on the grant-date fair value. For stock option grants, we use the Black-Scholes model to determine fair value. For grants of restricted stock units (“RSUs”), the fair value of the grant is the market value of our stock at the date of issuance. For grants of performance-based restricted stock units (“PSUs”), the fair value of the grant is the market value of our stock at the date of issuance adjusted for a market condition, a performance condition and a service condition.

Earnings per Share

Earnings per Share. Basic earnings per share for a particular period is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effects of any stock options, RSUs and PSUs, which are calculated using the treasury-stock method.

Fair Value of Financial Instruments

Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to subjectivity associated with the inputs to fair value measurements as follows:  

• Level 1 – Inputs represent unadjusted quoted prices in active markets for identical assets or liabilities.

• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (for example, quoted market prices for similar assets or liabilities in active markets or quoted market prices for identical assets or liabilities in markets not considered to be active, inputs other than quoted prices that are observable for the asset or liability, or market-corroborated inputs).

• Level 3 – Inputs that are not observable from objective sources such as our internally developed assumptions used in pricing an asset or liability (for example, an estimate of future cash flows used in our internally developed present value of future cash flows model that underlies the fair-value measurement).

In determining fair value, we use observable market data when available, or models that incorporate observable market data. When we are required to measure fair value and there is not a market-observable price for the asset or liability or for a similar asset or liability, we use the cost or income approach depending on the quality of information available to support management’s assumptions. The cost approach is based on management’s best estimate of the current asset replacement cost. The income approach is based on management’s best assumptions regarding expectations of future net cash flows and discounts the expected cash flows using a commensurate risk-adjusted discount rate. Such evaluations involve significant judgment, and the results are based on expected future events or conditions such as sales prices, economic and regulatory climates, and other factors, most of which are often outside of management’s control. However, we believe assumptions used reflect a market participant’s view of long-term prices, costs, and other factors and are consistent with assumptions used in our business plans and investment decisions.

In arriving at fair-value estimates, we use relevant observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement is characterized based on the lowest level of input that is significant to the fair-value measurement.

The fair value of cash and cash equivalents, restricted cash and accounts payable approximate their carrying amounts because of the short maturity of these instruments. The fair value of customer accounts receivable, determined using a Level 3 discounted cash flow analysis, approximates their carrying value, net of the allowance for doubtful accounts. The fair value of our Revolving Credit Facility approximates carrying value based on the current borrowing rate for similar types of borrowing arrangements. At July 31, 2019, the fair value of the Senior Notes outstanding, which was determined using Level 1 inputs, was $230.2 million as compared to the carrying value of $227.0 million, excluding the impact of the related discount. At July 31, 2019, the fair value of the asset-backed notes approximates their carrying value and was determined using Level 2 inputs based on inactive trading activity.

Revenue Recognition, Deferred Revenue [Policy Text Block]

Deferred Revenue. Deferred revenue related to contracts with customers consists of deferred customer deposits and deferred RSA administration fees. During the three and six months ended July 31, 2019, we recognized $1.0 million and $1.4 million of revenue for customer deposits deferred as of the beginning of the period. During the three and six months ended July 31, 2019, we recognized $1.3 million and $2.5 million of revenue for RSA administrative fees deferred as of January 31, 2019.

Recent Accounting Pronouncements Adopted and Recent Accounting Pronouncements Yet To Be Adopted

Recent Accounting Pronouncements Adopted. In February 2016 the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for most leases. Effective February 1, 2019, the Company adopted ASU 2016-02 using the modified retrospective approach. For most leases, a liability was recorded on the balance sheet based on the present value of future lease obligations with a corresponding right-of-use asset. Primarily for those leases currently classified by us as operating leases, we recognize a single lease cost on a straight line basis. Other leases are required to be accounted for as financing arrangements similar to how we previously accounted for capital leases. Upon adoption we elected a package of practical expedients permitted under the transition guidance within the new standard. The practical expedients adopted allowed us to carry forward the historical lease classification, allowed us to not separate and allocate the consideration paid between lease and non-lease components included within a contract and allowed us to carry forward our accounting treatment for land easements on existing agreements. We also adopted an optional transition method finalized by the FASB in July 2018 that waives the requirement to apply this ASU in the comparative periods presented within the financial statements in the year of adoption. Therefore, results for reporting periods beginning after February 1, 2019 are presented under ASC Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting policies under ASC Topic 840.

Additionally, we have elected the short-term policy election for the Company for any lease that, at the commencement date, has a lease term of twelve months or less. We will not recognize a lease liability or right-of-use asset on the balance sheet for any of our short-term leases. Rather, the short-term lease payments will be recognized as an expense on a straight-line basis over the lease term. The current period short-term lease expense reasonably reflects our short-term lease commitments.

The cumulative effect of the changes made to the Company’s Condensed Consolidated Balance Sheet as a result of the adoption of ASC 842 were as follows (in thousands):

	Impact of Adoption of ASC 842
(in thousands)	Balance at January 31, 2019		Adjustments due to ASC 842			Balance at February 1, 2019
Assets
Current assets (1)	$	1,014,394	$	(2,983	)	$	1,011,411
Operating lease right-of-use assets (2)	—		227,421			227,421
Deferred income taxes (3)	27,535		(1,447		)	26,088
Liabilities
Current liabilities (4)	237,568		(12,426		)	225,142
Operating lease liability - current (5)	—		29,815			29,815
Deferred rent (4)	93,127		(93,127		)	—
Operating lease liability - non-current (5)	—		300,170			300,170
Other long-term liabilities (3)	33,015		(7,606		)	25,409
Stockholder’s equity (3)	619,975		6,159			626,134

(1) Reclassification of the $3.0 million January 31, 2019 balance of accounts receivable for tenant improvement allowances to a reduction in the operating lease liability.

(2) The operating lease right-of-use assets represent the present value of the lease liability offset by the full value of deferred rent and tenant improvement allowances received from the lessor which had not been utilized as of the date of adoption.

(3) A net cumulative-effect adjustment to increase retained earnings by $6.2 million to recognize the $7.6 million January 31, 2019 balance of deferred gains which resulted from sale and operating leaseback transactions made at off-market terms offset by the $1.4 million impact on our deferred tax asset related to the sale-leaseback transactions.

(4) Reclassification of the full value of deferred rent and tenant improvement allowances received from lessors, which were previously recorded as liabilities as they had not been utilized as of the date of adoption, to a reduction of the operating lease right-of-use assets.

(5) The operating lease liability represents the $340.5 million present value of future operating lease obligations as of January 31, 2019, offset by $10.5 million of accounts receivable for tenant improvement allowances.

Recent Accounting Pronouncements Yet To Be Adopted. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The standard will become effective for us in the first quarter of fiscal year 2021 and early adoption was permitted beginning in the first quarter of fiscal year 2020. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2019-04 requires that the current estimate of recoveries are included in the allowance for credit losses. We have formed a cross-functional working group comprised of individuals from various functional areas including credit, finance, accounting, and information technology. While we are currently evaluating the likely impact the adoption of this ASU will have on our Consolidated Financial Statements, the adoption of ASU 2016-13 will result in a material increase in the allowance for loan losses as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio.

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Debt and Financing Lease Obligations - Debt Covenants (Details)	6 Months Ended
	Jul. 31, 2019 USD ($)
Actual
Interest Coverage Ratio for the quarter must equal or exceed (minimum)	4.69
Interest Coverage Ratio for the trailing two quarters must equal or exceed (minimum)	4.38
Leverage Ratio must not exceed (maximum)	1.90
ABS Excluded Leverage Ratio must not exceed (maximum)	1.12
Capital Expenditures, net, must not exceed (maximum)	$ 27,300,000
Required Minimum/ Maximum
Interest Coverage Ratio for the quarter must equal or exceed (minimum)	1.00
Interest Coverage Ratio for the trailing two quarters must equal or exceed (minimum)	1.5
Leverage Ratio must not exceed (maximum)	4.00
ABS Excluded Leverage Ratio must not exceed (maximum)	2.00
Capital Expenditures, net, must not exceed (maximum)	$ 100,000,000.0
Determination period	12 months

