10-Q 1 conn-20220430.htm 10-Q conn-20220430
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C.  20549 
FORM 10-Q
(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 30, 2022
 or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from to .
Commission File Number 001-34956
CONN’S, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1672840
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2445 Technology Forest Blvd., Suite 800, The Woodlands, TX
77381
(Address of principal executive offices)
(Zip Code)
 Registrant’s telephone number, including area code:  (936) 230-5899
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareCONNNASDAQ Global Select Market
Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ý  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
ý
Non-accelerated filer
o
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of May 25, 2022: 
Class Outstanding
Common stock, $0.01 par value per share 23,787,948


CONN’S, INC. AND SUBSIDIARIES

FORM 10-Q
FOR THE FISCAL QUARTER ENDED APRIL 30, 2022

TABLE OF CONTENTS
Page No.
PART I.FINANCIAL INFORMATION 
Item 1.Financial Statements 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II.OTHER INFORMATION 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
This Quarterly Report on Form 10-Q includes our trademarks such as “Conn’s,” “Conn’s HomePlus,” “YE$ YOU’RE APPROVED,” “YES Money,” “YE$ Money,” “YES Lease,” “YE$ Lease,” and our logos, which are protected under applicable intellectual property laws and are the property of Conn’s, Inc.  This report also contains trademarks, service marks, trade names and copyrights of other companies, which are the property of their respective owners.  Solely for convenience, trademarks and trade names referred to in this Quarterly Report may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names.
References to “we,” “our,” “us,” “the Company,” “Conn’s” or “CONN” refer to Conn’s, Inc. and, as apparent from the context, its consolidated bankruptcy-remote variable-interest entities (“VIEs”), and its wholly-owned subsidiaries.



PART I.    FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS
CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
April 30,
2022
January 31,
2022
Assets(unaudited)
Current assets:
Cash and cash equivalents$10,456 $7,707 
Restricted cash (includes VIE balances of $30,868 and $29,872, respectively)
32,926 31,930 
Customer accounts receivable, net of allowances (includes VIE balances of $183,709 and $212,259, respectively)
434,639 455,787 
Other accounts receivable58,911 63,055 
Inventories255,648 246,826 
Income taxes receivable4,501 6,745 
Prepaid expenses and other current assets10,361 8,756 
Total current assets807,442 820,806 
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $114,619 and $167,905, respectively)
407,072 432,431 
Property and equipment, net208,619 192,763 
Operating lease right-of-use assets253,100 256,267 
Other assets51,500 52,199 
Total assets$1,727,733 $1,754,466 
Liabilities and Stockholders’ Equity  
Current liabilities:  
Current finance lease obligations$882 $889 
Accounts payable71,659 74,705 
Accrued compensation and related expenses19,490 36,677 
Accrued expenses78,813 73,035 
Operating lease liability - current56,546 54,534 
Income taxes payable3,378 3,007 
Deferred revenues and other credits14,494 15,569 
Total current liabilities245,262 258,416 
Operating lease liability - non current325,771 330,439 
Long-term debt and finance lease obligations (includes VIE balances of $266,357 and $367,925, respectively)
572,350 522,149 
Deferred tax liability7,116 7,351 
Other long-term liabilities22,843 21,292 
Total liabilities1,173,342 1,139,647 
Commitments and contingencies (Note 5)
Stockholders’ equity:  
Preferred stock ($0.01 par value, 1,000,000 shares authorized; none issued or outstanding)
  
Common stock ($0.01 par value, 100,000,000 shares authorized; 33,192,277 and 33,015,053 shares issued, respectively)
332 330 
Treasury stock (at cost; 9,404,920 shares and 6,088,920 shares issued, respectively)
(193,370)(125,145)
Additional paid-in capital141,993 140,419 
Retained earnings605,436 599,215 
Total stockholders’ equity554,391 614,819 
Total liabilities and stockholders’ equity
$1,727,733 $1,754,466 
See notes to condensed consolidated financial statements.

1

CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and dollars in thousands, except per share amounts)
Three Months Ended
April 30,
 20222021
Revenues:
Product sales$249,973 $269,211 
Repair service agreement commissions19,836 19,131 
Service revenues2,455 2,954 
Total net sales272,264 291,296 
Finance charges and other revenues67,557 72,406 
Total revenues339,821 363,702 
Costs and expenses:
Cost of goods sold178,382 184,879 
Selling, general and administrative expense132,783 126,049 
Provision (benefit) for bad debts14,731 (17,136)
Total costs and expenses325,896 293,792 
Operating income13,925 69,910 
Interest expense5,521 9,204 
Loss on extinguishment of debt 1,218 
Income before income taxes8,404 59,488 
Provision for income taxes2,183 14,090 
Net income $6,221 $45,398 
Income per share:
Basic$0.25 $1.55 
Diluted$0.25 $1.52 
Weighted average common shares outstanding:
Basic24,801,987 29,324,052 
Diluted25,313,613 29,881,407 
See notes to condensed consolidated financial statements.

2

CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited and in thousands, except for number of shares)
Additional Paid-in Capital
Common StockRetained EarningsTreasury Stock
SharesAmountSharesAmountTotal
Balance January 31, 202233,015,053 $330 $140,419 $599,215 (6,088,920)$(125,145)$614,819 
Exercise of options and vesting of restricted stock, net of withholding tax163,032 2 (2,029)— — — (2,027)
Issuance of common stock under Employee Stock Purchase Plan14,192 — 194 — — — 194 
Stock-based compensation— — 3,409 — — — 3,409 
Common stock repurchase— — — — (3,316,000)(68,225)(68,225)
Net income— — — 6,221 — — 6,221 
Balance April 30, 202233,192,277 $332 $141,993 $605,436 (9,404,920)$(193,370)$554,391 
Additional Paid-in Capital
Common StockRetained EarningsTreasury Stock
SharesAmountSharesAmountTotal
Balance January 31, 202132,711,623 $327 $132,108 $491,010 (3,485,441)$(66,290)$557,155 
Exercise of options and vesting of restricted stock, net of withholding tax115,159 1 (999)— — — (998)
Issuance of common stock under Employee Stock Purchase Plan18,240  180 — — — 180 
Stock-based compensation— — 2,039 — — — 2,039 
Net income— — — 45,398 — — 45,398 
Balance April 30, 202132,845,022 $328 $133,328 $536,408 (3,485,441)$(66,290)$603,774 
See notes to condensed consolidated financial statements.

