
10.	Guarantor Financial Information

Conn's, Inc. is a holding company with no independent assets or operations other than its investments in its subsidiaries. The Senior Notes, which were issued by Conn's, Inc., are fully and unconditionally guaranteed on a joint and several senior unsecured basis by the Guarantors. As of July 31, 2017 and January 31, 2017, the direct or indirect subsidiaries of Conn's, Inc. that were not Guarantors (the "Non-Guarantor Subsidiaries") were the VIEs and minor subsidiaries. There are no restrictions under the Indenture on the ability of any of the Guarantors to transfer funds to Conn's, Inc. in the form of dividends or distributions.

The following financial information presents the condensed consolidated balance sheet, statement of operations, and statement of cash flows for Conn's, Inc. (the issuer of the Senior Notes), the Guarantors, and the Non-Guarantor Subsidiaries, together with certain eliminations. Investments in subsidiaries are accounted for by the parent company using the equity method for purposes of this presentation. Results of operations of subsidiaries are therefore reflected in the parent company's investment accounts and operations. The consolidated financial information includes financial data for:

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

(ii) Guarantors,

(iii) Non-Guarantor Subsidiaries, and

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

Condensed Consolidated Balance Sheet as of July 31, 2017.



(in thousands)	Conn's, Inc.		Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	35,018	$	—	$	—		$	35,018
Restricted cash	—		—		86,436		—			86,436
Customer accounts receivable, net of allowance	—		213,293		430,855		—			644,148
Other accounts receivable	—		59,401		—		—			59,401
Inventories	—		196,768		—		—			196,768
Other current assets	—		19,711		8,526		(12,354		)	15,883
Total current assets	—		524,191		525,817		(12,354		)	1,037,654
Investment in and advances to subsidiaries	673,953		205,738		—		(879,691		)	—
Long-term portion of customer accounts receivable, net of allowance	—		270,348		331,642		—			601,990
Property and equipment, net	—		154,788		—		—			154,788
Deferred income taxes	72,435		—		—		—			72,435
Other assets	—		8,196		—		—			8,196
Total assets	$	746,388	$	1,163,261	$	857,459	$	(892,045	)	$	1,875,063
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of capital lease obligations	$	—	$	906	$	—	$	—		$	906
Accounts payable	—		100,268		—		—			100,268
Accrued expenses	685		54,162		5,660		(3,828		)	56,679
Other current liabilities	—		25,335		4,146		(8,526		)	20,955
Total current liabilities	685		180,671		9,806		(12,354		)	178,808
Deferred rent	—		85,538		—		—			85,538
Long-term debt and capital lease obligations	220,426		204,534		635,760		—			1,060,720
Other long-term liabilities	—		18,565		6,155		—			24,720
Total liabilities	221,111		489,308		651,721		(12,354		)	1,349,786
Total stockholders' equity	525,277		673,953		205,738		(879,691		)	525,277
Total liabilities and stockholders' equity	$	746,388	$	1,163,261	$	857,459	$	(892,045	)	$	1,875,063

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

Condensed Consolidated Balance Sheet as of January 31, 2017.



(in thousands)	Conn's, Inc.		Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	23,566	$	—	$	—		$	23,566
Restricted cash	—		—		110,698		—			110,698
Customer accounts receivable, net of allowance	—		173,054		529,108		—			702,162
Other accounts receivable	—		69,286		—		—			69,286
Inventories	—		164,856		—		—			164,856
Other current assets	—		21,505		7,368		(11,768		)	17,105
Total current assets	—		452,267		647,174		(11,768		)	1,087,673
Investment in and advances to subsidiaries	678,149		220,107		—		(898,256		)	—
Long-term portion of customer accounts receivable, net of allowance	—		295,522		320,382		—			615,904
Property and equipment, net	—		159,202		—		—			159,202
Deferred income taxes	71,442		—		—		—			71,442
Other assets	—		6,913		—		—			6,913
Total assets	$	749,591	$	1,134,011	$	967,556	$	(910,024	)	$	1,941,134
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of capital lease obligations	$	—	$	849	$	—	$	—		$	849
Accounts payable	—		101,612		—		—			101,612
Accrued expenses	686		40,287		6,525		(4,399		)	43,099
Other current liabilities	—		25,230		3,961		(7,370		)	21,821
Total current liabilities	686		167,978		10,486		(11,769		)	167,381
Deferred rent	—		87,957		—		—			87,957
Long-term debt and capital lease obligations	219,768		179,044		745,581		—			1,144,393
Other long-term liabilities	—		20,883		2,730		—			23,613
Total liabilities	220,454		455,862		758,797		(11,769		)	1,423,344
Total stockholders' equity	529,137		678,149		208,759		(898,255		)	517,790
Total liabilities and stockholders' equity	$	749,591	$	1,134,011	$	967,556	$	(910,024	)	$	1,941,134

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

Condensed Consolidated Statement of Operations for the three months ended July 31, 2017.



