Capmark Financial Group Inc. Announces Unaudited. Consolidated Fourth Quarter and Full Year 2014 Earnings Results

Transcription

1 Capmark Financial Group Inc. Announces Unaudited Consolidated Fourth Quarter and Full Year 2014 Earnings Results Horsham, PA April 28, 2015 Capmark Financial Group Inc. (OTCMKTS: CPMK) today reported unaudited consolidated financial results that include its wholly-owned subsidiary, Bluestem Brands, Inc. and its subsidiaries, for Capmark s and Bluestem s 13- and 52-week periods ended January 30, 2015 (we refer to the 13-week periods ended January 30, 2015 and January 31, 2014 in this release as respectively the fourth quarter of fiscal 2014 and fiscal 2013). Bluestem, which merged with Capmark on November 7, 2014, is a multi-brand, online retailer of name-brand and private label general merchandise serving low- to middle-income consumers nationwide. Capmark delivered strong consolidated results in fiscal 2014, with full year diluted EPS of $0.99, up 1% over fiscal On a stand-alone basis, Bluestem delivered a record year in fiscal 2014, with net sales of $1.07 billion and adjusted pro-forma EBITDA of $98.7 million, year-over-year increases of 28% and 50%, respectively. Finally, we re quite pleased with our progress integrating Bluestem into Capmark since the November 7 th acquisition and we look forward to capitalizing on the combined strengths of both organizations in said Steve Nave, Capmark s President and Chief Executive Officer Capmark Consolidated Highlights Net income for the fourth quarter of fiscal 2014 was $58.7 million, an increase of over 300% compared to $12.9 million for the fourth quarter of fiscal Diluted earnings per share were $0.43, compared to $0.19 for fiscal Net income for fiscal year 2014 was $103.0 million, an increase of 23% compared to net income of $83.7 million for fiscal year Diluted earnings per share were $0.99, compared to $0.98 for fiscal year Cash and cash equivalents were $254.2 million as of January 30, 2015, compared to $169.0 million as of January 31, Bluestem Stand-alone Highlights Net sales for the fourth quarter of fiscal 2014 were $456.5 million, a 22% increase over net sales of $373.7 million for the same period in fiscal Net sales for fiscal year 2014 were $1,071.5 million, a 28% increase over net sales of $838.9 million for fiscal year Net loss for the fourth quarter of fiscal 2014 was $8.6 million, compared to a net income of $44.8 million for the fourth quarter of fiscal Net income for fiscal year 2014 was $1.0 million, compared to a net loss of $126.8 million for fiscal year Adjusted pro forma EBITDA was $56.0 million in the fourth quarter of fiscal 2014, a 1% increase over $55.5 million for the fourth quarter of fiscal Adjusted pro forma EBITDA for fiscal year 2014 was $98.7 million, a 50% increase over $65.7 million for fiscal year Revolving new customer credit accounts were 288 thousand, a 7% increase over 270 thousand in the fourth quarter of fiscal For the fiscal year 2014, revolving new customer credit accounts were 731 thousand, a 14% increase over 643 thousand in fiscal Page 1 of 21

2 FreshStart new customer credit accounts were 123 thousand, a 47% increase over 84 thousand in the fourth quarter of fiscal For the fiscal year 2014, FreshStart new customer credit accounts were 270 thousand, a 20% increase over 225 thousand in fiscal Active accounts increased to 1,593 thousand in fiscal year 2014, a 12% increase over fiscal All financial information included in this release is unaudited. Information for Capmark is presented on a consolidated basis, including Bluestem beginning November 7, Information for Capmark s wholly-owned subsidiary, Bluestem, is also presented on a stand-alone basis. The acquisition of Bluestem was accounted for as a business combination. By the application of push down accounting, Bluestem s assets and liabilities were adjusted to fair value on November 7, Adjusted EBITDA and Adjusted pro forma EBITDA are defined in the accompanying financial information of Bluestem. Please see, Capmark Financial Group Inc. and Bluestem Brands, Inc. Financial Information-Overview and Basis of Presentation below and accompanying disclosures for a more detailed explanation of the foregoing matters. Earnings Teleconference Information Capmark will discuss Capmark s and Bluestem s 13- and 52-week periods ended January 30, 2015 financial results during a teleconference today, April 28, 2015, at 5:00 PM ET. The conference call can be accessed at (888) or (719) (International). The call will also be broadcast simultaneously at Following completion of the call, a recorded replay of the webcast will be available on Capmark s website. To listen to the telephone replay, call toll-free (877) or (858) (International), replay pin # The telephone replay will be available at 8:00 PM ET April 28, Additional investor information can be accessed at Annual Meeting of Stockholders Capmark will hold its Annual Meeting of Stockholders on Wednesday, June 17, 2015, at the offices of Faegre Baker Daniels LLP, 2200 Wells Fargo Center, 90 South Seventh St., Minneapolis, Minnnesota, at 8:30AM CT. The board of directors has fixed April 30, 2015 as the record date for holders of capital stock entitled to notice of and to vote at the meeting. About Capmark Capmark Financial Group Inc. is a holding company whose businesses include Bluestem Brands, Inc., a multi-brand, online retailer of a broad selection of name-brand and private label general merchandise serving low- to middle-income consumers nationwide. Bluestem operates Fingerhut, Gettington.com and PayCheck Direct brands. Complementing each brand is a large selection of merchandise with a variety of payment options to provide customers with the flexibility of paying over time. Capmark is headquartered in Horsham, PA. For additional information visit Capmark s website at Forward Looking Statements This release contains statements that are forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions Page 2 of 21

