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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 October 31, 2020
 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from to .
Commission File Number 001-34956
CONN’S, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1672840
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2445 Technology Forest Blvd., Suite 800,
The Woodlands, TX
77381
(Address of principal executive offices)
(Zip Code)
 Registrant’s telephone number, including area code:  (936) 230-5899
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each 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 ☒  No ☐
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 ☒  No ☐
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
Accelerated filer
Non-accelerated filer
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 ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of December 1, 2020: 
Class Outstanding
Common stock, $0.01 par value per share 29,203,187


Table of Contents
CONN’S, INC. AND SUBSIDIARIES

FORM 10-Q
FOR THE FISCAL QUARTER ENDED OCTOBER 31, 2020

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.

Explanatory Note
As previously disclosed in Note 17, Quarterly Information (Unaudited), in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020 (the “2020 Form 10-K”), we restated our audited consolidated financial statements for the three and nine month periods ended October 31, 2019 (the “Non-Reliance Periods”). Accordingly, the condensed consolidated financial statements for the Non-Reliance Periods included in this Form 10-Q have been restated as described in the 2020 Form 10-K. See also Note 1, Summary of Significant Accounting Policies, for further information on the impact of the restatement on the condensed consolidated financial statements for the Non-Reliance Periods.


Table of Contents
PART I.    FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS
CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and dollars in thousands, except per share amounts)
October 31,
2020
January 31,
2020
Assets
Current assets:
Cash and cash equivalents$107,822 $5,485 
Restricted cash (includes VIE balances of $76,438 and $73,214, respectively)
78,374 75,370 
Customer accounts receivable, net of allowances (includes VIE balances of $322,235 and $393,764, respectively)
489,841 673,742 
Other accounts receivable56,414 68,753 
Inventories216,161 219,756 
Income taxes receivable10,631 4,315 
Prepaid expenses and other current assets9,944 11,445 
Total current assets969,187 1,058,866 
Long-term portion of customer accounts receivable, net of allowances (includes VIE balances of $263,866 and $420,454, respectively)
444,352 663,761 
Property and equipment, net191,079 173,031 
Operating lease right-of-use assets269,770 242,457 
Deferred income taxes44,725 18,599 
Other assets14,343 12,055 
Total assets$1,933,456 $2,168,769 
Liabilities and Stockholders’ Equity  
Current liabilities:  
Current finance lease obligations$769 $605 
Accounts payable74,338 48,554 
Accrued compensation and related expenses23,673 10,795 
Accrued expenses66,518 52,295 
Operating lease liability - current37,663 35,390 
Income taxes payable1,036 2,394 
Deferred revenues and other credits12,765 12,237 
Total current liabilities216,762 162,270 
Operating lease liability - non current362,035 329,081 
Long-term debt and finance lease obligations (includes VIE balances of $570,991 and $768,121, respectively)
800,586 1,025,535 
Other long-term liabilities25,602 24,703 
Total liabilities1,404,985 1,541,589 
Commitments and contingencies
Stockholders’ equity:  
Preferred stock ($0.01 par value, 1,000,000 shares authorized; none issued or outstanding)
  
Common stock ($0.01 par value, 100,000,000 shares authorized; 32,645,472 and 32,125,055 shares issued, respectively)
326 321 
Treasury stock (at cost; 3,485,441 shares and 3,485,441 shares, respectively)
(66,290)(66,290)
Additional paid-in capital128,552 122,513 
Retained earnings465,883 570,636 
Total stockholders’ equity528,471 627,180 
Total liabilities and stockholders’ equity
$1,933,456 $2,168,769 
See notes to condensed consolidated financial statements.

