Conn’s, Inc. Reports Fourth Quarter Fiscal Year 2020 Financial Results And Provides Business Update Related to COVID-19

The Woodlands, Texas, UNITED STATES


THE WOODLANDS, Texas, April 14, 2020 (GLOBE NEWSWIRE) -- Conn’s, Inc. (NASDAQ: CONN) (“Conn’s” or the “Company”), a specialty retailer of furniture and mattresses, home appliances, consumer electronics and home office products, and provider of consumer credit, today announced its financial results for the quarter ended January 31, 2020 and provided an update on the business related to the impact of the COVID-19 pandemic.

“We are disappointed with our fourth quarter credit and retail results,” stated Norm Miller, Conn’s Chairman and Chief Executive Officer. “As expected, difficult market conditions within the premium TV and gaming sectors persisted during the fourth quarter and we continued to see the impact of underwriting adjustments we made in the third quarter.  We also experienced declining credit performance associated with higher risk vintages, an increase in new customers and difficulties in collections efforts related to implementation of the Company’s new loan management system.”

“The COVID-19 pandemic has had a significant impact on our daily lives and our hearts go out to anyone who has been impacted by the illness.  We are taking decisive actions to navigate the impacts the rapidly evolving COVID-19 situation is having within our markets.  We are working to ensure our stores remain open and provide essential products and services that help customers adjust to in-home activities and lifestyles.  We are revising our fiscal year 2021 store expansion plans to open between 6 and 8 stores, delaying our Florida expansion to next fiscal year and delaying other non-essential capital expenditures. In addition, we recently borrowed an additional $275.0 million of cash on our revolving credit facility as a precautionary measure to preserve financial flexibility in light of the current uncertainty.”

“For over 130 years, Conn’s has provided products and services that improve the lifestyles of our local communities, while supporting customers in good and bad times through our affordable financing options.  Our experienced leadership team, profitable operating model and strong balance sheet provide us with the necessary resources to navigate this challenging period.  We remain committed to helping our customers, employees and communities in this time of need.  I want to thank our dedicated team for their efforts serving our customers through these uncertain times,” concluded Mr. Miller.

In response to the COVID-19 pandemic, Conn’s has enacted the following key actions:

  • Continue to operate almost all of our showrooms as of April 14, 2020, with reduced in-store hours of 10:00 AM to 7:00 PM to provide additional flexibility to our employees, allow for additional cleaning and manage expenses;
  • Implemented a series of underwriting changes beginning in March to control delinquencies and charge-offs;
  • Borrowed $275 million of cash from our revolving credit facility as a precautionary measure to preserve financial flexibility, increasing our cash on balance sheet to over $270 million and cash and immediately available liquidity to approximately $400 million;
  • Delayed or eliminated non-essential capital expenditures, including reducing the number of planned showroom openings in fiscal year 2021 from 16 to 18 to 6 to 8 and delaying our showrooms associated with our future Florida distribution center;
  • Temporarily increased hourly wages by $2 per hour to support our front-line employees; and
  • Temporarily reduced the salaries for certain executives, including named executive officers, by 20% and our CEO by 25%.

Fourth Quarter Results

Net income for the fourth quarter of fiscal year 2020 was $5.1 million, or $0.17 per diluted share, compared to net income for the fourth quarter of fiscal year 2019 of $29.5 million, or $0.91 per diluted share.  On a non-GAAP basis, adjusted net income for the fourth quarter of fiscal year 2020 was $5.9 million, or $0.20 per diluted share, which excludes a loss on extinguishment of debt.   This compares to adjusted net income for the fourth quarter of fiscal year 2019 of $31.0 million, or $0.96 per diluted share, which excludes a charge related to an increase in our indirect tax audit reserve.

Retail Segment Fourth Quarter Results

Retail revenues were $315.3 million for the three months ended January 31, 2020 compared to $338.9 million for the three months ended January 31, 2019, a decrease of $23.6 million or 7.0%.  The decrease in retail revenue was primarily driven by a decrease in same store sales of 13.3%, partially offset by new store growth of 7.6%.  The decrease in same store sales was a result of a combination of significant price deflation for premium large screen televisions and an increase in production by second- and third-tier manufacturers, which has made cash purchases of large screen televisions more accessible to our core customer, and negatively impacted same store sales during the three months ended January 31, 2020.  In addition, underwriting adjustments made during the year ended January 31, 2020 further negatively impacted same store sales.