3 concerning matters that are not historical facts. All statements contained herein that are not clearly historical in nature are forward-looking. In some cases, you can identify these statements by use of forward-looking words such as may, will, should, anticipate, estimate, expect, plan, believe, predict, potential, project, intend, could or similar expressions. In particular, statements regarding Capmark s plans, strategies, prospects and expectations regarding its business are forward-looking statements. You should be aware that these statements and any other forward-looking statements in this document only reflect Capmark s beliefs, assumptions and expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Many of these risks, uncertainties and assumptions are beyond Capmark s control and may cause actual results and performance to differ materially from Capmark s expectations. Forward-looking statements are based on Capmark s beliefs, assumptions and expectations of its future performance and actions, taking into account all information currently available to Capmark. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to Capmark or are within its control. If a change occurs, Capmark s plans, business, financial condition, and liquidity may vary materially from those expressed in its forward-looking statements. Important factors that could cause the actual results to be materially different from Capmark s expectations include the risks and uncertainties set forth in Risk Factors in Capmark s Report as of and for the years ended December 31, 2013 and Accordingly, you should not place undue reliance on the forward-looking statements contained in this release. These forward-looking statements are made only as of the date of this release. Capmark undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Investor Relations: Denise Garcia ICR (215) Page 3 of 21

4 CAPMARK FINANCIAL GROUP INC. FINANCIAL INFORMATION 13- and 52-weeks ended January 30, 2015 and January 31, 2014 Overview and Basis of Presentation The accompanying financial information for Capmark is presented on a consolidated basis, including Bluestem beginning from November 7, The accompanying financial information for Capmark s wholly-owned subsidiary, Bluestem, is presented on a stand-alone basis. All such information is unaudited. Capmark Consolidated Financial Information On November 7, 2014, Capmark acquired Bluestem. As a result, the financial results of Bluestem from that date through January 30, 2015 were included in the Capmark consolidated results. The acquisition of Bluestem was accounted for as a business combination. In December 2014, Capmark changed its fiscal year from December 31 to the Friday closest to January 31 of the following year to conform to the fiscal year of Bluestem. Bluestem operates on a fiscal calendar widely used by the retail industry that results in fiscal years consisting of a 52- or 53-week period ending on the Friday closest to January 31 of the following year. The previously audited results for Capmark for the year ended December 31, 2013 were restated for the new fiscal year. To supplement the historical financial data derived from Capmark s consolidated financial statements, which are prepared in accordance with U.S. generally accepted accounting principles, or GAAP, this release uses, non-gaap operating income, non-gaap net income and non-gaap diluted earnings per share of Capmark, as non-gaap performance measures. These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP. Please see, Capmark Financial Group Inc.-Non-GAAP Financial Measures below for further important information concerning these non-gaap measures. Bluestem Standalone Financial Information As previously discussed, the acquisition of Bluestem was accounted for as a business combination. By the application of push down accounting, Bluestem s assets and liabilities were adjusted to fair value on November 7, The accompanying Bluestem financial results are presented as Predecessor or Successor to indicate the period preceding the acquisition or the period succeeding the acquisition, respectively. The financial information in this release includes summary Bluestem consolidated adjusted pro forma EBITDA data, assuming the receivable sales transaction that we closed with Santander Consumer USA in April 2013 was in effect and fully transitioned at the beginning of all periods presented. This Page 4 of 21

5 information has been derived from internally prepared pro forma data, and are presented for informational purposes only and do not purport to represent what Bluestem s consolidated financial position actually would have been had the events so described occurred on the dates indicated or to project its consolidated financial position as of any future date. This pro forma data does not relate in any way to or depict the effects in any way of the merger of Capmark and Bluestem. To supplement the historical financial data derived from Bluestem s consolidated financial statements, which are prepared in accordance with U.S. generally accepted accounting standards, or GAAP, this release uses, in addition to the above referenced adjusted pro forma EBITDA data of Bluestem, contribution margin, net (loss) income before loss from derivatives in our own equity and adjusted EBITDA, as non-gaap performance measures. These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP. Please see, Bluestem Brands, Inc.-Non- GAAP Financial Measures below for further important information concerning these non-gaap measures. Page 5 of 21

6 CAPMARK FINANCIAL GROUP INC. Condensed Consolidated Balance Sheets January 30, 2015 January 31, 2014 ASSETS Current assets:. Cash and cash equivalents. $ 254,207 $ 169,006 Restricted cash. 13,586 11,756 Customer accounts receivable, net of allowance of $10, ,928 - Commercial real estate accounts and other receivables. 19,270 4,738 Retail merchandise inventories. 96,431 - Other current assets. 34,999 6,828 Current assets of discontinued operations. - 85,325 Total current assets. 459, ,653 Loans held for sale. 78, ,716 Equity investments. 114, ,801 Property and equipment, net. 49,755 - Intangibles - net. 377,892 - Goodwill. 201,642 - Other assets. 26,474 42,625 Other assets of discontinued operations. - 48,574 Total Assets. $ 1,308,000 $ 649,369. LIABILITIES AND STOCKHOLDERS EQUITY. Current liabilities:. Accounts payable. $ 82,037 $ 8 Accrued costs and other liabilities. 92,823 17,127 Short-term debt. 19,116 - Current liabilities of discontinued operations. - 3,636 Total current liabilities. 193,976 20,771 Long-term debt. 359, ,274 Deferred income taxes. 79,948 - Other long-term liabilities. 20,037 41,444 Other liabilities of discontinued operations. - 73,784 Total liabilities. 653, ,273. Stockholders' Equity:. Series A participating convertible preferred stock. 4,856 - Common stock. 1, Additional paid-in capital. 356, ,970 Retained earnings. 290, ,922 Accumulated other comprehensive income (loss), net of tax ,601 Total Capmark Financial Group Inc. stockholders equity. 654, ,593 Noncontrolling interest. - 32,503 Total Equity. 654, ,096 Total Liabilities and Stockholders' Equity. $ 1,308,000 $ 649,369. Page 6 of 21