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Debt and Financing Lease Obligations - Schedule of Debt and Capital Lease Obligations (Details) - USD ($) $ in Thousands	Jul. 31, 2019	Jan. 31, 2019
Long-term debt [Abstract]
Long-term debt	$ 560,425
Financing lease obligations	5,402	$ 5,075
Total debt and financing lease obligations	956,327	962,934
Less:
Discount on debt	(1,684)	(1,966)
Deferred debt issuance costs	(6,104)	(5,637)
Current maturities of long-term debt and financing lease obligations	(2,558)	(54,109)
Long-term debt and financing lease obligations	945,981	901,222
2017-B Class B Notes [Member]
Long-term debt [Abstract]
Long-term debt	29,001
2017-B Class C Notes [Member]
Long-term debt [Abstract]
Long-term debt	78,640
2018-A VIE Class A Notes [Member]
Long-term debt [Abstract]
Long-term debt	61,415
2018-A VIE Class B Notes [Member]
Long-term debt [Abstract]
Long-term debt	37,038
2018-A VIE Class C Notes [Member]
Long-term debt [Abstract]
Long-term debt	37,038
2019-A VIE Class A Notes [Member]
Long-term debt [Abstract]
Long-term debt	187,959
2019-A VIE Class B Notes [Member]
Long-term debt [Abstract]
Long-term debt	64,750
2019-A VIE Class C Notes [Member]
Long-term debt [Abstract]
Long-term debt	62,510
Warehouse Notes [Member]
Long-term debt [Abstract]
Long-term debt	2,074	53,635
Senior Notes [Member]
Long-term debt [Abstract]
Long-term debt	227,000	227,000
Secured Debt [Member] | 2017-B Class B Notes [Member]
Long-term debt [Abstract]
Long-term debt	29,001	98,297
Secured Debt [Member] | 2017-B Class C Notes [Member]
Long-term debt [Abstract]
Long-term debt	78,640	78,640
Secured Debt [Member] | 2018-A VIE Class A Notes [Member]
Long-term debt [Abstract]
Long-term debt	61,415	105,971
Secured Debt [Member] | 2018-A VIE Class B Notes [Member]
Long-term debt [Abstract]
Long-term debt	37,038	63,908
Secured Debt [Member] | 2018-A VIE Class C Notes [Member]
Long-term debt [Abstract]
Long-term debt	37,038	63,908
Secured Debt [Member] | 2019-A VIE Class A Notes [Member]
Long-term debt [Abstract]
Long-term debt	187,959	0
Secured Debt [Member] | 2019-A VIE Class B Notes [Member]
Long-term debt [Abstract]
Long-term debt	64,750	0
Secured Debt [Member] | 2019-A VIE Class C Notes [Member]
Long-term debt [Abstract]
Long-term debt	62,510	0
Revolving Credit Facility [Member]
Less:
Deferred debt issuance costs	(5,200)	(6,100)
Revolving Credit Facility [Member] | Line of Credit [Member]
Long-term debt [Abstract]
Long-term debt	$ 163,500	$ 266,500

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jul. 31, 2019	Jan. 31, 2019
Restricted cash, VIE balance	$ 68,219	$ 59,025
Customer accounts receivable, net of allowances (includes VIE balances of $273,685 and $324,064, respectively)	664,980	652,769
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $365,180 and $230,901, respectively)	653,831	$ 686,344
Long-term debt	$ 560,425
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	32,000,548	31,788,162
Treasury Stock, Shares	1,874,846	0
Variable Interest Entity [Member]
Restricted cash, VIE balance	$ 66,444	$ 57,475
Customer accounts receivable, net of allowances (includes VIE balances of $273,685 and $324,064, respectively)	273,685	324,064
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $365,180 and $230,901, respectively)	365,180	230,901
Long-term debt	554,636	407,993
Non-Guarantor Subsidiaries
Restricted cash, VIE balance	66,444	57,475
Customer accounts receivable, net of allowances (includes VIE balances of $273,685 and $324,064, respectively)	273,685	324,064
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $365,180 and $230,901, respectively)	$ 365,180	$ 230,901

XML

Summary of Significant Accounting Policies

6 Months Ended

Jul. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Business. Conn’s, Inc., a Delaware corporation, is a holding company with no independent assets or operations other than its investments in its subsidiaries. References to “we,” “our,” “us,” “the Company,” “Conn’s” or “CONN” refer to Conn’s, Inc. and, as apparent from the context, its subsidiaries. Conn’s is a leading specialty retailer that offers a broad selection of quality, branded durable consumer goods and related services in addition to proprietary credit solutions for its core credit-constrained consumers. We operate an integrated and scalable business through our retail stores and website. Our complementary product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points. Our credit offering provides financing solutions to a large, under-served population of credit-constrained consumers who typically have limited credit alternatives.

We operate two reportable segments: retail and credit. Our retail stores bear the “Conn’s HomePlus” name with all of our stores providing the same products and services to a common customer group. Our stores follow the same procedures and methods in managing their operations. Our retail business and credit business are operated independently from each other. The credit segment is dedicated to providing short- and medium-term financing to our retail customers. The retail segment is not involved in credit approval decisions or collection efforts. Our management evaluates performance and allocates resources based on the operating results of the retail and credit segments.

Basis of Presentation. The accompanying unaudited Condensed Consolidated Financial Statements of Conn’s, Inc. and its wholly-owned subsidiaries, including its Variable Interest Entities (“VIEs”), have been prepared by management in accordance with U.S. generally accepted accounting principles (“GAAP”) and prevailing industry practice for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated financial position, results of operations and cash flows for these interim periods are not necessarily indicative of the results that may be expected in future periods. The balance sheet at January 31, 2019 has been derived from the audited financial statements at that date. The financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2019 (the “2019 Form 10-K”) filed with the United States Securities and Exchange Commission (the “SEC”) on March 26, 2019.

Fiscal Year. Our fiscal year ends on January 31. References to a fiscal year refer to the calendar year in which the fiscal year ends.

Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of Conn’s, Inc. and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. 

Variable Interest Entities. VIEs are consolidated if the Company is the primary beneficiary. The primary beneficiary of a VIE is the party that has (i) the power to direct the activities that most significantly impact the performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

We securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. We retain the servicing of the securitized portfolio and have a variable interest in each corresponding VIE by holding the residual equity. We have determined that we are the primary beneficiary of each respective VIE because (i) our servicing responsibilities for the securitized portfolio give us the power to direct the activities that most significantly impact the performance of the VIE and (ii) our variable interest in the VIE gives us the obligation to absorb losses and the right to receive residual returns that potentially could be significant. As a result, we consolidate the respective VIEs within our Condensed Consolidated Financial Statements.

Refer to Note 4, Debt and Financing Lease Obligations, and Note 7, Variable Interest Entities, for additional information.

Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ, even significantly, from these estimates. Management evaluates its estimates and related assumptions regularly, including those related to the allowance for doubtful accounts and allowances for no-interest option credit programs, which are particularly sensitive given the size of our customer portfolio balance.

Cash and Cash Equivalents. As of July 31, 2019 and January 31, 2019, cash and cash equivalents included cash, credit card deposits in transit, and highly liquid debt instruments purchased with a maturity date of three months or less. Credit card deposits in transit included in cash and cash equivalents were $2.3 million and $2.5 million as of July 31, 2019 and January 31, 2019, respectively. 

Restricted Cash. The restricted cash balance as of July 31, 2019 and January 31, 2019 includes $53.7 million and $45.3 million, respectively, of cash we collected as servicer on the securitized receivables that was subsequently remitted to the VIEs and $12.7 million and $12.2 million, respectively, of cash held by the VIEs as additional collateral for the asset-backed notes.

Customer Accounts Receivable. Customer accounts receivable reported in the Condensed Consolidated Balance Sheet includes total receivables managed, including both those transferred to the VIEs and those not transferred to the VIEs. Customer accounts receivable are recognized at the time the customer takes possession of the product. Based on contractual terms, we record the amount of principal and accrued interest on customer receivables that is expected to be collected within the next twelve months in current assets with the remaining balance in long-term assets on the Condensed Consolidated Balance Sheet. Customer accounts receivable include the net of unamortized deferred fees charged to customers and origination costs. Customer receivables are considered delinquent if a payment has not been received on the scheduled due date. Accounts that are delinquent more than 209 days as of the end of a month are charged-off against the allowance for doubtful accounts along with interest accrued subsequent to the last payment.

In an effort to mitigate losses on our accounts receivable, we may make loan modifications to a borrower experiencing financial difficulty. In our role as servicer, we may also make modifications to loans held by the VIEs. The loan modifications are intended to maximize net cash flow after expenses and avoid the need to exercise legal remedies available to us. We may extend or “re-age” a portion of our customer accounts, which involves modifying the payment terms to defer a portion of the cash payments due. Our re-aging of customer accounts does not change the interest rate or the total principal amount due from the customer and typically does not reduce the monthly contractual payments. To a much lesser extent, we may provide the customer the ability to refinance their account, which typically does not change the interest rate or the total principal amount due from the customer but does reduce the monthly contractual payments and extend the term. We consider accounts that have been re-aged in excess of three months or refinanced as Troubled Debt Restructurings (“TDR” or “Restructured Accounts”).

Interest Income on Customer Accounts Receivable.Interest income, which includes interest income and amortization of deferred fees and origination costs, is recorded using the interest method and is reflected in finance charges and other revenues. Typically, interest income is recorded until the customer account is paid off or charged-off and we provide an allowance for estimated uncollectible interest. Any contractual interest income received from customers in excess of the interest income calculated using the interest method is recorded as deferred revenue on our balance sheets. At July 31, 2019 and January 31, 2019, there was $11.6 million and $11.2 million, respectively, of deferred interest included in deferred revenues and other credits and other long-term liabilities. The deferred interest will ultimately be brought into income as the accounts pay off or charge-off.

