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, 2016~~April 30, 2017



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)

4055 Technology Forest Blvd, Suite 210, 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)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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, or a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated ~~filer"~~filer," "smaller reporting company," and ~~"smaller reporting~~"emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ýo		Accelerated filer	oý

Non-accelerated filer	o	(Do not check if a smaller reporting company)	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 ~~September 1, 2016:~~May 30, 2017:



Class		Outstanding
Common stock, $0.01 par value per share		~~30,778,299~~31,013,907

CONN'S, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE FISCAL QUARTER ENDED ~~JULY 31, 2016~~APRIL 30, 2017

TABLE OF CONTENTS



		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2123
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	3736
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3736
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	37
	Signature	38
	Exhibit Index	39

This Quarterly Report on Form 10-Q includes our trademarks such as "Conn's," "Conn's HomePlus," "YES Money," "YE$ Money," 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.

~~Unless the context otherwise indicates, references~~References to "Conn's," the "Company," "we," "us," and "our" refer to ~~the consolidated business operations of~~ Conn's, Inc., and, as apparent from the context, its consolidated ~~VIEs,~~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 in thousands, except per share ~~data)~~amounts)


	July 31, 2016		January 31, 2016		April 30, 2017		January 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	15,535	$	12,254	$	112,819	$	23,566
Restricted cash (all held by VIEs)	70,981		64,151		160,041		110,698
Customer accounts receivable, net of allowances (includes balances for VIEs of $499,385 and $390,150, respectively)	733,718		743,931
Customer accounts receivable, net of allowances (includes VIE balance of $581,679 and $529,108, respectively)					652,046		702,162
Other accounts receivable	82,924		95,404		61,197		69,286
Inventories	191,642		201,969		170,999		164,856
Income taxes recoverable	19,700		10,774		4,219		2,150
Prepaid expenses and other current assets	16,482		20,092		16,737		14,955
Total current assets	1,130,982		1,148,575		1,178,058		1,087,673
Long-term portion of customer accounts receivable, net of allowances (includes balances for VIEs of $276,967 and $331,254, respectively)	586,870		631,645
Long-term restricted cash (all held by VIEs)	25,002		14,425
Long-term portion of customer accounts receivable, net of allowances (includes VIE balance of $474,474 and $320,382, respectively)					593,329		615,904
Property and equipment, net	174,815		151,483		158,928		159,202
Deferred income taxes	70,919		70,219		71,328		71,442
Other assets	8,590		8,953		8,963		6,913
Total assets	$	1,997,178	$	2,025,300	$	2,010,606	$	1,941,134
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of capital lease obligations	$	761	$	799	$	1,190	$	849
Accounts payable	117,628		86,797		104,915		101,612
Accrued compensation and related expenses	12,140		9,337		8,960		13,325
Accrued expenses	34,363		30,037		33,965		26,456
Income taxes payable	1,692		2,823		4,207		3,318
Deferred revenues and other credits	19,701		16,332		21,390		21,821
Total current liabilities	186,285		146,125		174,627		167,381
Deferred rent	88,452		74,559		86,727		87,957
Long-term debt and capital lease obligations (includes balances of VIEs of $662,011 and $699,515, respectively)	1,181,948		1,248,879
Long-term debt and capital lease obligations (includes VIE balance of $981,836 and $745,581, respectively)					1,206,452		1,144,393
Other long-term liabilities	20,853		17,456		25,752		23,613
Total liabilities	1,477,538		1,487,019		1,493,558		1,423,344
Commitments and contingencies
Stockholders' equity:
Preferred stock ($0.01 par value, 1,000 shares authorized; none issued or outstanding)	—		—		—		—
Common stock ($0.01 par value, 100,000 shares authorized; 30,775 and 30,630 shares issued, respectively)	308		306
Common stock ($0.01 par value, 100,000 shares authorized; 31,004 and 30,962 shares issued, respectively)					310		310
Additional paid-in capital	88,239		85,209		92,114		90,276
Retained earnings	431,093		452,766		424,624		427,204
Total stockholders' equity	519,640		538,281		517,048		517,790
Total liabilities and stockholders' equity	$	1,997,178	$	2,025,300	$	2,010,606	$	1,941,134

See notes to condensed consolidated financial statements.

CONN'S, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)


	Three Months Ended July 31,					Six Months Ended July 31,					Three Months Ended April 30,
	2016			2015		2016			2015		2017			2016
Revenues:
Product sales	$	299,723		$	293,739	$	586,213		$	565,365	$	251,362		$	286,490
Repair service agreement commissions	28,310			27,756		56,495			51,552		24,696			28,185
Service revenues	3,966			3,451		7,833			6,508		3,227			3,867
Total net sales	331,999			324,946		650,541			623,425		279,285			318,542
Finance charges and other revenues	66,158			71,104		136,729			137,701		76,541			70,571
Total revenues	398,157			396,050		787,270			761,126		355,826			389,113
Costs and expenses:
Cost of goods sold	208,869			202,461		413,335			389,594		171,950			204,466
Selling, general and administrative expenses	119,846			104,832		233,093			200,507		106,537			113,247
Provision for bad debts	60,196			51,646		118,414			99,189		55,930			58,218
Charges and credits	2,895			1,013		3,421			1,632		1,227			526
Total costs and expenses	391,806			359,952		768,263			690,922		335,644			376,457
Operating income	6,351			36,098		19,007			70,204		20,182			12,656
Interest expense	24,138			10,055		50,034			19,483		24,008			25,896
Income (loss) before income taxes	(17,787		)	26,043		(31,027		)	50,721
Provision (benefit) for income taxes	(5,863		)	9,505		(9,354		)	18,506
Net income (loss)	$	(11,924	)	$	16,538	$	(21,673	)	$	32,215
Earnings (loss) per share:
Loss on extinguishment of debt											349			—
Loss before income taxes											(4,175		)	(13,240		)
Benefit for income taxes											(1,595		)	(3,491		)
Net loss											$	(2,580	)	$	(9,749	)
Loss per share:
Basic	$	(0.39	)	$	0.45	$	(0.71	)	$	0.88	$	(0.08	)	$	(0.32	)
Diluted	$	(0.39	)	$	0.45	$	(0.71	)	$	0.87	$	(0.08	)	$	(0.32	)
Weighted average common shares outstanding:
Basic	30,731			36,466		30,696			36,416		30,972			30,661
Diluted	30,731			37,042		30,696			36,967		30,972			30,661

See notes to condensed consolidated financial statements.

CONN'S, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)


	Six Months Ended July 31,						Three Months Ended April 30,
	2016			2015			2017			2016
Cash flows from operating activities:
Net income (loss)	$	(21,673	)	$	32,215
Adjustments to reconcile net income (loss) to net cash from operating activities:
Net loss							$	(2,580	)	$	(9,749	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation	13,773			10,579			7,631			6,636
Impairments of long-lived assets	1,385			—
Amortization of debt issuance costs	13,812			1,666			5,265			7,730
Provision for bad debts and uncollectible interest	133,084			116,217			65,748			67,860
Loss on extinguishment of debt							349			—
Stock-based compensation expense	2,886			1,805			1,583			1,297
Excess tax benefits from stock-based compensation	(1		)	(474		)
Charges, net of credits, for store and facility closures	—			425
Charges, net of credits, for facility closures							323			—
Deferred income taxes	(700		)	(10,346		)	114			955
Gain on sale of property and equipment	(180		)	(517		)	(235		)	(178		)
Tenant improvement allowances received from landlords	18,860			7,212			1,893			6,972
Change in operating assets and liabilities:
Customer accounts receivable	(78,096		)	(183,881		)	6,943			(16,253		)
Other accounts receivable	5,751			(7,580		)	6,296			11,745
Inventories	10,327			(14,509		)	(6,143		)	20,426
Other assets	(1,213		)	201			(2,105		)	864
Accounts payable	28,831			23,658			3,428			8,718
Accrued expenses	6,782			507			2,586			4,360
Income taxes	(10,489		)	10,086			(1,180		)	(4,443		)
Deferred rent, revenues and other credits	8,759			(710		)	848			1,714
Net cash provided by (used in) operating activities	131,898			(13,446		)
Net cash provided by operating activities							90,764			108,654
Cash flows from investing activities:
Purchase of property and equipment	(32,020		)	(29,656		)	(4,286		)	(16,996		)
Proceeds from sale of property	686			35			—			696
Net cash used in investing activities	(31,334		)	(29,621		)	(4,286		)	(16,300		)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	493,540			—			469,814			493,540
Payments on asset-backed notes	(537,819		)	—			(232,931		)	(289,639		)
Changes in restricted cash balances	(17,406		)	—			(49,342		)	(40,498		)
Borrowings from revolving credit facility	405,378			220,246			265,935			170,393
Payments on revolving credit facility	(435,085		)	(184,450		)	(443,435		)	(421,735		)
Payment of debt issuance costs and amendment fees	(6,089		)	—			(7,605		)	(5,289		)
Proceeds from stock issued under employee benefit plans	618			1,688			256			385
Excess tax benefits from stock-based compensation	1			474
Other	(421		)	(246		)	83			(223		)
Net cash provided by (used in) financing activities	(97,283		)	37,712			2,775			(93,066		)
Net change in cash and cash equivalents	3,281			(5,355		)	89,253			(712		)
Cash and cash equivalents, beginning of period	12,254			12,223			23,566			12,254
Cash and cash equivalents, end of period	$	15,535		$	6,868		$	112,819		$	11,542
Non-cash investing and financing activities:
Capital lease asset additions and related obligations	$	—		$	1,720		$	3,196		$	—
Property and equipment purchases not yet paid	$	6,476		$	3,406		$	732		$	6,476
Supplemental cash flow data:
Cash interest paid	$	38,403		$	17,838		$	17,804		$	18,448
Cash income taxes paid, net	$	1,816		$	18,330
Cash income taxes paid (refunded), net							$	(529	)	$	61

See notes to condensed consolidated financial statements.

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

~~Business.~~ 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 a proprietary credit ~~solution~~solutions for its core ~~credit constrained~~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~~credit-constrained consumers who typically have limited ~~banking options.~~credit alternatives.

We operate two reportable segments: retail and credit. Our retail stores bear the "Conn's" or "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 ~~for~~to our retail customers. The retail segment is not involved in credit approval decisions. 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 the VIEs (as defined below), have been prepared by management in accordance with accounting principles generally accepted in the United States ("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 accounting principles generally accepted in the United States 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, ~~2016~~2017 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, ~~2016,~~2017, filed with the United States Securities and Exchange Commission (the ~~"SEC"~~“SEC”) on ~~March 29, 2016.~~

~~Variable Interest Entities.~~ In September 2015, we securitized $1.4 billion of customer accounts receivables by transferring the receivables to a bankruptcy-remote variable-interest entity (the "2015 VIE"). The 2015 VIE issued asset-backed notes at a face amount of $1.12 billion secured by the transferred portfolio balance, which resulted in net proceeds to us of approximately $1.08 billion, net of transaction costs and restricted cash held by the 2015 VIE. The net proceeds were used to pay down the outstanding balance on our revolving credit facility, to repurchase shares of the Company's common stock and Senior Notes, and for other general corporate purposes.

In March 2016, we securitized $705.1 million of customer accounts receivables by transferring the receivables to a new bankruptcy-remote variable-interest entity (the "2016 VIE" or together with the 2015 VIE, the "VIEs"). The 2016 VIE issued two classes of asset-backed notes at a total face amount of $493.5 million secured by the transferred customer accounts receivables. This resulted in net proceeds to us of approximately $478.0 million, net of transaction costs and restricted cash held by the 2016 VIE. The net proceeds were used to pay down the outstanding balance on our revolving credit facility and for other general corporate purposes.

We currently hold the residual equity of the VIEs as well as a third class of asset-backed notes of the 2016 VIE, of which we may elect to retain all or a portion of these interests if that is determined to be in our best economic interest. In addition, we retain the servicing of the securitized portfolios. We determined that we have a variable interest in both VIEs and we are the primary beneficiary because (i) our servicing responsibilities for the securitized portfolios give us the power to direct the activities that most significantly impact the performance of the VIEs, and (ii) our variable interest in the VIEs gives us the obligation to absorb losses and the right to receive residual returns that could potentially be significant. As a result, so long as we hold all or a significant portion of the residual equity of the VIEs and the third class of asset-backed notes of the 2016 VIE, we will consolidate the VIEs within our financial statements. If we sell all or a significant portion of our interest, we will assess if the transaction achieves sale treatment for accounting purposes, which may result in deconsolidation of one or both of the VIEs. There is no assurance that we will complete a sale of all or a portion of our interest in the VIEs, and there is no assurance we will achieve sale treatment. As a result, we have determined that the securitized portfolios do not meet the criteria for treatment as an asset held for sale, which would require recording at the lower of cost, net of allowances, or fair value. We have not made an adjustment to the customer accounts receivable balance as a result of the transaction or in anticipation of any gain or loss that may occur should a sale of our interest in the VIEs be completed.

~~CONN'S, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Principles of Consolidation.~~ The consolidated financial statements include the accounts of Conn's, Inc. and its wholly-owned subsidiaries, including the VIEs. Conn's, Inc., a Delaware corporation, is a holding company with no independent assets or operations other than its investments in its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.April 4, 2017.

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.

~~Accounting Policies.~~ Principles of Consolidation. The ~~complete summary of significant accounting policies is included in the notes to the~~ consolidated financial statements ~~as presented~~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. 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 ~~Annual Report on Form 10-K~~servicing responsibilities for the ~~fiscal year ended January 31, 2016.~~ 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 consolidated financial statements.

Refer to Note 6, Debt and Capital Lease Obligations, and Note 8, Variable Interest Entities, for additional information.

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

Cash and Cash Equivalents. Cash and cash equivalents include cash, credit card deposits in-transit, and highly liquid debt instruments purchased with a maturity of three months ~~ended July~~or less. Cash and cash equivalents include credit card deposits in-transit of $6.2 million and $2.4 million, as of April 30, 2017 and January 31, ~~2016, we revised our methods for calculating these estimates and recorded the following adjustments as a result of changes to our estimates:~~

Allowance for doubtful accounts – We adjusted our allowances for doubtful accounts in two respects in connection with changes in estimates to our sales tax recovery for charged-off accounts. First, we revised our estimate of the amount of sales tax recovery for previously charged-off accounts that we expect to claim with particular taxing jurisdictions, based on updated financial information. We reduced our sales tax receivable by $3.9 million, which resulted in higher net charge-offs and an increase to our provision for bad debts. Second, we updated our estimate of the amount of sales tax recovery associated with expected charge-offs over the next twelve months in estimating our allowance for doubtful accounts and recorded an additional allowance of $1.1 million with an increase in our provision for bad debts.

Allowances for no-interest option credit programs – We revised our estimate of the interest income to be waived for customers that we expect will comply with our no-interest option credit programs based on specific customer loan information rather than information from pooled loans by origination. We recorded an increase in the allowance for no-interest option credit programs of $4.7 million with a corresponding decrease in interest income and fees.

Deferred interest – We revised our estimate of the timing of the benefit we recognize to interest income related to our assumptions regarding future prepayments based on our historical experience of the timing of expected prepayments over the remaining life of pooled loans. We changed our estimate to consider a greater number of pools based on origination terms and recorded an increase in deferred interest of $3.5 million with a corresponding decrease in interest income and fees.

~~Earnings per Share.~~ Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share include the potential dilutive effects of any stock-based awards, which is calculated using the treasury-stock method. The following table sets forth the shares outstanding used for the earnings per share calculations:2017, respectively.

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended
July 31, Six Months Ended
July 31,
(in thousands) 2016 2015 2016 2015
Weighted average common shares outstanding - Basic 30,731
36,466
30,696
36,416
Dilutive effect of stock based awards —
576
—
551
Weighted average common shares outstanding - Diluted 30,731
37,042
30,696
36,967

For the three months ended July 31, 2016 and 2015, the weighted average number of shares from stock based awards not included in the calculation due to their anti-dilutive effect was approximately 1.3 million and 69,000 shares, respectively. For the six months ended July 31, 2016 and 2015, the weighted average number of shares from stock based awards not included in the calculation due to their anti-dilutive effect was approximately 1.0 million and 0.2 million shares, respectively.

Restricted Cash.The restricted cash balance as of ~~July 31, 2016~~April 30, 2017 and January 31, ~~2016~~2017 includes ~~$71.0~~$116.1 million and ~~$64.2~~$75.2 million, respectively, of cash we collected as servicer on the securitized receivables that was subsequently remitted to the VIEs and ~~$25.0~~$43.9 million and ~~$14.4~~$35.5 million, respectively, of cash held by the VIEs as additional collateral for the asset-backed notes.

~~CONN'S, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Customer accounts receivable. Customer accounts receivable reported in the consolidated balance sheet includes total receivables managed, including both those transferred to the VIEs and those ~~receivables~~ not transferred to the VIEs. Customer accounts receivable are ~~originated~~recognized at the time ~~of sale and delivery~~the customer takes possession of the ~~various products and services.~~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 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 ~~and~~along with interest accrued subsequent to the last ~~payment is reversed and charged against the allowance for uncollectible interest.~~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 repossess collateral or exercise legal remedies available to us. We may extend or "re-age" a portion of our customer accounts, which ~~involve~~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 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 re-age their obligation by refinancing the account, which does not change the interest rate or the total amount due from the customer but does reduce the monthly contractual payments and ~~extends~~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").

~~Allowance for doubtful accounts.~~ 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 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 for our non-TDR customer accounts receivable that we expect to charge-off over the next twelve months based on our historical cash collection and net loss experience. In addition to pre-charge-off cash collections and charge-off information, 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 policies are also considered.

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. The excess of the carrying amount over the discounted cash flow amount is recorded as an allowance for loss on those accounts.

Interest income on customer accounts ~~receivable.~~receivable. Interest income, which includes interest income and amortization of deferred fees and origination costs, is ~~accrued~~recorded using the interest method ~~for installment contracts~~ and is reflected in finance charges and other revenues. Typically, interest income is ~~accrued~~recorded until the customer account is paid off or charged-off, and we provide an allowance for estimated uncollectible interest. ~~Interest~~Any contractual interest income ~~on installment contracts with our~~received from customers ~~is based on the rule~~in excess of ~~78s. In order to convert~~ the interest income ~~recognized to~~calculated using the interest method ~~we have~~is recorded ~~the excess earnings of rule of 78s over the interest method~~ as deferred revenue on our balance sheets. Our calculation of interest income ~~also~~for customers with similar financing arrangements for which the timing and amount of prepayments can be reasonably estimated includes an estimate of the benefit from future prepayments based on our historical ~~experience of the timing of expected prepayments over the remaining life of pooled loans.~~experience. At ~~July 31, 2016~~April 30, 2017 and January 31, ~~2016,~~2017, there ~~were $8.9~~was $13.9 million and ~~$5.2~~$13.7 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 ~~12-month,~~12-and 18-month no-interest ~~finance~~option programs. 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 ~~12-month,~~ 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 previously offered 18- and 24-month equal-payment, no-interest~~No-interest option finance programs ~~to certain higher credit quality borrowers, which were~~with terms greater than 12 months are discounted to their present value at origination, resulting in a reduction in sales and customer receivables, and the discount amount is amortized into finance charges and other revenues over the term of the contract. ~~If a customer is delinquent in making a scheduled monthly payment (grace periods are provided), the account begins accruing interest based on the contract rate from the date of the last payment made.~~

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 typically only place accounts in non-accrual status when legally required. Payments received on non-accrual loans will be applied to principal and reduce the amount of the loan. Interest accrual is resumed on those accounts once a legally-mandated settlement arrangement is reached or other payment arrangements are made with the customer. At ~~July 31, 2016~~April 30, 2017 and January 31, 2017, customer receivables carried in non-accrual status were $22.3 million and $22.9 million, respectively. At April 30, 2017 and January 31, 2017, customer receivables that were past due 90 days or more and still accruing interest totaled $108.1 million and $124.0 million, respectively.