7 CAPMARK FINANCIAL GROUP INC. Consolidated Statement of Comprehensive Income (unaudited in thousands, except share data) Net sales and revenue 13 Weeks Ended 52 Weeks Ended January 30, 2015 January 31, 2014 January 30, 2015 January 31, 2014 Net retail sales $ 432,392 $ - $ 432,392 $ - Commercial real estate revenue Net interest income 1,734 3,462 6,609 23,255 Net gains on investments and real estate ,978 78,794 Other noninterest income 8,295 23,209 23,505 49,848 Total net sales and revenue 442,454 26, , ,897 Costs and expenses Retail cost of goods sold 256, ,885 - Retail sales and marketing expenses 69,128-69,128 - Retail net credit expense (income) 18,011-18,011 - Commercial real estate operating expenses 833 1,750 4,901 18,583 General and administrative expenses 64,837 7,611 85,289 28,830 Amortization and depreciation not included in retail cost of goods sold 21, , Loss from derivatives in our own equity 15,353-15,353 - Total costs and expenses 446,620 9, ,194 48,150 Operating Income (4,166) 17,120 7, ,747 Retail interest expense 7,091-7,091 - Income from continuing operations before income taxes (11,257) 17, ,747 Income tax benefit 69,969 1,233 69, Income from continuing operations after income taxes 58,712 18,353 69, ,616 Income (loss) from discontinued operations, net of tax - (5,436) 33,037 (20,900) Net income 58,712 12, ,006 83,716 Plus: Net loss attributable to noncontrolling interests - 5,823 5,930 14,185 Net income attributable to Capmark Financial Group Inc. 58,712 18, ,936 97,901 Other comprehensive income (loss) Net change in unrealized gains and (losses) on investment securities 54 (789) (737) (1,248) Net foreign currency translation - 9,141-8,964 Other comprehensive income (loss) 54 8,352 (737) 7,716 Comprehensive income attributable to Capmark Financial Group Inc $ 58,766 $ 27,092 $ 108,199 $ 105,617 Basic and Diluted Earnings Per Share - Common Stockholders Basic earnings per share - continuing operations $ 0.43 $ 0.24 $ 0.69 $ 1.19 Diluted earnings per share - continuing operations $ 0.43 $ 0.24 $ 0.69 $ 1.19 Basic earnings per share attributable to Capmark Financial Group Inc. $ 0.43 $ 0.19 $ 1.00 $ 0.98 Diluted earnings per share attributable to Capmark Financial Group Inc. $ 0.43 $ 0.19 $ 0.99 $ 0.98 Basic weighted average shares outstanding 133,657,808 99,734, ,277,257 99,734,703 Diluted weighted average share outstanding 135,124,471 99,787, ,335,400 99,787,071 Page 7 of 21

8 CAPMARK FINANCIAL GROUP INC. Consolidated Statement of Changes in Stockholders Equity (unaudited in thousands, except share data) Capmark Financial Group, Inc. Stockholders Accumulated Series A Convertible Additional Other Total Preferred Stock Common Stock Paid-In Retained Comprehensive Noncontrolling Stockholders Shares Amount Shares Amount Capital Earnings Income Interest Equity BALANCE February 1, $ - 100,242,722 $ 100 $ 1,240,985 $ 84,021 $ (6,115) $ 60,204 1,379,195 Net income (loss) 97,901 $ (14,185) 83,716 Total other comprehensive income net of tax 7,716 7,716 Stock-based compensation 1,801 1,801 Treasury shares retired (60,303) (267) (267) Stockholder distributions (1,052,549) (1,052,549) Other (includes impact from sale of discontinued operations assets) (13,516) (13,516) BALANCE January 31, $ - 100,182,419 $ 100 $ 189,970 $ 181,922 $ 1,601 $ 32,503 $ 406,096 Net income 108,936 (5,930) 103,006 Total other comprehensive (loss) net of tax (737) (737) Common stock par value adjustment 902 (902) - Issuance of preferred stock 1,000 5,000 5,000 Beneficial conversion feature associated with preferred stock at issuance (228) Issuance of common stock 2,081, ,317 8,338 Issuance of restricted common stock 249, Exercise of common stock warrants 33,861, , ,650 Deemed dividend from beneficial conversion feature associated with preferred stock 84 (84) - Stock-based compensation 23,773 23,773 Other (includes impact from sale of discontinued operations assets) (26,573) (26,573) BALANCE January 30, ,000 $ 4, ,374,593 $ 1,364 $ 356,697 $ 290,774 $ 864 $ - $ 654,555 Page 8 of 21

9 CAPMARK FINANCIAL GROUP INC. Consolidated Statement of Cash Flows 13 Weeks Ended 52 Weeks Ended January 30, 2015 January 31,2014 January 30, 2015 January 31,2014 Operating Activities of Continuing Operations Net income $ 58,712 $ 12,917 $ 103,006 $ 83,716 Net income (loss) from discontinued operations - (5,436) 33,037 (20,900) Net income from continuing operations 58,712 18,353 69, ,616 Adjustments to reconcile net income from continuing operations to net cash provided by operating activities of continuing operations: Benefit for deferred income taxes (48,778) - (48,047) - Uncertain tax positions (18,699) - (18,699) - Net gains 27 (4,022) (17,722) (99,585) Equity in net gains of investees and cash return on investment (6,797) (15,142) (11,330) (20,527) Amortization and depreciation expense 21, , Net accretion of fresh start accounting adjustment (14,414) Loss from derivatives in our own equity 15,353-15,353 - Provision for doubtful accounts 10,510-10,510 - Provision for retail merchandise returns 11,455-11,455 - Stock-based compensation expense 21, ,773 1,801 Other, net 12, , Net change in assets and liabilities which provided (used) cash: - - Customer account and other receivables, net (40,162) 23,973 (35,297) 9,796 Retail merchandise inventories 78,895-78,895 - Other assets 19,833 (124) 21,477 5,918 Accounts payable and other liabilities (57,975) (8,466) (61,671) (54,777) Proceeds from sales of/payments from loans held for sale 4, ,060 26, ,729 Net cash provided by operating activities of continuing operations 83, ,512 99, ,871 Investing Activities of Continuing Operations Net decrease in restricted cash 7,761 38,225 12,331 63,299 Proceeds from sales of investment securities classified as available for sale - 3,589-17,832 Proceeds from repayments of investment securities classified as available for sale ,972 32,059 Proceeds from sales of real estate investments ,419 Proceeds from sales of/capital distributions from equity investments 13,307 19,216 73,105 71,967 Purchases of investment securities classified as available for sale (11,027) Purchase of customer accounts receivable (430,600) - (430,600) - Proceeds from sale of customer accounts receivable 430, ,949 - Acquisition of Bluestem Brands, Inc. net of cash on hand (509,796) - (509,796) - Net (purchase) disposition of property and equipment (5,349) 124 (688) 1,787 Net cash (used in) provided by investing activities of continuing operations (493,728) 61,154 (408,727) 357,336 Financing Activities of Continuing Operations Repayments of debt (6,739) (61,526) (25,961) (115,047) Borrowings on debt, net of financing fees 281, ,064 - Repayments of deposit liabilities (1,001,206) Borrowings on revolving credit facilities 180, ,287 - Repayments on revolving credit facilities (182,676) - (182,676) - Settlement of Bluestem Brands Selling Stockholders' acquisition-related liabilities (66,362) - (66,362) - Proceeds from issuance of preferred stock - - 5,000 - Proceeds from issuance of common stock 143, ,988 - Distributions to stockholders - (185,449) - (1,052,549) Other financing activities, net - (272) - (9,954) Net cash provided by (used in) financing activities of continuing operations 349,562 (247,247) 335,340 (2,178,756) Effect of Foreign Exchange Rates on Cash (242) (286) (297) (593) Discontinued Operations Net cash provided by (used in) operating activities of discontinued operations - 1,801 (6,313) (5,539) Net cash provided by (used in) investing activities of discontinued operations - (1,740) 65,710 (7,496) Net cash used in financing activities of discontinued operations (1,823) Net cash provided by (used in) discontinued operations ,397 (14,858) Net Increase (Decrease) in Cash and Cash Equivalents (61,214) 29,194 84,763 (1,433,000) Cash and Cash Equivalents, Beginning of Period 315, , ,444 1,602,444 Cash and Cash Equivalents, End of Period $ 254,207 $ 169,444 $ 254,207 $ 169,444 Page 9 of 21