We offer a 12-month no-interest option program. If the customer is delinquent in making a scheduled monthly payment or does not repay the principal in full by the end of the no-interest option program period (grace periods are provided), the account does not qualify for the no-interest provision and none of the interest earned is waived. Interest income is recognized based on estimated accrued interest earned to date on all no-interest option finance programs with an offsetting reserve for those customers expected to satisfy the requirements of the program based on our historical experience.

We recognize interest income on TDR accounts using the interest income method, which requires reporting interest income equal to the increase in the net carrying amount of the loan attributable to the passage of time. Cash proceeds and other adjustments are applied to the net carrying amount such that it equals the present value of expected future cash flows.

We place accounts in non-accrual status when legally required. Payments received on non-accrual loans are applied to principal and reduce the balance of the loan. At July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable in non-accrual status was $14.6 million and $13.9 million, respectively. At July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable that were past due 90 days or more and still accruing interest totaled $95.4 million and $106.5 million, respectively. At July 31, 2019 and January 31, 2019, the carrying value of customer accounts receivable in a bankruptcy status that were less than 60 days past due of $12.1 million and $12.0 million, respectively, were included within the customer receivables balance carried in non-accrual status.

Allowance for Doubtful Accounts. The determination of the amount of the allowance for bad debts is, by nature, highly complex and subjective. Future events that are inherently uncertain could result in material changes to the level of the allowance for bad debts. General economic conditions, changes to state or federal regulations and a variety of other factors that affect the ability of borrowers to service their debts or our ability to collect will impact the future performance of the portfolio.   

We establish an allowance for doubtful accounts, including estimated uncollectible interest, to cover probable and estimable losses on our customer accounts receivable resulting from the failure of customers to make contractual payments. Our customer accounts receivable portfolio balance consists of a large number of relatively small, homogeneous accounts. None of our accounts are large enough to warrant individual evaluation for impairment.

We record an allowance for doubtful accounts on our non-TDR customer accounts receivable that we expect to charge-off over the next 12 months based on historical gross charge-off rates over the last 24 months. We incorporate an adjustment to historical gross charge-off rates for a scaled factor of the year-over-year change in six month average first payment default rates and the year-over-year change in the balance of customer accounts receivable that are 60 days or more past due.  In addition to adjusted historical gross charge-off rates, estimates of post-charge-off recoveries, including cash payments from customers, amounts realized from the repossession of the products financed, sales tax recoveries from taxing jurisdictions, and payments received under credit insurance and repair service agreement (“RSA”) policies are also considered.               

Qualitative adjustments are made to the allowance for bad debts when, based on management’s judgment, there are internal or external factors impacting probable incurred losses not taken into account by the quantitative calculations. These qualitative considerations are based on the following factors: changes in lending policies and procedures, changes in economic and business conditions, changes in the nature and volume of the portfolio, changes in lending management, changes in credit quality statistics, changes in concentrations of credit, and other internal or external factor changes. We utilize an economic qualitative adjustment based on changes in unemployment rates if current unemployment rates in our markets are worse than they were on average over the last 24 months.  We also qualitatively limit the impact of changes in first payment default rates and changes in delinquency when those changes result in a decrease to the allowance for bad debts based on a measure of the dispersion of historical charge-off rates.

We determine allowances for those accounts that are TDR based on the discounted present value of cash flows expected to be collected over the life of those accounts based primarily on the performance of TDR loans over the last 24 months. The cash flows are discounted based on the weighted-average effective interest rate of the TDR accounts. The excess of the carrying amount over the discounted cash flow amount is recorded as an allowance for loss on those accounts.

Debt Issuance Costs. Costs that are direct and incremental to debt issuance are deferred and amortized to interest expense using the effective interest method over the expected life of the debt. All other costs related to debt issuance are expensed as incurred. We present debt issuance costs associated with long-term debt as a reduction of the carrying amount of the debt. Unamortized costs related to the Revolving Credit Facility, as defined in Note 4, Debt and Financing Lease Obligations, are included in other assets on our Condensed Consolidated Balance Sheet and were $5.2 million and $6.1 million as of July 31, 2019 and January 31, 2019, respectively.

Income Taxes. For the six months ended July 31, 2019 and 2018, we utilized the estimated annual effective tax rate based on our estimated fiscal year 2020 and 2019 pre-tax income, respectively, in determining income tax expense.

Provision for income taxes for interim periods is based on an estimated annual income tax rate, adjusted for discrete tax items. As a result, our interim effective tax rates may vary significantly from the statutory tax rate and the annual effective tax rate.

For the six months ended July 31, 2019 and 2018, the effective tax rate was 23.9% and 21.4%, respectively. The primary factor affecting the increase in our effective tax rate for the six months ended July 31, 2019 was a decrease in deductible compensation expense compared to the prior year period.

Stock-based Compensation. Stock-based compensation expense is recorded, net of estimated forfeitures, for share-based compensation awards over the requisite service period using the straight-line method. An adjustment is made to compensation cost for any difference between the estimated forfeitures and the actual forfeitures related to the awards. For equity-classified share-based compensation awards, expense is recognized based on the grant-date fair value. For stock option grants, we use the Black-Scholes model to determine fair value. For grants of restricted stock units (“RSUs”), the fair value of the grant is the market value of our stock at the date of issuance. For grants of performance-based restricted stock units (“PSUs”), the fair value of the grant is the market value of our stock at the date of issuance adjusted for a market condition, a performance condition and a service condition.

The following table sets forth the RSUs, stock options and PSUs granted during the three and six months ended July 31, 2019 and 2018: 

	Three Months Ended   July 31,				Six Months Ended   July 31,
	2019		2018		2019		2018
RSUs (1)	100,365		69,478		103,794		149,889
Stock Options (2)	—		—		—		620,166
PSUs (3)	33,894		—		33,894		—
Total stock awards granted	134,259		69,478		137,688		770,055
Aggregate grant date fair value (in thousands)	$	2,774	$	1,673	$	2,845	$	17,184

(1) The majority of RSUs issued during the three and six months ended July 31, 2019 and 2018 are scheduled to vest ratably over periods of three to four years from the date of grant.

(2) The weighted-average assumptions for the option awards granted during the six months ended July 31, 2018 included expected volatility of 68.0%, an expected term of 6.5 years and risk-free interest rate of 2.67%. No dividend yield was included in the weighted-average assumptions for the option awards granted during the six months ended July 31, 2018.

(3) The PSUs issued during the three months ended July 31, 2019 will vest, if at all, upon certification, after the Company’s fiscal year 2022 by the Compensation Committee, of the satisfaction of certain performance conditions.

For the three months ended July 31, 2019 and 2018, stock-based compensation expense was $3.4 million and $3.1 million, respectively. For the six months ended July 31, 2019 and 2018, stock-based compensation expense was $6.6 million and $5.6 million, respectively.

Earnings per Share. Basic earnings per share for a particular period is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effects of any stock options, RSUs and PSUs, which are calculated using the treasury-stock method. The following table sets forth the shares outstanding for the earnings per share calculations: 

	Three Months Ended   July 31,		Six Months Ended   July 31,
	2019	2018	2019	2018
Weighted-average common shares outstanding - Basic	31,442,909	31,652,017	31,660,320	31,597,225
Dilutive effect of stock options, PSUs and RSUs	515,795	590,446	537,704	613,534
Weighted-average common shares outstanding - Diluted	31,958,704	32,242,463	32,198,024	32,210,759

For the three months ended July 31, 2019 and 2018, the weighted-average number of stock options and RSUs not included in the calculation due to their anti-dilutive effect, was 927,969 and 624,291, respectively. For the six months ended July 31, 2019 and 2018, the weighted-average number of stock options and RSUs not included in the calculation due to their anti-dilutive effect, was 892,098 and 497,224, respectively.

As the performance conditions pursuant to the Company’s PSU agreements have not been met in full, 228,477 PSUs are not included in the computation of diluted EPS for the three and six months ended July 31, 2019 and 400,834 PSUs are not included in the computation of diluted EPS for the three and six months ended July 31, 2018.

Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to subjectivity associated with the inputs to fair value measurements as follows:  

• Level 1 – Inputs represent unadjusted quoted prices in active markets for identical assets or liabilities.

• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (for example, quoted market prices for similar assets or liabilities in active markets or quoted market prices for identical assets or liabilities in markets not considered to be active, inputs other than quoted prices that are observable for the asset or liability, or market-corroborated inputs).

• Level 3 – Inputs that are not observable from objective sources such as our internally developed assumptions used in pricing an asset or liability (for example, an estimate of future cash flows used in our internally developed present value of future cash flows model that underlies the fair-value measurement).

In determining fair value, we use observable market data when available, or models that incorporate observable market data. When we are required to measure fair value and there is not a market-observable price for the asset or liability or for a similar asset or liability, we use the cost or income approach depending on the quality of information available to support management’s assumptions. The cost approach is based on management’s best estimate of the current asset replacement cost. The income approach is based on management’s best assumptions regarding expectations of future net cash flows and discounts the expected cash flows using a commensurate risk-adjusted discount rate. Such evaluations involve significant judgment, and the results are based on expected future events or conditions such as sales prices, economic and regulatory climates, and other factors, most of which are often outside of management’s control. However, we believe assumptions used reflect a market participant’s view of long-term prices, costs, and other factors and are consistent with assumptions used in our business plans and investment decisions.