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Table of Contents
CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and dollars in thousands, except per share amounts)
Three Months Ended
October 31,
Nine Months Ended
October 31,
 2020201920202019
Revenues:
Product sales$239,157 $250,233 $702,497 $759,256 
Repair service agreement commissions17,465 26,478 57,730 78,149 
Service revenues3,150 3,411 9,611 10,758 
Total net sales259,772 280,122 769,838 848,163 
Finance charges and other revenues74,386 96,005 248,396 282,535 
Total revenues334,158 376,127 1,018,234 1,130,698 
Costs and expenses:
Cost of goods sold160,378 170,453 484,015 509,746 
Selling, general and administrative expense122,158 125,608 350,443 371,006 
Provision for bad debts27,493 45,925 176,864 135,707 
Charges and credits 3,837 3,589 3,142 
Total costs and expenses310,029 345,823 1,014,911 1,019,601 
Operating income24,129 30,304 3,323 111,097 
Interest expense11,563 15,051 39,778 43,944 
Income (loss) before income taxes12,566 15,253 (36,455)67,153 
Provision (benefit) for income taxes5,147 3,784 (8,192)16,201 
Net income (loss)$7,419 $11,469 $(28,263)$50,952 
Income (loss) per share:
Basic$0.25 $0.39 $(0.97)$1.65 
Diluted$0.25 $0.39 $(0.97)$1.62 
Weighted average common shares outstanding:
Basic29,142,843 29,094,062 29,013,759 30,796,114 
Diluted29,483,481 29,710,740 29,013,759 31,353,834 
See notes to condensed consolidated financial statements.

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Table of Contents
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, 202032,125,055 $321 $122,513 $570,636 (3,485,441)$(66,290)$627,180 
Adoption of ASU 2016-13— — — (76,490)— — (76,490)
Exercise of options and vesting of restricted stock, net of withholding tax321,468 3 (1,288)— — — (1,285)
Issuance of common stock under Employee Stock Purchase Plan47,450 1 176 — — — 177 
Stock-based compensation— — 2,430 — — — 2,430 
Net loss— — — (56,202)— — (56,202)
Balance April 30, 202032,493,973 $325 $123,831 $437,944 (3,485,441)$(66,290)$495,810 
Exercise of options and vesting of restricted stock, net of withholding tax70,271 1 (159)— — — (158)
Issuance of common stock under Employee Stock Purchase Plan51,643 — 160 — — — 160 
Stock-based compensation— — 2,254 — — — 2,254 
Net income— — — 20,520 — — 20,520 
Balance July 31, 202032,615,887 $326 $126,086 $458,464 (3,485,441)$(66,290)$518,586 
Exercise of options and vesting of restricted stock, net of withholding tax6,856 — (32)— — — (32)
Issuance of common stock under Employee Stock Purchase Plan22,729 — 194 — — — 194 
Stock-based compensation— — 2,304 — — — 2,304 
Net income— — — 7,419 — — 7,419 
Balance October 31, 202032,645,472 $326 $128,552 $465,883 (3,485,441)$(66,290)$528,471 

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Table of Contents
Additional Paid-in Capital
Common StockRetained EarningsTreasury Stock
SharesAmountSharesAmountTotal
Balance January 31, 201931,788,162 $318 $111,185 $508,472  $ $619,975 
Adoption of ASU 2016-02— — — 6,160 — — 6,160 
Exercise of options and vesting of restricted stock, net of withholding tax136,206 1 (1,241)— — — (1,240)
Issuance of common stock under Employee Stock Purchase Plan12,158 — 198 — — — 198 
Stock-based compensation— — 3,217 — — — 3,217 
Net income— — — 19,509 — — 19,509 
Balance April 30, 201931,936,526 $319 $113,359 $534,141  $ $647,819 
Exercise of options and vesting of restricted stock, net of withholding tax51,384 1 (327)— — — (326)
Issuance of common stock under Employee Stock Purchase Plan12,638 — 194 — — — 194 
Stock-based compensation— — 3,419 — — — 3,419 
Common stock repurchase— — — — (1,874,846)(34,344)(34,344)
Net income— — — 19,974 — — 19,974 
Balance July 31, 201932,000,548 $320 $116,645 $554,115 (1,874,846)$(34,344)$636,736 
Exercise of options and vesting of restricted stock, net of withholding tax19,043 — (211)— — — (211)
Issuance of common stock under Employee Stock Purchase Plan18,341 — 220 — — — 220 
Stock-based compensation— — 3,216 — — — 3,216 
Common stock repurchase— — — — (1,261,819)(24,727)(24,727)
Net income— — — 11,469 — — 11,469 
Balance October 31, 201932,037,932 $320 $119,870 $565,584 (3,136,665)$(59,071)$626,703 
See notes to condensed consolidated financial statements.