Allowance for doubtful accounts. 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 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 for our non-TDR customer accounts receivable that we expect to charge-off over the next 12 months based on our historical cash collection and net loss experience. In addition to pre-charge-off cash collections and charge-off information, estimates of post-charge-off recoveries, including cash payments from customers, amounts realized

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~2016, customer receivables carried in non-accrual status~~from the repossession of the products financed, sales tax recoveries from taxing jurisdictions, and payments received under credit insurance policies are also considered.

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. 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 were ~~$24.4~~$7.4 million and ~~$20.6~~$5.7 million ~~respectively. At July 31, 2016~~as of April 30, 2017 and January 31, ~~2016, customer receivables that~~2017, respectively, and were ~~past due 90 days or more and still accruing interest totaled $104.7 million and $115.1 million, respectively.~~included in other assets on our consolidated balance sheet.

Income Taxes. For the ~~six~~three months ended ~~July 31, 2016,~~April 30, 2017, we utilized the estimated annual effective tax rate based on our estimated fiscal year 2018 pre-tax income in determining income tax expense rather than the actual effective tax rate (discrete method), which we used for the three months ended April 30, 2016.

Stock-based compensation.During the three months ended April 30, 2017, the Company granted 429,000 performance stock awards ("PSUs"), all of which were special equity awards ("Special Equity Awards") to certain officers of the Company, and 324,487 restricted stock awards (“RSUs"), of which 269,000 were Special Equity Awards to certain officers of the Company, with an aggregate grant date fair value of $7.8 million. During the three months ended April 30, 2016, ~~based on our updated estimated~~the Company granted 9,413 RSUs with an aggregate grant date fair value of $0.2 million. The PSUs will vest, if at all, upon the certification, after the Company’s fiscal year 2020, by the compensation committee of the satisfaction of the annual and cumulative Earnings Before Interest, Taxes, Depreciation and Amortization performance conditions over the three fiscal years commencing with the Company’s fiscal year 2018. The majority of the RSUs will vest, if at all, over periods of three to five years from the date of grant. For the three months ended April 30, 2017 ~~pre-tax income.~~and 2016, stock-based compensation expense was $1.6 million and $1.3 million, respectively.

Earnings per Share. Basic earnings per share is calculated by dividing net (loss) 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 and restricted stock units granted, which is calculated using the treasury-stock method. The following table sets forth the shares outstanding for the earnings per share calculations:



	Three Months Ended April 30,
(in thousands)	2017	2016
Weighted-average common shares outstanding - Basic	30,972	30,661
Dilutive effect of stock options and restricted stock units	—	—
Weighted-average common shares outstanding - Diluted	30,972	30,661

For the three months ended April 30, 2017 and 2016, the weighted-average number of stock options and restricted stock units not included in the calculation due to their anti-dilutive effect was 0.9 million and 1.0 million, respectively.

Fair Value of Financial ~~Instruments.~~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 – ~~Quoted~~Inputs represent unadjusted quoted prices ~~available~~ in active markets for identical assets or liabilities

Level 2 – ~~Pricing inputs not~~Inputs other than quoted ~~in active markets but~~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 – ~~Significant~~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

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 ~~pricing that have little or no transparency with inputs requiring significant management judgment or estimation~~the fair-value measurement.

The fair value of cash and cash equivalents, restricted cash held by the consolidated VIEs and accounts payable approximate their carrying amounts because of the short maturity of these instruments. The fair value of customer accounts receivables, determined using a Level 3 discounted cash flow analysis, approximates their carrying ~~amount.~~amount, which includes 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, 2016,~~April 30, 2017, the fair value of ~~our~~the Senior Notes outstanding, which was determined using Level 1 inputs, was ~~$175.9~~$201.6 million as compared to the carrying value of $227.0 million, excluding the impact of the related discount. At ~~July 31, 2016,~~April 30, 2017, the fair value of the ~~VIE's Class A Notes~~asset-backed notes approximates their carrying value and ~~Class B Notes, which were~~was determined using Level 2 inputs based on inactive trading ~~activity, approximates their carrying value.~~activity.

~~Reclassifications.~~Recent Accounting Pronouncements Adopted. In March 2016, the FASB issued ASU 2016-09, ~~Certain reclassifications have been made~~Compensation—Stock Compensation (Topic 718): Improvements to ~~prior~~Employee Share-Based Payment Accounting, which modifies the accounting for excess tax benefits and tax deficiencies associated with share-based payments, the accounting for forfeitures, and the classification of certain items on the statement of cash flows. ASU 2016-09 eliminates the requirement to recognize excess tax benefits in additional paid-in capital ("APIC"), and the requirement to evaluate tax deficiencies for APIC or income tax expense classification, and provides for these benefits or deficiencies to be recorded as an income tax expense or benefit in the income statement. With these changes, tax-related cash flows resulting from share-based payments will be classified as operating activities as opposed to financing, as currently presented. The standard became effective for us in the first quarter of fiscal year ~~amounts to conform to~~2018. The amendment requiring the ~~presentation~~recognition of excess tax benefits and deficiencies as income tax benefit or expense in the ~~current fiscal year. On the consolidated balance sheets,~~income statement as ~~of January 31, 2016, we reclassified cash held by the VIEs~~opposed to being recognized as additional ~~collateral~~paid-in-capital was applied prospectively; the impact was not material. The Company retrospectively adopted the amendments requiring the classification of excess tax benefits and deficiencies with other income tax cash flows as operating activities and cash paid when directly withholding shares as financing activities in the accompanying consolidated statements of cash flows; the impact was not material. The Company has elected to continue its current practice of estimating the number of awards expected to vest in determining the amount of compensation cost to be recognized related to share based payment transactions.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU 2015-11 requires that inventory that has historically been measured using first-in, first-out or average cost method be measured at the lower of cost and net realizable value. The update requires prospective application and became effective for us in the ~~asset-backed notes out~~first quarter of ~~current restricted cash and separately presented as long-term restricted cash. These reclassifications~~fiscal year 2018. The adoption of this ASU did not have a material impact on our consolidated ~~operating income or net income.~~financial statements.

Recent Accounting ~~Pronouncements.~~Pronouncements Yet To Be Adopted. In May 2014, the ~~Financial Accounting Standards Board ("FASB")~~FASB issued ~~Accounting Standards Update ("ASU")~~ASU 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive accounting standard for revenue recognition for contracts with customers and supersedes current guidance. Upon adoption of ASU 2014-09, entities are required to recognize revenue using the following comprehensive model: (1) identify contracts with customers, (2) identify the performance obligations in such contracts, (3) determine transaction price, (4) allocate the transaction price to the performance obligations, and (5) recognize revenue as each performance obligation is satisfied. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of Effective Date, which defers the effective date of ASU 2014-09 by one year and allows early adoption on a limited basis. The FASB has also issued ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net); ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing; ASU 2016-11, Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 ~~is now~~and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting; and ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, all of which were issued to improve and clarify the guidance in ASU 2014-09. These ASUs are effective for us beginning in the first quarter of fiscal year 2019 and will result in retrospective application, either in the form of recasting all prior periods presented or a cumulative adjustment to equity in the period of adoption. We ~~are~~ currently ~~assessing~~anticipate adopting the ~~impact~~standard using the ~~new standard will have~~cumulative catch-up transition method. Based on our preliminary assessment, we do not expect the adoption of these ASUs to have a material impact on our consolidated financial ~~statements.~~statements other than the expected additional disclosure requirements.

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will change how lessees account for leases. For most leases, a liability will be 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 will recognize a single lease cost on a straight line basis based on the combined amortization of the lease obligation and the right-of-use asset. Other leases will be required to be accounted for as financing arrangements similar to how we currently account for capital leases. On transition, we will recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The final standard iswill become effective for us beginning in the first quarter of fiscal year 2020. We are currently assessing the impact ~~the new standard~~this ASU will have on our financial statements.

~~In March 2016,~~ We are the ~~FASB issued ASU 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting,~~ ~~which modifies the accounting~~lessee under various lease agreements for ~~excess tax benefits~~our retail stores and ~~tax deficiencies associated with share-based payments, the accounting~~equipment that are currently accounted for forfeitures, and the classification of certain items on the statement of cash flows. ASU 2016-09 eliminates the requirement to recognize excess tax benefits in additional paid-in capital ("APIC"), and the requirement to evaluate tax deficiencies for APIC or income tax expense classification, and provides for these benefits or deficiencies to be recorded as an income tax expense or benefit in the income statement. With these changes, tax-related cash flows resulting from share-based payments will be classified as operating ~~activities~~leases as ~~opposed to financing, as currently presented. The standard is effective~~discussed in Note 6, Leases, of our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for ~~us in~~ the ~~first quarter of~~ fiscal year ~~2018, although early adoption is permitted. We are currently assessing the impact the new standard will have on our financial statements.~~ended January 31, 2017

~~CONN'S, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

In June 2016, the FASB issued ASU 2016-13, Financial ~~Instruments -~~ Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires that financial assets measured at amortized cost should 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 iswill become effective for us in the first quarter of fiscal year 2021 and earlier adoption is permitted beginning in the first quarter of fiscal year 2020. We are currently assessing the impact ~~the new standard~~this ASU will have on our financial statements.

~~2. Charges~~In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and ~~Credits~~

~~Charges and credits consisted~~Cash Payments (a consensus of the ~~following:~~Emerging Issues Task Force). ASU 2016-15 clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice. Among other things, the presentation of debt prepayment or debt extinguishment costs as cash outflows for financing activities on the statement of cash flow. The standard will become effective for us in the first quarter of fiscal year 2019 and early adoption is permitted. The adoption of this ASU is not expected to have a significant impact on our consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. We will be required to adopt the amendments in this ASU in the annual and interim periods for our fiscal year ending January 31, 2019, with early adoption permitted. The application of the amendments will require the use of a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. We are evaluating the standard and the impact it will have on our consolidated financial statements.

Three Months Ended
July 31, Six Months Ended
July 31,
(in thousands) 2016 2015 2016 2015
Store and facility closure costs $ —
$ —
$ —
$ 425
Impairments from disposals 1,385
—
1,385
—
Legal and professional fees related to the exploration of strategic alternatives and securities-related litigation 135
1,013
589
1,207
Employee severance 1,213
—
1,213
—
Executive management transition costs 162
—
234
—
$ 2,895
$ 1,013
$ 3,421
$ 1,632

~~During~~In November 2016, the ~~three~~FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). ASU 2016-18 requires that the statement of cash flows provides the change in the total of cash, cash equivalents, and six months ended July 31, 2016, we had costs associated with impairments from disposals, legal and professional fees related to our securities-related litigation, charges for severance and transition costs due torestricted cash or restricted cash equivalents. This will result in us no longer showing the changes in restricted cash balances as a component of cash flows from financing activities but instead include the ~~executive management team. The impairments from disposals included~~balances of both current and long-term restricted cash with cash and cash equivalents in total cash, cash equivalents and restricted cash for the ~~write-off of leasehold improvements for one store we relocated prior to the~~beginning and end of ~~its useful life and incurred costs~~the periods presented. The ASU will become effective for ~~a terminated store project prior~~us in the first quarter of fiscal year 2019, early adoption is permitted. We are currently assessing when we expect to ~~starting construction. During~~adopt the three and six months ended July 31, 2015, we had costs associated with legal and professional fees related to our exploration of strategic alternatives and our securities-related litigation. During the six months ended July 31, 2015, we also had charges related to the closing of under-performing retail locations.

~~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) 2016 2015 2016 2015
Interest income and fees $ 54,502
$ 57,383
$ 115,123
$ 112,802
Insurance commissions 11,219
13,062
20,675
24,091
Other revenues 437
659
931
808
$ 66,158
$ 71,104
$ 136,729
$ 137,701

Interest income and fees and insurance commissions are derived from the credit segment operations, whereas other revenues are derived from the retail segment operations. During the three months ended July 31, 2016, we decreased interest income and fees by $8.2 million as a result of changes in estimates to our allowance for no-interest option credit programs and deferred interest as described in Note 1, ~~Summary of Significant Accounting Policies.~~ For the three months ended July 31, 2016 and 2015, interest income and fees was reduced by provisions for uncollectible interest of $10.2 million and $8.9 million, respectively. For the six months ended July 31, 2016 and 2015, interest income and fees was reduced by provisions for uncollectible interest of $20.2 million and $17.4 million, respectively. For the three months ended July 31, 2016 and 2015, the amount included in interest income and fees related to TDR accounts was $4.2 million and $3.3 million, respectively. For the six months ended July 31, 2016 and 2015, the amount included in interest income and fees related to TDR accounts was $8.3 million and $6.5 million, respectively.ASU.

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.2. Customer Accounts Receivable

Customer accounts receivable consisted of the following:


	Total Outstanding Balance														Total Outstanding Balance
	Customer Accounts Receivable						60 Days Past Due ⁽¹⁾				Re-aged ⁽¹⁾				Customer Accounts Receivable						60 Days Past Due ⁽¹⁾				Re-aged ⁽¹⁾
(in thousands)	July 31, 2016			January 31, 2016			July 31, 2016		January 31, 2016		July 31, 2016		January 31, 2016		April 30, 2017			January 31, 2017			April 30, 2017		January 31, 2017		April 30, 2017		January 31, 2017
Customer accounts receivable	$	1,415,728		$	1,470,205		$	115,316	$	127,400	$	108,242	$	112,221	$	1,342,789		$	1,417,581		$	112,080	$	127,747	$	96,521	$	111,585
Restructured accounts	128,611			117,651			33,558		30,323		128,611		117,651		138,111			138,858			33,572		38,010		138,111		138,858
Total customer portfolio balance	1,544,339			1,587,856			$	148,874	$	157,723	$	236,853	$	229,872	1,480,900			1,556,439			$	145,652	$	165,757	$	234,632	$	250,443
Allowance for uncollectible accounts	(201,176		)	(190,990		)									(207,061		)	(210,175		)
Allowances for no-interest option credit programs	(22,575		)	(21,290		)									(17,860		)	(21,207		)
Deferred fees and origination costs, net															(10,604		)	(6,991		)
Total customer accounts receivable, net	1,320,588			1,375,576											1,245,375			1,318,066
Short-term portion of customer accounts receivable, net	(733,718		)	(743,931		)									(652,046		)	(702,162		)
Long-term portion of customer accounts receivable, net	$	586,870		$	631,645										$	593,329		$	615,904
Securitized receivables held by the VIE	$	922,994		$	870,684		$	129,466	$	135,800	$	216,215	$	204,594
Receivables not held by the VIE	621,345			717,172			19,408		21,923		20,638		25,278
Securitized receivables held by the VIEs															$	1,261,699		$	1,015,837		$	143,664	$	156,344	$	232,269	$	238,375
Receivables not held by the VIEs															219,201			540,602			1,988		9,413		2,363		12,068
Total customer portfolio balance	$	1,544,339		$	1,587,856		$	148,874	$	157,723	$	236,853	$	229,872	$	1,480,900		$	1,556,439		$	145,652	$	165,757	$	234,632	$	250,443

(1)

Due to the fact that an account can become past due after having been re-aged, accounts could be represented as both past due and re-aged. As of ~~July 31, 2016~~April 30, 2017 and January 31, ~~2016,~~2017, the amounts included within both past due and re-aged were ~~$58.1~~$53.2 million and ~~$55.2~~$66.7 million, respectively. As of ~~July 31, 2016~~April 30, 2017 and January 31, ~~2016,~~2017, the total customer portfolio balance past due one day or greater was ~~$381.3~~$387.2 million and ~~$387.3~~$406.1 million, respectively. These amounts include the 60 days past due balances shown.

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


	Six Months Ended July 31, 2016									Six Months Ended July 31, 2015									Three Months Ended April 30, 2017									Three Months Ended April 30, 2016
(in thousands)	Customer Accounts Receivable			Restructured Accounts			Total			Customer Accounts Receivable			Restructured Accounts			Total			Customer Accounts Receivable			Restructured Accounts			Total			Customer Accounts Receivable			Restructured Accounts			Total
Allowance at beginning of period	$	149,226		$	41,764		$	190,990		$	118,786		$	28,196		$	146,982		$	158,992		$	51,183		$	210,175		$	149,226		$	41,764		$	190,990
Provision ⁽¹⁾	108,333			29,768			138,101			91,821			24,396			116,217			48,516			17,232			65,748			52,924			14,937			67,861
Principal charge-offs ⁽²⁾	(91,261		)	(20,969		)	(112,230		)	(71,280		)	(14,190		)	(85,470		)	(48,087		)	(13,397		)	(61,484		)	(45,634		)	(10,097		)	(55,731		)
Interest charge-offs	(15,384		)	(3,544		)	(18,928		)	(13,056		)	(2,599		)	(15,655		)	(7,519		)	(2,095		)	(9,614		)	(8,129		)	(1,798		)	(9,927		)
Recoveries ⁽²⁾	2,636			607			3,243			1,881			375			2,256			1,749			487			2,236			1,585			351			1,936
Allowance at end of period	$	153,550		$	47,626		$	201,176		$	128,152		$	36,178		$	164,330		$	153,651		$	53,410		$	207,061		$	149,972		$	45,157		$	195,129
Average total customer portfolio balance	$	1,428,396		$	123,451		$	1,551,847		$	1,297,951		$	95,652		$	1,393,603		$	1,372,808		$	139,026		$	1,511,834		$	1,438,442		$	121,447		$	1,559,889


(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 principal collections of previously charged-off balances. Net charge-offs are calculated as the net of principal charge-offs and recoveries. During the three months ended July 31, 2016, we increased provision for bad debts by $5.0 million as a result of changes in estimates as it relates to sales tax recovery on previously charged-off accounts as described in Note 1, ~~Summary of Significant Accounting Policies.~~

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.3. Accrual for Store and Facility Closures

We have closed or relocated retail and facility locations that did not perform at a level ~~we expect~~expected for mature store ~~locations.~~locations or that did not align with our long-term retail objectives. Certain of the closed or relocated stores and facilities had ~~noncancelable~~non-cancelable lease agreements, resulting in the accrual of the present value of the remaining lease payments and estimated related occupancy obligations, net of estimated sublease income. Adjustments to these projections for changes in estimated marketing times and sublease rates, as well as other revisions, are made to the obligation as further information related to the actual terms and costs become available.

The following table presents detail of the activity in the accrual for store and facility closures:


	Six Months Ended July 31,						Three Months Ended April 30,
(in thousands)	2016			2015			2017			2016
Balance at beginning of period	$	1,866		$	2,556		$	1,874		$	1,866
Accrual for additional closures	—			318			1,227			—
Adjustments	23			(32		)	(27		)	(15		)
Cash payments, net of sublease income	(339		)	(698		)	(1,305		)	(163		)
Balance at end of period	1,550			2,144			1,769			1,688
Current portion, included in accrued expenses	(643		)	(640		)	(1,011		)	(643		)
Long-term portion, included in other long-term liabilities	$	907		$	1,504		$	758		$	1,045

4. Charges and Credits

Charges and credits consisted of the following:



	Three Months Ended April 30,
(in thousands)	2017		2016
Facility closure costs	$	1,227	$	—
Legal and professional fees related to the exploration of strategic alternatives and securities-related litigation	—		454
Executive management transition costs	—		72
	$	1,227	$	526

During the three months ended April 30, 2017, we incurred exit costs associated with reducing the square footage of a distribution center. During the three months ended April 30, 2016, we incurred costs associated with legal and professional fees related to our securities-related litigation and transition costs due to changes in the executive management team.