In arriving at fair-value estimates, we use relevant observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement is characterized based on the lowest level of input that is significant to the fair-value measurement.

The fair value of cash and cash equivalents, restricted cash and accounts payable approximate their carrying amounts because of the short maturity of these instruments. The fair value of customer accounts receivable, determined using a Level 3 discounted cash flow analysis, approximates their carrying value, net of the allowance for doubtful accounts. The fair value of our Revolving Credit Facility approximates carrying value based on the current borrowing rate for similar types of borrowing arrangements. At July 31, 2019, the fair value of the Senior Notes outstanding, which was determined using Level 1 inputs, was $230.2 million as compared to the carrying value of $227.0 million, excluding the impact of the related discount. At July 31, 2019, the fair value of the asset-backed notes approximates their carrying value and was determined using Level 2 inputs based on inactive trading activity.

Deferred Revenue. Deferred revenue related to contracts with customers consists of deferred customer deposits and deferred RSA administration fees. During the three and six months ended July 31, 2019, we recognized $1.0 million and $1.4 million of revenue for customer deposits deferred as of the beginning of the period. During the three and six months ended July 31, 2019, we recognized $1.3 million and $2.5 million of revenue for RSA administrative fees deferred as of January 31, 2019.

Recent Accounting Pronouncements Adopted. In February 2016 the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for most leases. Effective February 1, 2019, the Company adopted ASU 2016-02 using the modified retrospective approach. For most leases, a liability was recorded on the balance sheet based on the present value of future lease obligations with a corresponding right-of-use asset. Primarily for those leases currently classified by us as operating leases, we recognize a single lease cost on a straight line basis. Other leases are required to be accounted for as financing arrangements similar to how we previously accounted for capital leases. Upon adoption we elected a package of practical expedients permitted under the transition guidance within the new standard. The practical expedients adopted allowed us to carry forward the historical lease classification, allowed us to not separate and allocate the consideration paid between lease and non-lease components included within a contract and allowed us to carry forward our accounting treatment for land easements on existing agreements. We also adopted an optional transition method finalized by the FASB in July 2018 that waives the requirement to apply this ASU in the comparative periods presented within the financial statements in the year of adoption. Therefore, results for reporting periods beginning after February 1, 2019 are presented under ASC Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting policies under ASC Topic 840.

Additionally, we have elected the short-term policy election for the Company for any lease that, at the commencement date, has a lease term of twelve months or less. We will not recognize a lease liability or right-of-use asset on the balance sheet for any of our short-term leases. Rather, the short-term lease payments will be recognized as an expense on a straight-line basis over the lease term. The current period short-term lease expense reasonably reflects our short-term lease commitments.

The cumulative effect of the changes made to the Company’s Condensed Consolidated Balance Sheet as a result of the adoption of ASC 842 were as follows (in thousands):

	Impact of Adoption of ASC 842
(in thousands)	Balance at January 31, 2019		Adjustments due to ASC 842			Balance at February 1, 2019
Assets
Current assets (1)	$	1,014,394	$	(2,983	)	$	1,011,411
Operating lease right-of-use assets (2)	—		227,421			227,421
Deferred income taxes (3)	27,535		(1,447		)	26,088
Liabilities
Current liabilities (4)	237,568		(12,426		)	225,142
Operating lease liability - current (5)	—		29,815			29,815
Deferred rent (4)	93,127		(93,127		)	—
Operating lease liability - non-current (5)	—		300,170			300,170
Other long-term liabilities (3)	33,015		(7,606		)	25,409
Stockholder’s equity (3)	619,975		6,159			626,134

(1) Reclassification of the $3.0 million January 31, 2019 balance of accounts receivable for tenant improvement allowances to a reduction in the operating lease liability.

(2) The operating lease right-of-use assets represent the present value of the lease liability offset by the full value of deferred rent and tenant improvement allowances received from the lessor which had not been utilized as of the date of adoption.

(3) A net cumulative-effect adjustment to increase retained earnings by $6.2 million to recognize the $7.6 million January 31, 2019 balance of deferred gains which resulted from sale and operating leaseback transactions made at off-market terms offset by the $1.4 million impact on our deferred tax asset related to the sale-leaseback transactions.

(4) Reclassification of the full value of deferred rent and tenant improvement allowances received from lessors, which were previously recorded as liabilities as they had not been utilized as of the date of adoption, to a reduction of the operating lease right-of-use assets.

(5) The operating lease liability represents the $340.5 million present value of future operating lease obligations as of January 31, 2019, offset by $10.5 million of accounts receivable for tenant improvement allowances.

Recent Accounting Pronouncements Yet To Be Adopted. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The standard will become effective for us in the first quarter of fiscal year 2021 and early adoption was permitted beginning in the first quarter of fiscal year 2020. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2019-04 requires that the current estimate of recoveries are included in the allowance for credit losses. We have formed a cross-functional working group comprised of individuals from various functional areas including credit, finance, accounting, and information technology. While we are currently evaluating the likely impact the adoption of this ASU will have on our Consolidated Financial Statements, the adoption of ASU 2016-13 will result in a material increase in the allowance for loan losses as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jul. 31, 2019

Accounting Policies [Abstract]

RSUs, PSUs and stock options granted during the period

The following table sets forth the RSUs, stock options and PSUs granted during the three and six months ended July 31, 2019 and 2018: 

	Three Months Ended   July 31,				Six Months Ended   July 31,
	2019		2018		2019		2018
RSUs (1)	100,365		69,478		103,794		149,889
Stock Options (2)	—		—		—		620,166
PSUs (3)	33,894		—		33,894		—
Total stock awards granted	134,259		69,478		137,688		770,055
Aggregate grant date fair value (in thousands)	$	2,774	$	1,673	$	2,845	$	17,184

(1) The majority of RSUs issued during the three and six months ended July 31, 2019 and 2018 are scheduled to vest ratably over periods of three to four years from the date of grant.

(2) The weighted-average assumptions for the option awards granted during the six months ended July 31, 2018 included expected volatility of 68.0%, an expected term of 6.5 years and risk-free interest rate of 2.67%. No dividend yield was included in the weighted-average assumptions for the option awards granted during the six months ended July 31, 2018.

(3) The PSUs issued during the three months ended July 31, 2019 will vest, if at all, upon certification, after the Company’s fiscal year 2022 by the Compensation Committee, of the satisfaction of certain performance conditions.

Shares outstanding for the earnings per share calculations

The following table sets forth the shares outstanding for the earnings per share calculations: 

	Three Months Ended   July 31,		Six Months Ended   July 31,
	2019	2018	2019	2018
Weighted-average common shares outstanding - Basic	31,442,909	31,652,017	31,660,320	31,597,225
Dilutive effect of stock options, PSUs and RSUs	515,795	590,446	537,704	613,534
Weighted-average common shares outstanding - Diluted	31,958,704	32,242,463	32,198,024	32,210,759

Cumulative effect of the changes for adoption of ASC 842

The cumulative effect of the changes made to the Company’s Condensed Consolidated Balance Sheet as a result of the adoption of ASC 842 were as follows (in thousands):

	Impact of Adoption of ASC 842
(in thousands)	Balance at January 31, 2019		Adjustments due to ASC 842			Balance at February 1, 2019
Assets
Current assets (1)	$	1,014,394	$	(2,983	)	$	1,011,411
Operating lease right-of-use assets (2)	—		227,421			227,421
Deferred income taxes (3)	27,535		(1,447		)	26,088
Liabilities
Current liabilities (4)	237,568		(12,426		)	225,142
Operating lease liability - current (5)	—		29,815			29,815
Deferred rent (4)	93,127		(93,127		)	—
Operating lease liability - non-current (5)	—		300,170			300,170
Other long-term liabilities (3)	33,015		(7,606		)	25,409
Stockholder’s equity (3)	619,975		6,159			626,134

(1) Reclassification of the $3.0 million January 31, 2019 balance of accounts receivable for tenant improvement allowances to a reduction in the operating lease liability.

(2) The operating lease right-of-use assets represent the present value of the lease liability offset by the full value of deferred rent and tenant improvement allowances received from the lessor which had not been utilized as of the date of adoption.

(3) A net cumulative-effect adjustment to increase retained earnings by $6.2 million to recognize the $7.6 million January 31, 2019 balance of deferred gains which resulted from sale and operating leaseback transactions made at off-market terms offset by the $1.4 million impact on our deferred tax asset related to the sale-leaseback transactions.

(4) Reclassification of the full value of deferred rent and tenant improvement allowances received from lessors, which were previously recorded as liabilities as they had not been utilized as of the date of adoption, to a reduction of the operating lease right-of-use assets.

(5) The operating lease liability represents the $340.5 million present value of future operating lease obligations as of January 31, 2019, offset by $10.5 million of accounts receivable for tenant improvement allowances.

