Bluestem Group Inc. Announces Unaudited. Consolidated Second Quarter 2015 Earnings Results

Transcription

1 Bluestem Group Inc. Announces Unaudited Consolidated Second Quarter 2015 Earnings Results Eden Prairie, MN September 28, 2015 Bluestem Group Inc. (OTCMKTS: BGRP) today reported unaudited consolidated financial results that include its wholly-owned subsidiary, Bluestem Brands, Inc. and its subsidiaries ( Bluestem ), for the 13-week period ended July 31, 2015 (we refer to the 13-week periods ended July 31, 2015 and August 1, 2014 in this release as respectively the second quarter of fiscal 2015 and fiscal 2014). Bluestem is a multi-brand, online retailer of a broad selection of namebrand and private label general merchandise serving low- to middle-income consumers nationwide. It was an exciting quarter for Bluestem Group with the successful closing of the Orchard Brands acquisition and the adoption of our new corporate name, Bluestem Group Inc. We have a lot of work ahead of us but the integration of the Orchard portfolio is off to a great start. Before the favorable impact of the Orchard portfolio of brands performance, which are consolidated with our results for the last 22 days of the quarter, Bluestem s sales grew 10% year-over-year in the second quarter to $252.9 million. Including results from the Orchard portfolio of brands, Bluestem s sales grew 31% to $301.4 million. As we expected, adjusted EBITDA including the Orchard portfolio of brands decreased to $20.5 million compared to adjusted pro forma EBITDA of $26.7 million for the second quarter of last year. said Steve Nave, Bluestem Group s Chief Executive Officer. Second Quarter 2015 Bluestem Group Consolidated Highlights Adjusted EBITDA for the second quarter of fiscal 2015 was $17.8 million compared to $13.4 million in second quarter of fiscal Net loss for the second quarter of fiscal 2015 was $13.8 million compared to net income of $10.9 million for the second quarter of fiscal Included in the second quarter net loss was $10.1 million amortization of acquired intangible assets related to the acquisition of Bluestem in November 2014, $6.6 million in expenses related to the Orchard Brands acquisition and $8.8 million in interest expense. Diluted loss per share was $0.10 for the second quarter of fiscal 2015, compared to diluted earnings per share of $0.11 for the second quarter of fiscal Cash and cash equivalents were $163.5 million as of July 31, 2015, and net commercial real estate assets were approximately $53.4 million. During the quarter, $47.4 million in cash was received from asset collections and revenue on legacy commercial real estate-related assets and businesses, including a final redemption of $36.2 million from the equity investment in the Federal Home Loan Bank of Seattle. Second Quarter 2015 Bluestem Brands Stand-alone Highlights Net sales for the second quarter of fiscal 2015 were $301.4 million, including $48.4 million of net sales from the Orchard portfolio, a 31% increase over net sales of $230.5 million for the second quarter of fiscal Before the impact of the Orchard portfolio, Bluestem s net sales grew 10% year-over-year. 1

2 Adjusted EBITDA was $20.5 million in the second quarter of fiscal 2015, a 23% decrease compared to adjusted pro forma EBITDA of $26.7 million for the second quarter of fiscal Net loss for the second quarter of fiscal 2015 was $12.7 million, compared to net income of $9.9 million for the second quarter of fiscal Revolving new customer credit accounts were 150 thousand, a 2% decrease over 153 thousand in the second quarter of fiscal FreshStart new customer credit accounts were 50 thousand, a 6% increase over 47 thousand in the second quarter of fiscal Active accounts increased to 1.68 million as of the end of the second quarter of fiscal 2015, an 11% increase over the end of the second quarter of fiscal day delinquent balances on the revolving portfolio were 16.3% at the end of the second quarter of fiscal 2015 compared to 16.7% for the same period in All financial information included in this release is unaudited. Information for Bluestem Group is presented on a consolidated basis, including Bluestem Brands, Inc. beginning November 7, 2014 and the Orchard Portfolio beginning July 10, Consolidated information for Bluestem Group s whollyowned subsidiary, Bluestem, is also presented on a stand-alone basis. The acquisitions of Bluestem Brands and Orchard were accounted for as business combinations. Adjusted EBITDA and adjusted pro forma EBITDA are defined in the accompanying financial information of Bluestem Group and Bluestem Brands. Please see Bluestem 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, reconciliations to results reported under GAAP and other important information for investors to consider. Earnings Teleconference Information Management will discuss the company s 13-week period ended July 31, 2015 financial results during a teleconference tomorrow, September 29, 2015, at 8:00 AM 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 Bluestem Group 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 September 29, Additional investor information can be accessed at About Bluestem Group Bluestem Group Inc. is a holding company whose businesses include Bluestem Brands, a multi-brand, online retailer of a broad selection of name-brand and private label general merchandise serving low- to middle-income consumers through 16 retail brands that include: Appleseed s, Bedford Fair, Blair, Draper s & Damon s, Fingerhut, Gettington, Gold Violin, Haband, LinenSource, Norm Thompson, Old Pueblo Traders, PayCheck Direct, Sahalie, Solutions, Tog Shop and Wintersilks. Complementing each brand is a large selection of merchandise with payment options that provide customers with the flexibility of paying over time. Bluestem Group is headquartered in Eden Prairie, MN. For additional information visit the Bluestem Group website at 2