5. Finance Charges and Other Revenues

Finance charges and other revenues consisted of the following:



	Three Months Ended April 30,
(in thousands)	2017		2016
Interest income and fees	$	67,131	$	60,621
Insurance commissions	9,330		9,457
Other revenues	80		493
	$	76,541	$	70,571

Interest income and fees and insurance commissions are derived from the credit segment operations, whereas other revenues are derived from the retail segment operations. During the three months ended April 30, 2017 and 2016, interest income and fees reflected provisions for uncollectible interest of $10.0 million and $10.0 million and amounts related to TDR accounts of $4.5 million and $4.1 million, respectively.

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Debt and Capital Lease Obligations

Debt and capital lease obligations consisted of the following:


(in thousands)	July 31, 2016			January 31, 2016			April 30, 2017			January 31, 2017
Revolving credit facility	$	299,500		$	329,207		$	—		$	177,500
Senior Notes	227,000			227,000			227,000			227,000
2015-A Class A Notes	195,518			551,383
2015-A Class B Notes	165,900			165,900
2016-A Class A Notes	241,077			—
2016-A Class B Notes	70,510			—
2015 VIE Asset-backed Class A notes							—			12,166
2015 VIE Asset-backed Class B notes							113,281			165,900
2016-A VIE Asset-backed Class A notes							4,332			64,732
2016-A VIE Asset-backed Class B notes							70,510			70,510
2016-A VIE Asset-backed Class C notes							70,510			70,510
2016-B VIE Asset-backed Class A notes							148,767			256,513
2016-B VIE Asset-backed Class B notes							111,960			111,960
2017-A VIE Asset-backed Class A notes							313,220			—
2017-A VIE Asset-backed Class B notes							106,270			—
2017-A VIE Asset-backed Class C notes							50,340			—
Capital lease obligations	2,065			2,488			5,709			2,393
Total debt and capital lease obligations	1,201,570			1,275,978			1,221,899			1,159,184
Less:
Unamortized discounts and debt issuance costs	(18,861		)	(26,300		)
Discount on debt							(2,949		)	(3,089		)
Deferred debt issuance costs							(11,308		)	(10,853		)
Current maturities of capital lease obligations	(761		)	(799		)	(1,190		)	(849		)
Long-term debt and capital lease obligations	$	1,181,948		$	1,248,879		$	1,206,452		$	1,144,393

Senior Notes. On July 1, 2014, we issued $250.0 million of the unsecured Senior Notes due July 2022 bearing interest at ~~7.250%~~7.25% (the "Senior Notes"), pursuant to an indenture dated July 1, 2014 (the "Indenture"), among Conn's, Inc., its subsidiary guarantors (the "Guarantors") and U.S. Bank National Association, as trustee. ~~During the year ended January 31, 2016, we repurchased $23.0 million of face value of the Senior Notes for $22.9 million.~~ The effective interest rate of the Senior Notes after giving effect to ~~offering fees~~the discount and ~~debt discount~~issuance costs is ~~7.7%~~7.8%.

~~CONN'S, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Indenture, of less than or equal to 2.50 to ~~1.00. Thus,~~1.0. As a result of these exceptions, as of ~~July 31, 2016, $190.2~~April 30, 2017, $173.4 million would have been free from the ~~dividend~~distribution restriction. However, as a result of the revolving credit facility ~~dividend~~distribution restrictions, which are further described below, ~~no amount was available for dividends.~~we were restricted from making a distribution as of April 30, 2017. 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.

Events of default under the Indenture include customary events, such as a cross-acceleration provision in the event that we default inon the payment of other debt due at maturity or upon acceleration ~~for~~of default 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. During fiscal years 2018, 2017 and 2016, we securitized customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. In ~~September 2015,~~turn, the ~~2015 VIE~~VIEs issued asset-backed notes secured by the transferred customer accounts receivables and restricted cash held by the ~~2015 VIE.~~ VIEs.

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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 repair service agreements 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 ~~consist of the following securities:~~

Asset-backed Fixed Rate Notes, Class A, Series 2015-A ("2015-A Class A Notes") in aggregate principal amount of $952.1 million that bear interest at a fixed annual rate of 4.565% and mature on September 15, 2020. The effective interest rate of the 2015-A Class A Notes after giving effect to offering fees is 6.8%.

Asset-backed Fixed Rate Notes, Class B, Series 2015-A ("2015-A Class B Notes") in aggregate principal amount of $165.9 million that bear interest at a fixed annual rate of 8.500% and mature on September 15, 2020. The effective interest rate of the 2015-A Class B Notes after giving effect to offering fees is 12.8%.

~~The 2015-A Class A Notes and 2015-A Class B Notes~~ were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities ~~Act.~~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 ~~would~~may be accelerated, in which event the cash proceeds of the receivables that otherwise might be released to ~~us as the holder of~~ the residual equity holder would instead be directed entirely toward repayment of the ~~2015-A Class A Notes and 2015-A Class B Notes.~~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 ~~2015 VIE.~~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.

~~In March 2016, the 2016 VIE issued asset-backed notes secured by the transferred customer accounts receivables and restricted cash held by the 2016 VIE.~~ The asset-backed notes consist of the ~~following securities:~~following:

Asset-backed Fixed Rate Notes, Class A, Series 2016-A ("2016-A Class A Notes") in aggregate principal amount of $423.0 million that bear interest at a fixed annual rate of 4.680% and mature on April 16, 2018. The effective interest rate of the 2016-A Class A Notes after giving effect to offering fees is 6.8%.

Asset-backed Fixed Rate Notes, Class B, Series 2016-A ("2016-A Class B Notes") in aggregate principal amount of $70.5 million that bear interest at a fixed annual rate of 8.960% and mature on August 15, 2018. The effective interest rate of the 2016-A Class B Notes after giving effect to offering fees is 9.8%.



Asset-Backed Notes	Principal Amount		Net Proceeds⁽¹⁾		Issuance Date	Maturity Date	Fixed Interest Rate	Effective Interest Rate⁽²⁾
2015 Class B Notes	165,900		156,200		9/10/2015	9/15/2020	8.50%	15.60%
2016-A Class A Notes	423,030		409,845		3/17/2016	4/16/2018	4.68%	6.50%
2016-A Class B Notes	70,510		68,309		3/17/2016	8/15/2018	8.96%	9.60%
2016-A Class C Notes	70,510		71,648		10/12/2016	4/15/2020	12.00%	11.00%
2016-B Class A Notes	391,840		380,033		10/6/2016	10/15/2018	3.73%	5.70%
2016-B Class B Notes	111,960		108,586		10/6/2016	3/15/2019	7.34%	8.10%
2017-A Class A Notes	313,220		304,451		4/19/2017	7/15/2019	2.73%	5.50%
2017-A Class B Notes	106,270		103,300		4/19/2017	2/15/2020	5.11%	6.00%
2017-A Class C Notes	50,340		48,919		4/19/2017	10/15/2021	7.40%	7.90%
Total	$	1,703,580	$	1,651,291

The 2016-A Class A Notes and 2016-A Class B Notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act. If an event of default were to occur under the indenture that governs the notes, the payment of the outstanding amounts would be accelerated, in which event the cash proceeds of the receivables that otherwise might be released to us as the holder of a third class of asset-backed notes issued by the 2016 VIE ("2016-A Class C Notes") and the residual equity would instead be directed entirely toward repayment of the 2016-A Class A Notes and 2016-A Class B Notes. The holders of the notes have no recourse to assets outside of the 2016 VIE. Events of default include, but are not limited to, failure to make required payments on the notes or specified bankruptcy-related events.


(1)	After giving effect to debt issuance costs and restricted cash held by the VIEs.


(2)	For the three months ended April 30, 2017, and inclusive of retrospective adjustments to deferred debt issuance costs based on changes in timing of actual and expected cash flows.

Revolving Credit Facility.On ~~October 30, 2015,~~March 31, 2017, Conn's, Inc. and certain of its subsidiaries (the "Borrowers") entered into a Third Amendment (the "Third Amendment") to the Third Amended and Restated Loan and Security Agreement, dated as of October 30, 2015, with ~~a syndicate of banks that~~certain lenders, which provides for ~~an $810.0~~a $750.0 million asset-based revolving credit facility (the "revolving credit facility") under which credit availability is subject to a borrowing base. The revolving credit facility matures on October 30, ~~2018.~~2019.

~~On February 16, 2016,~~The Third Amendment, among other things, (a) extends the ~~Borrowers entered into~~maturity date of the credit facility one year to October 30, 2019; (b) provides for a ~~first amendment~~reduction in the aggregate commitments from $810 million to $750 million; (c) amends the minimum interest coverage ratio covenant to (i) eliminate the application of the minimum interest coverage ratio covenant for the fiscal quarter ending April 30, 2017 and (ii) reduce the minimum interest coverage ratio (A) to 0.80x as of the last day of the fiscal quarter ending July 31, 2017, (B) to 1.10x as of the last day of the fiscal quarter ending October 31, 2017 and (C) to 1.25x as of the last day of each fiscal quarter thereafter, beginning with the fiscal quarter ending January 31, 2018; (d) sets the applicable margin at 3.50% for LIBOR loans and 2.50% for Base Rate loans until the Company demonstrates an interest coverage ratio of equal to or greater than 1.10x for the fiscal quarter ending October 31, 2017, at which point the applicable margin will revert to being determined according to the ~~revolving credit~~existing pricing grid based on facility ~~which resulted~~availability; (e) reduces the minimum cash recovery percentage on the contracts it owns and manages from 4.50% to 4.45% for the first nine months of each fiscal year, and from 4.25% to 4.20% for the last three months of each fiscal year; (f) amends the definition of “EBITDA” to, among other things, exclude the impact of non-cash asset write-offs relating to construction in process; (g) amends the definition of “Interest Expense” to exclude certain non-interest expenses; (h) amends various ~~changes, including:~~

~~Excluding non-cash deferred amortization~~definitions and other related provisions to clarify the Company’s ability to undertake permitted securitization transactions; (i) increases the number of ~~debt related transaction costs~~equity cures that may be exercised during the term of the agreement from ~~interest coverage ratio;~~one time to two times, and

~~Extending~~ increases the maximum amount of each such cure from ~~6 months~~$10 million to ~~18 months~~$20 million; and (j) modifies the ~~time frame subsequent~~calculations of “Tangible Net Worth” and “Interest Coverage Ratio” to deduct certain amounts attributable to the ~~closing of~~difference between a ~~securitization transaction in which~~calculated loss reserve and the ~~Cash Recovery Percent covenant will be determined.~~Company’s recorded loss reserve on its customer receivables.

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~On May 18, 2016, the Borrowers entered into a second amendment to the revolving credit facility, which resulted in various changes, including:~~

~~Amending the minimum interest coverage ratio covenant, so long as the borrowing base reduction discussed below is in effect, to:~~


◦	~~Reduce the minimum interest coverage ratio covenant to 1.0x for the second quarter of fiscal 2017 through the first quarter of fiscal 2018; and~~


◦	~~Reduce the minimum interest coverage ratio covenant to 1.25x for the second quarter of fiscal 2018 through the third quarter of fiscal 2019.~~

~~Modifying the conditions for repurchases of the Company's common stock, including the addition of a requirement to achieve a minimum interest coverage ratio of 2.5x for two consecutive quarters; and~~

Reducing the borrowing base by $15.0 million beginning on May 31, 2016, reducing the borrowing base by $10.0 million for any month beginning with July 31, 2017 so long as the interest coverage ratio is at least 1.25x, and no borrowing base reduction at any time the interest coverage ratio is at least 2.0x for two consecutive quarters.

~~As of July 31, 2016, loans~~Loans under the revolving credit facility bear interest, at our option, at a rate ofequal to LIBOR plus the applicable margin at 3.50% for LIBOR loans and 2.50% for base rate loans until the Company demonstrates an interest coverage ratio of equal to or greater than 1.10x for the fiscal quarter ending October 31, 2017, at which point the applicable margin will revert to being determined according to the existing pricing grid based on facility availability which specifies a margin ranging from ~~2.5%~~2.75% to ~~3.0%~~3.25% per annum (depending on quarterly average net availability under the borrowing base) or the alternate base rate plus a margin ranging from ~~1.5%~~1.75% to ~~2.0%~~2.25% per annum (depending on quarterly average net availability under the borrowing base). ~~Pursuant to the second amendment, the margins increased by 25 basis points subsequent to July 31, 2016.~~ The alternate base rate is the ~~greater~~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%. ~~The effective interest rate on borrowings outstanding under the revolving credit facility after giving effect to offering fees is 5.5%.~~ We also pay an unused fee on the portion of the commitments that ~~are~~is available for future borrowings or letters of credit at a rate ranging from 0.25% to 0.75% per annum, depending on the average outstanding balance and letters of credit of the revolving credit ~~facility.~~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 6.0% for the three months ended April 30, 2017.

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, 2016,~~April 30, 2017, we had immediately available borrowing capacity of ~~$97.7~~$128.8 million under our revolving credit facility, net of standby letters of credit issued of ~~$5.3~~$5.8 million. We also had ~~$407.5~~$615.4 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 make dividends and distributions to the Company and other obligors under the revolving credit facility without restriction. As of ~~July 31, 2016, under~~April 30, 2017, $66.7 million would have been free to repay the Senior Notes. However, we were unable to make other distributions as a result of the revolving credit facility ~~as amended, no amount was available for dividends.~~distribution 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.

In connection with entering into the third amendment to the revolving credit facility, we wrote-off $0.3 million of debt issuance costs for lenders that did not continue to participate. We also paid $2.8 million of debt issuance costs, recorded as other assets, which will be amortized ratably over the remaining term of the revolving credit facility along with the unamortized debt issuance costs remaining on the revolving credit facility.

Debt covenants. We were in compliance with our debt covenants, as amended, at ~~July 31, 2016.~~April 30, 2017. A summary of the significant financial covenants that govern our revolving credit facility, as amended, compared to our actual compliance status at ~~July 31, 2016~~April 30, 2017 is presented below:

Actual

Required

Minimum/

Maximum

Actual

Required

Minimum/

Maximum

Interest Coverage Ratio must equal or exceed minimum(1)

1.03:1.00

1.00:1.00

1.27:1.00

Not Tested

Leverage Ratio must not exceed maximum

2.63:1.00

4.00:1.00

2.42:1.00

4.00:1.00

ABS Excluded Leverage Ratio must not exceed maximum

1.52:1.00

2.00:1.00

0.78:1.00

2.00:1.00

Cash Recovery Percent must exceed stated amount

4.77%

4.50%

5.51%

4.45%

Capital Expenditures, net, must not exceed maximum

$26.0 million

$75.0 million

$4.5 million

$75.0 million

~~CONN'S, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

(1) Not tested for the three months ended April 30, 2017.

All capitalized terms in the above table are defined by the revolving credit facility, as amended, and may or may not agree directly ~~with~~to the financial statement captions in this document. ~~Compliance with the~~The covenants isare calculated quarterly, except for the Cash Recovery Percent, which is calculated monthly on a trailing three-month basis, and Capital Expenditures, which is calculated for a period of four consecutive fiscal quarters, as of the end of each fiscal quarter. The revolving credit facility provides for 18 months subsequent to the closing of a securitization transaction in which the Cash Recovery Percent will be determined based on the portfolio of contracts subject to the (i) securitization facilities; and (ii) a lien under the revolving credit facility.

7. Contingencies

Securities Class Action Litigation.We and ~~one of our current and one~~two of our former executive officers are defendants in a consolidated securities class action lawsuit pending in the United States District Court for the Southern District of Texas (the ~~"Court"~~“Court”), captioned In re Conn's Inc. Securities Litigation, Cause No. 14-CV-00548 (the ~~"Consolidated~~“Consolidated Securities ~~Action"~~Action”). The Consolidated Securities Action started as three separate purported securities class action lawsuits filed between March 5, 2014 and May 5, 2014 ~~which~~ in the Court that

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

were ~~combined~~consolidated into the Consolidated Securities Action on June 3, 2014. The plaintiffs in the Consolidated Securities Action allege that the defendants made false and misleading statements ~~and/~~or failed to disclose material adverse facts about our business, operations, and prospects. They allege violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and seek to certify a class of all persons and entities that purchased or otherwise acquired Conn's common stock ~~and/~~or call options, or ~~sold/~~sold or wrote Conn's put options between April 3, 2013 and December 9, 2014. The complaint does not specify the amount of damages sought.

On June 30, 2015, the Court held a hearing on the defendants' motion to dismiss plaintiffs' complaint. At the hearing, the Court dismissed Brian Taylor, a former executive officer, and certain other aspects of the complaint. The Court ordered the plaintiffs to further amend their complaint in accordance with its ruling, and the plaintiffs filed their Fourth Consolidated Amended Complaint on July 21, 2015. The remaining defendants filed a motion to dismiss on August 28, 2015. The ~~briefing on the defendants'~~defendant's motion to dismiss was fully briefed and the Court held a hearing on defendants' motion ~~over the course of two days,~~ on March 25, 2016 and ~~29, 2016. On~~on May 6,5, 2016, the Court ~~granted in part and denied in part defendants' motion to dismiss the plaintiffs' complaint. Thereafter, the defendants filed~~issued a ~~motion requesting the Court's decision be certified for interlocutory appeal to the United States Fifth Circuit Court~~ruling that dismissed 78 of Appeals, which the Court denied on June 13, 2016. On June 24, 2016, the defendant’s filed their answer to the Consolidated Securities Action, denying liability and raising numerous affirmative defenses to the claims asserted against them.

91 alleged misstatements. The parties have ~~negotiated a~~submitted their respective briefs in support of, and in opposition to, class certification, and also engaged in discovery pursuant to the Court’s scheduling ~~order, which has not yet been entered by the Court, and discovery~~order. Trial is ~~proceeding.~~scheduled for July 2018.

~~The defendants~~We intend to vigorously defend against all of ~~these claims.~~the claims in the Consolidated Securities Action against us. 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.

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 executive officers in the Court, 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 Court, which has been consolidated with the Original Derivative Action.

The Court previously approved a stipulation among the parties to stay the action pending resolution of the motion to dismiss in the Consolidated Securities Action. The parties ~~are currently discussing next steps in~~have agreed to continue the ~~litigation process.~~stay.

Another derivative action was filed on January 27, 2015, captioned as Richard A. Dohn v. Wright, et al., Cause No. 2015-04405, filed in the 281^st Judicial District Court, Harris County, Texas. This action makes substantially similar allegations to the Original Derivative Action against the same defendants. On ~~July 28, 2016,~~March 15, 2017, the court entered an order extending the stay for an additional 90 days (until ~~October 26, 2016)~~June 13, 2017). On May 19, 2016, an alleged shareholder, purportedly on behalf of the Company, filed a lawsuit against us and certain of our current and former directors and executive officers in the 55^th Judicial District Court, Harris County, Texas, captioned as Robert J. Casey II, 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.

~~CONN'S, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Pursuant to the parties’ agreement, this action is currently stayed.

None of the plaintiffs in any of the 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. We~~claims, and we cannot reasonably estimate the possible loss or range of possible loss from these claims.

Regulatory Matters.We are continuing to cooperate with the SEC's investigation ~~which began on or around November 2014, which generally relates to~~of our underwriting policies and bad debt ~~provisions.~~provisions, which began in November 2014. The investigation is a non-public, fact-finding inquiry, and the SEC has stated that the investigation does not mean that any violations of law have occurred.

In addition, 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 ~~our financial position, results of operations or cash flows.~~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.