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Table of Contents
CONN’S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Nine Months Ended October 31,
 20202019
Cash flows from operating activities:
Net income (loss)$(28,263)$50,952 
Adjustments to reconcile net income (loss) to net cash from operating activities:  
Depreciation30,506 27,171 
Change in right-of-use asset21,926 20,588 
Amortization of debt issuance costs6,388 6,410 
Provision for bad debts and uncollectible interest225,713 179,150 
Stock-based compensation expense6,988 9,852 
Charges, net of credits3,589 3,142 
Deferred income taxes(3,954)2,846 
Gain on disposal of property and equipment198 68 
Tenant improvement allowances received from landlords15,137 19,685 
Change in operating assets and liabilities:  
Customer accounts receivable79,357 (162,075)
Other accounts receivables11,918 (3,138)
Inventories3,595 (27,581)
Other assets(342)(7,994)
Accounts payable23,423 14,313 
Accrued expenses24,666 (8,823)
Operating leases(29,151)(24,703)
Income taxes(4,370)(7,656)
Deferred revenues and other credits(1,862)322 
Net cash provided by operating activities385,462 92,529 
Cash flows from investing activities:  
Purchases of property and equipment(46,644)(48,324)
Proceeds from asset dispositions 724 
Net cash used in investing activities(46,644)(47,600)
Cash flows from financing activities:  
Proceeds from issuance of asset-backed notes240,100 381,790 
Payments on asset-backed notes(438,523)(351,424)
Borrowings under revolving credit facility1,143,311 1,247,195 
Payments on revolving credit facility(1,172,411)(1,215,395)
Payments on warehouse facility (53,635)
Payments of debt issuance costs and amendment fees(4,570)(3,416)
Proceeds from stock issued under employee benefit plans533 835 
Tax payments associated with equity-based compensation transactions(1,477)(2,009)
Purchase of treasury stock (59,071)
Other(440)(817)
Net cash used in financing activities(233,477)(55,947)
Net change in cash, cash equivalents and restricted cash105,341 (11,018)
Cash, cash equivalents and restricted cash, beginning of period80,855 64,937 
Cash, cash equivalents and restricted cash, end of period$186,196 $53,919 
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new finance lease liabilities$1,045 $1,110 
Right-of-use assets obtained in exchange for new operating lease liabilities$65,958 $56,743 
Property and equipment purchases not yet paid$7,023 $8,558 
Supplemental cash flow data:
Cash interest paid$28,803 $33,496 
Cash income taxes paid (refunded), net$394 $17,119 
See notes to condensed consolidated financial statements.

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Table of Contents
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, 2020 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, 2020 (the “2020 Form 10-K”) filed with the United States Securities and Exchange Commission (the “SEC”) on April 14, 2020.
Restatement. In connection with the preparation of the 2020 Form 10-K, the Company’s management became aware that the Company’s historical condensed consolidated interim financial statements for the Non-Reliance Periods contained errors in the calculation and reporting of finance charges and other revenues and provision for bad debts resulting from an error in the allowance for bad debts and uncollectible interest related to the implementation of the Company’s new loan management system. As a result of these errors, the Company restated its historical condensed consolidated interim financial statements for the Non-Reliance Periods. The condensed consolidated cash flow statement for the nine month Non-Reliance Period was not impacted by the errors.
The correction of these errors reduced finance charges and other revenues in the condensed consolidated statements of income for the Non-Reliance Periods by $1.6 million and increased provision for bad debts for the Non-Reliance Periods by $3.3 million. Those changes affected the condensed consolidated balance sheets and condensed consolidated statement of stockholders’ equity as of the end of the Non-Reliance Periods as follows: customer accounts receivable, net of allowances, decreased by $4.9 million, income taxes receivable increased by $0.9 million and deferred income taxes increased 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. See Note 17, Quarterly Information (Unaudited), in the 2020 Form 10-K for further details.
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