10 CAPMARK FINANCIAL GROUP INC. Non-GAAP Financial Measures To supplement the consolidated financial statements of Capmark Financial Group, Inc. and its subsidiaries which are presented in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, we use the following measures that are not in accordance with, or an alternative to, measures prepared in accordance with GAAP (non-gaap measures): Non-GAAP operating income, as we present it, represents operating income before amortization of acquired intangible assets, stock-based compensation expense, losses on derivatives in our own equity, costs related to acquisitions and costs related to the Centerbridge Investment Agreement. Non-GAAP net income, as we present it, represents net income attributable to Capmark Financial Group, Inc. before amortization of acquired intangible assets, stock-based compensation expense, losses on derivatives in our own equity, costs related to acquisitions, costs related to the Centerbridge Investment Agreement and deferred tax valuation allowance and recognized uncertain tax positions. Non-GAAP diluted earnings per share, as we present it, represents diluted earnings per share before amortization of acquired intangible assets, stock-based compensation expense, losses on derivatives in our own equity, costs related to acquisitions, costs related to the Centerbridge Investment Agreement and deferred tax valuation allowance and recognized uncertain tax positions. We provide these measures because we believe they are useful to investors in evaluating our operating performance compared to other companies in our industry. As non-gaap measures, they have limitations in that they do not reflect all of the amounts associated with Capmark s results of operations as determined in accordance with GAAP and are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures should be considered along with the GAAP financial presentation and should not be considered in isolation or as a substitute for results reported in accordance with GAAP. In addition, our calculations of non-gaap operating income, non-gaap net income and non-gaap diluted earnings per share may not be comparable to the calculations of such measures by other companies. 13 Weeks Ended 52 Weeks Ended January 30, 2015 January 31,2014 January 30, 2015 January 31,2014 GAAP Operating income. $ (4,166) $ 17,120 $ 7,290 $ 103,747 Adjustments:. Amortization of acquired intangible assets. 18,300-18,300 - Stock-based compensation expense. 21, ,773 1,801 Losses on derivatives in our own equity. 15,353-15,353 - Costs related to acquisitions. 8,533-9,926 - Costs related to Centerbridge Investment Agreement , Non-GAAP operating income. $ 59,899 $ 17,919 $ 80,308 $ 105,747. GAAP net income attributable to Capmark Financial Group, Inc.. $ 58,712 $ 18,740 $ 108,936 $ 97,901 Adjustments:. Amortization of acquired intangible assets. 18,300-18,300 - Stock-based compensation expense. 21, ,773 1,801 Losses on derivatives in our own equity. 15,353-15,353 - Costs related to acquisitions. 8,533-9,926 - Costs related to Centerbridge Investment Agreement , Tax effect of adjustments. (1,074) (25) (1,225) (61) Deferred tax valuation allowance and recognized uncertain tax positions. (84,317) - (90,529) - Non-GAAP net income attributable to Capmark Financial Group, Inc.. $ 37,386 $ 19,514 $ 90,200 $ 99,840.. GAAP diluted earnings per share available to common stockholders. $ 0.43 $ 0.19 $ 0.99 $ 0.98 Adjustments:. Amortization of acquired intangible assets Stock-based compensation expense Losses on derivatives in our own equity Costs related to acquisitions Costs related to Centerbridge Investment Agreement Tax effect of adjustments. (0.01) (0.00) (0.01) - Deferred tax valuation allowance and recognized uncertain tax positions. (0.62) - (0.83) - Non-GAAP diluted earnings per share available to common stockholders. $ 0.27 $ 0.20 $ 0.82 $ 1.00 Page 10 of 21