For the three months ended January 31, 2020 and January 31, 2019, retail segment operating income was $35.7 million and $54.7 million, respectively.  On a non-GAAP basis, adjusted retail segment operating income for the three months ended January 31, 2020 was $35.7 million.  On a non-GAAP basis, adjusted retail segment operating income for the three months ended January 31, 2019 was $56.7 million, after excluding a charge related to an increase in our indirect tax audit reserve.

The following table presents net sales and changes in net sales by category:

 Three Months Ended January 31,     Same Store
(dollars in thousands)2020 % of Total 2019 % of Total Change % Change % Change
Furniture and mattress$94,042  29.8% $100,289  29.6% $(6,247) (6.2)% (12.7)%
Home appliance93,452  29.7  83,573  24.7  9,879  11.8  3.5 
Consumer electronics69,995  22.2  91,571  27.0  (21,576) (23.6) (29.0)
Home office20,804  6.6  25,811  7.6  (5,007) (19.4) (23.3)
Other4,875  1.5  4,165  1.2  710  17.0  11.4 
Product sales283,168  89.8  305,409  90.1  (22,241) (7.3) (13.6)
Repair service agreement commissions (1)28,848  9.2  29,824  8.9  (976) (3.3) (10.6)
Service revenues3,056  1.0  3,496  1.0  (440) (12.6)  
Total net sales$315,072  100.0% $338,729  100.0% $(23,657) (7.0)% (13.3)%
  1. The total change in sales of repair service agreement commissions includes retrospective commissions, which are not reflected in the change in same store sales.

Credit Segment Fourth Quarter Results

Credit revenues were $97.7 million for the three months ended January 31, 2020 compared to $94.1 million for the three months ended January 31, 2019, an increase of $3.6 million or 3.8%.  The increase in credit revenue was due to a 1.3% increase in the average outstanding balance of the customer accounts receivable portfolio offset by a decrease in the portfolio yield rate to 21.5% from 21.6% for the comparative period. The total customer accounts receivable portfolio balance was $1.60 billion at January 31, 2020 compared to $1.59 billion at January 31, 2019, an increase of 0.8%. In addition, insurance income contributed to an increase in credit revenue over the comparative period primarily due to an increase in insurance retrospective income.

Provision for bad debts increased to $69.3 million for the three months ended January 31, 2020 compared to $55.4 million for the three months ended January 31, 2019, an increase of $13.9 million.  The increase was driven by a greater increase in the allowance for bad debts during the three months ended January 31, 2020 compared to the three months ended January 31, 2019, and by a year-over-year increase in net charge-offs of $4.1 million. The increase in the allowance for bad debts for the three months ended January 31, 2020 was primarily driven by a year-over-year increase in the incurred loss rate, first payment default and delinquency rates compared to the three months ended January 31, 2019, partially offset by an increase in customer recovery rate.

Credit segment operating loss was $12.3 million for the three months ended January 31, 2020, compared to an operating loss of $0.9 million for the three months ended January 31, 2019.

Additional information on the credit portfolio and its performance may be found in the Customer Accounts Receivable Portfolio Statistics table included within this press release and in the Company’s Form 10-K for the year ended January 31, 2020, to be filed with the Securities and Exchange Commission on April 14, 2020.

Share Repurchase Program

On May 30, 2019 our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $75.0 million of our outstanding common stock. The stock repurchase program expires on May 30, 2020. During the three months ended January 31, 2020, we repurchased 348,776 shares of our common stock at an average weighted cost per share of $20.70 for an aggregate amount of $7.2 million.

Showroom and Facilities Update

The Company has opened two new Conn’s HomePlus® stores during the first quarter of fiscal year 2021, bringing the total store count to 139 in 14 states.  During fiscal year 2021, the Company plans to open between 6 and 8 new stores (including the two already opened) in existing states to leverage current infrastructure.

Liquidity and Capital Resources

As of January 31, 2020, the Company had $416.8 million of immediately available borrowing capacity under its $650.0 million revolving credit facility.  The Company also had $5.5 million of unrestricted cash available for use.

On March 18, 2020, the Company completed the borrowing of an additional $275.0 million under its $650.0 million Revolving Credit Facility as a precautionary measure to increase its cash position and maintain financial flexibility in response to the COVID-19 pandemic.  See Part II, Item 8., in Note 18, Subsequent Events, of the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the annual period ended January 31, 2020 for additional details.