6

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

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 5, Debt and Financing Lease Obligations, and Note 7, Variable Interest Entities, for additional information.
Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ, even significantly, from these estimates. Management evaluates its estimates and related assumptions regularly, including those related to the allowance for doubtful accounts and allowances for no-interest option credit programs, which are particularly sensitive given the size of our customer portfolio balance. During the three months ended July 31, 2020, we refined our historical charge-off estimate in our current expected credit loss model which resulted in an increase to the allowance for bad debt of $15.8 million. No further changes were made to the historical charge-off estimate during the three months ended October 31, 2020.
Cash and Cash Equivalents. As of October 31, 2020 and January 31, 2020, cash and cash equivalents included cash and credit card deposits in transit. Credit card deposits in transit included in cash and cash equivalents were $6.3 million and $4.0 million as of October 31, 2020 and January 31, 2020, respectively. 
Restricted Cash. The restricted cash balance as of October 31, 2020 and January 31, 2020 includes $67.3 million and $59.7 million, respectively, of cash we collected as servicer on the securitized receivables that was subsequently remitted to the VIEs and $9.1 million and $13.9 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. As discussed in more detail below, Recent Accounting Pronouncements Adopted, effective February 1, 2020 the Company adopted ASC 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Under the newly adopted standard, 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. In our role as servicer, we may also make modifications to loans held by the VIEs. The loan modifications are intended to maximize net cash flow after expenses and avoid the need to exercise legal remedies available to us. We may extend or “re-age” a portion of our customer accounts, which involves modifying the payment terms to defer a portion of the cash payments due. Our re-aging of customer accounts does not change the interest rate or the total principal amount due from the customer and typically does not reduce the monthly contractual payments. To a much lesser extent, we may provide the customer the ability to refinance their account, which typically does not change the interest rate or the total principal amount due from the customer but does reduce the monthly contractual payments and extend the term. We consider accounts that have been re-aged in excess of three months or refinanced as Troubled Debt Restructurings (“TDR” or “Restructured Accounts”).
On March 27, 2020 the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law to address the economic impact of the COVID-19 pandemic. Under the CARES Act, modifications deemed to be COVID-19 related are not considered a TDR if the loan was current (not more than 30 days past due as of March 31, 2020) and the deferral was executed between April 1, 2020 and the earlier of 60 days after the termination of the COVID-19 national emergency or December 31, 2020. In response to the CARES Act, the Company implemented short-term deferral programs for our customers. The carrying value of the customer receivables on accounts which were current prior to receiving a COVID-19 related deferment was $75.8 million as of October 31, 2020.
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 October 31, 2020 and January 31, 2020, there was $9.2 million and $10.6 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.