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Variable Interest Entities

~~The VIEs have issued asset-backed notes secured by the transferred~~In fiscal years 2018, 2017 and 2016, we securitized customer accounts receivables ~~and restricted cash held~~ 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 ~~receivable principal and interest payment cash flows will~~receivables go first to the servicer and the holders of ~~issued~~the asset-backed notes, and then to ~~us as~~ the ~~holder of the 2016-A Class C Notes and~~ residual ~~equities.~~equity holder. We retain the servicing of the securitized ~~portfolios~~portfolio and ~~are receiving~~receive a monthly fee of 4.75% (annualized) based on the outstanding balance of the securitized ~~receivables.~~receivables, and we currently hold all of the residual equity. In addition, we, rather than the VIEs, will retain ~~all~~certain credit insurance income together with certain recoveries related to credit insurance and repair service agreements 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 ~~and that are included in our consolidated balance sheet~~ (for legal purposes, the assets and liabilities of the VIEs will remain distinct from Conn's, Inc.):


(in thousands)	July 31, 2016			January 31, 2016			April 30, 2017			January 31, 2017
Assets:
Restricted cash	$	95,983		$	78,576		$	160,041		$	110,698
Due from Conn's, Inc.	4,226			3,405
Due from Conn's, Inc., net							12,697			7,368
Customer accounts receivable:
Customer accounts receivable	803,815			763,278			1,125,925			884,367
Restructured accounts	119,179			107,406			135,774			131,470
Allowance for uncollectible accounts	(131,719		)	(136,325		)	(183,273		)	(150,435		)
Allowances for no-interest option credit programs	(14,923		)	(12,955		)	(16,748		)	(15,912		)
Deferred fees and origination costs							(5,525		)	—
Total customer accounts receivable, net	776,352			721,404			1,056,153			849,490
Total assets	$	876,561		$	803,385		$	1,228,891		$	967,556
Liabilities:
Accrued interest	$	1,693		$	1,636
Deferred interest income	5,387			3,042
Accrued expenses							$	10,312		$	6,525
Other liabilities							13,042			6,691
Long-term debt:
2015-A Class A Notes	195,518			551,383
2015-A Class B Notes	165,900			165,900
2015 Class A Notes							—			12,166
2015 Class B Notes							113,281			165,900
2016-A Class A Notes	241,077			—			4,332			64,732
2016-A Class B Notes	70,510			—			70,510			70,510
2016-A Class C Notes							70,510			70,510
2016-B Class A Notes							148,767			256,513
2016-B Class B Notes							111,960			111,960
2017-A Class A notes							313,220			—
2017-A Class B notes							106,270			—
2017-A Class C notes							50,340			—
	673,005			717,283			989,190			752,291
Less unamortized discounts and debt issuance costs	(10,994		)	(17,768		)
Less: deferred debt issuance costs							(7,354		)	(6,710		)
Total long-term debt	662,011			699,515			981,836			745,581
Total liabilities	$	669,091		$	704,193		$	1,005,190		$	758,797

The assets of the VIEs serve as collateral for the obligations of the VIEs. The holders of the ~~Class A Notes and Class B Notes~~asset-backed notes have no recourse to assets outside of the respective VIEs.

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. Segment Reporting

~~Financial~~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 in the retail furniture and mattresses, home appliances, consumer electronics and home office products business. 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. 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 consolidated financial statements.

We evaluate a segment’s performance based upon operating income before taxes. Selling, general and administrative expenses include 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 ~~presented~~estimated using an annual rate of 2.5% times the average portfolio balance for each applicable period.

As of April 30, 2017, we operated retail stores in 13 states with no operations outside of the ~~following tables:~~

Three Months Ended July 31, 2016 Three Months Ended July 31, 2015
(in thousands) Retail Credit Total Retail Credit Total
Revenues:
Furniture and mattress $ 105,562
$ —
$ 105,562
$ 98,882
$ —
$ 98,882
Home appliance 101,359
—
101,359
97,260
—
97,260
Consumer electronic 65,735
—
65,735
69,682
—
69,682
Home office 21,701
—
21,701
22,940
—
22,940
Other 5,366
—
5,366
4,975
—
4,975
Product sales 299,723
—
299,723
293,739
—
293,739
Repair service agreement commissions 28,310
—
28,310
27,756
—
27,756
Service revenues 3,966
—
3,966
3,451
—
3,451
Total net sales 331,999
—
331,999
324,946
—
324,946
Finance charges and other revenues 437
65,721
66,158
659
70,445
71,104
Total revenues 332,436
65,721
398,157
325,605
70,445
396,050
Costs and expenses:

Cost of goods sold 208,869
—
208,869
202,461
—
202,461
Selling, general and administrative expenses ⁽¹⁾
84,838
35,008
119,846
76,683
28,149
104,832
Provision for bad debts 127
60,069
60,196
324
51,322
51,646
Charges and credits 2,895
—
2,895
1,013
—
1,013
Total costs and expense 296,729
95,077
391,806
280,481
79,471
359,952
Operating income (loss) 35,707
(29,356 ) 6,351
45,124
(9,026 ) 36,098
Interest expense —
24,138
24,138
—
10,055
10,055
Income (loss) before income taxes $ 35,707
$ (53,494 ) $ (17,787 ) $ 45,124
$ (19,081 ) $ 26,043

United States. No single customer accounts for more than 10% of our total revenues.

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial information by segment is presented in the following tables:


	Six Months Ended July 31, 2016								Six Months Ended July 31, 2015							Three Months Ended April 30, 2017								Three Months Ended April 30, 2016
(in thousands)	Retail		Credit			Total			Retail		Credit			Total		Retail		Credit			Total			Retail		Credit			Total
Revenues:
Furniture and mattress	$	210,868	$	—		$	210,868		$	188,384	$	—		$	188,384	$	94,443	$	—		$	94,443		$	105,306	$	—		$	105,306
Home appliance	189,263		—			189,263			181,362		—			181,362		80,122		—			80,122			87,904		—			87,904
Consumer electronic	131,600		—			131,600			141,112		—			141,112		55,753		—			55,753			65,865		—			65,865
Home office	44,174		—			44,174			44,925		—			44,925		16,788		—			16,788			22,473		—			22,473
Other	10,308		—			10,308			9,582		—			9,582		4,256		—			4,256			4,942		—			4,942
Product sales	586,213		—			586,213			565,365		—			565,365		251,362		—			251,362			286,490		—			286,490
Repair service agreement commissions	56,495		—			56,495			51,552		—			51,552		24,696		—			24,696			28,185		—			28,185
Service revenues	7,833		—			7,833			6,508		—			6,508		3,227		—			3,227			3,867		—			3,867
Total net sales	650,541		—			650,541			623,425		—			623,425		279,285		—			279,285			318,542		—			318,542
Finance charges and other revenues	931		135,798			136,729			808		136,893			137,701		80		76,461			76,541			494		70,077			70,571
Total revenues	651,472		135,798			787,270			624,233		136,893			761,126		279,365		76,461			355,826			319,036		70,077			389,113
Costs and expenses:
Cost of goods sold	413,335		—			413,335			389,594		—			389,594		171,950		—			171,950			204,466		—			204,466
Selling, general and administrative expenses ⁽¹⁾	164,821		68,272			233,093			144,910		55,597			200,507		73,947		32,590			106,537			79,983		33,264			113,247
Provision for bad debts	525		117,889			118,414			393		98,796			99,189		230		55,700			55,930			398		57,820			58,218
Charges and credits	3,421		—			3,421			1,632		—			1,632		1,227		—			1,227			526		—			526
Total costs and expense	582,102		186,161			768,263			536,529		154,393			690,922		247,354		88,290			335,644			285,373		91,084			376,457
Operating income (loss)	69,370		(50,363		)	19,007			87,704		(17,500		)	70,204		32,011		(11,829		)	20,182			33,663		(21,007		)	12,656
Interest expense	—		50,034			50,034			—		19,483			19,483		—		24,008			24,008			—		25,896			25,896
Loss on extinguishment of debt																—		349			349			—		—			—
Income (loss) before income taxes	$	69,370	$	(100,397	)	$	(31,027	)	$	87,704	$	(36,983	)	$	50,721	$	32,011	$	(36,186	)	$	(4,175	)	$	33,663	$	(46,903	)	$	(13,240	)

(1)

Selling, general and administrative expenses include 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 that benefit the credit operations by sourcing credit customers and collecting payments. The reimbursement received by the retail segment from the credit segment is estimated using an annual rate of 2.5% times the average portfolio balance for each applicable period. For the three months ended ~~July 31,~~April 30, 2017 and 2016, ~~and 2015,~~ the amount of corporate overhead allocated to each segment reflected in selling, general and administrative expense was ~~$6.5~~$6.4 million and ~~$3.4 million, respectively. For the six months ended July 31, 2016 and 2015, the amount of overhead allocated to each segment was $12.2 million and $6.9~~$5.7 million, respectively. For the three months ended ~~July 31,~~April 30, 2017 and 2016, ~~and 2015,~~ the amount of ~~reimbursements~~reimbursement made to the retail segment by the credit segment ~~were $9.6~~was $9.4 million and ~~$8.9 million, respectively. For the six months ended July 31, 2016 and 2015, the amount of reimbursements made to the retail segment by the credit segment were $19.4 million and $17.4~~$9.7 million, respectively.

~~CONN'S, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~


10.	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. ~~The direct or indirect subsidiaries~~As of ~~Conn's, Inc. that are not Guarantors are~~April 30, 2017 and January 31, 2017, the ~~VIE and minor subsidiaries. Prior to transferring the securitized customer receivables to the 2015 VIE in September 2015, the only~~ 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 ~~loans, advances~~dividends or ~~dividends, except as provided by applicable law.~~ distributions.

The following financial information presents the condensed consolidated balance sheet, statement of operations, and statement of cash flows for Conn's, Inc. (the issuer of the Senior Notes), the Guarantor Subsidiaries, and the ~~Non-guarantor~~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 consolidated financial information includes financial data for:

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

(ii) Guarantor subsidiaries,

(iii) Non-Guarantor Subsidiaries, and

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(iv) the parent company and the subsidiaries on a consolidated basis at April 30, 2017 and January 31, 2017 (after the elimination of intercompany balances and transactions). Condensed consolidated net (loss) income is the same as condensed consolidated comprehensive (loss) income for the periods presented.

Condensed Consolidated Balance Sheet as of ~~July 31, 2016.~~April 30, 2017.


(in thousands)	Conn's, Inc.		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated		Conn's, Inc.		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	15,535	$	—	$	—		$	15,535	$	—	$	112,819	$	—	$	—		$	112,819
Restricted cash	—		—		70,981		—			70,981		—		—		160,041		—			160,041
Customer accounts receivable, net of allowance	—		234,333		499,385		—			733,718		—		70,367		581,679		—			652,046
Other accounts receivable	—		82,924		—		—			82,924		—		61,197		—		—			61,197
Inventories	—		191,642		—		—			191,642		—		170,999		—		—			170,999
Other current assets	19,700		16,482		4,226		(4,226		)	36,182		—		28,504		12,697		(20,245		)	20,956
Total current assets	19,700		540,916		574,592		(4,226		)	1,130,982		—		443,886		754,417		(20,245		)	1,178,058
Investment in and advances to subsidiaries	648,840		203,244		—		(852,084		)	—		722,171		262,557		—		(984,728		)	—
Long-term portion of customer accounts receivable, net of allowance	—		309,903		276,967		—			586,870		—		118,855		474,474		—			593,329
Long-term restricted cash	—		—		25,002		—			25,002
Property and equipment, net	—		174,815		—		—			174,815		—		158,928		—		—			158,928
Deferred income taxes	70,919		—		—		—			70,919		71,328		—		—		—			71,328
Other assets	—		8,590		—		—			8,590		—		8,963		—		—			8,963
Total assets	$	739,459	$	1,237,468	$	876,561	$	(856,310	)	$	1,997,178	$	793,499	$	993,189	$	1,228,891	$	(1,004,973	)	$	2,010,606
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of capital lease obligations	$	—	$	761	$	—	$	—		$	761	$	—	$	1,190	$	—	$	—		$	1,190
Accounts payable	—		117,628		—		—			117,628		—		104,915		—		—			104,915
Accrued expenses	686		44,124		1,693		—			46,503		4,800		39,568		10,312		(7,548		)	47,132
Other current liabilities	—		17,963		3,430		—			21,393		—		15,248		6,142		—			21,390
Total current liabilities	686		180,476		5,123		—			186,285		4,800		160,921		16,454		(7,548		)	174,627
Deferred rent	—		88,452		—		—			88,452		—		86,727		—		—			86,727
Long-term debt and capital lease obligations	219,133		300,804		662,011		—			1,181,948		220,097		4,519		981,836		—			1,206,452
Other long-term liabilities	—		18,896		1,957		—			20,853		—		18,852		6,900		—			25,752
Total liabilities	219,819		588,628		669,091		—			1,477,538		224,897		271,019		1,005,190		(7,548		)	1,493,558
Total stockholders' equity	519,640		648,840		207,470		(856,310		)	519,640		568,602		722,170		223,701		(997,425		)	517,048
Total liabilities and stockholders' equity	$	739,459	$	1,237,468	$	876,561	$	(856,310	)	$	1,997,178	$	793,499	$	993,189	$	1,228,891	$	(1,004,973	)	$	2,010,606

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

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheet as of January 31, ~~2016.~~2017.


(in thousands)	Conn's, Inc.		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated		Conn's, Inc.		Guarantor Subsidiaries		Non-guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	12,254	$	—	$	—		$	12,254	$	—	$	23,566	$	—	$	—		$	23,566
Restricted cash	—		—		64,151		—			64,151		—		—		110,698		—			110,698
Customer accounts receivable, net of allowance	—		353,781		390,150		—			743,931		—		173,054		529,108		—			702,162
Other accounts receivable	—		95,404		—		—			95,404		—		69,286		—		—			69,286
Inventories	—		201,969		—		—			201,969		—		164,856		—		—			164,856
Other current assets	10,774		20,092		3,405		(3,405		)	30,866		—		21,505		7,368		(11,768		)	17,105
Total current assets	10,774		683,500		457,706		(3,405		)	1,148,575		—		452,267		647,174		(11,768		)	1,087,673
Investment in and advances to subsidiaries	676,492		95,787		—		(772,279		)	—		678,149		220,107		—		(898,256		)	—
Long-term portion of customer accounts receivable, net of allowance	—		300,391		331,254		—			631,645		—		295,522		320,382		—			615,904
Long-term restricted cash	—		—		14,425		—			14,425
Property and equipment, net	—		151,483		—		—			151,483		—		159,202		—		—			159,202
Deferred income taxes	70,219		—		—		—			70,219		71,442		—		—		—			71,442
Other assets	—		8,953		—		—			8,953		—		6,913		—		—			6,913
Total assets	$	757,485	$	1,240,114	$	803,385	$	(775,684	)	$	2,025,300	$	749,591	$	1,134,011	$	967,556	$	(910,024	)	$	1,941,134
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of capital lease obligations	$	—	$	799	$	—	$	—		$	799	$	—	$	849	$	—	$	—		$	849
Accounts payable	—		86,797		—		—			86,797		—		101,612		—		—			101,612
Accrued expenses	736		37,002		1,636		—			39,374		686		40,287		6,525		(4,399		)	43,099
Other current liabilities	—		17,510		1,645		—			19,155		—		25,230		3,961		(7,370		)	21,821
Total current liabilities	736		142,108		3,281		—			146,125		686		167,978		10,486		(11,769		)	167,381
Deferred rent	—		74,559		—		—			74,559		—		87,957		—		—			87,957
Long-term debt and capital lease obligations	218,468		330,896		699,515		—			1,248,879		219,768		179,044		745,581		—			1,144,393
Other long-term liabilities	—		16,059		1,397		—			17,456		—		20,883		2,730		—			23,613
Total liabilities	219,204		563,622		704,193		—			1,487,019		220,454		455,862		758,797		(11,769		)	1,423,344
Total stockholders' equity	538,281		676,492		99,192		(775,684		)	538,281		529,137		678,149		208,759		(898,255		)	517,790
Total liabilities and stockholders' equity	$	757,485	$	1,240,114	$	803,385	$	(775,684	)	$	2,025,300	$	749,591	$	1,134,011	$	967,556	$	(910,024	)	$	1,941,134

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

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Statement of Operations for the three months ended ~~July 31, 2016.~~April 30, 2017.


(in thousands)	Conn's, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated			Conn's, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	331,999		$	—		$	—		$	331,999		$	—		$	279,285		$	—		$	—		$	279,285
Finance charges and other revenues	—			33,062			33,096			—			66,158			—			36,798			39,743			—			76,541
Servicing fee revenue	—			13,176			—			(13,176		)	—			—			15,184			—			(15,184		)	—
Total revenues	—			378,237			33,096			(13,176		)	398,157			—			331,267			39,743			(15,184		)	355,826
Costs and expenses:
Cost of goods sold	—			208,869			—			—			208,869			—			171,950			—			—			171,950
Selling, general and administrative expenses	—			119,846			13,176			(13,176		)	119,846			—			106,233			15,488			(15,184		)	106,537
Provision for bad debts	—			20,830			39,366			—			60,196			—			(5,433		)	61,363			—			55,930
Charges and credits	—			2,895			—			—			2,895			—			1,227			—			—			1,227
Total costs and expenses	—			352,440			52,542			(13,176		)	391,806			—			273,977			76,851			(15,184		)	335,644
Operating income	—			25,797			(19,446		)	—			6,351			—			57,290			(37,108		)	—			20,182
Loss (income) from consolidated subsidiaries	9,066			23,293			—			(32,359		)	—			(268		)	33,921			—			(33,653		)	—
Interest expense	4,397			3,352			16,389			—			24,138			4,443			1,778			17,787			—			24,008
Loss on extinguishment of debt																—			349			—			—			349
Income (loss) before income taxes	(13,463		)	(848		)	(35,835		)	32,359			(17,787		)	(4,175		)	21,242			(54,895		)	33,653			(4,175		)
Provision (benefit) for income taxes	(1,539		)	8,218			(12,542		)	—			(5,863		)	(1,595		)	8,116			(20,974		)	12,858			(1,595		)
Net income (loss)	$	(11,924	)	$	(9,066	)	$	(23,293	)	$	32,359		$	(11,924	)	$	(2,580	)	$	13,126		$	(33,921	)	$	20,795		$	(2,580	)

Condensed Consolidated Statement of Operations for the ~~six~~three months ended ~~July 31,~~April 30, 2016.


(in thousands)	Conn's, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated			Conn's, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	650,541		$	—		$	—		$	650,541		$	—		$	318,542		$	—		$	—		$	318,542
Finance charges and other revenues	—			63,234			73,495			—			136,729			—			30,172			40,399			—			70,571
Servicing fee revenue	—			30,311			—			(30,311		)	—			—			17,135			—			(17,135		)	—
Total revenues	—			744,086			73,495			(30,311		)	787,270			—			365,849			40,399			(17,135		)	389,113
Costs and expenses:
Cost of goods sold	—			413,335			—			—			413,335			—			204,466			—			—			204,466
Selling, general and administrative expenses	—			233,093			30,311			(30,311		)	233,093			—			113,247			17,135			(17,135		)	113,247
Provision for bad debts	—			56,412			62,002			—			118,414			—			35,582			22,636			—			58,218
Charges and credits	—			3,421			—			—			3,421			—			526			—			—			526
Total costs and expenses	—			706,261			92,313			(30,311		)	768,263			—			353,821			39,771			(17,135		)	376,457
Operating income	—			37,825			(18,818		)	—			19,007			—			12,028			628			—			12,656
Loss (income) from consolidated subsidiaries	15,925			34,703			—			(50,628		)	—			8,794			12,926			—			(21,720		)	—
Interest expense	8,843			6,620			34,571			—			50,034			4,446			3,268			18,182			—			25,896
Income (loss) before income taxes	(24,768		)	(3,498		)	(53,389		)	50,628			(31,027		)	(13,240		)	(4,166		)	(17,554		)	21,720			(13,240		)
Provision (benefit) for income taxes	(3,095		)	12,427			(18,686		)	—			(9,354		)	(3,491		)	(1,099		)	(4,628		)	5,727			(3,491		)
Net income (loss)	$	(21,673	)	$	(15,925	)	$	(34,703	)	$	50,628		$	(21,673	)	$	(9,749	)	$	(3,067	)	$	(12,926	)	$	15,993		$	(9,749	)

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Statement of Cash Flows for the ~~six~~three months ended ~~July 31,~~April 30, 2017.