(in thousands)	Conn's, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	286,413		$	—		$	—		$	286,413
Finance charges and other revenues	—			40,279			39,955			—			80,234
Servicing fee revenue	—			12,648			—			(12,648		)	—
Total revenues	—			339,340			39,955			(12,648		)	366,647
Costs and expenses:
Cost of goods sold	—			172,306			—			—			172,306
Selling, general and administrative expenses	—			111,455			12,825			(12,648		)	111,632
Provision for bad debts	—			25,418			24,031			—			49,449
Charges and credits	—			4,068			—			—			4,068
Total costs and expenses	—			313,247			36,856			(12,648		)	337,455
Operating income	—			26,093			3,099			—			29,192
Interest expense	4,443			743			14,853			—			20,039
Loss on extinguishment of debt	—			—			2,097			—			2,097
Income (loss) before income taxes	(4,443		)	25,350			(13,851		)	—			7,056
Provision (benefit) for income taxes	(1,967		)	12,124			(7,374		)	—			2,783
Net income (loss) before consolidation	$	(2,476	)	$	13,226		$	(6,477	)	$	—		$	4,273
Income (loss) from consolidated subsidiaries (after tax)	$	6,749		$	(6,477	)	$	—		$	(272	)	$	—
Consolidated net income (loss)	$	4,273		$	6,749		$	(6,477	)	$	(272	)	$	4,273

Condensed Consolidated Statement of Operations for the three months ended July 31, 2016.



(in thousands)	Conn's, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	331,999		$	—		$	—		$	331,999
Finance charges and other revenues	—			33,062			33,096			—			66,158
Servicing fee revenue	—			13,176			—			(13,176		)	—
Total revenues	—			378,237			33,096			(13,176		)	398,157
Costs and expenses:
Cost of goods sold	—			208,869			—			—			208,869
Selling, general and administrative expenses	—			119,846			13,176			(13,176		)	119,846
Provision for bad debts	—			20,830			39,366			—			60,196
Charges and credits	—			2,895			—			—			2,895
Total costs and expenses	—			352,440			52,542			(13,176		)	391,806
Operating income	—			25,797			(19,446		)	—			6,351
Interest expense	4,397			3,352			16,389			—			24,138
Income (loss) before income taxes	(4,397		)	22,445			(35,835		)	—			(17,787		)
Provision (benefit) for income taxes	(1,449		)	7,398			(11,812		)	—			(5,863		)
Net income (loss) before consolidation	$	(2,948	)	$	15,047		$	(24,023	)	$	—		$	(11,924	)
Income (loss) from consolidated subsidiaries (after tax)	$	(8,976	)	$	(24,023	)	$	—		$	32,999		$	—
Consolidated net income (loss)	$	(11,924	)	$	(8,976	)	$	(24,023	)	$	32,999		$	(11,924	)

Condensed Consolidated Statement of Operations for the six months ended July 31, 2017.



(in thousands)	Conn's, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	565,698		$	—		$	—		$	565,698
Finance charges and other revenues	—			77,077			79,698			—			156,775
Servicing fee revenue	—			27,832			—			(27,832		)	—
Total revenues	—			670,607			79,698			(27,832		)	722,473
Costs and expenses:
Cost of goods sold	—			344,256			—			—			344,256
Selling, general and administrative expenses	—			217,688			28,313			(27,832		)	218,169
Provision for bad debts	—			19,985			85,394			—			105,379
Charges and credits	—			5,295			—			—			5,295
Total costs and expenses	—			587,224			113,707			(27,832		)	673,099
Operating income	—			83,383			(34,009		)	—			49,374
Interest expense	8,886			2,521			32,640			—			44,047
Loss on extinguishment of debt	—			349			2,097			—			2,446
Income (loss) before income taxes	(8,886		)	80,513			(68,746		)	—			2,881
Provision (benefit) for income taxes	(3,664		)	33,200			(28,348		)	—			1,188
Net income (loss) before consolidation	$	(5,222	)	$	47,313		$	(40,398	)	$	—		$	1,693
Income (loss) from consolidated subsidiaries (after tax)	$	6,915		$	(40,398	)	$	—		$	33,483		$	—
Consolidated net income (loss)	$	1,693		$	6,915		$	(40,398	)	$	33,483		$	1,693

Condensed Consolidated Statement of Operations for the six months ended July 31, 2016.