3

CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Three Months Ended April 30,
 20222021
Cash flows from operating activities:
Net income$6,221 $45,398 
Adjustments to reconcile net income to net cash from operating activities:  
Depreciation11,429 11,342 
Change in right-of-use asset9,601 8,335 
Amortization of debt issuance costs1,440 1,963 
Provision (benefit) for bad debts and uncollectible interest24,072 (9,612)
Stock-based compensation expense3,409 2,039 
Deferred income taxes(235)9,448 
Loss on extinguishment of debt 1,218 
Loss on disposal of property and equipment310 265 
Tenant improvement allowances received from landlords5,062 7,605 
Change in operating assets and liabilities:  
Customer accounts receivable22,706 57,563 
Other accounts receivables3,874 11,449 
Inventories(8,822)(6,438)
Other assets(1,342)(1,880)
Accounts payable(3,046)(4,421)
Accrued expenses(16,501)2,529 
Operating leases(14,153)(12,777)
Income taxes2,424 4,591 
Deferred revenues and other credits667 2,156 
Net cash provided by operating activities47,116 130,773 
Cash flows from investing activities:  
Purchases of property and equipment(18,957)(9,457)
Net cash used in investing activities(18,957)(9,457)
Cash flows from financing activities:  
Proceeds from issuance of asset-backed notes 62,900 
Payments on asset-backed notes(102,639)(134,504)
Borrowings under revolving credit facility376,386 397,151 
Payments on revolving credit facility(224,386)(302,651)
Payments of debt issuance costs and amendment fees(22)(3,940)
Proceeds from stock issued under employee benefit plans194 180 
Tax payments associated with equity-based compensation transactions(2,029)(998)
Payment from extinguishment of debt (141,278)
Purchase of treasury stock(71,696) 
Other(222)(221)
Net cash used in financing activities(24,414)(123,361)
Net change in cash, cash equivalents and restricted cash3,745 (2,045)
Cash, cash equivalents and restricted cash, beginning of period39,637 60,260 
Cash, cash equivalents and restricted cash, end of period$43,382 $58,215 
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new finance lease liabilities$1 $44 
Right-of-use assets obtained in exchange for new operating lease liabilities$11,055 $5,209 
Property and equipment purchases not yet paid$17,696 $5,646 
Accrual for purchase of treasury stock$(3,471)$ 
Supplemental cash flow data:
Cash interest paid$3,613 $6,734 
Cash income taxes paid (refunded), net$ $51 
See notes to condensed consolidated financial statements.

4

CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.     Summary of Significant Accounting Policies 
Business. Conn’s, Inc., a Delaware corporation, is a holding company with no independent assets or operations other than its investments in its subsidiaries. References to “we,” “our,” “us,” “the Company,” “Conn’s” or “CONN” refer to Conn’s, Inc. and, as apparent from the context, its subsidiaries. Conn’s is a leading specialty retailer that offers a broad selection of quality, branded durable consumer goods and related services in addition to proprietary credit solutions for its core credit-constrained consumers. We operate an integrated and scalable business through our retail stores and website. Our complementary product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points. Our credit offering provides financing solutions to a large, under-served population of credit-constrained consumers who typically have limited credit alternatives.
We operate two reportable segments: retail and credit. Our retail stores bear the “Conn’s HomePlus” name with all of our stores providing the same products and services to a common customer group. Our stores follow the same procedures and methods in managing their operations. Our retail business and credit business are operated independently from each other. The credit segment is dedicated to providing short- and medium-term financing to our retail customers. The retail segment is not involved in credit approval decisions or collection efforts. Our management evaluates performance and allocates resources based on the operating results of the retail and credit segments.
Basis of Presentation. The accompanying unaudited Condensed Consolidated Financial Statements of Conn’s, Inc. and its wholly-owned subsidiaries, including its Variable Interest Entities (“VIEs”), have been prepared by management in accordance with U.S. generally accepted accounting principles (“GAAP”) and prevailing industry practice for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The condensed consolidated financial position, results of operations and cash flows for these interim periods are not necessarily indicative of the results that may be expected in future periods. The balance sheet at January 31, 2022 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, 2022 (the “2022 Form 10-K”) filed with the United States Securities and Exchange Commission (the “SEC”) on March 29, 2022.
Fiscal Year. Our fiscal year ends on January 31. References to a fiscal year refer to the calendar year in which the fiscal year ends.
Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of Conn’s, Inc. and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. 
Variable Interest Entities. VIEs are consolidated if the Company is the primary beneficiary. The primary beneficiary of a VIE is the party that has (i) the power to direct the activities that most significantly impact the performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
We securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. We retain the servicing of the securitized portfolio and have a variable interest in each corresponding VIE by holding the residual equity. We have determined that we are the primary beneficiary of each respective VIE because (i) our servicing responsibilities for the securitized portfolio give us the power to direct the activities that most significantly impact the performance of the VIE and (ii) our variable interest in the VIE gives us the obligation to absorb losses and the right to receive residual returns that potentially could be significant. As a result, we consolidate the respective VIEs within our Condensed Consolidated Financial Statements.
Refer to Note 4, Debt and Financing Lease Obligations, and Note 6, Variable Interest Entities, for additional information.
Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ, even significantly, from these estimates. Management evaluates its estimates and related assumptions regularly, including those related to the allowance for doubtful accounts and allowances for no-interest option credit programs, which are particularly sensitive given the size of our customer portfolio balance.
Cash and Cash Equivalents. As of April 30, 2022 and January 31, 2022, cash and cash equivalents included cash and credit card deposits in transit. Credit card deposits in transit included in cash and cash equivalents were $7.8 million and $5.2 million as of April 30, 2022 and January 31, 2022, respectively. 