Restatement of Third Quarter Fiscal Year 2020 Financial Statements

As a result of the operation of the Company’s internal controls over financial reporting in connection with the preparation of the Company’s Form 10-K for the year ended January 31, 2020, to be filed with the Securities and Exchange Commission on April 14, 2020 (the “Fiscal Year 2020 Form 10-K”), the Company’s management became aware that the Company’s historical condensed consolidated interim financial statements for the three and nine month periods ended October 31, 2019 (the “Non-Reliance Periods”) contained errors in its calculation and reporting of finance charges and other revenues and provision for bad debts (the “Restated Financial Data”) resulting from an error in its allowance for bad debts and uncollectible interest related to the implementation of its new loan management system. As a result, the Company will restate the Restated Financial Data in its condensed consolidated interim financial statements for the Non-Reliance Periods in the Fiscal Year 2020 Form 10-K. The condensed consolidated cash flow statement for the nine month Non-Reliance Period was not impacted by the errors.

The correction of these errors reduces finance charges and other revenues in the condensed consolidated statements of income for the Non-Reliance Periods by $1.6 million and increases provision for bad debts for the Non-Reliance Periods by $3.3 million.  Those changes have the following effects on the condensed consolidated balance sheets and the condensed consolidated statement of stockholders’ equity as of the end of the Non-Reliance Periods: customer accounts receivable, net of allowances, decreases by $4.9 million, income taxes receivable increases by $0.9 million and deferred income taxes increases by $0.3 million, resulting in a decrease in each of total assets, total stockholders’ equity and total liabilities and stockholders’ equity of approximately $3.7 million. As will be further described in the Fiscal Year 2020 Form 10-K, the Company has substantially completed changes to internal processes to reduce the likelihood of similar errors occurring in future periods.  However, control weaknesses are not considered remediated until new internal controls have been operational for a period of time, are tested, and management concludes that these controls are operating effectively.

The following tables present the effects this restatement had on the reported condensed consolidated interim financial statements for the Non-Reliance Periods:

Statements of Income     
(dollars in thousands, except per share amounts)Three Months Ended October 31, 2019
As Previously ReportedQ3 CorrectionsRestated
Finance charges and other revenues$97,586  $(1,581) $96,005 
Total revenues377,708  (1,581) 376,127 
Provision for bad debts42,586  3,339  45,925 
Operating income35,224  (4,920) 30,304 
Income before taxes20,173  (4,920) 15,253 
Net income$15,143  $(3,674) $11,469 
Earnings per share:     
Basic$0.52  $(0.13) $0.39 
Diluted$0.51  $(0.12) $0.39 
      
 Nine Months Ended October 31, 2019
 As Previously ReportedQ3 CorrectionsRestated
Finance charges and other revenues$284,116  $(1,581) $282,535 
Total revenues1,132,279  (1,581) 1,130,698 
Provision for bad debts132,368  3,339  135,707 
Operating income116,017  (4,920) 111,097 
Income before taxes72,073  (4,920) 67,153 
Net income$54,626  $(3,674) $50,952 
Earnings per share:     
Basic$1.77  $(0.12) $1.65 
Diluted$1.74  $(0.12) $1.62 
      
Balance Sheet     
 October 31, 2019
 As Previously ReportedQ3 CorrectionsRestated
Customer accounts receivable, net of allowances$666,922  $(4,920) $662,002 
Income taxes receivable1,688  912  2,600 
Total current assets$1,047,752  $(4,008) $1,043,744 
Deferred income taxes22,908  334  23,242 
Total assets$2,156,825  $(3,674) $2,153,151 
Total stockholders’ equity$630,377  $(3,674) $626,703 
Total liabilities and stockholders’ equity$2,156,825  $(3,674) $2,153,151 


Conference Call Information

The Company will host a conference call on April 14, 2020, at 10 a.m. CT / 11 a.m. ET, to discuss its three months ended January 31, 2020 financial results.  Participants can join the call by dialing 877-451-6152 or 201-389-0879.  The conference call will also be broadcast simultaneously via webcast on a listen-only basis.  A link to the earnings release, webcast and fourth quarter fiscal year 2020 conference call presentation will be available at ir.conns.com.

Replay of the telephonic call can be accessed through April 21, 2020 by dialing 844-512-2921 or 412-317-6671 and Conference ID:  13699463.

About Conn’s, Inc.