(in thousands)	Conn's, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(256	)	$	(192,236	)	$	283,256		$	—		$	90,764
Cash flows from investing activities:
Purchase of customer accounts receivables	—			—			(466,056		)	466,056			—
Sale of customer accounts receivables	—			466,056			—			(466,056		)	—
Purchase of property and equipment	—			(4,286		)	—			—			(4,286		)
Proceeds from sales of property	—			—			—			—			—
Net cash provided by (used in) investing activities	—			461,770			(466,056		)	—			(4,286		)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	—			—			469,814			—			469,814
Payments on asset-backed notes	—			—			(232,931		)	—			(232,931		)
Changes in restricted cash balances	—			—			(49,342		)	—			(49,342		)
Borrowings from revolving credit facility	—			265,935			—			—			265,935
Payments on revolving credit facility	—			(443,435		)	—			—			(443,435		)
Payment of debt issuance costs and amendment fees	—			(2,864		)	(4,741		)	—			(7,605		)
Proceeds from stock issued under employee benefit plans	256			—			—			—			256
Other	—			83			—			—			83
Net cash provided by (used in) financing activities	256			(180,281		)	182,800			—			2,775
Net change in cash and cash equivalents	—			89,253			—			—			89,253
Cash and cash equivalents, beginning of period	—			23,566			—			—			23,566
Cash and cash equivalents, end of period	$	—		$	112,819		$	—		$	—		$	112,819

CONN'S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Statement of Cash Flows for the three months ended April 30, 2016.


(in thousands)	Conn's, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated			Conn's, Inc.			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(29,362	)	$	(383,378	)	$	544,638		$	—		$	131,898		$	(9,554	)	$	(201,353	)	$	319,561		$	—		$	108,654
Cash flows from investing activities:
Purchase of customer accounts receivables	—			—			(478,080		)	478,080			—			—			—			(478,080		)	478,080			—
Sale of customer accounts receivables	—			478,080			—			(478,080		)	—			—			478,080			—			(478,080		)	—
Purchase of property and equipment	—			(32,020		)	—			—			(32,020		)	—			(16,996		)	—			—			(16,996		)
Proceeds from sales of property	—			686			—			—			686			—			696			—			—			696
Net change in intercompany	28,743									(28,743		)	—			9,169			—			—			(9,169		)	—
Net cash provided by (used in) investing activities	28,743			446,746			(478,080		)	(28,743		)	(31,334		)	9,169			461,780			(478,080		)	(9,169		)	(16,300		)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	—			—			493,540			—			493,540			—			—			493,540			—			493,540
Payments on asset-backed notes	—			—			(537,819		)	—			(537,819		)	—			—			(289,639		)	—			(289,639		)
Changes in restricted cash balances	—			—			(17,406		)	—			(17,406		)	—			—			(40,498		)	—			(40,498		)
Borrowings from revolving credit facility	—			405,378			—			—			405,378			—			170,393			—			—			170,393
Payments on revolving credit facility	—			(435,085		)	—			—			(435,085		)	—			(421,735		)	—			—			(421,735		)
Payment of debt issuance costs and amendment fees	—			(1,216		)	(4,873		)	—			(6,089		)	—			(405		)	(4,884		)	—			(5,289		)
Proceeds from stock issued under employee benefit plans	618			—			—			—			618			385			—			—			—			385
Net change in intercompany	—			(28,743		)				28,743			—			—			(9,169		)	—			9,169			—
Other	1			(421		)	—			—			(420		)	—			(223		)	—			—			(223		)
Net cash provided by (used in) financing activities	619			(60,087		)	(66,558		)	28,743			(97,283		)	385			(261,139		)	158,519			9,169			(93,066		)
Net change in cash and cash equivalents	—			3,281			—			—			3,281			—			(712		)	—			—			(712		)
Cash and cash equivalents, beginning of period	—			12,254			—			—			12,254			—			12,254			—			—			12,254
Cash and cash equivalents, end of period	$	—		$	15,535		$	—		$	—		$	15,535		$	—		$	11,542		$	—		$	—		$	11,542


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 ~~including the sale of any remaining residual equity~~ 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 ~~its~~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 ability to continue the repurchase program;~~ 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, ~~2016~~2017 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.~~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 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 ~~increased~~decreased to ~~$398.2~~$355.8 million for the three months ended ~~July 31, 2016,~~April 30, 2017 compared to ~~$396.1~~$389.1 million for the three months ended ~~July 31, 2015.~~April 30, 2016. Retail revenues decreased to $279.4 million for the three months ended April 30, 2017 from $319.0 million for the three months ended April 20, 2016. The ~~increase~~decrease in retail revenue was primarily driven ~~by new store growth, partially offset~~ by a decrease in same store sales of ~~5.1%. Excluding the impact of our April 2015 decision to exit video game products, digital cameras, and certain tablets, same~~15.2%, partially offset by new store ~~sales for the quarter decreased 4.6%. Slower sales growth was also~~growth. Sales were negatively impacted by underwriting changes made during the 2017 fiscal year, the delay in receipt of tax refunds by our customers, one less business day in 2017 versus the ~~fourth quarter of fiscal~~leap year in 2016, and ingeneral consumer softness. Credit revenue increased to $76.5 million for the ~~first quarter of fiscal 2017.~~three months ended April 30, 2017 from $70.1 million for the three months ended April 30, 2016. The ~~decrease~~increase in credit revenue ~~was due to a~~resulted from the origination of our higher-yielding direct loan product, which resulted in an increase in the portfolio yield rate ~~of 14.0%~~to 18.2% from 15.8%, 210 basis points lower than a year ago, which included the negative impact of adjustments of $8.2 million as a result of changes in estimates for amounts of allowances for no-interest option credit programs and deferred interest, partially offset by ~~growth~~a 3.1% decline in the average balance of the customer receivable ~~portfolio of 8.7%. Excluding the impact of the changes in estimates, yield was up 10 basis points to the prior year period.~~portfolio.

Retail gross margin for the three months ended ~~July 31, 2016~~April 30, 2017 was ~~37.1%~~38.4%, ~~a decrease~~an increase of 60260 basis points ~~versus~~from the ~~37.7%~~35.8% reported in the ~~comparable quarter last year.~~three months ended April 30, 2016. The ~~decrease~~increase in retail gross margin was ~~driven by the impact softer sales have on our fixed warehouse and delivery costs, partially offset by the~~primarily due to improved product margins across all product categories, favorable ~~shift in~~ product mix ~~towards the furniture~~ and ~~mattress category.~~lower warehouse, delivery and transportation expenses through increased efficiencies and further optimization.

Selling, general and administrative expenses ("SG&A") for the three months ended ~~July 31, 2016~~April 30, 2017 was ~~$119.8~~$106.5 million, ~~an increase~~a decrease of ~~$15.0~~$6.7 million, or ~~14.3%~~5.9%, over the ~~same prior year period.~~three months ended April 30, 2016. The SG&A ~~increase~~decrease in the retail segment was primarily due to ~~higher~~a decrease in compensation, advertising, and delivery and transportation costs, partially offset by an increase in new store occupancy ~~advertising~~costs and ~~compensation. The~~an increase in the corporate overhead allocation. The SG&A ~~for~~decrease in the credit segment was ~~driven~~primarily

due to a decrease in compensation costs and in the charge to the credit segment to reimburse the retail segment for expenses, partially offset by an increase in the ~~additional investments~~corporate overhead allocation. The increase in ~~credit personnel~~the corporate overhead allocation made to ~~improve long-term credit performance. Total SG&A~~each of the segments was ~~also impacted~~driven by investments we are making in ITinformation technology and other personnel to support long-term performance improvement initiatives.

Provision for bad debts for the ~~three months ended July 31, 2016~~first quarter of fiscal year 2018 was ~~$60.2~~$55.9 million, ~~an increase~~a decrease of ~~$8.6~~$2.3 million from the ~~same prior year~~comparable prior-year period. The ~~increase~~decrease was ~~impacted by~~primarily the ~~following:~~

~~During~~result of a decline in the ~~three months ended July 31, 2016, provision~~allowance for bad debts ~~increased~~driven by ~~$5.0 million as~~ a result of changes in estimates as it relates to sales tax recovery on previously charged-off accounts (excluding the impact of the changes in estimates, provision for bad debts as a percent of average portfolio balance was down 20 basis points to the prior year period);

~~An 8.7% increase~~decline in the ~~average receivable portfolio balance resulting from new store openings over the past 12 months; and~~

~~The~~ balance of customer receivables ~~accounted for as troubled debt restructurings increased~~in the first quarter of fiscal year 2018 compared to ~~$128.6 million, or 8.3% of~~an increase in the ~~total portfolio balance, driving $1.9 million of additional provision~~allowance for bad ~~debts.~~debts driven by an increase in the balance of customer receivables in the first quarter of fiscal year 2017, partially offset by higher net-charge offs in the first quarter of fiscal year 2018 compared to the first quarter of fiscal year 2017.

Interest expense ~~increased~~decreased to ~~$24.1~~$24.0 million for the three months ended ~~July 31, 2016,~~April 30, 2017, compared to ~~$10.1~~$25.9 million for the three months ended ~~July 31, 2015,~~April 30, 2016, primarily reflecting ~~the increase in~~a lower average outstanding ~~debt and an increase in our effective interest rate due to the asset-backed notes issued by our consolidated VIEs.~~balance of debt.

Net loss for the three months ended ~~July 31, 2016~~April 30, 2017 was ~~$11.9~~$2.6 million or ~~$0.39 loss~~$0.08 per ~~diluted~~ share, which included ~~the pre-tax impact of changes in estimates of $13.2 million, or $0.29 per diluted share, and net~~certain pre-tax charges of ~~$2.9~~$1.6 million or ~~$0.06~~$0.03 per ~~diluted~~ share, primarily ~~from impairments from disposals of two real estate assets, legal and professional fees~~ related to exit costs associated with reducing the square footage of a distribution center and the loss on extinguishment of debt related to the amendment of our ~~securities-related litigation, charges for severance and transition costs due to changes in the executive management team.~~revolving loan facility. This compares to net ~~income~~loss for the three months ended ~~July 31, 2015~~April 30, 2016 of ~~$16.5~~$9.7 million, or ~~$0.45~~$0.32 earnings per ~~diluted~~ share, which included net pre-tax charges of ~~$1.0~~$0.5 million, or ~~$0.02~~$0.01 per ~~diluted~~ share, primarily related to legal and professional fees related to the exploration of strategic alternatives and securities-related ~~litigation.~~litigation, and executive management transition costs.

Company Initiatives

~~We are positioning ourselves~~In the first quarter of fiscal year 2018, we maintainedour focus on enhancing our credit platform to ~~execute~~improve near-term results and support the pursuit of the Company’s long-term growth ~~strategies~~objectives. While impacted by tighter underwriting and other factors, our retail stores performed well, demonstrating our differentiated business model and the significant value we provide our customers. We believe our credit operations will benefit from the structural changes we are making to increase yield, reduce losses and improve overall credit performance. We delivered the following financial and operational results in the first quarter of fiscal year 2018:

We successfully launched our direct loan program in all six of our Louisiana locations, which contributed to an increase in the weighted average origination loan yield to 27.3% in the first quarter of fiscal year 2018 from 21.4% in the second quarter of fiscal year 2017, an increase of 590 basis points;

Retail gross margin for the first quarter of fiscal year 2018 was 38.4%, an increase of 260 basis points over the first quarter of fiscal year 2017 of 35.8% driven primarily by improved product margins and mix;

We delivered an all-in cost of funds on the April 2017 Class A and B notes only, including transaction costs, of approximately 5.4% which was a 150- basis point improvement over the 6.9% all-in cost of funds, including transaction costs, for the Class A and B notes issued in the October 2016 securitization transaction;

We concurrently issued the Class C notes in the April 2017 transaction to obtain an advance rate of approximately 84%, the highest advance rate achieved in a securitization transaction since we re-entered the securitization market in 2012; and

Began to introduce a lease-to-own product through Progressive Leasing to our customers who do not qualify for our proprietary credit programs.

We believe we are positioned to prudently execute our long-term growth strategy and reduce financial and operational risk while enhancing shareholder value. ~~As a result, we expect~~We have identified the following strategic priorities for fiscal ~~2017~~year 2018:

Implement our direct loan program in certain additional states to ~~be a transitional year as we work on improving the performance of~~further enhance our ~~credit operation while moderating our retail growth plan. Our plans include:~~yield;

~~Completing implementation of an updated underwriting strategy~~Continue to refine and ~~continuing to review and modify~~enhance our underwriting ~~analysis~~model and ~~standards to improve the overall quality of our credit portfolio by quickly adapting to changes in consumer behavior, the regulatory environment, and portfolio performance;~~

Targeting the implementation of our new direct consumer loan program, at a higher interest rate of up to 30%, across all Texas locations by the end of this fiscal year, followed by the implementation of the program in other states with similar regulatory frameworks;

~~In states where regulations do not generally limit the interest rate charged, we recently increased our rates to 29.99%.~~

~~During the first quarter of fiscal 2017, we made changes to our no-interest programs to improve returns~~focus on capital that should increase the yield on our portfolio over the next few quarters, including reducing the availability of short-term no-interest programs to higher risk customers and moving all long-term no-interest programs to a third-party;

~~Focusing on further improvement of execution within~~ our collection operations to reduce delinquency rates and future ~~charge-offs;~~charge-offs to improve future credit segment profitability;

~~Focusing on~~Lower our cost of funds;

Optimize our mix of quality, branded products and reduce warehouse, delivery and transportation costs to ~~improve operating performance;~~increase our retail gross margin;

~~Reducing warehouse and delivery costs;~~

~~Optimizing~~Maintain focus on cost control of our ~~product offering;~~SG&A expenses; and

~~During the six months ended July 31, 2016, we opened nine~~Open three new stores, two of which were successfully opened in ~~Alabama (1), Louisiana (2), Mississippi (1), Nevada (1), North Carolina (1), South Carolina (1)~~the first quarter of fiscal year 2018 and ~~Tennessee (2), and we plan to open one additional new store for a total~~all of ~~10 new stores for fiscal 2017, compared to 15 stores in fiscal 2016.~~which have been successfully opened as of the date of this report.

Outlook

The broad appeal of the Conn's store to our geographically diverse core demographic, the historical unit economics and current retail real estate market conditions provide ~~substantial opportunity to expand towards a national retail platform.~~us ample room for continued expansion. There are many markets in the United States with ~~similar~~ demographic characteristics similar to those in our ~~current successful store base.~~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, sourcing, distribution and credit operations. As we penetrate new ~~and existing~~ markets, we expect to increase our purchase volumes, achieve distribution efficiencies and strengthen our relationships with our key vendors. 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 consolidated ~~and segment~~ basis:


Consolidated:	Three Months Ended July 31,								Six Months Ended July 31,								Three Months Ended April 30,
(in thousands)	2016			2015		Change			2016			2015		Change			2017			2016			Change
Revenues:
Total net sales	$	331,999		$	324,946	$	7,053		$	650,541		$	623,425	$	27,116		$	279,285		$	318,542		$	(39,257	)
Finance charges and other revenues	66,158			71,104		(4,946		)	136,729			137,701		(972		)	76,541			70,571			5,970
Total revenues	398,157			396,050		2,107			787,270			761,126		26,144			355,826			389,113			(33,287		)
Costs and expenses:
Cost of goods sold	208,869			202,461		6,408			413,335			389,594		23,741			171,950			204,466			(32,516		)
Selling, general and administrative expenses	119,846			104,832		15,014			233,093			200,507		32,586			106,537			113,247			(6,710		)
Provision for bad debts	60,196			51,646		8,550			118,414			99,189		19,225			55,930			58,218			(2,288		)
Charges and credits	2,895			1,013		1,882			3,421			1,632		1,789			1,227			526			701
Total costs and expenses	391,806			359,952		31,854			768,263			690,922		77,341			335,644			376,457			(40,813		)
Operating income	6,351			36,098		(29,747		)	19,007			70,204		(51,197		)	20,182			12,656			7,526
Interest expense	24,138			10,055		14,083			50,034			19,483		30,551			24,008			25,896			(1,888		)
Income (loss) before income taxes	(17,787		)	26,043		(43,830		)	(31,027		)	50,721		(81,748		)
Provision (benefit) for income taxes	(5,863		)	9,505		(15,368		)	(9,354		)	18,506		(27,860		)
Net income (loss)	$	(11,924	)	$	16,538	$	(28,462	)	$	(21,673	)	$	32,215	$	(53,888	)
Loss on extinguishment of debt																	349			—			349
Loss before income taxes																	(4,175		)	(13,240		)	9,065
Benefit for income taxes																	(1,595		)	(3,491		)	1,896
Net loss																	$	(2,580	)	$	(9,749	)	$	7,169

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 consolidated financial statements.

We evaluate a segment’s performance based upon operating income before taxes. Selling, general and administrative expenses include 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 estimated using an annual rate of 2.5% multiplied by the average portfolio balance for each applicable period.

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


Retail Segment:	Three Months Ended July 31,							Six Months Ended July 31,								Three Months Ended April 30,
(in thousands)	2016		2015		Change			2016		2015			Change			2017		2016		Change
Revenues:
Product sales	$	299,723	$	293,739	$	5,984		$	586,213	$	565,365		$	20,848		$	251,362	$	286,490	$	(35,128	)
Repair service agreement commissions	28,310		27,756		554			56,495		51,552			4,943			24,696		28,185		(3,489		)
Service revenues	3,966		3,451		515			7,833		6,508			1,325			3,227		3,867		(640		)
Total net sales	331,999		324,946		7,053			650,541		623,425			27,116			279,285		318,542		(39,257		)
Other revenues	437		659		(222		)	931		808			123			80		494		(414		)
Total revenues	332,436		325,605		6,831			651,472		624,233			27,239			279,365		319,036		(39,671		)
Costs and expenses:
Cost of goods sold	208,869		202,461		6,408			413,335		389,594			23,741			171,950		204,466		(32,516		)
Selling, general and administrative expenses ⁽¹⁾	84,838		76,683		8,155			164,821		144,910			19,911			73,947		79,983		(6,036		)
Provision for bad debts	127		324		(197		)	525		393			132			230		398		(168		)
Charges and credits	2,895		1,013		1,882			3,421		1,632			1,789			1,227		526		701
Total costs and expenses	296,729		280,481		16,248			582,102		536,529			45,573			247,354		285,373		(38,019		)
Operating income	$	35,707	$	45,124	$	(9,417	)	$	69,370	$	87,704		$	(18,334	)	$	32,011	$	33,663	$	(1,652	)
Number of stores:
Beginning of period	108		91					103		90						113		103
Open	4		4					9		7						2		5
Closed	—		—					—		(2		)				—		—
End of period	112		95					112		95						115		108


Credit Segment:	Three Months Ended July 31,									Six Months Ended July 31,									Three Months Ended April 30,
(in thousands)	2016			2015			Change			2016			2015			Change			2017			2016			Change
Revenues -
Finance charges and other revenues	$	65,721		$	70,445		$	(4,724	)	$	135,798		$	136,893		$	(1,095	)	$	76,461		$	70,077		$	6,384
Costs and expenses:
Selling, general and administrative expenses ⁽¹⁾	35,008			28,149			6,859			68,272			55,597			12,675			32,590			33,264			(674		)
Provision for bad debts	60,069			51,322			8,747			117,889			98,796			19,093			55,700			57,820			(2,120		)
Total cost and expenses	95,077			79,471			15,606			186,161			154,393			31,768			88,290			91,084			(2,794		)
Operating loss	(29,356		)	(9,026		)	(20,330		)	(50,363		)	(17,500		)	(32,863		)	(11,829		)	(21,007		)	9,178
Interest expense	24,138			10,055			14,083			50,034			19,483			30,551			24,008			25,896			(1,888		)
Loss on extinguishment of debt	—			—			—			—			—			—			349			—			349
Loss before income taxes	$	(53,494	)	$	(19,081	)	$	(34,413	)	$	(100,397	)	$	(36,983	)	$	(63,414	)	$	(36,186	)	$	(46,903	)	$	10,717

(1)

Selling, general and administrative expenses include 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 that benefit the credit operations by sourcing credit customers and collecting payments. The reimbursement received by the retail segment from the credit segment is estimated using an annual rate of 2.5% times the average portfolio balance for each applicable period. For the three months ended ~~July 31,~~April 30, 2017 and 2016, ~~and 2015,~~ the amount of corporate overhead allocated to each segment was ~~$6.5~~$6.4 million and ~~$3.4 million, respectively. For the six months ended July 31, 2016 and 2015, the amount of overhead allocated to each segment was $12.2 million and $6.9~~$5.7 million, respectively. For the three months ended ~~July 31,~~April 30, 2017 and 2016, ~~and 2015,~~ the amount of reimbursements made to the retail segment by the credit segment were ~~$9.6~~$9.4 million and ~~$8.9 million, respectively. For the six months ended July 31, 2016 and 2015, the amount of reimbursements made to the retail segment by the credit segment were $19.4 million and $17.4~~$9.7 million, respectively.