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Cash. The restricted cash balance as of April 30, 2022 and January 31, 2022 includes $26.7 million and $25.7 million, respectively, of cash we collected as servicer on the securitized receivables that was subsequently remitted to the VIEs and $4.2 million and $4.2 million, respectively, of cash held by the VIEs as additional collateral for the asset-backed notes.
Customer Accounts Receivable. Customer accounts receivable reported in the Condensed Consolidated Balance Sheet includes total receivables managed, including both those transferred to the VIEs and those not transferred to the VIEs. Customer accounts receivable are recognized at the time the customer takes possession of the product. Expected lifetime losses on customer accounts receivable are recognized upon origination through an allowance for credit losses account that is deducted from the customer account receivable balance and presented net. Customer accounts receivable include the net of unamortized deferred fees charged to customers and origination costs. Customer receivables are considered delinquent if a payment has not been received on the scheduled due date. Accounts that are delinquent more than 209 days as of the end of a month are charged-off against the allowance for doubtful accounts along with interest accrued subsequent to the last payment.
In an effort to mitigate losses on our accounts receivable, we may make loan modifications to a borrower experiencing financial difficulty. The loan modifications are intended to maximize net cash flow after expenses and avoid the need to exercise legal remedies available to us. We may extend or “re-age” a portion of our customer accounts, which involves modifying the payment terms to defer a portion of the cash payments due. Our re-aging of customer accounts does not change the interest rate or the total principal amount due from the customer and typically does not reduce the monthly contractual payments. To a much lesser extent, we may provide the customer the ability to refinance their account, which typically does not change the interest rate or the total principal amount due from the customer but does reduce the monthly contractual payments and extend the term. We consider accounts that have been re-aged in excess of three months or refinanced as Troubled Debt Restructurings (“TDR” or “Restructured Accounts”).
Interest Income on Customer Accounts Receivable. Interest income, which includes interest income and amortization of deferred fees and origination costs, is recorded using the interest method and is reflected in finance charges and other revenues. Typically, interest income is recorded until the customer account is paid off or charged-off and we provide an allowance for estimated uncollectible interest. We reserve for interest that is more than 60 days past due. Any contractual interest income received from customers in excess of the interest income calculated using the interest method is recorded as deferred revenue on our balance sheets. At April 30, 2022 and January 31, 2022, there was $8.5 million and $8.6 million, respectively, of deferred interest included in deferred revenues and other credits and other long-term liabilities. The deferred interest will ultimately be brought into income as the accounts pay off or charge-off.
We offer a 12-month no-interest option program. If the customer is delinquent in making a scheduled monthly payment or does not repay the principal in full by the end of the no-interest option program period (grace periods are provided), the account does not qualify for the no-interest provision and none of the interest earned is waived. Interest income is recognized based on estimated accrued interest earned to date on all no-interest option finance programs with an offsetting reserve for those customers expected to satisfy the requirements of the program based on our historical experience.
We recognize interest income on TDR accounts using the interest income method, which requires reporting interest income equal to the increase in the net carrying amount of the loan attributable to the passage of time. Cash proceeds and other adjustments are applied to the net carrying amount such that it equals the present value of expected future cash flows.
We place accounts in non-accrual status when legally required. Payments received on non-accrual loans are applied to principal and reduce the balance of the loan. At April 30, 2022 and January 31, 2022, the carrying value of customer accounts receivable in non-accrual status was $6.6 million and $5.9 million, respectively. At April 30, 2022 and January 31, 2022, the carrying value of customer accounts receivable that were past due 90 days or more and still accruing interest totaled $80.8 million and $84.1 million, respectively. At April 30, 2022 and January 31, 2022, the carrying value of customer accounts receivable in a bankruptcy status that were less than 60 days past due of $6.1 million and $5.5 million, respectively, were included within the customer receivables balance carried in non-accrual status.
Allowance for Doubtful Accounts. The determination of the amount of the allowance for credit losses is, by nature, highly complex and subjective. Future events that are inherently uncertain could result in material changes to the level of the allowance for credit losses. General economic conditions, changes to state or federal regulations and a variety of other factors that affect the ability of borrowers to service their debts or our ability to collect will impact the future performance of the portfolio.
We establish an allowance for credit losses, including estimated uncollectible interest, to cover expected credit losses on our customer accounts receivable resulting from the failure of customers to make contractual payments. Our customer accounts receivable portfolio balance consists of a large number of relatively small, homogeneous accounts. None of our accounts are large enough to warrant individual evaluation for impairment. The allowance for credit losses is measured on a collective (pool) basis where similar risk characteristics exist. The allowance for credit losses is determined for each pool and added to the pool’s carrying amount to establish a new amortized cost basis.