Conn’s is a specialty retailer currently operating 139 retail locations in Alabama, Arizona, Colorado, Georgia, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia.  The Company’s primary product categories include:

  • Furniture and mattress, including furniture and related accessories for the living room, dining room and bedroom, as well as both traditional and specialty mattresses; 
  • Home appliance, including refrigerators, freezers, washers, dryers, dishwashers and ranges;  
  • Consumer electronics, including LED, OLED, QLED, 4K Ultra HD, 8K and smart televisions, gaming products and home theater and portable audio equipment; and
  • Home office, including computers, printers and accessories.

Additionally, Conn’s offers a variety of products on a seasonal basis.  Unlike many of its competitors, Conn’s provides flexible in-house credit options for its customers in addition to third-party financing programs and third-party lease-to-own payment plans.

This press release contains forward-looking statements within the meaning of the federal securities laws, including but not limited to, the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Such forward-looking statements include information concerning our future financial performance, business strategy, plans, goals and objectives. Statements containing the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should,” “predict,” “will,” “potential,” or the negative of such terms or other similar expressions are generally forward-looking in nature and not historical facts. Such forward-looking statements are based on our current expectations. We can give no assurance that such statements will prove to be correct, and actual results may differ materially. A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by our forward-looking statements, including, but not limited to: general economic conditions impacting our customers or potential customers; our ability to execute periodic securitizations of future originated customer loans on favorable terms; our ability to continue existing customer financing programs or to offer new customer financing programs; changes in the delinquency status of our credit portfolio; unfavorable developments in ongoing litigation; increased regulatory oversight; higher than anticipated net charge-offs in the credit portfolio; the success of our planned opening of new stores; technological and market developments and sales trends for our major product offerings; our ability to manage effectively the selection of our major product offerings; our ability to protect against cyber-attacks or data security breaches and to protect the integrity and security of individually identifiable data of our customers and employees; our ability to fund our operations, capital expenditures, debt repayment and expansion from cash flows from operations, borrowings from our Revolving Credit Facility, and proceeds from accessing debt or equity markets; the effects of epidemics or pandemics, including the COVID-19 outbreak; the impact of the restatement and correction of the Company’s previously issued financial statements; the identified weakness in the Company’s internal control over financial reporting and the Company’s ability to remediate that material weakness; the initiation of legal or regulatory proceedings with respect to the restatement and corrections; the adverse effects on the Company’s business, results of operations, financial condition and stock price as a result of the restatement and correction process; 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, 2020 and other reports filed with the Securities and Exchange Commission. If one or more of these or other risks or uncertainties materialize (or the consequences of such a development changes), or should our underlying assumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We disclaim any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise, or to provide periodic updates or guidance. All forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.

CONN-G

S.M. Berger & Company
Andrew Berger (216) 464-6400


CONN’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands, except per share amounts)

    
    
       
        
        
        
 Three Months Ended
January 31,

 Year Ended
January 31,

 2020 2019 2020 2019
Revenues:               
Total net sales$315,072  $338,731  $1,163,235  $1,194,674 
Finance charges and other revenues97,916  94,251  380,451  355,139 
Total revenues412,988  432,982  1,543,686  1,549,813 
Costs and expenses:       
Cost of goods sold188,038  195,033  697,784  702,135 
Selling, general and administrative expense132,018  126,613  503,024  480,561 
Provision for bad debts69,510  55,627  205,217  198,082 
Charges and credits  1,943  3,142  7,780 
Total costs and expenses389,566  379,216  1,409,167  1,388,558 
Operating income23,422  53,766  134,519  161,255 
Interest expense15,163  15,220  59,107  62,704 
Loss on extinguishment of debt1,094    1,094  1,773 
Income before income taxes7,165  38,546  74,318  96,778 
Provision for income taxes2,113  9,070  18,314  22,929 
Net income$5,052  $29,476  $56,004  $73,849 
Earnings per share:       
Basic$0.18  $0.93  $1.85  $2.33 
Diluted$0.17  $0.91  $1.82  $2.28 
Weighted average common shares outstanding:       
Basic28,720,508  31,763,676  30,275,662  31,668,370 
Diluted29,276,167  32,388,111  30,814,775  32,374,375 



CONN’S, INC. AND SUBSIDIARIES
RETAIL SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)