3 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 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 Bluestem Group 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 Bluestem Group 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 Bluestem Group s control and may cause actual results and performance to differ materially from Bluestem Group s expectations. Forward-looking statements are based on Bluestem Group s beliefs, assumptions and expectations of its future performance and actions, taking into account all information currently available to Bluestem Group. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to Bluestem Group or are within its control. If a change occurs, Bluestem Group 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 Bluestem Group s expectations include the risks and uncertainties set forth in Risk Factors in Bluestem Group s Report as of and for the fiscal years ended January 30, 2015 and January 31, 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. Bluestem Group 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)

4 BLUESTEM GROUP INC. BLUESTEM BRANDS, INC. FINANCIAL INFORMATION 13 and 26 weeks ended July 31, 2015 and August 1, 2014 Overview and Basis of Presentation The accompanying financial information for Bluestem Group is presented on a consolidated basis, including Bluestem beginning from November 7, The accompanying financial information for Bluestem Group s wholly-owned subsidiary, Bluestem, is also presented on a stand-alone basis. All such information is unaudited. Bluestem Group Consolidated Financial Information On November 7, 2014, Bluestem Group Inc. (f/k/a Capmark Financial Group Inc.) acquired Bluestem. As a result, the financial results of Bluestem for the 13- and 26-week periods ended July 31, 2015 were included in Bluestem Group s consolidated results, and Bluestem s financial results were not included in the Bluestem Group s consolidated results for the 13- or 26-week periods ended August 1, The acquisition of Bluestem was accounted for as a business combination. In December 2014, Bluestem Group 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. On June 18, 2015 Capmark Financial Group Inc. changed its name to Bluestem Group Inc. and began trading on the OTC marketplace under the symbol BGRP on June 19, On July 10, 2015, Bluestem acquired Orchard Brands Corporation. Information for the Orchard portfolio is presented in Bluestem s consolidated financial information beginning July 10, To supplement the historical financial data derived from Bluestem Group s consolidated financial statements, which are prepared in accordance with U.S. generally accepted accounting principles, or GAAP, this release uses adjusted EBITDA of Bluestem Group as non-gaap performance measures. This measure is not in accordance with, or an alternative to, measures prepared in accordance with GAAP. Bluestem Stand-alone 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 as of November 7, The accompanying Bluestem financial results are presented as Predecessor or 4

5 Successor to indicate the period preceding the acquisition or the period succeeding the acquisition, respectively. The financial information in the accompanying report on Bluestem s results of operations for the 13 and 26 weeks ended July 31, 2015 includes summary Bluestem consolidated adjusted pro forma EBITDA, pro forma net credit expense (income) and pro forma contribution margin data, which gives effect to the Santander Consumer USA transaction to which Bluestem became a party in April This information has been derived from internally prepared pro forma data, and is presented for informational purposes only and does 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 Bluestem Group s acquisition of Bluestem. To supplement the historical financial data derived from Bluestem s consolidated financial statements, which are prepared in accordance with GAAP, the accompanying report on Bluestem s results of operations for the 13 and 26 weeks ended July 31, 2015 uses, in addition to the above referenced adjusted pro forma data of Bluestem, adjusted EBITDA, contribution margin and adjusted general and administrative expenses, as non-gaap performance measures. These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP. Please see the accompanying report on Bluestem s results of operations for the 13 and 26 weeks ended July 31, 2015 for further important information concerning these non-gaap measures. 5