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We use a risk-based, pool-level segmentation framework to calculate the expected loss rate. This framework is based on our historical gross charge-off history. In addition to adjusted historical gross charge-off rates, estimates of post-charge-off recoveries, including cash payments from customers, sales tax recoveries from taxing jurisdictions, and payments received under credit insurance and repair service agreement (“RSA”) policies are also considered. We also consider forward-looking economic forecasts based on a statistical analysis of economic factors (specifically, forecast of unemployment rates over the reasonable and supportable forecasting period). To the extent that situations and trends arise which are not captured in our model, management will layer on additional qualitative adjustments.
Pursuant to ASC 326 requirements, the Company uses a 24-month reasonable and supportable forecast period for the customer accounts receivable portfolio. We estimate losses beyond the 24-month forecast period based on historic loss rates experienced over the life of our historic loan portfolio by loan pool type. We revisit our measurement methodology and assumption annually, or more frequently if circumstances warrant.
As of April 30, 2022 and January 31, 2022, the balance of allowance for doubtful accounts and uncollectible interest for non-TDR customer receivables was $152.4 million and $165.0 million, respectively. As of April 30, 2022 and January 31, 2022, the amount included in the allowance for doubtful accounts associated with principal and interest on TDR accounts was $37.2 million and $44.0 million, respectively.
Debt Issuance Costs. Costs that are direct and incremental to debt issuance are deferred and amortized to interest expense using the effective interest method over the expected life of the debt. All other costs related to debt issuance are expensed as incurred. We present debt issuance costs associated with long-term debt as a reduction of the carrying amount of the debt. Unamortized costs related to the Revolving Credit Facility, as defined in Note 4, Debt and Financing Lease Obligations, are included in other assets on our Condensed Consolidated Balance Sheet and were $4.7 million and $5.1 million as of April 30, 2022 and January 31, 2022, respectively.
Loss on Extinguishment. During the three month period ended April 30, 2021, we incurred a loss of $1.0 million related to the retirement of the remaining $141.2 million aggregate principal amount of our 7.25% Senior Notes due 2022 and a loss of $0.2 million related to the amendment of our Fifth Amended and Restated Loan and Security Agreement.
Income Taxes. For the three months ended April 30, 2022 and 2021, we utilized the estimated annual effective tax rate based on our estimated fiscal year 2023 and 2022 pre-tax income, respectively, in determining income tax expense.
Provision for income taxes for interim periods is based on an estimated annual income tax rate, adjusted for discrete tax items. As a result, our interim effective tax rates may vary significantly from the statutory tax rate and the annual effective tax rate.
For the three months ended April 30, 2022 and 2021, the effective tax rate was 26.0% and 23.7%, respectively. The primary factor affecting the increase in our effective tax rate for the three months ended April 30, 2022 was the impact of increased state taxes.
Stock-based Compensation. During the three months ended April 30, 2022, the Company granted performance stock awards (“PSUs”) and restricted stock awards (“RSUs”). The awards had a combined aggregate grant date fair value of $14.7 million. The PSUs will vest in fiscal year 2025, if at all, upon certification by the Compensation Committee of the Board of Directors of satisfaction of certain total stockholder return performance conditions over the three fiscal years commencing with fiscal year 2023. The RSUs will vest ratably, over periods of three years from the date of grant.
Stock-based compensation expense is recorded, net of actual forfeitures, for share-based compensation awards over the requisite service period using the straight-line method. For equity-classified share-based compensation awards, expense is recognized based on the grant-date fair value. For stock option grants, we use the Black-Scholes model to determine fair value. For grants of restricted stock units, the fair value of the grant is the market value of our stock at the date of issuance. For grants of performance-based restricted stock units, the fair value is the market value of our stock at the date of issuance adjusted for the market condition using a Monte Carlo model.

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the RSUs and PSUs granted during the three months ended April 30, 2022 and 2021: 
Three Months Ended
April 30,
20222021
RSUs (1)
394,380 340,644 
PSUs (2)
176,509 152,349 
Total stock awards granted570,889 492,993 
Aggregate grant date fair value (in thousands)$14,691 $8,288 
(1)The RSUs issued during the three months ended April 30, 2022 and 2021 are scheduled to vest ratably over periods of three years to four years from the date of grant.
(2)The weighted-average assumptions used in the Monte Carlo model for the PSUs granted during the three months ended April 30, 2022 included expected volatility of 78.0%-80.0%, an expected term of 3 years and risk-free interest rate of 1.39%-2.58%.  No dividend yield was included in the weighted-average assumptions for the PSUs granted during the three months ended April 30, 2022. The weighted-average assumptions used in the Monte Carlo model for the PSUs granted during the three months ended April 30, 2021 included expected volatility of 83.0%, an expected term of 3 years and risk-free interest rate of 0.17%. No dividend yield was included in the weighted average assumptions for the PSUs granted during the three months ended April 30, 2021.
For the three months ended April 30, 2022 and 2021, stock-based compensation expense was $3.4 million and $2.0 million, respectively.
Earnings per Share. Basic earnings per share for a particular period is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effects of any stock options, RSUs and PSUs, which are calculated using the treasury-stock method. The following table sets forth the shares outstanding for the earnings per share calculations: 
 Three Months Ended
April 30,
20222021
Weighted-average common shares outstanding - Basic24,801,987 29,324,052 
Dilutive effect of stock options, PSUs and RSUs511,626 557,355 
Weighted-average common shares outstanding - Diluted25,313,613 29,881,407 
For the three months ended April 30, 2022 and 2021, the weighted average number of stock options, RSUs and PSUs not included in the calculation due to their anti-dilutive effect, was 901,546 and 1,033,650, respectively.
Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to subjectivity associated with the inputs to fair value measurements as follows:  
Level 1 – Inputs represent unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (for example, quoted market prices for similar assets or liabilities in active markets or quoted market prices for identical assets or liabilities in markets not considered to be active, inputs other than quoted prices that are observable for the asset or liability, or market-corroborated inputs).
Level 3 – Inputs that are not observable from objective sources such as our internally developed assumptions used in pricing an asset or liability (for example, an estimate of future cash flows used in our internally developed present value of future cash flows model that underlies the fair-value measurement).
In determining fair value, we use observable market data when available, or models that incorporate observable market data. When we are required to measure fair value and there is not a market-observable price for the asset or liability or for a similar asset or liability, we use the cost or income approach depending on the quality of information available to support management’s assumptions. The cost approach is based on management’s best estimate of the current asset replacement cost. The income approach is based on management’s best assumptions regarding expectations of future net cash flows and discounts the expected cash flows using a commensurate risk-adjusted discount rate. Such evaluations involve significant judgment, and the results are based on expected future events or conditions such as sales prices, economic and regulatory climates, and other