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Leases

6 Months Ended

Jul. 31, 2019

Leases [Abstract]

Leases

Leases

We lease most of our current store locations and certain of our facilities and operating equipment under operating leases. The fixed, non-cancelable terms of our real estate leases are generally five to 15 years and generally include renewal options that allow us to extend the term beyond the initial non-cancelable term. However, prior to the expiration of the existing contract, the Company will typically renegotiate any lease contracts as opposed to continuing in the current lease under the renewal terms. As such, the lease renewal options are not recognized as part of the right-of-use assets and liabilities. Most of the real estate leases require payment of real estate taxes, insurance and certain common area maintenance costs in addition to future minimum lease payments. Equipment leases generally provide for initial lease terms of three to five years and provide for a purchase right at the end of the lease term at the then fair market value of the equipment.

Certain operating leases contain tenant allowance provisions, which obligate the landlord to remit cash to us as an incentive to enter into the lease agreement. We record the full amount to be remitted by the landlord as a reduction to the operating lease right-of-use assets upon commencement of the lease and amortize the balance on a straight-line basis over the life of the lease.

Supplemental lease information is summarized below:

(in thousands)	Balance sheet classification	July 31, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	248,707
Finance lease assets	Property and equipment, net	5,993
Total leased assets		254,700
Liabilities
Operating (1)	Operating lease liability - current	$	44,804
Finance	Current maturities of debt and finance lease obligations	613
Operating	Operating lease liability - non current	331,010
Finance	Long-term debt and finance lease obligations	4,789
Total lease liabilities		$	381,216

(1) Represents the gross operating lease liability before tenant improvement allowances. As of July 31, 2019 we had $11.4 million of tenant improvement allowances to be remitted by the landlord.

Lease Cost		Three Months Ended July 31, 2019		Six Months Ended July 31, 2019
(in thousands)	Income statement classification
Operating lease costs (1)	Selling, general and administrative expense	$	14,587	$	28,515

(1) Includes short-term and variable lease costs, which are not significant.

Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Additional details regarding the Company’s leasing activities as a lessee are presented below:

Other Information	Six Months Ended   July 31, 2019
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	33,408
Weighted-average remaining lease term (in years)
Finance leases	11.4
Operating leases	7.3
Weighted-average discount rate
Finance leases	6.1		%
Operating leases (1)	8.5		%

(1)  Upon adoption of ASC 842, discount rates for existing operating leases were established as of February 1, 2019.

The following table presents a summary of our minimum contractual commitments and obligations as of July 31, 2019:

	Operating Leases		Finance Leases		Total
(in thousands)
2020	$	74,187	$	925	$	75,112
2021	73,119		889		74,008
2022	72,213		763		72,976
2023	68,284		731		69,015
2024	61,316		771		62,087
Thereafter	157,042		3,576		160,618
Total undiscounted cash flows	506,161		7,655		513,816
Less: Interest	130,347		2,253		132,600
Total lease liabilities	$	375,814	$	5,402	$	381,216

Leases

Leases

We lease most of our current store locations and certain of our facilities and operating equipment under operating leases. The fixed, non-cancelable terms of our real estate leases are generally five to 15 years and generally include renewal options that allow us to extend the term beyond the initial non-cancelable term. However, prior to the expiration of the existing contract, the Company will typically renegotiate any lease contracts as opposed to continuing in the current lease under the renewal terms. As such, the lease renewal options are not recognized as part of the right-of-use assets and liabilities. Most of the real estate leases require payment of real estate taxes, insurance and certain common area maintenance costs in addition to future minimum lease payments. Equipment leases generally provide for initial lease terms of three to five years and provide for a purchase right at the end of the lease term at the then fair market value of the equipment.

Certain operating leases contain tenant allowance provisions, which obligate the landlord to remit cash to us as an incentive to enter into the lease agreement. We record the full amount to be remitted by the landlord as a reduction to the operating lease right-of-use assets upon commencement of the lease and amortize the balance on a straight-line basis over the life of the lease.

Supplemental lease information is summarized below:

(in thousands)	Balance sheet classification	July 31, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	248,707
Finance lease assets	Property and equipment, net	5,993
Total leased assets		254,700
Liabilities
Operating (1)	Operating lease liability - current	$	44,804
Finance	Current maturities of debt and finance lease obligations	613
Operating	Operating lease liability - non current	331,010
Finance	Long-term debt and finance lease obligations	4,789
Total lease liabilities		$	381,216

(1) Represents the gross operating lease liability before tenant improvement allowances. As of July 31, 2019 we had $11.4 million of tenant improvement allowances to be remitted by the landlord.

Lease Cost		Three Months Ended July 31, 2019		Six Months Ended July 31, 2019
(in thousands)	Income statement classification
Operating lease costs (1)	Selling, general and administrative expense	$	14,587	$	28,515

(1) Includes short-term and variable lease costs, which are not significant.

Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Additional details regarding the Company’s leasing activities as a lessee are presented below:

Other Information	Six Months Ended   July 31, 2019
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	33,408
Weighted-average remaining lease term (in years)
Finance leases	11.4
Operating leases	7.3
Weighted-average discount rate
Finance leases	6.1		%
Operating leases (1)	8.5		%

(1)  Upon adoption of ASC 842, discount rates for existing operating leases were established as of February 1, 2019.

The following table presents a summary of our minimum contractual commitments and obligations as of July 31, 2019:

	Operating Leases		Finance Leases		Total
(in thousands)
2020	$	74,187	$	925	$	75,112
2021	73,119		889		74,008
2022	72,213		763		72,976
2023	68,284		731		69,015
2024	61,316		771		62,087
Thereafter	157,042		3,576		160,618
Total undiscounted cash flows	506,161		7,655		513,816
Less: Interest	130,347		2,253		132,600
Total lease liabilities	$	375,814	$	5,402	$	381,216

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Guarantor Financial Information

6 Months Ended

Jul. 31, 2019

Condensed Financial Information Disclosure [Abstract]

Guarantor Financial Information

Guarantor Financial Information

Conn’s, Inc. is a holding company with no independent assets or operations other than its investments in its subsidiaries. The Senior Notes, which were issued by Conn’s, Inc., are fully and unconditionally guaranteed on a joint and several senior unsecured basis by the Guarantors. As of July 31, 2019 and January 31, 2019, the direct or indirect subsidiaries of Conn’s, Inc. that were not Guarantors (the “Non-Guarantor Subsidiaries”) were the VIEs and minor subsidiaries. There are no restrictions under the Indenture on the ability of any of the Guarantors to transfer funds to Conn’s, Inc. in the form of dividends or distributions.

The following financial information presents the Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Income, and Condensed Consolidated Statement of Cash Flows for Conn’s, Inc. (the issuer of the Senior Notes), the Guarantors, and the Non-Guarantor Subsidiaries, together with certain eliminations. Investments in subsidiaries are accounted for by the parent company using the equity method for purposes of this presentation. Results of operations of subsidiaries are therefore reflected in the parent company’s investment accounts and operations. The condensed consolidated financial information includes financial data for:

(i) Conn’s, Inc. (on a parent-only basis),

(ii) Guarantors,

(iii) Non-Guarantor Subsidiaries, and

(iv) the parent company and the subsidiaries on a consolidated basis at July 31, 2019 and January 31, 2019 (after the elimination of intercompany balances and transactions).

Condensed Consolidated Balance Sheet as of July 31, 2019:

(in thousands)	Conn’s, Inc.		Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	7,563	$	—	$	—		$	7,563
Restricted cash	—		1,775		66,444		—			68,219
Customer accounts receivable, net of allowances	—		391,295		273,685		—			664,980
Other accounts receivable	—		67,056		—		—			67,056
Inventories	—		213,513		—		—			213,513
Other current assets	—		9,935		8,874		(8,098		)	10,711
Total current assets	—		691,137		349,003		(8,098		)	1,032,042
Investment in and advances to subsidiaries	834,864		148,049		—		(982,913		)	—
Long-term portion of customer accounts receivable, net of allowances	—		288,651		365,180		—			653,831
Property and equipment, net	—		174,225		—		—			174,225
Operating lease right-of-use assets	—		248,707		—		—			248,707
Deferred income taxes	25,612		—		—		—			25,612
Other assets	—		11,808		—		—			11,808
Total assets	$	860,476	$	1,562,577	$	714,183	$	(991,011	)	$	2,146,225
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of debt and financing lease obligations	$	—	$	613	$	1,945	$	—		$	2,558
Accounts payable	—		73,205		—		—			73,205
Accrued expenses	686		83,754		4,465		(3,196		)	85,709
Operating lease liability - current	—		33,398		—		—			33,398
Other current liabilities	—		13,783		2,346		(4,900		)	11,229
Total current liabilities	686		204,753		8,756		(8,096		)	206,099
Operating lease liability - non current	—		331,010		—		—			331,010
Long-term debt and financing lease obligations	223,055		168,290		554,636		—			945,981
Other long-term liabilities	—		23,660		2,740		—			26,400
Total liabilities	223,741		727,713		566,132		(8,096		)	1,509,490
Total stockholders’ equity	636,735		834,864		148,051		(982,915		)	636,735
Total liabilities and stockholders’ equity	$	860,476	$	1,562,577	$	714,183	$	(991,011	)	$	2,146,225

Deferred income taxes related to tax attributes of the Guarantors and Non-Guarantor Subsidiaries are reflected under Conn’s, Inc.