 Three Months Ended
January 31,
 Year Ended
January 31,
 2020 2019 2020 2019
Revenues:                
Product sales$283,168  $305,411  $1,042,424  $1,078,635 
Repair service agreement commissions28,848  29,824  106,997  101,928 
Service revenues3,056  3,496  13,814  14,111 
Total net sales315,072  338,731  1,163,235  1,194,674 
Other revenues208  156  810  447 
Total revenues315,280  338,887  1,164,045  1,195,121 
Costs and expenses:       
Cost of goods sold188,038  195,033  697,784  702,135 
Selling, general and administrative expense91,234  86,979  346,108  328,628 
Provision for bad debts260  220  905  1,009 
Charges and credits  1,943  1,933  2,980 
Total costs and expenses279,532  284,175  1,046,730  1,034,752 
Operating income$35,748  $54,712  $117,315  $160,369 
Retail gross margin40.3% 42.4% 40.0% 41.2%
Selling, general and administrative expense as percent of revenues28.9% 25.7% 29.7% 27.5%
Operating margin11.3% 16.1% 10.1% 13.4%
Store count:       
Beginning of period137  121  123  116 
Opened  2  14  7 
End of period137  123  137  123 



CONN’S, INC. AND SUBSIDIARIES
CREDIT SEGMENT FINANCIAL INFORMATION
(unaudited)
(dollars in thousands)

 Three Months Ended
January 31,
 Year Ended
January 31,
 2020 2019 2020 2019
Revenues:               
Finance charges and other revenues$97,708  $94,095  $379,641  $354,692 
Costs and expenses:       
Selling, general and administrative expense40,784  39,634  156,916  151,933 
Provision for bad debts69,250  55,407  204,312  197,073 
Charges and credits    1,209  4,800 
Total costs and expenses110,034  95,041  362,437  353,806 
Operating income (loss)(12,326) (946) 17,204  886 
Interest expense15,163  15,220  59,107  62,704 
Loss on extinguishment of debt1,094    1,094  1,773 
Loss before income taxes$(28,583) $(16,166) $(42,997) $(63,591)
Selling, general and administrative expense as percent of revenues41.7% 42.1% 41.3% 42.8%
Selling, general and administrative expense as percent of average outstanding customer accounts receivable balance (annualized)10.2% 10.1% 10.0% 10.0%
Operating margin(12.6)% (1.0)% 4.5% 0.2%



CONN’S, INC. AND SUBSIDIARIES
CUSTOMER ACCOUNTS RECEIVABLE PORTFOLIO STATISTICS
(unaudited)

 January 31,
 2020 2019
Weighted average credit score of outstanding balances (1)591  593 
Average outstanding customer balance$2,734  $2,677 
Balances 60+ days past due as a percentage of total customer portfolio carrying value (2)(3)(6)12.5% 9.5%
Re-aged balance as a percentage of total customer portfolio carrying value (2)(3)(4)(5)29.4% 25.7%
Carrying value of account balances re-aged more than six months (in thousands) (3)$112,410  $94,404 
Allowance for bad debts and uncollectible interest as a percentage of total customer accounts receivable portfolio balance14.6% 13.5%
Percent of total customer accounts receivable portfolio balance represented by no-interest option receivables17.7% 22.9%


 Three Months Ended
January 31,
 Year Ended
January 31,
 2020 2019 2020 2019
Total applications processed360,338  358,938  1,235,712  1,221,262 
Weighted average origination credit score of sales financed (1)606  608  608  609 
Percent of total applications approved and utilized27.0% 28.3% 27.0% 29.6%
Average income of credit customer at origination$46,000  $46,300  $45,800  $44,800 
Percent of retail sales paid for by:       
In-house financing, including down payments received66.7% 70.1% 67.6% 70.1%
Third-party financing18.9% 15.7% 17.8% 15.7%
Third-party lease-to-own option6.6% 8.1% 7.0% 7.5%
 92.2% 93.9% 92.4% 93.3%
  1. Credit scores exclude non-scored accounts.
  2. Accounts that become delinquent after being re-aged are included in both the delinquency and re-aged amounts.
  3. Carrying value reflects the total customer accounts receivable portfolio balance, net of deferred fees and origination costs, the allowance for no-interest option credit programs and the allowance for uncollectible interest.
  4. First time re-ages related to customers affected by Hurricane Harvey within FEMA-designated disaster areas included in the re-aged balance as of January 31, 2020 and January 31, 2019 were 0.6% and 1.7%, respectively, of the total customer portfolio carrying value.
  5. First time re-ages related to customers affected by Tropical Storm Imelda within FEMA-designated disaster areas included in the re-aged balance as of January 31, 2020 were 0.4% of the total customer portfolio carrying value.
  6. Increase in delinquency was primarily driven by underwriting adjustments made earlier in the year, an increase in new customers and difficulties in collections efforts related to the implementation of the Company’s new loan management system.