11 Consolidated Statements of Operations and Selected Operating Data (unaudited in thousands, except average order size) Successor Predecessor Total Predecessor (12 Weeks Ended) (1 Week Ended) (13 Weeks Ended) (13 Weeks Ended) Acquisition - January 30, 2015 November 1, November 7, 2014 November 1, January 30, 2015 November 2, January 31, 2014 Change (a) Net sales $ 432,392 $ 24,082 $ 456,474 $ 373, % Cost of sales 256,885 14, , , % Gross profit 175,507 9, , , % Sales and marketing expenses 69,128 4,882 74,010 58, % Net credit expense (income) 18,011 2,702 20,713 (30,397) % General and administrative expenses 34,466 28,650 63,116 42, % Amortization and depreciation not included in cost of sales (b) 21, ,847 3,260 n/m Loss on early extinguishment of debt - 9,298 9,298 - n/m Interest expense, net (c) 7, ,419 3, % Income (loss) before income taxes 25,238 (36,802) (11,564) 69,395 (116.7)% Income tax expense (benefit) 9,222 (12,182) (2,960) 24,551 (112.1)% Net income (loss) $ 16,016 $ (24,620) $ (8,604) $ 44,844 (119.2)% Margins and Expenses as a Percentage of Net Sales: Gross profit rate 40.5 % 39.1 % 138 bp Contribution margin (d) $ 90,116 $ 117,936 (23.6%) As a percentage of net sales 19.7 % 31.6 % (1,182) bp General and administrative expenses 13.8 % 11.2 % 259 bp Adjusted EBITDA (d) $ 56,637 $ 94,484 (40.1%) As a percentage of net sales 12.4 % 25.3 % (1,288) bp Adjusted pro forma EBITDA (d) $ 55,961 $ 55, % As a percentage of net sales 12.3 % 14.9 % (261) bp Selected Operating Data: Revolving new customer credit accounts (e) % FreshStart new customer credit accounts (e) % PayCheck Direct new customer credit accounts (e) % Active accounts (f) 1,593 1, % Average order size (g) $ 232 $ % PayCheck Direct eligible client employees (h) 2,348 1, % (a) Changes in rates are presented as the basis point (bp) increase (decrease) from the prior period. (b) Amortization and depreciation expense not included in cost of sales primarily consists of amortization expense of customer relationship finite-lived intangible assets and depreciation expense of software. Depreciation expense related to equipment in Bluestem's fulfillment facilities are included in cost of sales. (c) Interest expense net of interest income. (d) Please refer to the "Bluestem Brands, Inc. - Non-GAAP Financial Measures" within this release for a reconciliation of non-gaap financial measures to GAAP and why Bluestem believes these are important measures of its performance. (e) Customers that have made their initial order on account during the fiscal period presented. Revolving new customer credit accounts excludes FreshStart graduates whom were initially included in FreshStart new customer credit accounts when their initial order was made. (f) Revolving credit customers that have made at least one purchase on account within the previous twelve fiscal months and at least one payment on account since origination. (g) Average order size represents retail merchandise sales including shipping and handling revenue divided by the number of merchandise orders fulfilled during the fiscal period presented. (h) PayCheck Direct clients' full-time active employees with a tenure greater than six months, are at least 18 years old, and have met certain minimum annual earnings. Page 11 of 21

12 Consolidated Statements of Operations and Selected Operating Data (unaudited in thousands, except average order size) Successor Predecessor Total Predecessor (12 Weeks Ended) (40 Weeks Ended) (52 Weeks Ended) (52 Weeks Ended) Acquisition - January 30, 2015 February 1, November 7, 2014 February 1, January 30, 2015 February 2, January 31, 2014 Change (a) Net sales $ 432,392 $ 639,131 $ 1,071,523 $ 838, % Cost of sales 256, , , , % Gross profit 175, , , , % Sales and marketing expenses 69, , , , % Net credit expense (income) 18,011 (1,053) 16,958 (62,865) % General and administrative expenses 34, , , , % Amortization and depreciation not included in cost of sales (b) 21,573 9,739 31,312 12, % Loss from derivatives in our own equity (c) ,289 n/m Loss on early extinguishment of debt - 9,298 9,298 8, % Interest expense, net (d) 7,091 13,576 20,667 19, % Income (loss) before income taxes 25,238 (22,660) 2,578 (100,828) % Income tax expense (benefit) 9,222 (7,662) 1,560 26,017 (94.0)% Net income (loss) $ 16,016 $ (14,998) $ 1,018 $ (126,845) % Margins and Expenses as a Percentage of Net Sales: Gross profit rate 41.4 % 41.2 % 24 bp Contribution margin (e) $ 230,122 $ 237,811 (3.2%) As a percentage of net sales 21.5 % 28.3 % (687) bp General and administrative expenses 15.5 % 14.4 % 112 bp Net income before loss from derivatives in our equity (e) $ 1,018 $ 50,444 (98.0%) As a percentage of net sales 0.1 % 6.0 % (592) bp Adjusted EBITDA (e) $ 119,896 $ 143,628 (16.5%) As a percentage of net sales 11.2 % 17.1 % (593) bp Adjusted pro forma EBITDA (e) $ 98,699 $ 65, % As a percentage of net sales 9.2 % 7.8 % 138 bp Selected Operating Data: Revolving new customer credit accounts (f) % FreshStart new customer credit accounts (f) % PayCheck Direct new customer credit accounts (f) % Active accounts (g) 1,593 1, % Average order size (h) $ 228 $ % PayCheck Direct eligible client employees (i) 2,348 1, % (a) Changes in rates are presented as the basis point (bp) increase (decrease) from the prior period. (b) Amortization and depreciation expense not included in cost of sales primarily consists of amortization expense of customer relationship finite-lived intangible assets and depreciation expense of software. Depreciation expense related to equipment in Bluestem's fulfillment facilities are included in cost of sales. (c) Bluestem had derivative liabilities relating to certain Predecessor common stock warrants, preferred stock warrants, embedded derivatives in preferred stock, and a contingent fee agreement. All of the aforementioned derivatives were extinguished as part of the Predecessor 2013 recapitalization. These derivative liabilities were recorded at their estimated fair value at each balance sheet date. Changes in fair value were reflected in the consolidated statement of operations as gains or losses from derivatives in our own equity. (d) Interest expense net of interest income. (e) Please refer to the "Bluestem Brands, Inc. - Non-GAAP Financial Measures" within this release for a reconciliation of non-gaap financial measures to GAAP and why Bluestem believes these are important measures of its performance. (f) Customers that have made their initial order on account during the fiscal period presented. Revolving new customer credit accounts excludes FreshStart graduates whom were initially included in FreshStart new customer credit accounts when their initial order was made. (g) Revolving credit customers that have made at least one purchase on account within the previous twelve fiscal months and at least one payment on account since origination. (h) Average order size represents retail merchandise sales including shipping and handling revenue divided by the number of merchandise orders fulfilled during the fiscal period presented. (i) PayCheck Direct clients' full-time active employees with a tenure greater than six months, are at least 18 years old, and have met certain minimum annual earnings. Page 12 of 21