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

factors, most of which are often outside of management’s control. However, we believe assumptions used reflect a market participant’s view of long-term prices, costs, and other factors and are consistent with assumptions used in our business plans and investment decisions.
In arriving at fair-value estimates, we use relevant observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement is characterized based on the lowest level of input that is significant to the fair-value measurement.
The fair value of cash and cash equivalents, restricted cash and accounts payable approximate their carrying amounts because of the short maturity of these instruments. The fair value of customer accounts receivable, determined using a Level 3 discounted cash flow analysis, approximates their carrying value, net of the allowance for doubtful accounts. The fair value of our Revolving Credit Facility approximates carrying value based on the current borrowing rate for similar types of borrowing arrangements. At April 30, 2022, the fair value of the asset backed notes was $262.8 million as compared to the carrying value of $268.2 million and was determined using Level 2 inputs based on inactive trading activity.
Deferred Revenue. Deferred revenue related to contracts with customers consists of deferred customer deposits and deferred RSA administration fees. During the three months ended April 30, 2022, we recognized $6.0 million of revenue for customer deposits deferred as of January 31, 2022. During the three months ended April 30, 2022, we recognized $0.9 million of revenue for RSA administrative fees deferred as of January 31, 2022.
Recent Accounting Pronouncements Adopted.
Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, an update intended to simplify various aspects related to accounting for income taxes. This guidance removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This accounting standards update became effective for us in the first quarter of fiscal year 2022. The adoption did not have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements Yet to Be Adopted.
Reference Rate Reform on Financial Reporting. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, an update that provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), Scope, to clarify the scope of the guidance and reduce potential diversity in practice. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. We expect to adopt ASC 2020-04 and ASC 2021-01 upon transition from LIBOR, prior to December 31, 2022. We do not expect the adoption to have a material impact on our consolidated financial statements.
Financial Instruments - Troubled Debt Restructurings and Vintage Disclosures. In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, an update that eliminate the accounting guidance for troubled debt restructurings (TDRs) by creditors in ASC 310-40 while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in ASC 310-20 to determine whether a modification results in a new loan or a continuation of an existing loan. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and should be applied prospectively, with an option to apply a modified retrospective transition approach for the recognition and measurement of TDRs. We expect to adopt ASU 2022-02 during the first quarter of fiscal year 2024. We do not expect the adoption to have a material impact on our consolidated financial statements.


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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.    Customer Accounts Receivable
Customer accounts receivable consisted of the following:
(in thousands)April 30,
2022
January 31,
2022
Customer accounts receivable (1)
$1,062,478 $1,130,395 
Deferred fees and origination costs, net(12,573)(13,503)
Allowance for no-interest option credit programs(18,599)(19,654)
Allowance for uncollectible interest(14,329)(15,124)
Carrying value of customer accounts receivable1,016,977 1,082,114 
Allowance for credit losses (2)
(175,266)(193,896)
Carrying value of customer accounts receivable, net of allowance for credit losses841,711 888,218 
  Short-term portion of customer accounts receivable, net(434,639)(455,787)
Long-term customer accounts receivable, net$407,072 $432,431 
Carrying Value
(in thousands)April 30,
2022
January 31,
2022
Customer accounts receivable 60+ days past due (3)
$105,194 $112,858 
Re-aged customer accounts receivable (4)
167,131 181,996 
Restructured customer accounts receivable (5)
86,642 99,557 
(1)As of April 30, 2022 and January 31, 2022, the customer accounts receivable balance included $20.2 million and $22.3 million, respectively, in interest receivable. Net of the allowance for uncollectible interest, interest receivable outstanding as of April 30, 2022 and January 31, 2022 was $5.9 million and $7.2 million, respectively.
(2)Our current methodology to estimate expected credit losses utilized macroeconomic forecasts as of April 30, 2022 and January 31, 2022, which incorporated the continued estimated impact of the global COVID-19 outbreak on the U.S. economy. Our forecast utilized economic projections from a major rating service reflecting a decrease in unemployment rates.
(3)As of April 30, 2022 and January 31, 2022, the carrying value of customer accounts receivable past due one day or greater was $276.8 million and $299.0 million, respectively. These amounts include the 60+ days past due balances shown above.
(4)The re-aged carrying value as of April 30, 2022 and January 31, 2022 includes $42.8 million and $48.6 million, respectively, in carrying value that are both 60+ days past due and re-aged.
(5)The restructured carrying value as of April 30, 2022 and January 31, 2022 includes $23.6 million and $29.0 million, respectively, in carrying value that are both 60+ days past due and restructured.

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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The allowance for credit losses included in the current and long-term portion of customer accounts receivable, net as shown in the Condensed Consolidated Balance Sheet were as follows:
(in thousands)April 30, 2022January 31, 2022
Customer accounts receivable - current$536,191 $564,825 
Allowance for credit losses for customer accounts receivable - current(101,552)(109,038)
Customer accounts receivable, net of allowances434,639 455,787 
Customer accounts receivable - non current495,115 532,413 
Allowance for credit losses for customer accounts receivable - non current(88,043)(99,982)
Long-term portion of customer accounts receivable, net of allowances407,072 432,431 
Total customer accounts receivable, net$841,711 $888,218 
The following presents the activity in our allowance for credit losses and uncollectible interest for customer receivables: 
 Three Months Ended April 30, 2022Three Months Ended April 30, 2021
(in thousands)Customer
Accounts
Receivable
 
Restructured
Accounts
 
 
Total
Customer
Accounts
Receivable
 
Restructured
Accounts
 
 
Total
Allowance at beginning of period$165,044 $43,976 $209,020 $219,739 $78,298 $298,037 
Provision (benefit) for credit loss expense (1)
18,298 5,412 23,710 (16,197)6,567 (9,630)
Principal charge-offs (2)
(31,622)(12,470)(44,092)(34,794)(22,464)(57,258)
Interest charge-offs(7,656)(3,017)(10,673)(9,873)(6,375)(16,248)
Recoveries (2)
8,341 3,289 11,630 7,486 4,833 12,319 
Allowance at end of period$152,405 $37,190 $189,595 $166,361 $60,859 $227,220 
Average total customer portfolio balance$997,104 $97,641 $1,094,745 $998,226 $172,812 $1,171,038 
(1)Includes provision for uncollectible interest, which is included in finance charges and other revenues, and changes in expected future recoveries.
(2)Charge-offs include the principal amount of losses (excluding accrued and unpaid interest). Recoveries include the principal amount collected during the period for previously charged-off balances. Net charge-offs are calculated as the net of principal charge-offs and recoveries.
We manage our customer accounts receivable portfolio using delinquency as a key credit quality indicator. The following table presents the delinquency distribution of the carrying value of customer accounts receivable by year of origination. The information is presented as of April 30, 2022:
(in thousands)
Delinquency Bucket2022202120202019PriorTotal% of Total
Current$183,520 $389,657 $124,279 $37,707 $5,062 $740,225 72.8 %
1-3014,666 71,581 31,740 15,168 3,122 136,277 13.4 %
31-603,138 18,038 8,206 4,724 1,175 35,281 3.5 %
61-901,219 13,058 5,427 3,417 908 24,029 2.3 %
91+ 44,693 20,038 12,851 3,583 81,165 8.0 %
Total$202,543 $537,027 $189,690 $73,867 $13,850 $1,016,977 100.0 %