Condensed Consolidated Balance Sheet as of January 31, 2019:

(in thousands)	Conn’s, Inc.		Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	5,912	$	—	$	—		$	5,912
Restricted cash	—		1,550		57,475		—			59,025
Customer accounts receivable, net of allowances	—		328,705		324,064		—			652,769
Other accounts receivable	—		67,078		—		—			67,078
Inventories	—		220,034		—		—			220,034
Other current assets	—		12,344		5,504		(8,272		)	9,576
Total current assets	—		635,623		387,043		(8,272		)	1,014,394
Investment in and advances to subsidiaries	815,524		146,864		—		(962,388		)	—
Long-term portion of customer accounts receivable, net of allowances	—		455,443		230,901		—			686,344
Property and equipment, net	—		148,983		—		—			148,983
Deferred income taxes	27,535		—		—		—			27,535
Other assets	—		7,651		—		—			7,651
Total assets	$	843,059	$	1,394,564	$	617,944	$	(970,660	)	$	1,884,907
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of debt and financing lease obligations	$	—	$	474	$	53,635	$	—		$	54,109
Accounts payable	—		71,118		—		—			71,118
Accrued expenses	686		88,478		3,939		(2,768		)	90,335
Other current liabilities	—		24,918		2,592		(5,504		)	22,006
Total current liabilities	686		184,988		60,166		(8,272		)	237,568
Deferred rent	—		93,127		—		—			93,127
Long-term debt and financing lease obligations	222,398		270,831		407,993		—			901,222
Other long-term liabilities	—		30,094		2,921		—			33,015
Total liabilities	223,084		579,040		471,080		(8,272		)	1,264,932
Total stockholders’ equity	619,975		815,524		146,864		(962,388		)	619,975
Total liabilities and stockholders’ equity	$	843,059	$	1,394,564	$	617,944	$	(970,660	)	$	1,884,907

Deferred income taxes related to tax attributes of the Guarantor Subsidiaries and Non-Guarantor Subsidiaries are reflected under Conn’s, Inc.

Condensed Consolidated Statement of Income for the Three Months Ended July 31, 2019:

(in thousands)	Conn’s, Inc.			Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	306,062	$	—	$	—		$	306,062
Finance charges and other revenues	—			43,327		51,670		—			94,997
Servicing fee revenue	—			8,865		—		(8,865		)	—
Total revenues	—			358,254		51,670		(8,865		)	401,059
Costs and expenses:
Cost of goods sold	—			182,065		—		—			182,065
Selling, general and administrative expense	—			125,549		10,800		(8,865		)	127,484
Provision for bad debts	—			20,355		29,381		—			49,736
Total costs and expenses	—			327,969		40,181		(8,865		)	359,285
Operating income	—			30,285		11,489		—			41,774
Interest expense	4,443			1,337		8,616		—			14,396
Income (loss) before income taxes	(4,443		)	28,948		2,873		—			27,378
Provision (benefit) for income taxes	(1,218		)	7,979		643		—			7,404
Net income (loss)	(3,225		)	20,969		2,230		—			19,974
Income from consolidated subsidiaries	23,199			2,230		—		(25,429		)	—
Consolidated net income	$	19,974		$	23,199	$	2,230	$	(25,429	)	$	19,974

Condensed Consolidated Statement of Income for the Three Months Ended July 31, 2018:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	296,313		$	—		$	—		$	296,313
Finance charges and other revenues	—			56,653			31,654			—			88,307
Servicing fee revenue	—			3,035			—			(3,035		)	—
Total revenues	—			356,001			31,654			(3,035		)	384,620
Costs and expenses:
Cost of goods sold	—			173,627			—			—			173,627
Selling, general and administrative expense	—			115,515			8,210			(3,035		)	120,690
Provision for bad debts	—			29,868			20,883			—			50,751
Charges and credits	—			300			—			—			300
Total costs and expenses	—			319,310			29,093			(3,035		)	345,368
Operating income	—			36,691			2,561			—			39,252
Interest expense	4,448			3,733			7,385			—			15,566
Loss on extinguishment of debt	—			142			1,225			—			1,367
Income (loss) before income taxes	(4,448		)	32,816			(6,049		)	—			22,319
Provision (benefit) for income taxes	(1,058		)	7,805			(1,439		)	—			5,308
Net income (loss)	(3,390		)	25,011			(4,610		)	—			17,011
Income (loss) from consolidated subsidiaries	20,401			(4,610		)	—			(15,791		)	—
Consolidated net income (loss)	$	17,011		$	20,401		$	(4,610	)	$	(15,791	)	$	17,011

Condensed Consolidated Statement of Income for the Six Months Ended July 31, 2019:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	568,041		$	—	$	—		$	568,041
Finance charges and other revenues	—			107,352			79,178		—			186,530
Servicing fee revenue	—			17,698			—		(17,698		)	—
Total revenues	—			693,091			79,178		(17,698		)	754,571
Costs and expenses:
Cost of goods sold	—			339,293			—		—			339,293
Selling, general and administrative expense	—			245,005			18,091		(17,698		)	245,398
Provision for bad debts	—			44,339			45,443		—			89,782
Charges and credits	—			(695		)	—		—			(695		)
Total costs and expenses	—			627,942			63,534		(17,698		)	673,778
Operating income	—			65,149			15,644		—			80,793
Interest expense	8,886			5,924			14,083		—			28,893
Income (loss) before income taxes	(8,886		)	59,225			1,561		—			51,900
Provision (benefit) for income taxes	(2,126		)	14,169			374		—			12,417
Net income (loss)	(6,760		)	45,056			1,187		—			39,483
Income from consolidated subsidiaries	46,243			1,187			—		(47,430		)	—
Consolidated net income	$	39,483		$	46,243		$	1,187	$	(47,430	)	$	39,483

Condensed Consolidated Statement of Income for the Six Months Ended July 31, 2018:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	572,069		$	—		$	—		$	572,069
Finance charges and other revenues	—			102,308			68,630			—			170,938
Servicing fee revenue	—			19,781			—			(19,781		)	—
Total revenues	—			694,158			68,630			(19,781		)	743,007
Costs and expenses:
Cost of goods sold	—			340,216			—			—			340,216
Selling, general and administrative expense	—			235,308			20,041			(19,781		)	235,568
Provision for bad debts	—			36,876			58,031			—			94,907
Charges and credits	—			300			—			—			300
Total costs and expenses	—			612,700			78,072			(19,781		)	670,991
Operating income (loss)	—			81,458			(9,442		)	—			72,016
Interest expense	8,891			6,766			16,729			—			32,386
Loss on extinguishment of debt	—			142			1,631			—			1,773
Income (loss) before income taxes	(8,891		)	74,550			(27,802		)	—			37,857
Provision (benefit) for income taxes	(1,906		)	15,979			(5,959		)	—			8,114
Net income (loss)	(6,985		)	58,571			(21,843		)	—			29,743
Income (loss) from consolidated subsidiaries	36,728			(21,843		)	—			(14,885		)	—
Consolidated net income (loss)	$	29,743		$	36,728		$	(21,843	)	$	(14,885	)	$	29,743

Condensed Consolidated Statement of Cash Flows for the Six Months Ended July 31, 2019:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(597	)	$	173,701		$	(83,660	)	$	—		$	89,444
Cash flows from investing activities:
Purchase of customer accounts receivables	—			—			(379,200		)	379,200			—
Sale of customer accounts receivables	—			—			379,200			(379,200		)	—
Purchase of property and equipment	—			(33,330		)	—			—			(33,330		)
Investment in subsidiary	—			(33,019		)	—			33,019			—
Net cash used in investing activities	—			(66,349		)	—			33,019			(33,330		)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	—			—			381,790			—			381,790
Payments on asset-backed notes	—			—			(234,162		)	—			(234,162		)
Borrowings from revolving credit facility	—			778,166			—			—			778,166
Contribution from subsidiary	33,019			—			—			(33,019		)	—
Payments on revolving credit facility	—			(881,166		)	—			—			(881,166		)
Payments of debt issuance costs and amendment fees	—			(55		)	(3,437		)	—			(3,492		)
Payments on warehouse facility	—			—			(51,561		)	—			(51,561		)
Proceeds from stock issued under employee benefit plans	597			—			—			—			597
Tax payments associated with equity-based compensation transactions	—			(1,781		)	—			—			(1,781		)
Purchase of treasury stock	(33,019		)	—			—			—			(33,019		)
Other	—			(641		)	—			—			(641		)
Net cash provided by (used in) financing activities	597			(105,477		)	92,630			(33,019		)	(45,269		)
Net change in cash, cash equivalents and restricted cash	—			1,875			8,970			—			10,845
Cash, cash equivalents and restricted cash, beginning of period	—			7,462			57,475			—			64,937
Cash, cash equivalents and restricted cash, end of period	$	—		$	9,337		$	66,445		$	—		$	75,782