13 Condensed Consolidated Balance Sheets January 30, 2015 January 31, 2014 (Successor) (Predecessor) ASSETS Current assets: Cash and cash equivalents $ 59,222 $ 132,388 Restricted cash 13,425 7,065 Customer accounts receivable net of allowance for doubtful accounts of $10,457 and $37,101, respectively 40,928 36,406 Merchandise inventories 96,431 68,151 Promotional material inventories 13,976 15,362 Deferred income taxes 14,914 5,847 Prepaid expenses and other assets 20,360 22,751 Total current assets 259, ,970 Property and equipment net 49,755 37,063 Intangible assets net 377,892 - Goodwill 201,642 - Other assets 5,377 8,803 Total Assets $ 893,922 $ 333,836 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 82,037 $ 71,572 Current income taxes payable 18,567 18,876 Accrued costs and other liabilities 65,109 54,021 Short-term debt 19,116 27,979 Total current liabilities 184, ,448 Long-term debt 278, ,280 Deferred income taxes 140, Other long-term liabilities 5,187 7,754 Stockholders' equity: Predecessor: Series B convertible preferred stock Series A convertible preferred stock Successor: Common stock - - Additional paid-in capital 269, ,086 Retained earnings 16,016 (188,972) Total stockholders' equity (deficit) 285,618 (45,545) Total Liabilities and Stockholders Equity (Deficit) $ 893,922 $ 333,836 Page 13 of 21

14 Supplemental Financial Information Successor Predecessor Total Predecessor (12 Weeks Ended) (1 Week Ended) (13 Weeks Ended) (13 Weeks Ended) Acquisition - November 1, November 1, November 2, January 30, 2015 November 7, 2014 January 30, 2015 January 31, 2014 Change Total sales by merchandise category: Home $ 145,334 $ 8,854 $ 154, % $ 127, % 20.5 % Entertainment 225,163 12, , % 195, % 21.1 % Fashion 82,957 4,346 87, % 69, % 26.3 % Total merchandise sales (a) 453,454 25, , % 393, % 21.8 % Returns and allowances (27,218) (1,586) (28,804) (25,003) 15.2 % Commissions 6, ,573 5, % Net sales $ 432,392 $ 24,082 $ 456,474 $ 373, % Gross profit rate 40.5% 39.1% 140 bp Contribution margin rate (c) 19.7% 31.6% (1,190) bp Fingerhut sales by merchandise category: Home $ 131,050 $ 7,982 $ 139, % $ 116, % 19.3 % Entertainment 194,955 10, , % 173, % 18.2 % Fashion 75,333 3,987 79, % 63, % 24.1 % Total merchandise sales (a) 401,338 22, , % 354, % 19.6 % Returns and allowances (24,366) (1,411) (25,777) (22,659) 13.8 % Commissions 5, ,995 5, % Net sales $ 382,584 $ 21,290 $ 403,874 $ 336, % Gross profit rate 42.8% 41.8% 100 bp Contribution margin rate (c) 21.3% 34.1% (1,280) bp Other sales by merchandise category: (b) Home $ 14,284 $ 872 $ 15, % $ 11, % 32.6 % Entertainment 30,208 1,702 31, % 22, % 44.2 % Fashion 7, , % 5, % 53.2 % Total merchandise sales (a) 52,116 2,933 55, % 38, % 42.0 % Returns and allowances (2,852) (175) (3,027) (2,344) 29.1 % Commissions % Net sales $ 49,808 $ 2,792 $ 52,600 $ 36, % Gross profit rate 22.7% 14.7% 800 bp Contribution margin rate (c) 7.6% 8.0% (40) bp (a) Total merchandise sales includes shipping and handling revenue and is net of sales discounts. (b) Other includes Gettington.com and Paycheck Direct. (c) Contribution margin rate represents contribution margin as a percentage of net sales. Please refer to the "Bluestem Brands, Inc. - Non-GAAP Financial Measures" within this release for a reconciliation of non-gaap financial measures to GAAP and why Bluestem believes these are important measures of its performance. Page 14 of 21

15 Supplemental Financial Information Successor Predecessor Total Predecessor (12 Weeks Ended) (40 Weeks Ended) (52 Weeks Ended) (52 Weeks Ended) Acquisition - February 1, February 1, February 2, January 30, 2015 November 7, 2014 January 30, 2015 January 31, 2014 Change Total sales by merchandise category: Home $ 145,334 $ 294,184 $ 439, % $ 351, % 25.1 % Entertainment 225, , , % 387, % 28.4 % Fashion 82, , , % 140, % 32.2 % Total merchandise sales (a) 453, ,710 1,122, % 879, % 27.7 % Returns and allowances (27,218) (42,685) (69,903) (56,059) 24.7 % Commissions 6,156 13,106 19,262 15, % Net sales $ 432,392 $ 639,131 $ 1,071,523 $ 838, % Gross profit rate 41.4% 41.2% 20 bp Contribution margin rate (c) 21.5% 28.3% (680) bp Fingerhut sales by merchandise category: Home $ 131,050 $ 267,423 $ 398, % $ 323, % 23.3 % Entertainment 194, , , % 345, % 25.3 % Fashion 75,333 95, , % 131, % 30.2 % Total merchandise sales (a) 401, ,361 1,002, % 800, % 25.3 % Returns and allowances (24,366) (38,594) (62,960) (51,111) 23.2 % Commissions 5,612 12,342 17,954 15, % Net sales $ 382,584 $ 575,109 $ 957,693 $ 764, % Gross profit rate 43.6% 43.6% - bp Contribution margin rate (c) 23.2% 30.6% (740) bp Other sales by merchandise category: (b) Home $ 14,284 $ 26,761 $ 41, % $ 28, % 46.1 % Entertainment 30,208 33,775 63, % 41, % 54.0 % Fashion 7,624 6,813 14, % 8, % 61.4 % Total merchandise sales (a) 52,116 67, , % 78, % 52.0 % Returns and allowances (2,852) (4,091) (6,943) (4,948) 40.3 % Commissions , % Net sales $ 49,808 $ 64,022 $ 113,830 $ 74, % Gross profit rate 23.0% 16.4% 660 bp Contribution margin rate (c) 6.8% 5.2% 160 bp (a) Total merchandise sales includes shipping and handling revenue and is net of sales discounts. (b) Other includes Gettington.com and Paycheck Direct. (c) Contribution margin rate represents contribution margin as a percentage of net sales. Please refer to the "Bluestem Brands, Inc. - Non-GAAP Financial Measures" within this release for a reconciliation of non-gaap financial measures to GAAP and why Bluestem believes these are important measures of its performance. Page 15 of 21