Three months ended ~~July 31, 2016~~April 30, 2017 compared to three months ended ~~July 31, 2015~~April 30, 2016

Revenues

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


	Three Months Ended July 31,											%		Same store		Three Months Ended April 30,											%		Same store
(dollars in thousands)	2016		% of Total		2015		% of Total		Change			Change		% change		2017		% of Total		2016		% of Total		Change			Change		% change
Furniture and mattress	$	105,562	31.8	%	$	98,882	30.4	%	$	6,680		6.8	%	(3.5	)%	$	94,443	33.8	%	$	105,306	33.0	%	$	(10,863	)	(10.3	)%	(14.0	)%
Home appliance	101,359		30.5		97,260		29.9		4,099			4.2		(2.3	)	80,122		28.7		87,904		27.6		(7,782		)	(8.9	)	(11.3	)
Consumer electronic	65,735		19.8		69,682		21.5		(3,947		)	(5.7	)	(11.6	)	55,753		20.0		65,865		20.7		(10,112		)	(15.4	)	(17.6	)
Home office	21,701		6.6		22,940		7.1		(1,239		)	(5.4	)	(9.6	)	16,788		6.0		22,473		7.1		(5,685		)	(25.3	)	(27.0	)
Other	5,366		1.6		4,975		1.5		391			7.9		(1.8	)	4,256		1.5		4,942		1.6		(686		)	(13.9	)	(19.6	)
Product sales	299,723		90.3		293,739		90.4		5,984			2.0		(5.5	)	251,362		90.0		286,490		90.0		(35,128		)	(12.3	)	(15.1	)
Repair service agreement commissions	28,310		8.5		27,756		8.5		554			2.0		(2.4	)	24,696		8.8		28,185		8.8		(3,489		)	(12.4	)	(15.8	)
Service revenues	3,966		1.2		3,451		1.1		515			14.9				3,227		1.2		3,867		1.2		(640		)	(16.6	)
Total net sales	$	331,999	100.0	%	$	324,946	100.0	%	$	7,053		2.2	%	(5.1	)%	$	279,285	100.0	%	$	318,542	100.0	%	$	(39,257	)	(12.3	)%	(15.2	)%

~~Excluding the impact of our April 2015 decision to exit video game products, digital cameras, and certain tablets,~~The decrease in same store sales ~~for the quarter decreased 4.6%. Slower sales growth~~ was impacted by underwriting changes made during fiscal year 2017, the delay in the ~~fourth quarter~~payment of ~~fiscal~~tax refunds, one less business day in 2017 versus the leap year in 2016, and ~~in the first quarter of fiscal 2017.~~general consumer softness. The following provides a summary of the performance of our product categories during the first quarter of fiscal year 2018 compared to the ~~prior~~first quarter of fiscal year ~~period:~~2017:

Furniture unit volume ~~increased 4.8%, and average selling price increased 4.5%;~~

~~Mattress unit volume increased 4.3%~~decreased 24.1%, partially offset by a ~~3.2% decrease~~11.8% increase in average selling price;

Mattress unit volume decreased 21.6%, partially offset by a 15.0% increase in average selling price;

Home appliance unit volume ~~increased 5.2% with~~decreased 9.7% and average selling price ~~flat. Total sales for refrigeration increased 7.1%, laundry increased 3.9%, and cooking was flat;~~

decreased 1.8%;

Consumer electronic unit volume decreased ~~10.1%, partially offset by a 5.1% increase in~~16.0% and average ~~selling price. Television~~ sales price decreased ~~4.0% as unit volume decreased 11.6%, partially offset by an 8.5% increase in average selling price. Excluding the impact from exiting video game products~~2.0%; and ~~digital cameras, consumer electronics same store sales decreased 10.4%;~~

Home office unit volume decreased ~~9.7%~~28.7%, partially offset by a ~~5.4%~~2.5% increase in average selling price. ~~Excluding the impact from exiting certain tablets, home office same store sales decreased 7.6%; and~~

~~The increase in repair service agreement commissions was driven by increased retail sales partially offset by lower retrospective commissions.~~

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


	Three Months Ended July 31,							Three Months Ended April 30,
(in thousands)	2016		2015		Change			2017		2016		Change
Interest income and fees	$	54,502	$	57,383	$	(2,881	)	$	67,131	$	60,621	$	6,510
Insurance commissions	11,219		13,062		(1,843		)	9,330		9,457		(127		)
Other revenues	437		659		(222		)	80		493		(413		)
Finance charges and other revenues	$	66,158	$	71,104	$	(4,946	)	$	76,541	$	70,571	$	5,970

The ~~decrease~~increase in interest income and fees was due to a yield rate of ~~14.0%, 210~~18.2% during the first quarter of fiscal year 2018, 240 basis points ~~lower~~higher than the ~~prior~~first quarter of fiscal year ~~period, which included the negative impact of adjustments of $8.2 million as a result of changes in estimates of amounts for allowances for no-interest option credit programs and deferred interest,~~2017, partially offset by ~~growth~~a decline of 3.1% in the average balance of the customer receivable portfolio of 8.7%. Excluding the impact of the changes in estimates, yield was up 10 basis points to the prior year period. Insurance commissions decreased over the prior year period primarily due to the decline in the number of loans with insurance products. Insurance commissions were also impacted by the growth of sales in states that have lower premium requirements.portfolio.

The following table provides key portfolio performance information:


	Three Months Ended July 31,									Three Months Ended April 30,
(dollars in thousands)	2016			2015			Change			2017			2016			Change
Interest income and fees	$	54,502		$	57,383		$	(2,881	)	$	67,131		$	60,621		$	6,510
Net charge-offs	(55,192		)	(41,564		)	(13,628		)	(59,248		)	(53,795		)	(5,453		)
Interest expense	(24,138		)	(10,055		)	(14,083		)	(24,008		)	(25,896		)	1,888
Net portfolio yield	$	(24,828	)	$	5,764		$	(30,592	)
Net portfolio income										$	(16,125	)	$	(19,070	)	$	2,945
Average portfolio balance	$	1,540,224		$	1,417,100		$	123,124		$	1,511,834		$	1,559,880		$	(48,046	)
Interest income and fees yield (annualized)	14.0		%	16.1		%
Interest income and fee yield (annualized)										18.2		%	15.8		%
Net charge-off % (annualized)	14.3		%	11.7		%				15.7		%	13.8		%

Cost of Goods Sold and Retail Gross Margin


	Three Months Ended July 31,								Three Months Ended April 30,
(dollars in thousands)	2016			2015			Change		2017			2016			Change
Cost of goods sold	$	208,869		$	202,461		$	6,408	$	171,950		$	204,466		$	(32,516	)
Retail gross margin	37.1		%	37.7		%			38.4		%	35.8		%

The ~~decrease~~increase in retail gross margin was ~~driven by the impact softer sales have on our fixed warehouse and delivery costs, partially offset by the~~primarily due to improved product margins across all product categories, favorable ~~shift in~~ product mix ~~towards the furniture~~ and ~~mattress category.~~

lower warehouse, delivery and transportation expenses through increased efficiencies and further optimization.

Selling, General and Administrative Expenses


	Three Months Ended July 31,								Three Months Ended April 30,
(dollars in thousands)	2016			2015			Change		2017			2016			Change
Selling, general and administrative expenses:
Retail segment	$	84,838		$	76,683		$	8,155	$	73,947		$	79,983		$	(6,036	)
Credit segment	35,008			28,149			6,859		32,590			33,264			(674		)
Selling, general and administrative expenses - Consolidated	$	119,846		$	104,832		$	15,014	$	106,537		$	113,247		$	(6,710	)
Selling, general and administrative expenses as a percent of total revenues	30.1		%	26.5		%			29.9		%	29.1		%

The ~~increase in~~ SG&A ~~for~~decrease in the retail segment was primarily due to ~~higher~~a decrease in compensation, advertising, and delivery and transportation costs, partially offset by an increase in new store occupancy ~~advertising~~costs and ~~compensation, which~~an increase in the overhead allocation. The decrease in retail revenue resulted in an increase in SG&A as a percent of segment revenues of ~~190~~140 basis points as compared to the ~~prior~~first quarter of fiscal year ~~period.~~2017. The ~~increase in~~ SG&A ~~for~~decrease in the credit segment was ~~driven~~primarily due to a decrease in compensation costs and in the charge to the credit segment to reimburse the retail segment for expenses, partially offset by an increase in the ~~additional investments in credit personnel to improve long-term credit performance.~~corporate overhead allocation. As a percent of average total customer portfolio balance (annualized), SG&A for the credit segment in the ~~current period~~first quarter of fiscal year 2018 increased ~~120~~10 basis points as compared to the ~~prior~~first quarter of fiscal year ~~period. Total SG&A~~2017. The increase in the corporate overhead allocation made to each of the segments was ~~also impacted~~driven by investments we are making in ITinformation technology and other personnel to support long-term performance improvement initiatives.

Provision for Bad Debts


	Three Months Ended July 31,									Three Months Ended April 30,
(dollars in thousands)	2016			2015			Change			2017			2016			Change
Provision for bad debts:
Retail segment	$	127		$	324		$	(197	)	$	230		$	398		$	(168	)
Credit segment	60,069			51,322			8,747			55,700			57,820			(2,120		)
Provision for bad debts - Consolidated	$	60,196		$	51,646		$	8,550		$	55,930		$	58,218		$	(2,288	)
Provision for bad debts - Credit segment, as a percent of average portfolio balance (annualized)	15.6		%	14.5		%				14.7		%	14.8		%

The year-over-year ~~increase~~decrease of $2.3 million in the credit segment provision for bad debts was ~~impacted by~~primarily the ~~following:~~

~~An 8.7% increase~~decline in the ~~average receivable portfolio balance resulting from new store openings over the past 12 months; and~~

Charges and Credits


	Three Months Ended July 31,							Three Months Ended April 30,
(in thousands)	2016		2015		Change			2017		2016		Change
Impairments from disposals	$	1,385	$	—	$	1,385
Store and facility closure costs								$	1,227	$	—	$	1,227
Legal and professional fees related to the exploration of strategic alternatives and securities-related litigation	135		1,013		(878		)	—		454		(454		)
Employee severance	1,213		—		1,213
Executive management transition costs	162		—		162			—		72		(72		)
	$	2,895	$	1,013	$	1,882		$	1,227	$	526	$	701

During the three months ended ~~July 31, 2016,~~April 30, 2017, we ~~had~~incurred exit costs associated with ~~impairments from disposals~~reducing the square footage of ~~two real estate assets,~~a distribution center. During the three months ended April 30, 2016, we incurred costs associated with legal and professional fees related to our securities-related litigation ~~charges for severance~~ and transition costs due to changes in the executive management team. ~~The impairments from disposals included the write-off of leasehold improvements for one store~~

we relocated prior to the end of its useful life and incurred costs for a terminated store project prior to starting construction. During the three months ended July 31, 2015, we had costs associated with legal and professional fees related to our exploration of strategic alternatives and our securities-related litigation.

Interest Expense

For the three months ended ~~July 31, 2016,~~April 30, 2017, net interest expense ~~increased~~decreased by ~~$14.1~~$1.9 million from the prior year comparative period primarily reflecting a lower average outstanding balance of debt.

Loss on Extinguishment of Debt

During the ~~increase in outstanding~~three months ended April 30, 2017, we wrote-off $0.3 million of debt ~~and~~issuance costs related to an ~~increase in~~amendment to our ~~effective interest rate due~~revolving credit facility for lenders that did not continue to ~~the asset-backed notes issued by our consolidated VIEs.~~participate.

Provision for Income Taxes


	Three Months Ended July 31,									Three Months Ended April 30,
(dollars in thousands)	2016			2015			Change			2017			2016			Change
Provision (benefit) for income taxes	$	(5,863	)	$	9,505		$	(15,368	)	$	(1,595	)	$	(3,491	)	$	1,896
Effective tax rate	33.0		%	36.5		%				38.2		%	26.4		%

The ~~decrease~~increase in the income tax rate for the three months ended ~~July 31, 2016~~April 30, 2017 was ~~impacted by~~due to a change from the actual effective tax ~~expense from state taxes offsetting the federal income tax benefit.~~

~~Six months ended July 31, 2016 compared to six months ended July 31, 2015~~

~~Revenues~~

Six Months Ended July 31, % Same store
(dollars in thousands) 2016 % of Total 2015 % of Total Change Change % change
Furniture and mattress $ 210,868
32.4 % $ 188,384
30.2 % $ 22,484
11.9 % 0.7 %
Home appliance 189,263
29.1
181,362
29.1
7,901
4.4
(2.8 )
Consumer electronic 131,600
20.2
141,112
22.6
(9,512 ) (6.7 ) (12.4 )
Home office 44,174
6.8
44,925
7.2
(751 ) (1.7 ) (6.6 )
Other 10,308
1.6
9,582
1.5
726
7.6
(0.7 )
Product sales 586,213
90.1
565,365
90.6
20,848
3.7
(4.3 )
Repair service agreement commissions 56,495
8.7
51,552
8.3
4,943
9.6
0.1
Service revenues 7,833
1.2
6,508
1.1
1,325
20.4

Total net sales $ 650,541
100.0 % $ 623,425
100.0 % $ 27,116
4.3 % (3.8 )%

Excluding the impact of our April 2015 decision to exit video game products, digital cameras, and certain tablets, same store sales for the six months ended July 31, 2016 decreased 2.5%. Slower sales growth was also impacted by underwriting changes made in the fourth quarter of fiscal 2016 and in the first quarter of fiscal 2017. The following provides a summary of the performance of our product categories during the quarter comparedrate ("ETR") method to the ~~prior year period:~~

~~Furniture unit volume increased 12.8%,~~annualized ETR method and, ~~average selling price increased 1.1%;~~

~~Mattress unit volume increased 12.7%, partially offset by~~to a ~~4.1% decrease in average selling price;~~

~~Home appliance unit volume increased 5.3% with average selling price flat. Total sales for refrigeration increased 7.0%, laundry increased 3.3%, and cooking increased 4.0%;~~

~~Consumer electronic unit volume decreased 10.3%, partially offset by a 4.5% increase in average selling price. Television sales decreased 2.8% as unit volume decreased 9.9%, partially offset by~~lesser extent, an ~~7.9% increase in average selling price. Excluding the impact from exiting video game products and digital cameras, consumer electronics same store sales decreased 9.1%;~~

Home office unit volume decreased 8.5%, partially offset by a 8.1% increase in average selling price. Excluding the impact from exiting certain tablets, home office same store sales decreased 2.6%; and

~~The increase in repair service agreement commissions was driven by increased retail sales.~~

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

Six Months Ended
July 31,
(in thousands) 2016 2015 Change
Interest income and fees $ 115,123
$ 112,802
$ 2,321
Insurance commissions 20,675
24,091
(3,416 )
Other revenues 931
808
123
Finance charges and other revenues $ 136,729
$ 137,701
$ (972 )

~~Interest income and fees of the credit segment increased over the prior year primarily driven by a 11.4%~~ increase in the average balance of the portfolio, partially offset by a yield rate of 14.9%, 140 basis points lower than the prior year period, which included the negative impact of adjustments of $8.2 million as a result of changes in estimates of amounts for allowances for no-interest option credit programs and deferred interest resulting. Excluding the impact of the changes in estimates, yield was down 30 basis points comparedprovision related to the prior year period. Insurance commissions decreased over the prior year period primarily due to the decline in the number of loans with insurance products and due to the decline in retrospective commissions on insurance agreements as a result of higher charge-offs. Insurance commissions were also impacted by the growth of sales in states that have lower premium requirements.

~~The following table provides key portfolio performance information:~~

Six Months Ended
July 31,
(dollars in thousands) 2016 2015 Change
Interest income and fees $ 115,123
$ 112,802
$ 2,321
Net charge-offs (108,987 ) (83,214 ) (25,773 )
Interest expense (50,034 ) (19,483 ) (30,551 )
Net portfolio yield $ (43,898 ) $ 10,105
$ (54,003 )
Average portfolio balance $ 1,551,847
$ 1,393,603
158,244
Interest income and fee yield % (annualized) 14.9 % 16.3 %
Net charge-off % (annualized) 14.0 % 11.9 %

~~Cost of Goods Sold and Retail Gross Margin~~

Six Months Ended
July 31,
(dollars in thousands) 2016 2015 Change
Cost of goods sold $ 413,335
$ 389,594
$ 23,741
Retail gross margin 36.5 % 37.5 %

The decrease in retail gross margin was driven by the impact softer sales have on our fixed warehouse and delivery costs and higher inventory shrink, partially offset by the favorable shift in product mix towards the furniture and mattress category.

~~Selling, General and Administrative Expenses~~

Six Months Ended
July 31,
(dollars in thousands) 2016 2015 Change
Selling, general and administrative expenses:
Retail segment $ 164,821
$ 144,910
$ 19,911
Credit segment 68,272
55,597
12,675
Selling, general and administrative expenses - Consolidated $ 233,093
$ 200,507
$ 32,586
As a percent of total revenues 29.6 % 26.3 %
state income taxes.

The increase in SG&A for the retail segment was primarily due to higher new store occupancy, advertising and compensation, which resulted in an increase as a percent of segment revenues of 210 basis points as compared to the prior year period. The increase in SG&A for the credit segment was driven by the additional investments in credit personnel to improve long-term credit performance. As a percent of average total customer portfolio balance (annualized), SG&A for the credit segment in the current period increased 80 basis points as compared to the prior year period. Total SG&A was also impacted by investments we are making in IT and other personnel to support long-term performance improvement initiatives.

~~Provision for Bad Debts~~

Six Months Ended
July 31,
(dollars in thousands) 2016 2015 Change
Provision for bad debts:
Retail segment $ 525
$ 393
$ 132
Credit segment 117,889
98,796
19,093
Provision for bad debts - Consolidated $ 118,414
$ 99,189
$ 19,225
Provision for bad debts - Credit segment, as a percent of average portfolio balance (annualized) 15.2 % 14.2 %

~~The year-over-year increase in the credit segment provision for bad debts was impacted by the following:~~

During the six months ended July 31, 2016, provision for bad debts increased by $5.0 million as a result of changes in estimates as it relates to sales tax recovery on previously charged-off accounts (excluding the impact of the changes in estimates, provision for bad debts as a percent of average portfolio balance was up 40 basis points to the prior year period);

~~An 11.4% increase in the average receivable portfolio balance resulting from new store openings over the past 12 months; and~~

The balance of customer receivables accounted for as troubled debt restructurings increased to $128.6 million, or 8.3% of the total portfolio balance, driving $3.4 million of additional provision for bad debts.