6 BLUESTEM GROUP INC. Consolidated Statement of Comprehensive Income (unaudited in thousands, except shares and per share amounts) 13 Weeks Ended 26 Weeks Ended July 31, 2015 (a) August 1, 2014 July 31, 2015 (a) August 1, 2014 Net sales and revenue Net retail sales $ 301,375 $ - $ 507,550 $ - Commercial real estate revenue Net interest income 379 1,673 1,177 3,671 Net gains on investments available for sale , ,776 Other noninterest income 2,344 4,128 7,585 5,873 Total net sales and revenue 304,264 17, ,586 23,320 Costs and expenses Retail cost of goods sold 169, ,795 - Retail sales and marketing expenses 65, ,787 - Retail net credit expense 9,809-16,108 - Commercial real estate operating expenses 605 1,788 1,282 3,208 General and administrative expenses 49,969 5,537 87,717 13,657 Amortization and depreciation not included in retail cost of goods sold 14, , (Gain) loss from derivatives in our own equity (411) - 7,814 - Total costs and expenses 309,335 7, ,312 16,919 Operating (loss) income (5,071) 10,441 (20,726) 6,401 Retail interest expense 8,754-16,274 - (Loss) income from continuing operations before income taxes (13,825) 10,441 (37,000) 6,401 Income tax (benefit) expense (27) (Loss) income from continuing operations after income taxes (13,798) 10,232 (37,317) 5,902 Loss from discontinued operations, net of tax - (2,505) - (4,753) Net (loss) income (13,798) 7,727 (37,317) 1,149 Plus: Net loss attributable to noncontrolling interests - 3,125-5,267 Net (loss) income attributable to Bluestem Group Inc. (13,798) 10,852 (37,317) 6,416 Other comprehensive income (loss) Net change in unrealized gains and losses on investment securities 362 (483) 147 (416) Comprehensive (loss) income attributable to Bluestem Group Inc. $ (13,436) $ 10,369 $ (37,170) $ 6,000 Basic and Diluted Loss Per Share - Common Stockholders Basic and diluted loss per share - continuing operations $ (0.10) $ 0.13 $ (0.27) $ 0.11 Basic and diluted loss per share attributable to Bluestem Group Inc. $ (0.10) $ 0.11 $ (0.27) $ 0.06 Basic weighted average shares outstanding 136,140,955 99,803, ,132,962 99,803,233 Diluted weighted average shares outstanding 136,140, ,072, ,132, ,448,306 (a) Includes Orchard Portfolio results for the period July 10, July 31,

7 BLUESTEM GROUP INC. Condensed Consolidated Balance Sheets (in thousands) July 31, 2015 January 30, 2015 (unaudited) ASSETS Current assets:. Cash and cash equivalents. $ 163,517 $ 254,207 Restricted cash. 11,605 13,586 Customer accounts receivable net of allowance of $10,152 and $10,457 46,731 40,928 Commercial real estate accounts and other receivables. 19,375 19,270 Retail merchandise inventories. 225,571 96,431 Other current assets. 70,372 33,647 Total current assets. 537, ,069 Loans held-for-sale. 50,251 78,080 Equity investments. 58, ,736 Property and equipment net. 98,799 49,755 Intangibles net. 360, ,892 Goodwill. 506, ,642 Other assets. 10,957 21,107 Total Assets. $ 1,622,406 $ 1,301,281. LIABILITIES AND STOCKHOLDERS EQUITY. Current liabilities:. Accounts payable. $ 181,101 $ 82,037 Accrued costs and other liabilities. 124,153 92,823 Short-term debt. 31,179 17,764 Total current liabilities. 336, ,624 Long-term debt. 558, ,116 Deferred income taxes. 94,772 79,949 Other long-term liabilities. 13,371 20,037 Total liabilities.. 1,002, ,726 Stockholders' Equity:. Series A participating convertible preferred stock. 4,913 4,856 Common stock. 1,366 1,364 Treasury stock (131) - Additional paid-in capital. 358, ,697 Retained earnings. 253, ,774 Accumulated other comprehensive income, net of tax. 1, Total Bluestem Group Inc. stockholders equity. 619, ,555 Total Liabilities and Stockholders' Equity. $ 1,622,406 $ 1,301,281. 7