Condensed Consolidated Statement of Cash Flows for the Six Months Ended July 31, 2018:

(in thousands)	Conn’s, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(834	)	$	(33	)	$	156,519		$	—		$	155,652
Cash flows from investing activities:
Purchase of customer accounts receivables	—			—			(170,144		)	170,144			—
Sale of customer accounts receivables	—			—			170,144			(170,144		)	—
Purchase of property and equipment	—			(12,166		)	—			—			(12,166		)
Net cash used in investing activities	—			(12,166		)	—			—			(12,166		)
Cash flows from financing activities:
Payments on asset-backed notes	—			(169,803		)	(312,080		)	—			(481,883		)
Borrowings from revolving credit facility	—			839,236			—			—			839,236
Payments on revolving credit facility	—			(655,036		)	—			—			(655,036		)
Borrowings from warehouse facility	—			—			173,286			—			173,286
Payments of debt issuance costs and amendment fees	—			(2,825		)	(714		)	—			(3,539		)
Payments on warehouse facility	—			—			(52,226		)	—			(52,226		)
Proceeds from stock issued under employee benefit plans	834			—			—			—			834
Tax payments associated with equity-based compensation transactions	—			(2,516		)	—			—			(2,516		)
Payments from extinguishment of debt	—			(1,177		)	—			—			(1,177		)
Other	—			(531		)	—			—			(531		)
Net cash provided by (used in) financing activities	834			7,348			(191,734		)	—			(183,552		)
Net change in cash, cash equivalents and restricted cash	—			(4,851		)	(35,215		)	—			(40,066		)
Cash, cash equivalents and restricted cash, beginning of period	—			10,836			85,322			—			96,158
Cash, cash equivalents and restricted cash, end of period	$	—		$	5,985		$	50,107		$	—		$	56,092

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jul. 31, 2019	Jan. 31, 2019
Current assets:
Cash and cash equivalents	$ 7,563	$ 5,912
Restricted cash (includes VIE balances of $66,444 and $57,475, respectively)	68,219	59,025
Customer accounts receivable, net of allowances (includes VIE balances of $273,685 and $324,064, respectively)	664,980	652,769
Other accounts receivable	67,056	67,078
Inventories	213,513	220,034
Income taxes receivable	763	407
Prepaid expenses and other current assets	9,948	9,169
Total current assets	1,032,042	1,014,394
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $365,180 and $230,901, respectively)	653,831	686,344
Property and equipment, net	174,225	148,983
Operating lease assets	248,707	0
Deferred income taxes	25,612	27,535
Other assets	11,808	7,651
Total assets	2,146,225	1,884,907
Current liabilities:
Current maturities of debt and finance lease obligations (includes VIE balances of $1,945 and $53,635, respectively)	2,558	54,109
Accounts payable	73,205	71,118
Accrued compensation and related expenses	21,737	27,052
Accrued expenses	59,664	54,381
Operating lease liability - current	33,398	0
Income taxes payable	4,308	8,902
Deferred revenues and other credits	11,229	22,006
Total current liabilities	206,099	237,568
Deferred rent	0	93,127
Operating lease liability - non current	331,010	0
Long-term debt and finance lease obligations (includes VIE balances of $554,636 and $407,993, respectively)	945,981	901,222
Other long-term liabilities	26,400	33,015
Total liabilities	1,509,490	1,264,932
Commitments and contingencies
Stockholders’ equity:
Preferred stock ($0.01 par value, 1,000,000 shares authorized; none issued or outstanding)	0	0
Common stock ($0.01 par value, 100,000,000 shares authorized; 32,000,548 and 31,788,162 shares issued, respectively)	320	318
Treasury Stock, Value	(34,344)	0
Additional paid-in capital	116,645	111,185
Retained earnings	554,114	508,472
Total stockholders’ equity	636,735	619,975
Total liabilities and stockholders’ equity	$ 2,146,225	$ 1,884,907

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018
Cash flows from operating activities:
Net income	$ 39,483	$ 29,743
Adjustments to reconcile net income to net cash from operating activities:
Depreciation	17,682	15,434
Amortization of Right of Use Asset	13,763	0
Amortization of debt issuance costs	4,210	6,382
Provision for bad debts and uncollectible interest	116,272	118,765
Stock-based compensation expense	6,636	5,562
Costs and Impairment Charges Related to Store Closings	(680)	0
Deferred income taxes	475	(1,776)
Tenant improvement allowances received from landlords	14,254	4,362
Change in operating assets and liabilities:
Customer accounts receivable	(95,829)	(100,331)
Other accounts receivables	(17,356)	(14,679)
Inventories	6,521	16,167
Other assets	(5,818)	17,359
Accounts payable	763	11,091
Accrued expenses	(7,368)	22,910
Increase (Decrease) in Operating Lease Liabilities	(626)
Income taxes	(4,810)	31,868
Deferred revenues and other credits	1,872	(7,205)
Net cash provided by operating activities	89,444	155,652
Cash flows from investing activities:
Purchases of property and equipment	(33,330)	(12,166)
Net cash used in investing activities	(33,330)	(12,166)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	381,790	0
Payments on asset-backed notes	(234,162)	(481,883)
Borrowings from revolving credit facility	778,166	839,236
Payments on revolving credit facility	(881,166)	(655,036)
Borrowings from warehouse facility	0	173,286
Payments on warehouse facility	(51,561)	(52,226)
Payments of debt issuance costs and amendment fees	(3,492)	(3,539)
Proceeds from stock issued under employee benefit plans	597	834
Tax payments associated with equity-based compensation transactions	(1,781)	(2,516)
Payment from extinguishment of debt	0	(1,177)
Payments for Repurchase of Common Stock	(33,019)	0
Other	(641)	(531)
Net cash used in financing activities	(45,269)	(183,552)
Net change in cash, cash equivalents and restricted cash	10,845	(40,066)
Cash, cash equivalents and restricted cash, beginning of period	64,937	96,158
Cash, cash equivalents and restricted cash, end of period	75,782	56,092
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new finance lease liabilities	968	0
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability	53,974	0
Property and equipment purchases not yet paid	14,241	4,363
ShareRepurchasePayable	1,325	0
Supplemental cash flow data:
Cash interest paid	21,559	25,505
Cash income taxes paid, net	$ 16,859	$ (21,969)

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Debt and Financing Lease Obligations - Revolving Credit Facility (Details)			6 Months Ended
	Oct. 31, 2018	May 23, 2018 USD ($)	Jul. 31, 2019 USD ($)
Line of Credit Facility [Line Items]
Interest Coverage Ratio for the trailing two quarters must equal or exceed (minimum)			4.38
Interest coverage ratio for the quarter must equal or exceed minimum			1.00
Original principal amount			$ 1,071,970,000
Line of Credit [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Maximum capacity extended under credit facility		$ 650,000,000
Weighted-average interest rate			6.50%
Restrictions on payment of dividends, amount free from restriction			$ 266,400,000
Line of Credit [Member] | Revolving Credit Facility [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Unused capacity fee percentage	0.25%
Line of Credit [Member] | Revolving Credit Facility [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Unused capacity fee percentage	0.50%
Line of Credit [Member] | Revolving Credit Facility [Member] | Alternate Base Rate [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Variable basis spread		1.50%
Line of Credit [Member] | Revolving Credit Facility [Member] | Alternate Base Rate [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Variable basis spread		2.25%
Line of Credit [Member] | Letter of Credit [Member]
Line of Credit Facility [Line Items]
Original principal amount			40,000,000.0
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Available borrowing capacity			403,000,000
Sub-facility for letters of credit			2,500,000
Additional remaining borrowing capacity			$ 81,000,000
Revolving Credit Facility [Member] | LIBOR [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Variable basis spread		2.50%
Revolving Credit Facility [Member] | LIBOR [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Variable basis spread		3.25%

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Finance Charges and Other Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2019	Jul. 31, 2018	Jul. 31, 2019	Jul. 31, 2018
Troubled Debt Restructuring, Debtor, Subsequent Periods [Line Items]
Interest income and fees	$ 85,204	$ 80,435	$ 169,221	$ 156,781
Insurance income	9,590	7,774	16,904	14,045
Other revenues	203	98	405	112
Provisions for uncollectible interest	14,400	12,400	26,700	23,900
Other Income	94,997	88,307	186,530	170,938
Financing Receivable [Member]
Troubled Debt Restructuring, Debtor, Subsequent Periods [Line Items]
Interest income and fees	$ 8,600	$ 6,500	$ 16,700	$ 12,300