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

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 October 31, 2020 and January 31, 2020, the carrying value of customer accounts receivable in non-accrual status was $9.8 million and $12.5 million, respectively. At October 31, 2020 and January 31, 2020, the carrying value of customer accounts receivable that were past due 90 days or more and still accruing interest totaled $102.0 million and $132.7 million, respectively. At October 31, 2020 and January 31, 2020, the carrying value of customer accounts receivable in a bankruptcy status that were less than 60 days past due of $7.2 million and $12.1 million, respectively, were included within the customer receivables balance carried in non-accrual status.
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 5, Debt and Financing Lease Obligations, are included in other assets on our Condensed Consolidated Balance Sheet and were $4.1 million and $3.5 million as of October 31, 2020 and January 31, 2020, respectively.
Income Taxes. For the nine months ended October 31, 2020 and 2019, we utilized the estimated annual effective tax rate based on our estimated fiscal year 2021 and 2020 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 nine months ended October 31, 2020 and 2019, the effective tax rate was 22.5% and 24.1%, respectively. The primary factor affecting the decrease in our effective tax rate for the nine months ended October 31, 2020 was a $2.5 million benefit recognized in the current period as a result of net operating loss provisions within the CARES Act that provide for a five year carryback of losses.
Stock-based Compensation. During the nine months ended October 31, 2020, the Company granted performance stock awards (“PSUs”) and restricted stock awards (“RSUs”). The awards had a combined aggregate grant date fair value of $8.0 million. The PSUs will vest after the Company’s fiscal year 2024, if at all, upon certification by the compensation committee of the satisfaction of certain total shareholder return conditions over the three fiscal years commencing with the Company’s fiscal year 2021. The majority of the RSUs will vest, if at all, over periods of three years to four years from the date of grant.
Stock-based compensation expense is recorded, net of estimated forfeitures, for share-based compensation awards over the requisite service period using the straight-line method. An adjustment is made to compensation cost for any difference between the estimated forfeitures and the actual forfeitures related to the awards. For equity-classified share-based compensation awards, expense is recognized based on the grant-date fair value. For stock option grants, we use the Black-Scholes model to determine fair value. For grants of restricted stock units, the fair value of the grant is the market value of our stock at the date of issuance. For grants of performance-based restricted stock units, the fair value is the market value of our stock at the date of issuance adjusted for the market condition using a Monte Carlo model.
The following table sets forth the RSUs and PSUs granted during the three and nine months ended October 31, 2020 and 2019: 
Three Months Ended
October 31,
Nine Months Ended
October 31,
2020201920202019
RSUs  2,534 622,195 106,328 
PSUs (1)
  270,828 33,894 
Total stock awards granted 2,534 893,023 140,222 
Aggregate grant date fair value (in thousands)$ $65 $7,957 $2,910 
(1)The weighted-average assumptions used in the Monte Carlo model for the PSUs granted on February 6, 2020 included expected volatility of 60.0%, an expected term of 3 years and risk-free interest rate of 1.42%.  No dividend yield was included in the weighted-average assumptions.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended October 31, 2020 and 2019, stock-based compensation expense was $2.3 million and $3.2 million, respectively. For the nine months ended October 31, 2020 and 2019, stock-based compensation expense was $7.0 million and $9.9 million, respectively.
Earnings (loss) per Share. Basic earnings (loss) per share for a particular period is calculated by dividing net income (loss) 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
October 31,
Nine Months Ended
October 31,
(in thousands)2020201920202019
Weighted-average common shares outstanding - Basic29,142,843 29,094,062 29,013,759 30,796,114 
Dilutive effect of stock options, PSUs and RSUs340,638 616,678  557,720 
Weighted-average common shares outstanding - Diluted29,483,481 29,710,740 29,013,759 31,353,834 
For the three months ended October 31, 2020 and 2019, the weighted average number of stock options and RSUs not included in the calculation due to their anti-dilutive effect was 894,130 and 660,304, respectively. For the nine months ended October 31, 2020 and 2019, the weighted average number of stock options and RSUs not included in the calculation due to their anti-dilutive effect, was 1,225,771 and 885,554, 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 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 October 31, 2020, the fair value of the Senior Notes outstanding, which was determined using Level 1 inputs, was $219.0 million as compared to the carrying value of $227.0 million, excluding the impact of the related discount. At October 31, 2020, the fair value of the asset backed notes was $553.3 million as compared to the carrying value of $574.6 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 nine months ended October 31, 2020, we recognized $1.2 million of revenue for customer