~~Charges and Credits~~

Six Months Ended
July 31,
(in thousands) 2016 2015 Change
Store and facility closure costs $ —
$ 425
$ (425 )
Impairments from disposals 1,385
—
1,385
Legal and professional fees related to the exploration of strategic alternatives and securities-related litigation 589
1,207
(618 )
Employee severance 1,213
—
1,213
Executive management transition costs 234
—
234
$ 3,421
$ 1,632
$ 1,789

During the six months ended July 31, 2016, we had costs associated with impairments from disposals of two real estate assets, legal and professional fees related to our securities-related litigation, charges for severance and transition costs due to changes in the executive management team. The impairments from disposals included the write-off of leasehold improvements for one store we relocated prior to the end of its useful life and incurred costs for a terminated store project prior to starting construction. During the six months ended July 31, 2015, we had charges related to the closing of under-performing retail locations and costs associated with legal and professional fees related to our exploration of strategic alternatives and our securities-related litigation.

~~Interest Expense~~

For the six months ended July 31, 2016, net interest expense increased by $30.6 million from the prior year comparative period primarily reflecting the increase in outstanding debt and an increase in our effective interest rate due to the asset-backed notes issued by our consolidated VIEs.

~~Provision for Income Taxes~~

Six Months Ended
July 31,
(dollars in thousands) 2016 2015 Change
Provision (benefit) for income taxes $ (9,354 ) $ 18,506
$ (27,860 )
Effective tax rate 30.1 % 36.5 %

~~The decrease in the income tax rate for the six months ended July 31, 2016 was impacted by tax expense from state taxes offsetting the federal income tax benefit.~~

Customer Receivable Portfolio

We provide in-house financing to individual consumers on a ~~short-term~~short- and medium-term basis ~~(maximum initial contractual term is 32~~(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 ~~an installment contract, which requires a~~contracts that require fixed monthly ~~payment~~payments over a fixed ~~term.~~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 provide for interest at the maximum rate allowed by the respective regulations in the states in which we operate, which generally range between 18% and ~~21%~~30%. ~~We are working to fully implement~~During the third quarter of fiscal 2017, we implemented our new direct consumer loan program across all Texas locations. During the first quarter of fiscal year 2018, we implemented our new direct loan program ~~across~~in all ~~Texas locations by the end of this fiscal year.~~Louisiana locations. The ~~state~~states of Texas ~~represents~~and Louisiana represent approximately ~~70%~~72% of our ~~recent~~first quarter of fiscal year 2018 originations, which under our ~~current offering has~~previous offerings had a maximum equivalent interest rate of approximately 21%, compared to an interest rate of up to 30% under our new direct loan ~~program.~~programs. Additionally, we are working through the regulatory framework to raise our interest rates in certain other ~~states that represent 14% of our originations.~~states. In states where regulations do not generally limit the interest rate charged, we ~~recently~~ increased our rates in the third quarter of fiscal year 2017 to 29.99%.

We offer ~~12-month,~~12- and 18-month cash-option, no-interest finance programs. 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 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 previously offered 18- and 24-month equal-payment, no-interest finance programs to certain higher credit quality borrowers, which were discounted to their present value at origination, resulting in a reduction in sales and customer receivables, and the discount amount is amortized into finance charges and other revenues over the term of the contract. If a customer is delinquent in making a scheduled monthly payment (grace periods are provided), the account begins accruing interest based on the contract rate from the date of the last payment made.

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 ~~was~~is subsequently resolved, and when the customer indicates a willingness and ability to resume making monthly payments. 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. 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 us. Our re-aging of customer accounts does not change the interest rate or the total amount due from the customer and typically does not reduce the monthly contractual payments. We may also charge the customer an extension fee, which approximates the interest owed for the time period the contract was past due. To a much lesser extent, we may provide the customer the ability to re-age their obligation by refinancing the account, which does not change the interest rate or the total 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,						As of April 30,
	2016			2015			2017			2016
Weighted average credit score of outstanding balances⁽¹⁾	595			596			588			595
Average outstanding customer balance	$	2,365		$	2,366		$	2,360		$	2,381
Balances 60+ days past due as a percentage of total customer portfolio balance⁽²⁾	9.6		%	9.2		%	9.8		%	8.6		%
Re-aged balance as a percentage of total customer portfolio balance⁽²⁾	15.3		%	13.0		%	15.8		%	14.8		%
Account balances re-aged more than six months (in thousands)	$	69,415		$	52,688		$	74,238		$	65,615
Allowance for bad debts as a percentage of total customer portfolio balance	13.0		%	11.3		%	14.0		%	12.7		%
Percent of total customer portfolio balance represented by no-interest option receivables	33.3		%	36.1		%	26.0		%	36.5		%


	Three Months Ended July 31,						Six Months Ended July 31,						Three Months Ended April 30,
	2016			2015			2016			2015			2017			2016
Total applications processed	334,854			311,995			649,232			604,597			290,327			314,378
Weighted average origination credit score of sales financed⁽¹⁾	611			617			610			617			608			609
Percent of total applications approved and utilized	35.4		%	44.9		%	36.1		%	44.6		%	31.1		%	35.9		%
Average down payment	3.3		%	3.3		%	3.6		%	3.7		%	3.7		%	3.9		%
Average income of credit customer at origination	$	41,500		$	40,600		$	40,900		$	40,500		$	41,900		$	40,100
Percent of retail sales paid for by:
In-house financing, including down payment received	71.8		%	82.5		%	73.6		%	83.9		%	70.5		%	75.5		%
Third-party financing	17.2		%	7.0		%	14.9		%	4.9		%	15.1		%	12.5		%
Third-party rent-to-own option	4.9		%	4.1		%	5.1		%	4.6		%
Third-party lease-to-own option													7.6		%	5.2		%
	93.9		%	93.6		%	93.6		%	93.4		%	93.2		%	93.2		%


(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.

The decrease in the weighted average credit score of outstanding balances was driven by us reducing the availability of cash-option, no-interest programs to higher risk customers and moving origination of long-term equal-payment, no-interest programs to a third-party, partially offset by underwriting changes made in the fourth quarter of fiscal year 2016 and during fiscal year 2017. The underwriting changes were made to reduce credit risk, specifically related to new customers, while identifying opportunities to increase originations to certain existing customers.

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 payment term has not been cumulatively extended over 90 days or refinanced. Restructured accounts includes all accounts for which payment term has been re-aged in excess of three months or refinanced.

For customer accounts receivable (excluding restructured accounts), the allowance for uncollectible accounts as a percentage of the outstanding portfolio balance rose from ~~9.5%~~10.6% as of ~~July 31, 2015~~April 30, 2016 to ~~10.8%~~11.4% as of ~~July 31, 2016.~~April 30, 2017. The percentage of non-restructured accounts greater than 60 days past due increased 3080 basis points over the prior year period to ~~8.1%~~8.3% as of ~~July 31, 2016.~~April 30, 2017. We expect delinquency levels and ~~charge-offs~~charge-off rates to remain elevated over the short-term. The increase in delinquency and changes in expectations for customer performance and cash recoveries on charged-off accounts are reflected in our projection models, resulting in an increase in the ~~level~~rate of losses we expect to realize over the next ~~twelve~~12 months.

For restructured accounts, the allowance for uncollectible accounts as a percentage of the portfolio balance was ~~35.6%~~36.6% as of ~~July 31, 2015~~April 30, 2016 as compared to ~~37.0%~~38.7% as of ~~July 31, 2016.~~April 30, 2017. This ~~140~~210 basis point increase reflects the impact of higher delinquency rates and charge-offs from a year ago.

The percent of bad debt charge-offs, net of recoveries, to average portfolio balance was ~~11.7%~~13.8% for the three months ended ~~July 31, 2015~~April 30, 2016 compared to ~~14.3%~~15.7% for the three months ended ~~July 31, 2016.~~April 30, 2017. The increase was primarily due to the higher level of delinquency experienced over the past twelve months and included an adjustment of $3.9 million based on a revised estimate of the amount of sales tax recovery from previously charged-off accounts that we expect to claim with particular taxing jurisdictions, which resulted in an 110 basis point negative impact.months.

As of ~~July 31,~~April 30, 2017 and 2016, ~~and 2015,~~ balances under no-interest programs included within customer receivables were ~~$513.9~~$385.7 million and ~~$524.1~~$561.8 million, respectively. We ~~recently~~ shifted ~~our18-~~our 18- and 24-month equal-payment, no-interest programs to a third-party and ~~removed 12-month~~reduced the availability of cash-option, no-interest ~~program eligibility for certain~~programs to higher risk customers. As a result, a decline in the proportion of accounts financed under no-interest programs is likely to result in an increase in the overall yield recognized.

Liquidity and Capital Resources

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

~~In September 2015, we securitized $1.4 billion~~ We plan to execute periodic securitizations of future originated customer accounts receivables by transferring the receivables to a bankruptcy-remote variable-interest entity (the "2015 VIE"). The 2015 VIE issued asset-backed notes at a face amount of $1.12 billion secured by the transferred portfolio balance, which resulted in net proceeds to us of approximately $1.08 billion, net of transaction costs and restricted cash held by the 2015 VIE. The net proceeds were used to pay down the outstanding balance on our revolving credit facility, to repurchase shares of the Company's common stock and Senior Notes, and for other general corporate purposes.

In March 2016, we securitized $705.1 million of customer accounts receivables by transferring the receivables to a new bankruptcy-remote variable-interest entity (the "2016 VIE" or together with the 2015 VIE, the "VIEs"). The 2016 VIE issued two classes of asset-backed notes at a total face amount of $493.5 million secured by the transferred customer accounts receivables. This resulted in net proceeds to us of approximately $478.0 million, net of transaction costs and reserves. The net proceeds were used to pay down the outstanding balance on our revolving credit facility and for other general corporate purposes.

Under the terms of the securitization transactions, the customer receivable principal and interest payment cash flows will go first to the servicer and the holders of the securitization notes, and then to the residual equity holder. We retain the servicing of the securitized portfolios and are receiving monthly fees of 4.75% (annualized) based on the outstanding balance of the securitized receivables. We currently hold all of the residual equity for the VIEs and hold the third class of asset-backed notes of the 2016 VIE. In addition, we, rather than the VIEs, will retain all credit insurance income together with certain recoveries related to credit insurance and repair service agreements on charged-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 are working to fully implement our new direct loan program across all Texas locations by the end of this fiscal year. The state of Texas represents approximately 70% of our recent originations, which under our current offering has a maximum equivalent interest rate of approximately 21%, compared to 30% under our new direct loan program. Additionally, we are working through the regulatory framework to raise our interest rates in certain other states that represent 14% of our originations. In states where regulations do not generally limit the interest rate charged, we recently increased our rates to 29.99%. These efforts are expected enhance the profitability of our credit segment.

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

Operating cash ~~flow activities.~~flows. ~~During~~For the ~~six~~three months ended ~~July 31, 2016,~~April 30, 2017, net cash provided by operating activities was ~~$131.9~~$90.8 million as compared to ~~net cash used in operating activities of $13.4~~$108.7 million ~~during~~for the ~~prior-year period.~~three months ended April 30, 2016. The ~~increase~~decrease in net cash provided by operating activities was primarily driven by ~~the lower growth rate~~a decrease in ~~our customer portfolio balance,~~cash provided by working capital ~~improvements,~~ and ~~an increase~~a decrease in the amount of tenant improvement allowances received, partially offset by the ~~decrease~~lower growth rate in our customer portfolio balance, which resulted in collections on customer accounts exceeding the growth in new accounts, and an increase in net income when adjusted for non-cash ~~activity, including the increases in provision for bad debts and uncollectible interest and amortization of debt issuance costs and the change in deferred income taxes.~~activity.

Investing cash ~~flow activities.~~flows. ~~During~~For the ~~six~~three months ended ~~July 31, 2016,~~April 30, 2017, net cash used in investing activities was ~~$31.3~~$4.3 million as compared to ~~$29.6~~$16.3 million ~~during~~for the ~~prior-year period. Purchases~~three months ended April 30, 2016. The change was primarily the result of ~~property and equipment increased year-over-year related~~lower capital expenditures due to fewer new store openings in the current quarter compared to the ~~timing of construction activities for new stores, as well as store remodels and relocations.~~comparable prior year period.

Financing cash ~~flow activities.~~flows. ~~During~~For the ~~six~~three months ended ~~July 31, 2016,~~April 30, 2017, net cash provided by financing activities was $2.8 million compared to net cash used in financing activities ~~was $97.3~~of $93.1 million ~~as compared to net cash provided by financing activities of $37.7 million during~~for the ~~prior-year period.~~three months ended April 30, 2016. During the ~~six~~three months ended ~~July 31, 2016,~~April 30, 2017, the ~~2016~~2017-A VIE issued asset-backed notes resulting in net proceeds to us of approximately ~~$478.0~~$456.7 million, net of transaction costs and ~~reserves. The net proceeds~~restricted cash held by the 2017-A VIE, which were used to pay down the entire balance on our revolving credit ~~facility. Also~~facility and for other general corporate purposes. Cash collections from the securitized receivables were used to make payments on the asset-backed notes of approximately $232.9 million during the ~~six~~three months ended ~~July 31,~~April 30, 2017 compared to approximately $289.6 million in the comparable prior year period. During the three months ended April 30, 2016, ~~we made payments of $537.8 million on~~the 2016-A VIE issued asset-backed notes ~~from~~resulting in net proceeds ~~received~~to us of approximately $478.2 million, net of transaction costs and restricted cash held by the 2016-A VIE, which were used to pay down the balance on ~~the securitized receivables. During the six months ended July 31, 2015, financing activities were primarily limited to the use of the~~our revolving credit ~~facility.~~ facility and for other general corporate purposes.

Senior Notes. On July 1, 2014, we issued $250.0 million of the unsecured Senior Notes due July 2022 bearing interest at ~~7.250%~~7.25%, pursuant to an indenture dated July 1, 2014 (the "Indenture"), among Conn's, Inc., its subsidiary guarantors (the "Guarantors") and U.S. Bank National Association, as trustee. ~~During the year ended January 31, 2016, we repurchased $23.0 million of face value of the Senior Notes for $22.9 million.~~ The effective interest rate of the Senior Notes after giving effect to ~~offering fees~~the discount and ~~debt discount~~issuance costs is ~~7.7%~~7.8%.

The Indenture ~~as amended,~~ 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. Specifically, limitations ~~for~~on restricted payments are ~~triggered~~ only effective if one or more of the following occurred: (1) a default were to exist under the ~~indenture,~~Indenture, (2) if we could not satisfy a debt incurrence test, and (3) if the aggregate amount of restricted payments ~~would~~were to exceed an amount tied to ~~the~~ consolidated net income. These limitations, however, are subject to two exceptions: (1) an exception that permits the payment of up to $375.0 million in restricted payments, and (2) an exception that permits restricted payments regardless of dollar amount so long as, after giving pro forma effect to the dividends and other restricted payments, we would have had a leverage ratio, as defined under the Indenture, of less than or equal to 2.50 to ~~1.00. Thus,~~1.0. As a result of these exceptions, as of ~~July 31, 2016, $190.2~~April 30, 2017, $173.4 million would have been free from the ~~dividend~~distribution restriction. However, as a result of the revolving credit facility ~~dividend~~distribution restrictions, which are further described below, ~~no amount was available for dividends.~~we were restricted from making a distribution as of April 30, 2017. 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.

The asset-backed notes ~~consist of the following securities:~~

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 ~~2015 VIE.~~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.



Asset-Backed Notes	Principal Amount		Net Proceeds⁽¹⁾		Issuance Date	Maturity Date	Fixed Interest Rate	Effective Interest Rate⁽²⁾
2015 Class B Notes	165,900		156,200		9/10/2015	9/15/2020	8.50%	15.60%
2016-A Class A Notes	423,030		409,845		3/17/2016	4/16/2018	4.68%	6.50%
2016-A Class B Notes	70,510		68,309		3/17/2016	8/15/2018	8.96%	9.60%
2016-A Class C Notes	70,510		71,648		10/12/2016	4/15/2020	12.00%	11.00%
2016-B Class A Notes	391,840		380,033		10/6/2016	10/15/2018	3.73%	5.70%
2016-B Class B Notes	111,960		108,586		10/6/2016	3/15/2019	7.34%	8.10%
2017-A Class A Notes	313,220		304,451		4/19/2017	7/15/2019	2.73%	5.50%
2017-A Class B Notes	106,270		103,300		4/19/2017	2/15/2020	5.11%	6.00%
2017-A Class C Notes	50,340		48,919		4/19/2017	10/15/2021	7.40%	7.90%
Total	$	1,703,580	$	1,651,291


(1)	After giving effect to debt issuance costs and restricted cash held by the VIEs.


(2)	For the three months ended April 30, 2017, and inclusive of retrospective adjustments to deferred debt issuance costs based on changes in timing of actual and expected cash flows.

~~On February 16, 2016,~~The Third Amendment, among other things, (a) extends the ~~Borrowers entered into a first amendment to~~maturity date of the ~~revolving~~ credit facility ~~which resulted~~one year to October 30, 2019; (b) provides for a reduction in ~~various changes, including:~~

~~Excluding non-cash deferred amortization of debt related transaction costs~~the aggregate commitments from ~~interest coverage ratio; and~~

~~Extending from 6 months~~$810 million to ~~18 months the time frame subsequent to the closing of a securitization transaction in which the Cash Recovery Percent covenant will be determined.~~

~~On May 18, 2016, the Borrowers entered into a second amendment to the revolving credit facility, which resulted in various changes, including:~~

~~Amending~~$750 million; (c) amends the minimum interest coverage ratio covenant ~~so long as~~to (i) eliminate the ~~borrowing base reduction discussed below is in effect, to:~~


◦	~~Reduce the minimum interest coverage ratio covenant to 1.0x for the second quarter of fiscal 2017 through the first quarter of fiscal 2018; and~~


◦	~~Reduce the minimum interest coverage ratio covenant to 1.25x for the second quarter of fiscal 2018 through the third quarter of fiscal 2019.~~

~~Modifying the conditions for repurchases~~application of the ~~Company's common stock, including the addition of a requirement to achieve a~~ minimum interest coverage ratio covenant for the fiscal quarter ending April 30, 2017 and (ii) reduce the minimum interest coverage ratio (A) to 0.80x as of ~~2.5x for two consecutive quarters; and~~

~~Reducing~~ the ~~borrowing base by $15.0 million beginning on May 31, 2016, reducing~~last day of the ~~borrowing base by $10.0 million for any month beginning with~~fiscal quarter ending July 31, 2017, ~~so long~~(B) to 1.10x as of the last day of the fiscal quarter ending October 31, 2017 and (C) to 1.25x as of the last day of each fiscal quarter thereafter, beginning with the fiscal quarter ending January 31, 2018; (d) sets the applicable margin at 3.50% for LIBOR loans and 2.50% for Base Rate loans until the Company demonstrates an interest coverage ratio isof equal to or greater than 1.10x for the fiscal quarter ending October 31, 2017, at ~~least 1.25x,~~which point the applicable margin will revert to being determined according to the existing pricing grid based on facility availability; (e) reduces the minimum cash recovery percentage on the contracts it owns and ~~no borrowing base reduction at any~~manages from 4.50% to 4.45% for the first nine months of each fiscal year, and from 4.25% to 4.20% for the last three months of each fiscal year; (f) amends the definition of “EBITDA” to, among other things, exclude the impact of non-cash asset write-offs relating to construction in process; (g) amends the definition of “Interest Expense” to exclude certain non-interest expenses; (h) amends various definitions and other related provisions to clarify the Company’s ability to undertake permitted securitization transactions; (i) increases the number of equity cures that may be exercised during the term of the agreement from one time to two times, and increases the ~~interest coverage ratio is at least 2.0x for two consecutive quarters.~~maximum amount of each such cure from $10 million to $20 million; and (j) modifies the calculations of “Tangible Net Worth” and “Interest Coverage Ratio” to deduct certain amounts attributable to the difference between a calculated loss reserve and the Company’s recorded loss reserve on its contracts.