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CONN’S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3.     Finance Charges and Other Revenues 
Finance charges and other revenues consisted of the following:
Three Months Ended
April 30,
(in thousands)20222021
Interest income and fees$62,714 $67,679 
Insurance income4,572 4,518 
Other revenues271 209 
Total finance charges and other revenues$67,557 $72,406 
Interest income and fees and insurance income are derived from the credit segment operations, whereas other revenues are derived from the retail segment operations. Insurance income is comprised of sales commissions from third-party insurance companies that are recognized when coverage is sold and retrospective income paid by the insurance carrier if insurance claims are less than earned premiums.
During the three months ended April 30, 2022 and 2021, interest income and fees reflected provisions for uncollectible interest of $9.3 million and $7.5 million, respectively. The amounts included in interest income and fees related to TDR accounts for the three months ended April 30, 2022 and 2021 were $4.1 million and $7.5 million, respectively.

4.     Debt and Financing Lease Obligations 
Debt and financing lease obligations consisted of the following:
(in thousands)April 30,
2022
January 31,
2022
Revolving Credit Facility$301,000 $149,000 
2020-A VIE Asset-backed Class A Notes3,281 9,184 
2020-A VIE Asset-backed Class B Notes6,553 18,342 
2020-A VIE Asset-backed Class C Notes6,322 17,695 
2021-A VIE Asset-backed Class A Notes122,019 195,595 
2021-A VIE Asset-backed Class B Notes66,090 66,090 
2021-A VIE Asset-backed Class C Notes63,890 63,890 
Financing lease obligations5,874 6,115 
Total debt and financing lease obligations575,029 525,911 
Less:
Deferred debt issuance costs(1,797)(2,873)
Current maturities of long-term debt and financing lease obligations(882)(889)
Long-term debt and financing lease obligations$572,350 $522,149 
Asset-backed Notes. From time to time, we securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. In turn, the VIEs issue asset-backed notes secured by the transferred customer accounts receivables and restricted cash held by the VIEs.
Under the terms of the securitization transactions, all cash collections and other cash proceeds of the customer receivables go first to the servicer and the holders of issued notes, and then to us as the holder of non-issued notes, if any, and residual equity. We retain the servicing of the securitized portfolios and receive a monthly fee of 4.75% (annualized) based on the outstanding balance of the securitized receivables. In addition, we, rather than the VIEs, retain all credit insurance income together with certain recoveries related to credit insurance and RSAs on charge-offs of the securitized receivables, which are reflected as a reduction to net charge-offs on a consolidated basis.
The asset-backed notes were offered and sold to qualified institutional buyers pursuant to the exemptions from registration provided by Rule 144A under the Securities Act of 1933. If an event of default were to occur under the indenture that governs the respective asset-backed notes, the payment of the outstanding amounts may be accelerated, in which event the cash proceeds of the receivables that otherwise might be released to the residual equity holder would instead be directed entirely toward repayment of the asset-backed notes, or if the receivables are liquidated, all liquidation proceeds could be directed solely

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

to repayment of the asset-backed notes as governed by the respective terms of the asset-backed notes. The holders of the asset-backed notes have no recourse to assets outside of the VIEs. Events of default include, but are not limited to, failure to make required payments on the asset-backed notes or specified bankruptcy-related events.
The asset-backed notes outstanding as of April 30, 2022 consisted of the following:
(dollars in thousands)
Asset-Backed NotesOriginal Principal Amount
Original Net Proceeds (1)
Current Principal AmountIssuance DateMaturity DateContractual Interest Rate
Effective Interest Rate (2)
2020-A Class A Notes$174,900 $173,716 $3,281 10/16/20206/16/20251.71%3.31%
2020-A Class B Notes65,200 64,754 6,553 10/16/20206/16/20254.27%5.58%
2020-A Class C Notes62,900 62,535 6,322 2/24/20216/16/20254.20%6.26%
2021-A Class A Notes247,830 246,152 122,019 11/23/20215/15/20261.05%2.98%
2021-A Class B Notes66,090 65,635 66,090 11/23/20215/15/20262.87%3.40%
2021-A Class C Notes63,890 63,450 63,890 11/23/20215/15/20264.59%5.06%
Total$680,810 $676,242 $268,155 
(1)After giving effect to debt issuance costs.
(2)For the three months ended April 30, 2022, and inclusive of the impact of changes in timing of actual and expected cash flows.
Revolving Credit Facility. On March 29, 2021, Conn’s, Inc. and certain of its subsidiaries (the “Borrowers”) entered into the Fifth Amended and Restated Loan and Security Agreement (the “Fifth Amended and Restated Loan Agreement”), with certain lenders, which provides for a $650.0 million asset-based revolving credit facility (as amended, the “Revolving Credit Facility”) under which credit availability is subject to a borrowing base and a maturity date of March 29, 2025.
The Fifth Amended and Restated Loan Agreement, among other things, permits borrowings under the Letter of Credit Subline (as defined in the Fifth Amended and Restated Loan Agreement) that exceed the cap of $40 million to $100 million, solely at the discretion of the lenders for such amounts in excess of $40 million. The obligations under the Revolving Credit Facility are secured by substantially all assets of the Company, excluding the assets of the VIEs. As of April 30, 2022, under our Revolving Credit Facility, we had immediately available borrowing capacity of $206.1 million, net of standby letters of credit issued of $22.3 million, and an additional $120.6 million that may become available if the balance of eligible customer receivables and total eligible inventory balances increases.
Loans under the Revolving Credit Facility bear interest, at our option, at a rate of LIBOR plus a margin ranging from 2.50% to 3.25% per annum (depending on a pricing grid determined by our total leverage ratio) or the alternate base rate plus a margin ranging from 1.50% to 2.25% per annum (depending on a pricing grid determined by our total leverage ratio). The alternate base rate is a rate per annum equal to the greatest of the prime rate, the federal funds effective rate plus 0.5%, or LIBOR for a 30-day interest period plus 1.0%. We also pay an unused fee on the portion of the commitments that is available for future borrowings or letters of credit at a rate ranging from 0.25% to 0.50% per annum, depending on the average outstanding balance and letters of credit of the Revolving Credit Facility in the immediately preceding quarter. The weighted-average interest rate on borrowings outstanding and including unused line fees under the Revolving Credit Facility was 3.4% for the three months ended April 30, 2022.
The Revolving Credit Facility places restrictions on our ability to incur additional indebtedness, grant liens on assets, make distributions on equity interests, dispose of assets, make loans, pay other indebtedness, engage in mergers, and other matters. The Revolving Credit Facility restricts our ability to make dividends and distributions unless no event of default exists and a liquidity test is satisfied. Subsidiaries of the Company may pay dividends and make distributions to the Company and other obligors under the Revolving Credit Facility without restriction. As of April 30, 2022, we were restricted from making distributions in excess of $79.7 million as a result of the Revolving Credit Facility distribution and payment restrictions. The Revolving Credit Facility contains customary default provisions, which, if triggered, could result in acceleration of all amounts outstanding under the Revolving Credit Facility.