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Segment Reporting (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2019 USD ($) store state	Jul. 31, 2018 USD ($)	Jul. 31, 2019 USD ($) segment store state	Jul. 31, 2018 USD ($)	Jan. 31, 2019 USD ($)
Segment Reporting Information [Line Items]
Number of operating segments | segment			2
Estimated annual rate of reimbursement (in hundredths)			2.50%
Number of states with retail stores | state	14		14
Revenues:
Other Income	$ 94,997	$ 88,307	$ 186,530	$ 170,938
Total revenues	401,059	384,620	754,571	743,007
Total Net Sales	306,062	296,313	568,041	572,069
Costs and expenses:
Cost of goods sold	182,065	173,627	339,293	340,216
Selling, general and administrative expense	127,484	120,690	245,398	235,568
Provision for bad debts	49,736	50,751	89,782	94,907
Charges and credits	0	300	(695)	300
Total costs and expenses	359,285	345,368	673,778	670,991
Operating income	41,774	39,252	80,793	72,016
Interest expense	14,396	15,566	28,893	32,386
Loss on extinguishment of debt	0	1,367	0	1,773
Income before income taxes	27,378	22,319	51,900	37,857
Allocation of overhead by operating segments	9,700	9,300	17,600	17,600
Assets	2,146,225	1,796,501	2,146,225	1,796,501	$ 1,884,907
Intersegment Eliminations [Member]
Revenues:
Total revenues	9,700	9,400	19,400	18,800
Retail [Member]
Revenues:
Other Income	203	98	405	112
Total revenues	306,265	296,411	568,446	572,181
Total Net Sales	306,062	296,313	568,041	572,069
Costs and expenses:
Cost of goods sold	182,065	173,627	339,293	340,216
Selling, general and administrative expense	88,147	83,003	167,769	160,755
Provision for bad debts	(19)	243	110	503
Charges and credits	0	300	(695)	300
Total costs and expenses	270,193	257,173	506,477	501,774
Operating income	36,072	39,238	61,969	70,407
Interest expense	0	0	0	0
Loss on extinguishment of debt	0	0	0	0
Income before income taxes	36,072	39,238	61,969	70,407
Assets	699,382	416,166	699,382	416,166
Credit [Member]
Revenues:
Other Income	94,794	88,209	186,125	170,826
Total revenues	94,794	88,209	186,125	170,826
Total Net Sales	0	0	0	0
Costs and expenses:
Cost of goods sold	0	0	0	0
Selling, general and administrative expense	39,337	37,687	77,629	74,813
Provision for bad debts	49,755	50,508	89,672	94,404
Charges and credits	0	0	0	0
Total costs and expenses	89,092	88,195	167,301	169,217
Operating income	5,702	14	18,824	1,609
Interest expense	14,396	15,566	28,893	32,386
Loss on extinguishment of debt	0	1,367	0	1,773
Income before income taxes	(8,694)	(16,919)	(10,069)	(32,550)
Assets	1,446,843	1,380,335	1,446,843	1,380,335
Furniture and Mattress [Member]
Revenues:
Total revenues	99,455	97,066	187,819	194,086
Furniture and Mattress [Member] | Retail [Member]
Revenues:
Total revenues	99,455	97,066	187,819	194,086
Furniture and Mattress [Member] | Credit [Member]
Revenues:
Total revenues	0	0	0	0
Home Appliance [Member]
Revenues:
Total revenues	99,356	91,471	176,646	169,494
Home Appliance [Member] | Retail [Member]
Revenues:
Total revenues	99,356	91,471	176,646	169,494
Home Appliance [Member] | Credit [Member]
Revenues:
Total revenues	0	0	0	0
Consumer Electronic [Member]
Revenues:
Total revenues	53,692	55,654	103,341	107,956
Consumer Electronic [Member] | Retail [Member]
Revenues:
Total revenues	53,692	55,654	103,341	107,956
Consumer Electronic [Member] | Credit [Member]
Revenues:
Total revenues	0	0	0	0
Home Office [Member]
Revenues:
Total revenues	17,883	19,289	33,589	37,599
Home Office [Member] | Retail [Member]
Revenues:
Total revenues	17,883	19,289	33,589	37,599
Home Office [Member] | Credit [Member]
Revenues:
Total revenues	0	0	0	0
Other [Member]
Revenues:
Total revenues	4,192	3,699	7,628	7,358
Other [Member] | Retail [Member]
Revenues:
Total revenues	4,192	3,699	7,628	7,358
Other [Member] | Credit [Member]
Revenues:
Total revenues	0	0	0	0
Product [Member]
Revenues:
Total revenues	274,578	267,179	509,023	516,493
Product [Member] | Retail [Member]
Revenues:
Total revenues	274,578	267,179	509,023	516,493
Product [Member] | Credit [Member]
Revenues:
Total revenues	0	0	0	0
RSA Commission [Member]
Revenues:
Total revenues	27,647	25,662	51,671	48,525
RSA Commission [Member] | Retail [Member]
Revenues:
Total revenues	27,647	25,662	51,671	48,525
RSA Commission [Member] | Credit [Member]
Revenues:
Total revenues	0	0	0	0
Service [Member]
Revenues:
Total revenues	3,837	3,472	7,347	7,051
Service [Member] | Retail [Member]
Revenues:
Total revenues	3,837	3,472	7,347	7,051
Service [Member] | Credit [Member]
Revenues:
Total revenues	$ 0	$ 0	$ 0	$ 0
Outside of US [Member]
Segment Reporting Information [Line Items]
Number of stores | store	0		0

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Leases - Summary of our Minimum Contractual Commitements and Obligations (Details) - USD ($) $ in Thousands	Jul. 31, 2019	Jan. 31, 2019
Operating Leases
2019	$ 74,187
2020	73,119
2021	72,213
2022	68,284
2023	61,316
Thereafter	157,042
Total undiscounted cash flows	506,161
Less: Interest	130,347
Total lease liabilities	375,814
Finance Leases
2019	925
2020	889
2021	763
2022	731
2023	771
Thereafter	3,576
Total undiscounted cash flows	7,655
Less: Interest	2,253
Total lease liabilities	5,402	$ 5,075
Total
2019	75,112
2020	74,008
2021	72,976
2022	69,015
2023	62,087
Thereafter	160,618
Total undiscounted cash flows	513,816
Less: Interest	132,600
Total lease liabilities	$ 381,216

XML

Leases (Tables)

6 Months Ended

Jul. 31, 2019

Leases [Abstract]

Lease, Cost

Supplemental lease information is summarized below:

(in thousands)	Balance sheet classification	July 31, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	248,707
Finance lease assets	Property and equipment, net	5,993
Total leased assets		254,700
Liabilities
Operating (1)	Operating lease liability - current	$	44,804
Finance	Current maturities of debt and finance lease obligations	613
Operating	Operating lease liability - non current	331,010
Finance	Long-term debt and finance lease obligations	4,789
Total lease liabilities		$	381,216

(1) Represents the gross operating lease liability before tenant improvement allowances. As of July 31, 2019 we had $11.4 million of tenant improvement allowances to be remitted by the landlord.

Lease Cost		Three Months Ended July 31, 2019		Six Months Ended July 31, 2019
(in thousands)	Income statement classification
Operating lease costs (1)	Selling, general and administrative expense	$	14,587	$	28,515

(1) Includes short-term and variable lease costs, which are not significant.

Additional details regarding the Company’s leasing activities as a lessee are presented below:

Other Information	Six Months Ended   July 31, 2019
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	33,408
Weighted-average remaining lease term (in years)
Finance leases	11.4
Operating leases	7.3
Weighted-average discount rate
Finance leases	6.1		%
Operating leases (1)	8.5		%

(1)  Upon adoption of ASC 842, discount rates for existing operating leases were established as of February 1, 2019.

Lessee, Operating Lease, Liability, Maturity

The following table presents a summary of our minimum contractual commitments and obligations as of July 31, 2019:

	Operating Leases		Finance Leases		Total
(in thousands)
2020	$	74,187	$	925	$	75,112
2021	73,119		889		74,008
2022	72,213		763		72,976
2023	68,284		731		69,015
2024	61,316		771		62,087
Thereafter	157,042		3,576		160,618
Total undiscounted cash flows	506,161		7,655		513,816
Less: Interest	130,347		2,253		132,600
Total lease liabilities	$	375,814	$	5,402	$	381,216

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Summary of Significant Accounting Policies - Narrative (Details) $ in Thousands	6 Months Ended
	Jul. 31, 2019 USD ($) segment	Jul. 31, 2018	Jan. 31, 2019 USD ($)
Debt Instrument [Line Items]
Number of operating segments | segment	2
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents include credit card deposits in-transit	$ 2,300		$ 2,500
Restricted cash	68,219		59,025
Interest Income on Customer Accounts Receivable
Deferred revenue	11,600		11,200
Nonaccrual status	14,600		13,900
Amount in bankruptcy and less than 60 days past due	12,100		12,000
90 days past due and still accruing	95,400		106,500
Debt Issuance Costs
Deferred debt issuance costs	$ 6,104		5,637
Income Taxes
Effective tax rate	23.90%	21.40%
Fair Value of Financial Instruments
Long-term debt	$ 560,425
Senior Notes [Member]
Fair Value of Financial Instruments
Debt fair value	230,200
Revolving Credit Facility [Member]
Debt Issuance Costs
Deferred debt issuance costs	5,200		6,100
Securitized Receivables Servicer [Member]
Cash and Cash Equivalents and Restricted Cash
Restricted cash	12,700		12,200
Collateral Held by VIE [Member]
Cash and Cash Equivalents and Restricted Cash
Restricted cash	$ 53,700		$ 45,300