~~As of July 31, 2016, loans~~Loans under the revolving credit facility bear interest, at our option, at a rate ofequal to LIBOR plus the applicable margin at 3.50% for LIBOR loans and 2.50% for base rate loans until the Company demonstrates an interest coverage ratio of equal to or greater than 1.10x for the fiscal quarter ending October 31, 2017, at which point the applicable margin will revert to being determined according to the pricing grid based on facility availability which specifies a margin ranging from ~~2.5%~~2.75% to ~~3.0%~~3.25% per annum (depending on quarterly average net availability under the borrowing base) or the alternate base rate plus a margin ranging from ~~1.5%~~1.75% to ~~2.0%~~2.25% per annum (depending on quarterly average net availability under the borrowing base). ~~Pursuant to the second amendment, the margins increased by 25 basis points subsequent to July 31, 2016.~~ The alternate base rate is the ~~greater~~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%. ~~The effective interest rate on borrowings outstanding under the revolving credit facility after giving effect to offering fees is 5.5%.~~ We also pay an unused fee on the portion of the commitments that ~~are~~is available for future borrowings or letters of credit at a rate ranging from 0.25% to 0.75% per annum, depending on the average outstanding balance and letters of credit of the revolving credit ~~facility.~~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 6.0% for the three months ended April 30, 2017.

Debt ~~covenants.~~Covenants. We were in compliance with our debt covenants ~~as amended,~~ at ~~July 31, 2016.~~April 30, 2017. A summary of the significant financial covenants that govern our revolving credit facility, as amended, compared to our actual compliance status at ~~July 31, 2016~~April 30, 2017 is presented below:

Actual

Required

Minimum/

Maximum

Actual

Required
Minimum/
Maximum

Interest Coverage Ratio must equal or exceed minimum(1)

1.03:1.00

1.00:1.00

1.27:1.00

Not Tested

Leverage Ratio must not exceed maximum

2.63:1.00

4.00:1.00

2.42:1.00

4.00:1.00

ABS Excluded Leverage Ratio must not exceed maximum

1.52:1.00

2.00:1.00

0.78:1.00

2.00:1.00

Cash Recovery Percent must exceed stated amount

4.77%

4.50%

5.51%

4.45%

Capital Expenditures, net, must not exceed maximum

$26.0 million

$75.0 million

$4.5 million

$75.0 million

(1) Not tested for the three months ended April 30, 2017.

Capital expenditures. We lease the majority of our stores under operating leases, and our plans for future store locations include primarily 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 ~~$1.0~~$1.3 million and $1.5 million per store (before tenant improvement allowances), and for our existing store remodels, estimated to range between $0.5 million and $1.0 million per store remodel, 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 ~~relationship~~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 ~~are successful in these relationship developments,~~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, but could include full ownership. During the six months ended July 31, 2016, we~~stores. We have opened ~~nine~~three new stores during fiscal year 2018, two of which were successfully opened during the first quarter of fiscal year 2018 and weall of which have been successfully opened as of the date of this report. We do not plan to open ~~one~~any additional ~~new~~ stores ~~for a total of 10 new stores for~~during fiscal ~~2017.~~year 2018. Our anticipated capital expenditures for fiscal year ~~2017~~2018 are between ~~$37.0~~$20 and $25 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 and repayment of debt, we rely primarily on cash from operations. As of April 30, 2017, beyond cash generated from operations we had (i) immediately available borrowing capacity of $128.8 million under our revolving credit facility, (ii) $615.4 million that may become available under our revolving credit facility if we grow the balance of eligible customer receivables and ~~$42.0~~our total eligible inventory balances and (iii) $112.8 million ~~which does not take into account any potential~~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 ~~sale of owned real estate.~~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, 2016:~~April 30, 2017:


			Payments due by period										Payments due by period
(in thousands)	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years		Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Debt, including estimated interest payments:
Revolving credit facility ⁽¹⁾	$	325,531	$	11,573	$	313,958	$	—	$	—
Debt, including estimated interest payments⁽¹⁾:
Senior Notes	325,024		16,458		32,915		32,915		242,736		312,760		16,458		32,915		32,915		230,472
2015-A Class A Notes ⁽²⁾	232,344		8,925		17,851		205,568		—
2015-A Class B Notes ⁽²⁾	224,401		14,102		28,203		182,096		—
2016-A Class A Notes ⁽³⁾	260,365		11,282		249,083		—		—
2016-A Class B Notes ⁽³⁾	83,405		6,318		77,087		—		—
2015 Class B Notes⁽²⁾											145,835		9,629		19,258		116,948		—
2016A Class A Notes⁽²⁾											195		195		—		—		—
2016A Class B Notes											78,680		6,318		72,362		—		—
2016A Class C Notes⁽²⁾											95,569		8,461		87,108		—		—
2016B Class A Notes⁽²⁾											156,870		5,549		151,321		—		—
2016B Class B Notes⁽²⁾											127,360		8,218		119,142		—		—
2017A Class A Notes⁽²⁾											332,102		8,551		323,551		—		—
2017A Class B Notes⁽²⁾											121,460		5,430		116,030		—		—
2017A Class C Notes⁽²⁾											66,965		3,725		7,450		55,790		—
Capital lease obligations	2,340		902		1,438		—		—		8,363		1,371		1,891		953		4,148
Operating leases:
Real estate	470,593		27,617		112,894		107,650		222,432		440,181		56,998		113,328		106,877		162,978
Equipment	3,755		2,039		1,645		71		—		3,035		1,872		1,139		24		—
Contractual commitments ⁽⁴⁾	106,525		105,116		1,409		—		—
Contractual commitments⁽³⁾											98,173		92,913		4,385		875		—
Total	$	2,034,283	$	204,332	$	836,483	$	528,300	$	465,168	$	1,987,548	$	225,688	$	1,049,880	$	314,382	$	397,598


(1)	Estimated interest payments are based on the outstanding balance as of April 30, 2017 and the interest rate in effect ~~as of July 31, 2016.~~at that time.


(2)	The payments due by period for ~~2015-A Class A~~the Senior Notes and ~~2015-A Class B Notes~~asset-backed notes were based on ~~the~~their respective maturity ~~date of September 15, 2020~~dates at their respective fixed annual interest rate. Actual principal and interest payments will be provided based on the proceeds from the securitized customer accounts receivables.


(3)	The payments due by period for 2016-A Class A Notes and 2016-A Class B Notes were based on the maturity date of April 16, 2018 and August 15, 2018, respectively, at their respective fixed annual interest rate. Actual principal and interest payments will be provided based on the proceeds from the securitized customer accounts receivables.

~~(4)~~

Contractual commitments primarily includes commitments to purchase inventory of ~~$93.0~~$83.6 million and capital expenditures of ~~$4.5~~$2.8 million, which is not reduced for any reimbursements we might receive for tenant improvement allowances from landlords, with the remaining ~~relating to~~ commitments for advertising and other services. The timing of the payments is subject to change based upon actual receipt and the terms of payment with the vendor.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States 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 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. The description of critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2016.~~2017.

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

Loans under the revolving credit facility bear interest, at our option, at a rate ofequal to LIBOR plus the applicable margin at 3.50% for LIBOR loans and 2.50% for base rate loans until the Company demonstrates an interest coverage ratio of equal to or greater than 1.10x for the fiscal quarter ending October 31, 2017, at which point the applicable margin will revert to being determined according to the existing pricing grid based on facility availability which specifies a margin ranging from ~~2.5%~~2.75% to ~~3.0%~~3.25% per annum (depending on quarterly average net availability under the borrowing base) or the alternate base rate plus a margin ranging from ~~1.5%~~1.75% to ~~2.0%~~2.25% per annum (depending on quarterly average net availability under the borrowing base). ~~Pursuant to the second amendment to the revolving credit facility, the margins increased by 25 basis points subsequent to July 31, 2016.~~ The alternate base rate is the ~~greater~~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 average net availability under the borrowing base 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, 2016, the balance outstanding~~April 30, 2017, we did not have borrowings under our revolving credit facility ~~was $299.5 million. A 100 basis point increase in~~and, consequently, did not have any material exposure to interest ~~rates on~~rate market risks at the end of this period. However, any future borrowings under our revolving credit facility ~~would increase our borrowing costs by $3.0 million over~~will be at a ~~12-month~~variable rate of interest and we could potentially be materially adversely impacted should we require significant borrowings in the future, particularly during a period ~~based on the balance outstanding at July 31, 2016.~~of rising interest rates.

For additional information regarding quantitative and qualitative market risks, as updated by the preceding paragraphs, see Item ~~7A.~~7A, "Quantitative and Qualitative Disclosures about Market Risk," of our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2016.~~2017.


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, 2016,~~April 30, 2017, there have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.


PART II.	OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

The information set forth in Note 7, Contingencies, of the 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 Annual Report on Form 10-K for the year ended January 31, ~~2016.~~2017.


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

~~During the three months ended July 31, 2016, we did not engage in any share repurchase activity under our share repurchase program.~~None.

On September 9, 2015, we announced that the Board of Directors of the Company ("Board of Directors") authorized a repurchase program of up to an aggregate of $75.0 million of (i) shares of the Company's outstanding common stock; (ii) the Senior Notes; or (iii) a combination thereof. On November 2, 2015, we announced that the Board of Directors authorized an additional $100.0 million towards the repurchase program for purchase of shares of the Company's outstanding common stock, Senior Notes, or a combination thereof. During fiscal 2016, we purchased 5.9 million shares of common stock, using $151.6 million of the $175.0 million repurchase authorization. Additionally, we utilized $22.9 million of the repurchase authorization to acquire $23.0 million of face value of our senior notes. As a result of the second amendment to our revolving credit facility executed on May 18, 2016, we must achieve a 2.5x minimum interest coverage ratio for two consecutive quarters before we will be permitted to make any further stock repurchases.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4.	MINE SAFETY DISCLOSURE

Not applicable.


ITEM 5.	OTHER INFORMATION

None.


ITEM 6.	EXHIBITS

The exhibits required pursuant to Item 6 of Form 10-Q are listed in the Exhibit Index filed herewith, which Exhibit Index is incorporated herein by reference.

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 8, 2016~~June 6, 2017

	By:	/s/ Lee A. Wright
		Lee A. Wright
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and duly authorized to sign this report on behalf of the registrant)

Table of Contents

EXHIBIT INDEX



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.~~(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 ~~Conn's, Inc.~~ 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 ~~Conn's, Inc.~~ 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 ~~(as corrected December 31, 2013)~~ (incorporated herein by reference to Exhibit 3.1.3 to ~~Conn's, Inc.~~ 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 ~~fiscal~~quarterly period ended April 30, 2014 (File No. 001-34956) as filed with the Securities and Exchange Commission on June 2, 2014)
~~3.1.5~~		Certificate of Designations of Series A Junior Participating Preferred Stock of Conn's, Inc. (incorporated herein by reference to Exhibit 3.1 to Conn's, Inc. Current Report on Form 8-K (File No. 001-34956) filed with the Securities and Exchange Commission on October 6, 2014)
~~3.1.6~~		Certificate of Elimination of Certificate of Designations of Series A Junior Participating Preferred Stock of Conn's Inc., dated September 10, 2015 (incorporated herein by reference to Exhibit 3.1 to Conn's, Inc. Current Report on Form 8-K (File No. 001-34956) filed with the Securities and Exchange Commission on September 11, 2015)
3.2		Amended and Restated Bylaws of Conn's, Inc. effective as of December 3, 2013 (incorporated herein by reference to Exhibit 3.2 to ~~Conn's, Inc.~~ Form 10-Q for the ~~quarter~~quarterly period ended October 31, 2013 (File No. 001-34956) as filed with the Securities and Exchange Commission on December 6, 2013)
3.3		Certificate of Designations of Series A Junior Participating Preferred Stock of Conn's, Inc. (incorporated herein by reference to Exhibit 3.1 to Form 8-K (File No. 001-34956) filed with the Securities and Exchange Commission on October 6, 2014)
3.4		Certificate of Elimination of Certificate of Designations of Series A Junior Participating Preferred Stock of Conn’s Inc., dated September 10, 2015 (incorporated herein by reference to Exhibit 3.1 to Form 8-K (File No. 001-34956) as filed with the Securities and Exchange Commission on September 11, 2015)
4.1		Specimen of certificate for shares of Conn's, Inc.'s common stock (incorporated herein by reference to Exhibit 4.1 to ~~Conn's, Inc.~~ registration statement on Form S-1 (File No. 333-109046) as filed with the Securities and Exchange Commission on October 29, 2003)
4.2		Base Indenture, dated as of April 19, 2017 by and between Conn’s Receivables Funding 2017-A, LLC, and Wells Fargo Bank, National Association (incorporated herein by reference to Exhibit 4.1 to Form 8-K (File No. 001-34956) as filed with the Securities and Exchange Commission on April 20, 2017)
4.2.1		Series 2017-A Supplement to the Base Indenture, dated as of April 19, 2017, by and between Conn’s Receivables Funding 2017-A, LLC and Wells Fargo Bank, National Association (incorporated herein by reference to Exhibit 4.2 to Form 8-K (File No. 001-34956) as filed with the Securities and Exchange Commission on April 20, 2017)
10.1		~~Second Amendment to Third Amended and Restated Loan and Security~~Note Purchase Agreement, dated ~~May 18, 2016,~~April 12, 2017, by and among ~~the~~ Conn’s, Inc., ~~as parent and guarantor,~~Conn’s Receivables Funding 2017-A, LLC, Conn Appliances, Inc., Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC, MUFG Securities Americas Inc. and JP Morgan Securities LLC, as initial purchasers (incorporated herein by reference to Exhibit 1.1 to Form 8-K (File No. 001-34956) as filed with the Securities and Exchange Commission on April 20, 2017)
10.1.1		First Receivables Purchase Agreement, dated April 19, 2017, by and between Conn Credit I, LPL.P. and Conn ~~Credit Corporation, Inc., as borrowers, certain banks and financial institutions named therein, as lenders, and Bank of America N.A., in its capacity as agent for lenders~~Appliances Receivables Funding, LLC (incorporated herein by reference to Exhibit 10.1 to ~~Conn's, Inc. Current Report on~~ Form 8-K (File No. 001-34956) as filed with the Securities and Exchange Commission on ~~May~~April 20, ~~2016)~~2017)
~~10.2~~10.1.2		~~Offer of employment from the Company to Lee A. Wright,~~Second Receivables Purchase Agreement, dated ~~as of May 31, 2016~~April 19, 2017, by and between Conn Appliances Receivables Funding, LLC and Conn’s Receivables 2017-A Trust (incorporated herein by reference to Exhibit ~~10.1~~10.2 to ~~Conn's, Inc. Current Report on~~ Form 8-K (File No. 001-34956) as filed with the Securities and Exchange Commission on ~~June 2, 2016)~~April 20, 2017)
~~10.3~~10.2		~~Executive Severance~~Purchase and Sale Agreement, dated April 19, 2017 by and between ~~the Company~~Conn Appliances Receivables Funding, LLC and ~~Lee A. Wright, dated as of May 31, 2016~~Conn’s Receivables 2017-A Trust (incorporated herein by reference to Exhibit ~~10.2~~10.3 to ~~Conn's, Inc. Current Report on~~ Form 8-K (File No. 001-34956) as filed with the Securities and Exchange Commission on ~~June 2, 2016)~~April 20, 2017)
~~10.4~~10.2.1		Servicing Agreement dated as of April 19, 2017, among Conn’s Receivables Funding 2017-A, LLC, Conn’s Receivables 2017-A Trust, Conn Appliances, Inc. and Wells Fargo Bank, National Association (incorporated herein by reference to Exhibit 10.4 to Form ~~of Restricted Stock Unit Award Agreement (Time-based~~8-K (File No. 001-34956) as filed with the Securities and ~~Performance-based Vesting) under the Conn’s, Inc. 2016 Omnibus Stock Incentive Plan~~Exchange Commission on April 20, 2017)
~~10.5~~11.1		Statement re: computation of earnings per share (incorporated by reference to Note 1 to the condensed consolidated financial statements included in this Form ~~of Restricted Stock Unit Award Agreement (Time-based) under the Conn’s, Inc. 2016 Omnibus Stock Incentive Plan~~10-Q)
31.1		Rule 13a-14(a)/15d-14(a) Certification ~~(Principal~~(Chief Executive Officer) (filed herewith)



Exhibit Number		Description of Document

31.2		Rule ~~13a-14(a)~~13a-14(d)/~~15d-14(a)~~15d-14(d) Certification ~~(Principal~~(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~~first quarter of fiscal year ~~2017,~~2018, filed with the SEC on ~~September 8, 2016,~~June 6, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) the consolidated balance sheets at ~~July 31, 2016~~April 30, 2017 and January 31, ~~2016,~~2017, (ii) the consolidated statements of operations for the three ~~and six~~ months ended ~~July 31,~~April 30, 2017 and 2016, ~~and 2015,~~ (iii) the consolidated statements of cash flows for the ~~six~~three months ended ~~July 31,~~April 30, 2017 and 2016 ~~and 2015~~ and (iv) the notes to consolidated financial statements

3940



	Three Months Ended July 31, 2016								Three Months Ended July 31, 2015
(in thousands)	Retail		Credit			Total			Retail		Credit			Total
Revenues:
Furniture and mattress	$	105,562	$	—		$	105,562		$	98,882	$	—		$	98,882
Home appliance	101,359		—			101,359			97,260		—			97,260
Consumer electronic	65,735		—			65,735			69,682		—			69,682
Home office	21,701		—			21,701			22,940		—			22,940
Other	5,366		—			5,366			4,975		—			4,975
Product sales	299,723		—			299,723			293,739		—			293,739
Repair service agreement commissions	28,310		—			28,310			27,756		—			27,756
Service revenues	3,966		—			3,966			3,451		—			3,451
Total net sales	331,999		—			331,999			324,946		—			324,946
Finance charges and other revenues	437		65,721			66,158			659		70,445			71,104
Total revenues	332,436		65,721			398,157			325,605		70,445			396,050
Costs and expenses:
Cost of goods sold	208,869		—			208,869			202,461		—			202,461
Selling, general and administrative expenses ⁽¹⁾	84,838		35,008			119,846			76,683		28,149			104,832
Provision for bad debts	127		60,069			60,196			324		51,322			51,646
Charges and credits	2,895		—			2,895			1,013		—			1,013
Total costs and expense	296,729		95,077			391,806			280,481		79,471			359,952
Operating income (loss)	35,707		(29,356		)	6,351			45,124		(9,026		)	36,098
Interest expense	—		24,138			24,138			—		10,055			10,055
Income (loss) before income taxes	$	35,707	$	(53,494	)	$	(17,787	)	$	45,124	$	(19,081	)	$	26,043



	Six Months Ended July 31,											%		Same store
(dollars in thousands)	2016		% of Total		2015		% of Total		Change			Change		% change
Furniture and mattress	$	210,868	32.4	%	$	188,384	30.2	%	$	22,484		11.9	%	0.7	%
Home appliance	189,263		29.1		181,362		29.1		7,901			4.4		(2.8	)
Consumer electronic	131,600		20.2		141,112		22.6		(9,512		)	(6.7	)	(12.4	)
Home office	44,174		6.8		44,925		7.2		(751		)	(1.7	)	(6.6	)
Other	10,308		1.6		9,582		1.5		726			7.6		(0.7	)
Product sales	586,213		90.1		565,365		90.6		20,848			3.7		(4.3	)
Repair service agreement commissions	56,495		8.7		51,552		8.3		4,943			9.6		0.1
Service revenues	7,833		1.2		6,508		1.1		1,325			20.4
Total net sales	$	650,541	100.0	%	$	623,425	100.0	%	$	27,116		4.3	%	(3.8	)%