(in thousands)	Conn's, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Total net sales	$	—		$	650,541		$	—		$	—		$	650,541
Finance charges and other revenues	—			63,234			73,495			—			136,729
Servicing fee revenue	—			30,311			—			(30,311		)	—
Total revenues	—			744,086			73,495			(30,311		)	787,270
Costs and expenses:
Cost of goods sold	—			413,335			—			—			413,335
Selling, general and administrative expenses	—			233,093			30,311			(30,311		)	233,093
Provision for bad debts	—			56,412			62,002			—			118,414
Charges and credits	—			3,421			—			—			3,421
Total costs and expenses	—			706,261			92,313			(30,311		)	768,263
Operating income	—			37,825			(18,818		)	—			19,007
Interest expense	8,843			6,620			34,571			—			50,034
Income (loss) before income taxes	(8,843		)	31,205			(53,389		)	—			(31,027		)
Provision (benefit) for income taxes	(2,666		)	9,408			(16,096		)	—			(9,354		)
Net income (loss) before consolidation	$	(6,177	)	$	21,797		$	(37,293	)	$	—		$	(21,673	)
Income (loss) from consolidated subsidiaries (after tax)	$	(15,496	)	$	(37,293	)	$	—		$	52,789		$	—
Consolidated net income (loss)	$	(21,673	)	$	(15,496	)	$	(37,293	)	$	52,789		$	(21,673	)

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



(in thousands)	Conn's, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(1,905	)	$	(388,785	)	$	481,231		$	—		$	90,541
Cash flows from investing activities:
Purchase of customer accounts receivables	—			—			(466,056		)	466,056			—
Sale of customer accounts receivables	—			466,056			—			(466,056		)	—
Purchase of property and equipment	—			(6,135		)	—			—			(6,135		)
Proceeds from sales of property	—			—			—			—			—
Net cash provided by (used in) investing activities	—			459,921			(466,056		)	—			(6,135		)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	—			—			469,814			—			469,814
Payments on asset-backed notes	—			(78,779		)	(504,520		)	—			(583,299		)
Changes in restricted cash balances	—			—			24,262			—			24,262
Borrowings from revolving credit facility	—			844,941			—			—			844,941
Payments on revolving credit facility	—			(822,441		)	—			—			(822,441		)
Payment of debt issuance costs and amendment fees	—			(2,864		)	(4,731		)	—			(7,595		)
Proceeds from stock issued under employee benefit plans	1,905			—			—			—			1,905
Other	—			(541		)	—			—			(541		)
Net cash provided by (used in) financing activities	1,905			(59,684		)	(15,175		)	—			(72,954		)
Net change in cash and cash equivalents	—			11,452			—			—			11,452
Cash and cash equivalents, beginning of period	—			23,566			—			—			23,566
Cash and cash equivalents, end of period	$	—		$	35,018		$	—		$	—		$	35,018

Condensed Consolidated Statement of Cash Flows for the six months ended July 31, 2016.



(in thousands)	Conn's, Inc.			Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(29,362	)	$	(383,337	)	$	544,638		$	—		$	131,939
Cash flows from investing activities:
Purchase of customer accounts receivables	—			—			(478,080		)	478,080			—
Sale of customer accounts receivables	—			478,080			—			(478,080		)	—
Purchase of property and equipment	—			(32,020		)	—			—			(32,020		)
Proceeds from sales of property	—			686			—			—			686
Net change in intercompany	28,743									(28,743		)	—
Net cash provided by (used in) investing activities	28,743			446,746			(478,080		)	(28,743		)	(31,334		)
Cash flows from financing activities:
Proceeds from issuance of asset-backed notes	—			—			493,540			—			493,540
Payments on asset-backed notes	—			—			(537,819		)	—			(537,819		)
Changes in restricted cash balances	—			—			(17,406		)	—			(17,406		)
Borrowings from revolving credit facility	—			405,378			—			—			405,378
Payments on revolving credit facility	—			(435,085		)	—			—			(435,085		)
Payment of debt issuance costs and amendment fees	—			(1,216		)	(4,873		)	—			(6,089		)
Proceeds from stock issued under employee benefit plans	618			—			—			—			618
Net change in intercompany	—			(28,743		)				28,743			—
Other	1			(462		)	—			—			(461		)
Net cash provided by (used in) financing activities	619			(60,128		)	(66,558		)	28,743			(97,324		)
Net change in cash and cash equivalents	—			3,281			—			—			3,281
Cash and cash equivalents, beginning of period	—			12,254			—			—			12,254
Cash and cash equivalents, end of period	$	—		$	15,535		$	—		$	—		$	15,535