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

deposits deferred as of January 31, 2020. During the nine months ended October 31, 2020, we recognized $3.3 million of revenue for RSA administrative fees deferred as of January 31, 2020.
Leases. In response to the COVID-19 pandemic, during the nine months ended October 31, 2020, we renegotiated a portion of our leases as a means of preserving liquidity. On April 10, 2020 the Financial Accounting Standards Board (“FASB”) issued guidance for lease concessions entered into in response to the COVID-19 pandemic that allows lessees to make an election not to evaluate whether a lease concession provided by a lessor should be accounted for as a lease modification if it does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We have elected to apply this guidance to our COVID-19 lease concessions. As a result, for the nine months ended October 31, 2020, there were no material modifications to our leases.
Recent Accounting Pronouncements Adopted. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”). ASU 2016-13 replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. Under the new guidance entities must reserve an allowance for expected credit losses over the life of the loan. The measurement of expected credit losses is applicable to financial assets measured at amortized cost. The allowance for credit losses is a valuation account that is deducted from the customer account receivable’s amortized cost basis to present the net amount expected to be collected. Customer receivables are charged off against the allowance when management deems an account to be uncollectible. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2019-04 requires that the current estimate of recoveries are included in the allowance for credit losses.
Effective February 1, 2020, the Company adopted ASU 2016-13 and ASU 2019-04 using the modified retrospective approach. The Company has reviewed its entire portfolio of assets recognized on the balance sheet as of January 31, 2020 and identified Customer Accounts Receivables as the materially impacted asset in-scope of ASC 326. The risk of credit losses from the remaining portfolio of assets was concluded to be immaterial. Upon adoption of ASC 326 the Company recorded a net decrease to retained earnings of $76.5 million as of February 1, 2020. Results for reporting periods prior to February 1, 2020 are not adjusted and continue to be reported in accordance with the Company’s historic accounting policies under previously applicable GAAP.
The allowance for credit losses is measured on a collective (pool) basis where similar risk characteristics exist. Upon adoption of ASC 326, the Company elected to maintain the pools of customer accounts receivable that were previously accounted for under ASC 310 (Non-TDR Non-Re-aged, Non-TDR Re-aged, and TDR). These pools are further segmented based on shared risk attributes, which include the borrower’s FICO score, product class, length of customer relationship and delinquency status. 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. Changes to the allowance for credit losses after adoption are recorded through provision expense.
We have elected to 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 will revisit our measurement methodology and assumption annually, or more frequently if circumstances warrant.
The cumulative effect of the changes made to the Company’s Consolidated Balance Sheet as a result of the adoption of ASC 326 were as follows:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Impact of Adoption of ASC 326
(in thousands)Balance at January 31, 2020Adjustments due to ASC 326Balance at February 1, 2020
Assets
Customer accounts receivable$673,742 $(49,700)$624,042 
Long-term portion of customer accounts receivable663,761 (48,962)614,799 
Deferred Income Taxes18,599 22,172 40,771 
Stockholders’ Equity
Retained Earnings$570,636 $(76,490)$494,146 
Changes due to Securities and Exchange Commission Regulation S-X Rules 13-01 and 13-02. In March 2020, the Securities and Exchange Commission (“SEC”) amended Regulation S-X to create Rules 13-01 and 13-02. These new rules reduce and simplify financial disclosure requirements for issuers and guarantors of registered debt offerings. Previously, with limited exceptions, a parent entity was required to provide detailed disclosures with regard to guarantors of registered debt offerings within the footnotes to the consolidated financial statements. Under the new regulations, disclosure exceptions have been expanded and required disclosures may be provided within the Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations rather than in the notes to the financial statements. Further, summarized guarantor balance sheet and income statements are permitted, with the requirement to provide guarantor cash flow statements eliminated. Summarized guarantor financial statements only need be disclosed for the current fiscal year rather than all years presented in the financial statements as was previously required. The guidance will become effective for filings on or after January 4, 2021, with early adoption permitted.
The Company elected to early adopt the new regulations beginning with the first quarter of fiscal year 2021. Our summarized guarantor financial statements are presented in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