16 Supplemental Financial Information Successor Predecessor Total Predecessor (12 Weeks Ended) (1 Week Ended) (13 Weeks Ended) (13 Weeks Ended) Acquisition - January November 1, November 1, November 2, , 2015 November 7, 2014 January 30, 2015 January 31, 2014 Net credit expense (income): Finance charge and fee income $ (3,436) $ 60 $ (3,376) $ 13,082 Provision (benefit) for doubtful accounts 10,510 1,984 12,494 (18,841) Credit management costs 19,038 1,518 20,556 14,714 Portfolio profit sharing and servicing fee income (8,101) (860) (8,961) (39,352) Net credit expense (income) $ 18,011 $ 2,702 $ 20,713 $ (30,397) Serviced Portfolio Selected Credit Data: (13 Weeks Ended) November 1, January 30, 2015 Revolving (a) FreshStart (b) PCD Installment (c) Balance active accounts 1, Average balance outstanding $ 686 $ 127 $ 723 Customer accounts receivable (d) $ 1,287,526 $ 23,346 $ 17,921 Balances 30+ days delinquent (e) $ 189,092 $ 4,805 $ 1,109 Balances 30+ days delinquent as a percentage of total customer accounts receivable (f) 14.7 % 20.6% 6.2 % Average customer accounts receivable $ 1,220,616 $ 16,353 $ 15,053 Finance charge and fee income 87,673 1,782 n/a Finance charge and fee income rate (g) 28.7 % 21.6% n/a Net principal charge-offs $ 58,729 $ 2,431 $ 71 Net principal charge-off rate (h) 19.2 % 29.5% 1.9% (13 Weeks Ended) November 2, January 31, 2014 Revolving (a) FreshStart (b) PCD Installment (c) Balance active accounts 1, Average balance outstanding $ 606 $ 112 $ 736 Customer accounts receivable (d) $ 1,042,258 $ 15,060 $ 3,826 Balances 30+ days delinquent (e) $ 151,843 $ 3,487 $ 243 Balances 30+ days delinquent as a percentage of total customer accounts receivable (f) 14.6 % 23.2% 6.4 % Average customer accounts receivable $ 987,670 $ 12,432 $ 2,805 Finance charge and fee income $ 66,666 $ 962 n/a Finance charge and fee income rate (g) 27.0 % 15.5% n/a Net principal charge-offs $ 36,412 $ 2,286 $ 15 Net principal charge-off rate (h) 14.7 % 36.9% 2.2% (a) Revolving serviced portfolio includes Fingerhut and Gettington.com revolving credit accounts. (b) FreshStart serviced portfolio is Fingerhut's installment accounts. (c) PCD installment serviced portfolio is installment receivables issued to consumers who are members and employees of participating organizations and employers in the Paycheck Direct program. (d) Customer accounts receivable excludes impact from purchase accounting fair value adjustment. (e) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end. (f) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end as a percentage of total customer accounts receivable as of the customers' statement cycle dates prior to or on fiscal period end. (g) Revolving finance charge and fee income rate represents finance charge and fee income as a percentage of average customer accounts receivable for the 13 weeks ended January 30, 2015 and January 31, 2014 annualized to 52-week periods for comparability. FreshStart finance charge and fee income rate represents finance charge and fee income as a percentage of the 13 weeks of FreshStart related sales five months prior to the 13 weeks ended January 30, 2015 and January 31, (h) Revolving and PCD Installment net principal charge-off rate represents net principal charge-offs as a percentage of average customer accounts receivable for the 13 weeks ended January 30, 2015 and January 31, 2014 annualized to 52-week periods for comparability. FreshStart net principal charge-off rate represents net principal charge-offs as a percentage of the 13 weeks of FreshStart related sales five months prior to the 13 weeks ended January 30, 2015 and January 31, Page 16 of 21