CONN’S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)

 January 31,
 2020 2019
Assets   
Current Assets:   
Cash and cash equivalents$5,485  $5,912 
Restricted cash75,370  59,025 
Customer accounts receivable, net of allowances673,742  652,769 
Other accounts receivable68,753  67,078 
Inventories219,756  220,034 
Income taxes receivable4,315  407 
Prepaid expenses and other current assets11,445  9,169 
Total current assets1,058,866  1,014,394 
Long-term portion of customer accounts receivable, net of allowances663,761  686,344 
Operating lease right-of-use assets242,457   
Property and equipment, net173,031  148,983 
Deferred income taxes18,599  27,535 
Other assets12,055  7,651 
Total assets$2,168,769  $1,884,907 
Liabilities and Stockholders’ Equity   
Current liabilities:   
Current maturities of debt and capital lease obligations$605  $54,109 
Accounts payable48,554  71,118 
Accrued expenses63,090  81,433 
Operating lease liability - current35,390   
Other current liabilities14,631  30,908 
Total current liabilities162,270  237,568 
Deferred rent  93,127 
Operating lease liability - non current329,081   
Long-term debt and capital lease obligations1,025,535  901,222 
Other long-term liabilities24,703  33,015 
Total liabilities1,541,589  1,264,932 
Stockholders’ equity627,180  619,975 
Total liabilities and stockholders’ equity$2,168,769  $1,884,907 



CONN’S, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS
(unaudited)
(dollars in thousands, except per share amounts)

Basis for presentation of non-GAAP disclosures:

To supplement the consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the Company also provides the following non-GAAP financial measures: adjusted retail segment operating income, adjusted retail segment operating margin, adjusted credit segment operating income (loss), adjusted credit segment operating margin, adjusted net income, adjusted net income per diluted share, adjusted EBITDA and adjusted EBITDA margin.  These non-GAAP financial measures are not meant to be considered as a substitute for, or superior to, comparable GAAP measures and should be considered in addition to results presented in accordance with GAAP.  They are intended to provide additional insight into our operations and the factors and trends affecting the business.  Management believes these non-GAAP financial measures are useful to financial statement readers because (1) they allow for greater transparency with respect to key metrics we use in our financial and operational decision making, (2) they are used by some of our institutional investors and the analyst community to help them analyze our operating results and (3) in the case of adjusted EBITDA, it is used for management incentive programs.

RETAIL SEGMENT ADJUSTED OPERATING INCOME AND RETAIL SEGMENT ADJUSTED OPERATING MARGIN

 Three Months Ended
January 31,
 Year Ended
January 31, 
        
 2020 2019 2020 2019 
Retail segment operating income, as reported$35,748  $54,712  $117,315  $160,369 
Adjustments:               
Store and facility closure and relocation costs(1)    1,933   
Securities related matter and other legal fees (2)      300 
Indirect tax audit reserve (3)  1,943    1,943 
Employee severance (4)      737 
Retail segment operating income, as adjusted$35,748  $56,655  $119,248  $163,349 
Retail segment total revenues$315,280  $338,887  $1,164,045  $1,195,121 
Retail segment operating margin:       
As reported11.3% 16.1% 10.1% 13.4%
As adjusted11.3% 16.7% 10.2% 13.7%
  1. Represents impairments from the exiting of certain leases upon the relocation of three distribution centers into one facility, the gain from the sale of a cross-dock and from increased sublease income related to the consolidation of our corporate headquarters during the year ended January 31, 2020.
  2. Represents costs related to contingency reserves for legal matters.
  3. Represents charges related to increases in our indirect tax audit reserve primarily related to the period from fiscal year 2008 to fiscal year 2016.
  4. Represents severance costs related to a change in the executive management team.