2.    Customer Accounts Receivable
Customer accounts receivable consisted of the following:
(in thousands)October 31,
2020
January 31,
2020
Customer accounts receivable (1)
$1,276,100 $1,602,037 
Deferred fees and origination costs, net(14,093)(15,746)
Allowance for no-interest option credit programs(10,391)(14,984)
Allowance for uncollectible interest(20,894)(23,662)
Carrying value of customer accounts receivable1,230,722 1,547,645 
Allowance for credit losses (2)
(296,529)(210,142)
Carrying value of customer accounts receivable, net of allowance for credit losses934,193 1,337,503 
  Short-term portion of customer accounts receivable, net(489,841)(673,742)
Long-term customer accounts receivable, net$444,352 $663,761 
Carrying Value
(in thousands)October 31,
2020
January 31,
2020
Customer accounts receivable 60+ days past due (3)
$141,441 $193,797 
Re-aged customer accounts receivable (4)
347,113 455,704 
Restructured customer accounts receivable (5)
190,819 211,857 
(1)As of October 31, 2020 and January 31, 2020, the customer accounts receivable balance included $32.6 million and $43.7 million, respectively, in interest receivable. Net of the allowance for uncollectible interest, interest receivable outstanding as of October 31, 2020 and January 31, 2020 was $11.7 million and $20.0 million, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(2)Our current methodology to estimate expected credit losses utilized macroeconomic forecasts as of October 31, 2020, 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 an increase in unemployment. The allowance for credit losses as of January 31, 2020 is based on an incurred loss model, which reserves for incurred losses in the portfolio as of January 31, 2020.
(3)As of October 31, 2020 and January 31, 2020, the carrying value of customer accounts receivable past due one day or greater was $367.3 million and $527.0 million, respectively. These amounts include the 60+ days past due balances shown above.
(4)The re-aged carrying value as of October 31, 2020 and January 31, 2020 includes $91.3 million and $131.4 million, respectively, in carrying value that are both 60+ days past due and re-aged.
(5)The restructured carrying value as of October 31, 2020 and January 31, 2020 includes $52.4 million and $64.8 million, respectively, in carrying value that are both 60+ days past due and restructured.
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)October 31, 2020
Customer accounts receivable - current$666,294 
Allowance for credit losses for customer accounts receivable - current(176,453)
Customer accounts receivable, net of allowances489,841 
Customer accounts receivable - non current585,322 
Allowance for credit losses for customer accounts receivable - non current(140,970)
Long-term portion of customer accounts receivable, net of allowances444,352 
Total customer accounts receivable, net$934,193 
The following presents the activity in our allowance for credit losses and uncollectible interest for customer receivables: 
 Nine Months Ended October 31, 2020Nine Months Ended October 31, 2019
(in thousands)Customer
Accounts
Receivable
 
Restructured
Accounts
 
 
Total
Customer
Accounts
Receivable
 
Restructured
Accounts
 
 
Total
Allowance at beginning of period, prior to adoption of ASC 326$145,680 $88,123 $233,803 $147,123 $67,756 $214,879 
Impact of adoption ASC 32695,136 3,526 98,662 — — — 
Provision for credit loss expense (1)
164,697 60,595 225,292 119,846 58,818 178,664 
Principal charge-offs (2)
(144,048)(62,678)(206,726)(116,698)(44,686)(161,384)
Interest charge-offs(40,340)(17,553)(57,893)(27,076)(10,368)(37,444)
Recoveries (3)
16,922 7,363 24,285 13,571 5,197 18,768 
Allowance at end of period$238,047 $79,376 $317,423 $136,766 $76,717 $213,483 
Average total customer portfolio balance$1,219,794 $216,433 $1,436,227 $1,362,790 $195,471 $1,558,261 
(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). The increase in bad debt charge-offs, net of recoveries, was primarily due to an increase in new customer mix and the impact of difficulties in collection efforts related to the implementation of our new loan management system during the fourth quarter of fiscal year 2020.
(3)Recoveries include the principal amount collected during the period for previously charged-off balances.

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

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 updated as of October 31, 2020:
(in thousands)
Delinquency Bucket2020201920182017PriorTotal% of Total
Current$418,548 $316,243 $113,741 $14,045 $851 $863,428 70.2 %
1-3049,070 78,166 36,580 8,113 685 172,614 14.0 %
31-6012,652 23,948 12,449 3,805 385 53,239 4.3 %
61-907,536 17,974 8,756 2,755 264 37,285 3.0 %
91+19,328 50,445 25,437 8,026 920 104,156 8.5 %
Total$507,134 $486,776 $196,963 $36,744 $3,105 $1,230,722 100.0 %

3.     Charges and Credits
Charges and credits consisted of the following:
Three Months Ended
October 31,
Nine Months Ended
October 31,
(in thousands)2020201920202019
Professional fees$ $ $3,589 $ 
Write-off of software costs