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Debt Covenants. We were in compliance with our debt covenants at April 30, 2022. A summary of the significant financial covenants that govern our Revolving Credit Facility compared to our actual compliance status at April 30, 2022 is presented below: 
 ActualRequired Minimum/ Maximum
Interest Coverage Ratio for the quarter must equal or exceed minimum7.14:1.001.00:1.00
Interest Coverage Ratio for the trailing two quarters must equal or exceed minimum7.73:1.001.50:1.00
Leverage Ratio must not exceed maximum1.80:1.004.50:1.00
ABS Excluded Leverage Ratio must not exceed maximum1.37:1.002.50:1.00
Capital Expenditures, net, must not exceed maximum$42.8 million$100.0 million
All capitalized terms in the above table are defined in the Revolving Credit Facility and may or may not match directly to the financial statement captions in this document. The covenants are calculated quarterly, except for capital expenditures, which is calculated for a period of four consecutive fiscal quarters, as of the end of each fiscal quarter.

5.     Contingencies
Securities Litigation. On April 2, 2018, MicroCapital Fund, LP, MicroCapital Fund, Ltd., and MicroCapital LLC (collectively, “MicroCapital”) filed a lawsuit against us and certain of our former executive officers in the U.S. District Court for the Southern District of Texas, Cause No. 4:18-CV-01020 (the “MicroCapital Action”). The plaintiffs in this action allege that the defendants made false and misleading statements or failed to disclose material facts about our credit and underwriting practices, accounting and internal controls. Plaintiffs allege violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, Texas and Connecticut common law fraud, and Texas common law negligent misrepresentation against all defendants; as well as violations of section 20A of the Securities Exchange Act of 1934; and Connecticut common law negligent misrepresentation against certain defendants arising from plaintiffs’ purchase of Conn’s, Inc. securities between April 3, 2013 and February 20, 2014. The complaint does not specify the amount of damages sought.
The Court previously stayed the MicroCapital Action pending resolution of other outstanding litigation (In re Conn’s Inc. Sec. Litig., Cause No. 14-CV-00548 (S.D. Tex.) (the “Consolidated Securities Action”)), which was settled in October 2018. After that settlement, the stay was lifted, and the defendants filed a motion to dismiss plaintiff’s complaint in the MicroCapital Action on November 6, 2018. On July 26, 2019, the magistrate judge issued a report recommending that defendants’ motion to dismiss the complaint be granted in part and denied in part. On September 25, 2019, the district court adopted the magistrate judge’s report, which permitted MicroCapital to file an amended complaint, which MicroCapital filed on October 30, 2019. Defendants filed their answer to the amended complaint on November 27, 2019.
The parties reached a settlement agreement in this matter on October 28, 2021, that resolves the claims against the defendants in their entirety, and the case was dismissed with prejudice on November 18, 2021. Neither the Company nor any individual defendant admitted any wrongdoing.
Derivative Litigation. On December 1, 2014, an alleged shareholder, purportedly on behalf of the Company, filed a shareholder derivative lawsuit in federal court against us and certain of our current and former directors and former executive officers captioned 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 (S.D. Tex.) (the "Hack Litigation"). 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 Conn’s. 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 (S.D. Tex.), was filed, asserting substantially similar claims against the same defendants. It was consolidated with the Hack Litigation (collectively, the "Federal Derivative Actions").
The parties have reached a settlement in principle to fully resolve the Federal Derivative Actions. Judge Ellison approved the settlement and entered a Final Order and Judgement dismissing the derivative action with prejudice on March 15, 2022 (the "Final Order"). Neither the Company nor any individual defendant admits any wrongdoing through the settlement agreement.
On April 7, 2022, State Court Plaintiff and Objector Richard Dohn, filed an appeal of the Final Order with the Fifth Circuit Court of Appeals (Hack v. Wright, No. 22-20177 (5th Cir.)). Dohn's opening brief was originally due on May 23, 2022, but following Dohn's request for extension filed on May 10, 2022, is currently due on June 23, 2022. Plaintiffs and Defendants in