CREDIT SEGMENT ADJUSTED OPERATING INCOME (LOSS) AND CREDIT SEGMENT ADJUSTED OPERATING MARGIN

 Three Months Ended
January 31,

 Year Ended
January 31,

 2020
 2019
 2020
 2019
Credit segment operating income (loss), as reported$(12,326) $(946) $17,204  $886 
Adjustments:       
Write-off of software costs (1)    1,209   
Legal judgment (2)      4,800 
Credit segment operating income (loss), as adjusted$(12,326) $(946) $18,413  $5,686 
Credit segment total revenues$97,708  $94,095  $379,641  $354,692 
Credit segment operating margin:       
As reported(12.6)% (1.0)% 4.5% 0.2%
As adjusted(12.6)% (1.0)% 4.9% 1.6%
  1. Represents impairments of software costs for a loan management system that was abandoned during the year ended January 31, 2020 related to the implementation of a new loan management system.
  2. Represents costs related to the TF LoanCo (“TFL”) judgment. See Part II, Item 8., in Note 4, Charges and Credits, of the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020 for additional details of the TFL judgment.

ADJUSTED NET INCOME AND ADJUSTED NET INCOME PER DILUTED SHARE

 Three Months Ended
January 31,
 Year Ended
January 31,
 2020 2019 2020 2019
Net income, as reported$5,052  $29,476  $56,004  $73,849 
Adjustments:       
Store and facility closure and relocation costs(1)    1,933   
Legal judgment, securities related matter and other legal fees (2)      5,100 
Indirect tax audit reserve (3)  1,943    1,943 
Employee severance (4)      737 
Write-off of software costs (5)    1,209   
Loss on extinguishment of debt (6)1,094    1,094  1,773 
Tax impact of adjustments (7)(246) (435) (951) (2,161)
Net income, as adjusted$5,900  $30,984  $59,289  $81,241 
Weighted average common shares outstanding - Diluted29,276,167  32,388,111  30,814,775  32,374,375 
Diluted earnings per share:       
As reported$0.17  $0.91  $1.82  $2.28 
As adjusted$0.20  $0.96  $1.92  $2.51 
  1. Represents impairments from the exiting of certain leases upon the relocation of three distribution centers into one facility,  the gain from the sale of a cross-dock and from increased sublease income related to the consolidation of our corporate headquarters during the year ended January 31, 2020.
  2. Represents costs related to the TFL judgment and costs related to contingency reserves for legal matters.
  3. Represents charges related to increases in our indirect tax audit reserve primarily related to the period from fiscal year 2008 to fiscal year 2016.
  4. Represents severance costs related to a change in the executive management team.
  5. Represents impairments of software costs for a loan management system that was abandoned during the year ended January 31, 2020 related to the implementation of a new loan management system.
  6. Represents costs incurred for the early retirement of our debt.
  7. Represents the tax effect of the adjusted items based on the applicable statutory tax rate.

ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN

 Three Months Ended
January 31,
 Year Ended
January 31,

        
 2020 2019 2020 2019
Net income$5,052  $29,476  $56,004  $73,849 
Adjustments:       
Depreciation expense9,670  8,322  36,841  31,584 
Interest expense15,163  15,220  59,107  62,704 
Provision for income taxes2,113  9,070  18,314  22,929 
Store and facility closure and relocation costs(1)    1,933   
Employee severance (2)      737 
Legal judgment, securities related matter and other legal fees (3)      5,100 
Loss on extinguishment of debt (4)1,094    1,094  1,773 
Write-off of software costs (5)    1,209   
Indirect tax audit reserve (6)  1,943    1,943 
Stock-based compensation expense2,698  3,703  12,550  12,217 
Adjusted EBITDA$35,790  $67,734  $187,052  $212,836 
Total revenues$412,988  $432,982  $1,543,686  $1,549,813 
        
Operating Margin5.7% 12.4% 8.7% 10.4%
Adjusted EBITDA Margin8.7% 15.6% 12.1% 13.7%
  1. Represents impairments from the exiting of certain leases upon the relocation of three distribution centers into one facility, the gain from the sale of a cross-dock and from increased sublease income related to the consolidation of our corporate headquarters during the year ended January 31, 2020.
  2. Represents severance costs related to a change in the executive management team.
  3. Represents costs related to the TFL judgment and costs related to contingency reserves for legal matters.
  4. Represents costs incurred for the early retirement of our debt.
  5. Represents impairments of software costs for a loan management system that was abandoned during the year ended January 31, 2020 related to the implementation of a new loan management system.
  6. Represents charges related to increases in our indirect tax audit reserve primarily related to the period from fiscal year 2008 to fiscal year 2016.