17 Supplemental Financial Information Successor Predecessor Total Predecessor (12 Weeks Ended) (40 Weeks Ended) (52 Weeks Ended) (52 Weeks Ended) Acquisition - January February 1, February 1, February 2, , 2015 November 7, 2014 January 30, 2015 January 31, 2014 Net credit expense (income): Finance charge and fee income $ (3,436) $ 7,847 $ 4,411 $ (96,835) Provision (benefit) for doubtful accounts 10,510 (5,958) 4,552 74,562 Credit management costs 19,038 51,879 70,917 50,600 Portfolio profit sharing and servicing fee income (8,101) (54,821) (62,922) (91,192) Net credit expense (income) $ 18,011 $ (1,053) $ 16,958 $ (62,865) Serviced Portfolio Selected Credit Data: (52 Weeks Ended) February 1, January 30, 2015 Revolving (a) FreshStart (b) PCD Installment (c) Balance active accounts 1, Average balance outstanding $ 686 $ 127 $ 723 Customer accounts receivable (d) $ 1,287,526 $ 23,346 $ 17,921 Balances 30+ days delinquent (e) $ 189,092 $ 4,805 $ 1,109 Balances 30+ days delinquent as a percentage of total customer accounts receivable (f) 14.7 % 20.6% 6.2 % Average customer accounts receivable $ 1,077,369 $ 13,463 $ 8,243 Finance charge and fee income $ 314,662 $ 3,582 n/a Finance charge and fee income rate (g) 29.2% 9.7% n/a Net principal charge-offs $ 182,122 $ 11,979 $ 340 Net principal charge-off rate (h) 16.9% 32.5% 4.1% (52 Weeks Ended) February 2, January 31, 2014 Revolving (a) FreshStart (b) PCD Installment (c) Balance active accounts 1, Average balance outstanding $ 606 $ 112 $ 736 Customer accounts receivable (d) $ 1,042,258 $ 15,060 $ 3,826 Balances 30+ days delinquent (e) $ 151,843 $ 3,487 $ 243 Balances 30+ days delinquent as a percentage of total customer accounts receivable (f) 14.6% 23.2% 6.4 % Average customer accounts receivable $ 865,572 $ 14,609 $ 1,032 Finance charge and fee income $ 255,270 $ 2,727 n/a Finance charge and fee income rate (g) 29.5% 6.4% n/a Net principal charge-offs $ 132,703 $ 15,957 $ 53 Net principal charge-off rate (h) 15.3% 37.6% 5.1% (a) Revolving serviced portfolio includes Fingerhut and Gettington.com revolving credit accounts. (b) FreshStart serviced portfolio is Fingerhut's installment accounts. (c) PCD installment serviced portfolio is installment receivables issued to consumers who are members and employees of participating organizations and employers in the Paycheck Direct program. (d) Customer accounts receivable excludes impact from purchase accounting fair value adjustment. (e) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end. (f) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end as a percentage of total customer accounts receivable as of the customers' statement cycle dates prior to or on fiscal period end. (g) Revolving finance charge and fee income rate represents finance charge and fee income as a percentage of average customer accounts receivable for the 52 weeks ended January 30, 2015 and January 31, FreshStart finance charge and fee income rate represents finance charge and fee income as a percentage of the 52 weeks of FreshStart related sales five months prior to the 52 weeks ended January 30, 2015 and January 31, (h) Revolving and PCD Installment net principal charge-off rate represents net principal charge-offs as a percentage of average customer accounts receivable for the 52 weeks ended January 30, 2015 and January 31, FreshStart net principal charge-off rate represents net principal charge-offs as a percentage of the 52 weeks of FreshStart related sales five months prior to the 52 weeks ended January 30, 2015 and January 31, Page 17 of 21

18 Non-GAAP Financial Measures To supplement the consolidated financial information of Bluestem Brands, Inc. and its subsidiaries which are presented in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, Bluestem uses the following measures that are not in accordance with, or an alternative to, measures prepared in accordance with GAAP (non-gaap measures): Contribution Margin, as presented, is defined as net sales less cost of sales, sales and marketing expenses and net credit expense (income). Contribution Margin represents the combined performance of merchandising, marketing and credit management activities. Net (loss) income before loss from derivatives in our own equity, as presented, is defined as GAAP net (loss) income adjusted for the noncash loss from derivatives in our own equity. Bluestem no longer has derivatives in its own equity. Adjusted EBITDA, as presented, represents net (loss) income before interest expense, income tax (benefit) expense, amortization and depreciation expense, stock-based compensation expense, dividend equivalent expense, loss from derivatives in our own equity, loss on early extinguishment of debt, (gain) loss on disposal of assets, acquisition transaction costs, specified litigation matters, and other. Specified litigation matters are certain litigation contingencies that existed as of the November 7, 2014 acquisition of Bluestem by Capmark that are subject to limited indemnification by Bluestem's former shareholders. Adjusted pro forma EBITDA, as presented, represents net (loss) income, assuming that the Santander Consumer USA Inc. ("SCUSA") credit financing arrangement had been in place and all revolving customer accounts receivable were sold to SCUSA prior to the 2013 fiscal year, before interest expense, income tax (benefit) expense, amortization and depreciation expense, stock-based compensation expense, dividend equivalent expense, loss from derivatives in our own equity, loss on early extinguishment of debt, (gain) loss on disposal of assets, acquisition transaction costs, specified litigation matters, and other. In April 2013, the Company entered into a new strategic relationship with SCUSA, under which the Company would sell all newly originated Fingerhut and Gettington revolving credit receivables to SCUSA at par on the same business day as its purchase from WebBank and shares the profit on the receivables with SCUSA. We provide these measures because we believe they are useful to investors in evaluating our operating performance (while giving effect to the SCUSA transaction) compared to other companies in our industry. As non-gaap measures, they have limitations in that they do not reflect all of the amounts associated with Bluestem s results of operations as determined in accordance with GAAP and are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures should be considered along with the GAAP financial presentation and should not be considered in isolation or as a substitute for results reported in accordance with GAAP. In addition, our calculations of Contribution Margin, Net (loss) income before loss from derivatives in our own equity, Adjusted EBITDA, and Adjusted pro forma EBITDA may not be comparable to the calculations of such measures by other companies. The following table reconciles our Contribution Margin to the nearest GAAP performance measure, which is net income (loss): 13 Weeks Ended 52 Weeks Ended January 30, January 31, January 30, January 31, Contribution Margin: Net (loss) income $ (8,604) $ 44,844 $ 1,018 $ (126,845) Income tax (benefit) expense (2,960) 24,551 1,560 26,017 Interest expense, net 7,419 3,281 20,667 19,772 Loss on early extinguishment of debt 9,298-9,298 8,258 Loss from derivatives in our own equity ,289 General and administrative expenses 63,116 42, , ,756 Amortization and depreciation not included in cost of sales 21,847 3,260 31,312 12,564 Contribution Margin $ 90,116 $ 117,936 $ 230,122 $ 237,811 The following table reconciles our net (loss) income before loss from derivatives in our own equity to the nearest GAAP performance measure, which is net (loss) income: 13 Weeks Ended 52 Weeks Ended January 30, January 31, January 30, January 31, Net (loss) income before loss from derivatives in our own equity: Net (loss) income $ (8,604) $ 44,844 $ 1,018 $ (126,845) Loss from derivatives in our own equity ,289 Net (loss) income before loss from derivatives in our own equity: $ (8,604) $ 44,844 $ 1,018 $ 50,444 Page 18 of 21