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the Federal Derivative Action will have 30 days from the date Dohn's opening brief is filed to file their respective response briefs.
In addition to the Federal Derivative Actions, a derivative action was filed in Texas state court on January 27, 2015, captioned Richard A. Dohn v. Wright, et al., Cause No. 2015-04405, in the 281st Judicial District Court, Harris County, Texas. This action makes substantially similar allegations to the Federal Derivative Actions against the same defendants. The parties agreed to stay this case during the Securities Litigation and Federal Derivative Actions. Counsel for Dohn attended the February 17, 2022 and March 15, 2022 settlement hearings in the Federal Derivative Actions and objected to the proposed settlement. Dohn has filed an appeal of the Final Order with the Fifth Circuit Court of Appeals, and on May 17, 2022, the court entered an agreed order staying the case pending the outcome of that appeal.
Prior to filing his lawsuit, another alleged shareholder, Robert J. Casey II (“Casey”), submitted a demand under Delaware law, which our Board of Directors refused. On May 19, 2016, Casey, purportedly on behalf of the Company, filed a second state court lawsuit against us and certain of our current and former directors and former executive officers in the 55th Judicial District Court, Harris County, Texas, captioned Casey, derivatively on behalf of Conn’s, Inc., v. Theodore M. Wright (former executive officer and former director), Michael J. Poppe (former executive officer), Brian Taylor (former executive officer), Bob L. Martin, Jon E.M. Jacoby (former director), Kelly M. Malson (former director), 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 Federal Derivative Actions. The complaint does not specify the amount of damages sought. Since April 2018, this case has been abated pending the resolution of related cases. In July 2021, the parties requested that the court extend the abatement pending further developments in the Federal Derivative Actions. The case currently remains abated.
Other than Casey, none of the plaintiffs in the other derivative actions made a demand on our Board of Directors prior to filing their respective lawsuits. The defendants in the two state court derivative actions intend to vigorously defend against these claims. It is not possible at this time to predict the timing or outcome of any unsettled litigation, and we cannot reasonably estimate the possible loss or range of possible loss from such claims.
We are involved in other routine litigation and claims, incidental to our business from time to time which, individually or in the aggregate, are not expected to have a material adverse effect on us. As required, we accrue estimates of the probable costs for the resolution of these matters. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. However, the results of these proceedings cannot be predicted with certainty, and changes in facts and circumstances could impact our estimate of reserves for litigation. The Company believes that any probable and reasonably estimable loss associated with the foregoing has been adequately reflected in the accompanying financial statements.

6.     Variable Interest Entities
From time to time, we securitize customer accounts receivables by transferring the receivables to various bankruptcy-remote VIEs. Under the terms of the respective securitization transactions, all cash collections and other cash proceeds of the customer receivables go first to the servicer and the holders of the asset-backed notes, and then to the residual equity holder. We retain the servicing of the securitized portfolio and receive a monthly fee of 4.75% (annualized) based on the outstanding balance of the securitized receivables, and we currently hold all of the residual equity. In addition, we, rather than the VIEs, will retain certain credit insurance income together with certain recoveries related to credit insurance and RSAs on charge-offs of the securitized receivables, which will continue to be reflected as a reduction of net charge-offs on a consolidated basis for as long as we consolidate the VIEs.
We consolidate VIEs when we determine that we are the primary beneficiary of these VIEs, we have the power to direct the activities that most significantly impact the performance of the VIEs and our obligation to absorb losses and the right to receive residual returns are significant.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the assets and liabilities held by the VIEs (for legal purposes, the assets and liabilities of the VIEs will remain distinct from Conn’s, Inc.):
(in thousands)April 30,
2022
January 31,
2022
Assets:
Restricted cash$30,868 $29,872 
Customer accounts receivable:
Customer accounts receivable348,651 463,411 
Restructured accounts33,179 29,621 
Allowance for uncollectible accounts(75,923)(97,560)
Allowance for no-interest option credit programs(4,087)(10,275)
Deferred fees and origination costs(3,492)(5,033)
Total customer accounts receivable, net298,328 380,164 
Total assets$329,196 $410,036 
Liabilities:
Accrued expenses$2,069 $2,638 
Other liabilities3,158 3,930 
Due to Conn’s, Inc., net1,775 12,755 
Long-term debt:
2020-A Class A Notes3,281 9,184 
2020-A Class B Notes6,553 18,342 
2020-A Class C Notes6,322 17,695 
2021-A Class A Notes122,019 195,595 
2021-A Class B Notes66,090 66,090 
2021-A Class C Notes63,890 63,890 
268,155 370,796 
Less: deferred debt issuance costs(1,798)(2,871)
Total debt266,357 367,925 
Total liabilities$273,359 $387,248 
The assets of the VIEs serve as collateral for the obligations of the VIEs. The holders of asset-backed notes have no recourse to assets outside of the respective VIEs.

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

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credit segment to reimburse the retail segment for expenses it incurs related to occupancy, personnel, advertising and other direct costs of the retail segment, which benefit the credit operations by sourcing credit customers and collecting payments. The reimbursement received by the retail segment from the credit segment is calculated using an annual rate of 2.5% times the average outstanding portfolio balance for each applicable period.
As of April 30, 2022, we operated retail stores in 15 states with no operations outside of the United States. No single customer accounts for more than 10% of our total revenues.
Financial information by segment is presented in the following tables:
 Three Months Ended April 30, 2022Three Months Ended April 30, 2021
(in thousands)RetailCreditTotalRetailCreditTotal
Revenues:
Furniture and mattress$88,094 $ $88,094 $94,491 $ $94,491 
Home appliance109,728  109,728 113,261  113,261 
Consumer electronics33,604  33,604 38,038  38,038 
Home office10,189  10,189 14,521  14,521 
Other8,358  8,358 8,900  8,900 
Product sales249,973  249,973 269,211  269,211 
Repair service agreement commissions19,836  19,836 19,131  19,131 
Service revenues2,455  2,455 2,954  2,954 
Total net sales272,264  272,264 291,296