8 BLUESTEM GROUP INC. Consolidated Statement of Changes in Stockholders Equity (unaudited in thousands, except share data) Bluestem Group, Inc. Stockholders Accumulated Series A Convertible Additional Other Total Preferred Stock Common Stock Treasury Stock Paid-In Retained Comprehensive Noncontrolling Stockholders Shares Amount Shares Amount Shares Amount Capital Earnings Income Interest Equity BALANCE January 31, $ - 100,182,419 $ $ - $ 189,970 $ 181,922 $ 1,601 $ 32,503 $ 406,096 Net income (loss) 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 Net loss (37,317) (37,317) Total other comprehensive income, net of tax Issuance of restricted common stock 177, Exercise of common stock options 25,624 - Deemed dividend from beneficial conversion feature associated with preferred stock 57 (57) - Stock-based compensation 2,145 2,145 Treasury shares repurchased (21,419) 21,419 (131) 118 (13) BALANCE July 31, ,000 $ 4, ,555,963 $ 1,366 21,419 $ (131) $ 358,960 $ 253,400 $ 1,011 $ - $ 619,519 8

9 BLUESTEM GROUP INC. Consolidated Statement of Cash Flows (unaudited in thousands) 26-Weeks Ended July 31, 2015 August 1, 2014 Operating Activities of Continuing Operations Net (loss) income $ (37,317) $ 1,149 Net loss from discontinued operations - (4,753) Net (loss) income from continuing operations (37,317) 5,902 Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities of continuing operations: Provision for deferred income taxes (872) - Net (gains) losses on loans held for sale, investment securities and other (6,090) (15,607) Equity in net (gains) losses of investees and cash return on investment (1,129) (1,101) Amortization and depreciation expense 27, Loss from derivatives in our own equity 7,814 - Provision for doubtful accounts 7,157 - Provision for retail merchandise returns 13,852 - Stock-based compensation expense 2, Inventory obsolescence and other reserves 14,836 - Other, net 2,268 - Net change in assets and liabilities which provided (used) cash: Customer account and other receivables, net (22,637) 4,499 Retail merchandise inventories 1,978 - Other assets (1,570) 1,690 Accounts payable and other liabilities (61) 1,871 Proceeds from sales of/payments from loans held for sale 33,536 11,376 Net cash provided by operating activities of continuing operations 42,156 9,584 Investing Activities of Continuing Operations Net decrease in restricted cash 1,981 - Proceeds from sales of investment securities classified as available-for-sale 51 - Proceeds from repayments of investment securities classified as available-for-sale ,769 Proceeds from sales of/capital distributions from equity investments 57,523 33,009 Purchases of customer accounts receivable (475,031) - Proceeds from sale of customer accounts receivable 475,178 - Acquisition of Orchard Brands Corporation net of cash on hand (392,158) - Net (purchases) dispositions of property and equipment (15,223) 4,663 Net cash (used in) provided by investing activities of continuing operations (347,456) 51,441 Financing Activities of Continuing Operations Net borrowings/repayments of debt 217,486 (13,678) Borrowings on revolving credit facilities 192,276 - Repayments on revolving credit facilities (194,944) - Proceeds from issuance of preferred stock - 5,000 Treasury shares repurchased (131) - Net cash provided by (used in) financing activities of continuing operations 214,687 (8,678) Effect of Foreign Exchange Rates on Cash (77) 63 Discontinued Operations Net cash used in operating activities of discontinued operations - (1,192) Net cash provided by investing activities of discontinued operations - 2,736 Net cash provided by discontinued operations - 1,544 Net (Decrease) Increase in Cash and Cash Equivalents (90,690) 53,954 Cash and Cash Equivalents, Beginning of Period 254, ,444 Cash and Cash Equivalents, End of Period $ 163,517 $ 223,398 9

10 BLUESTEM GROUP INC. Non-GAAP Financial Measures (unaudited in thousands) To supplement the consolidated financial statements of Bluestem 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): Adjusted EBITDA, as presented, represents net loss before interest expense, income tax (benefit) expense, amortization and depreciation expense, stock-based compensation expense, (gain) loss from derivatives in our own equity, acquisition transaction costs and costs related to the Centerbridge Investment Agreement. Non-GAAP net income (loss), as we present it, represents net income (loss) attributable to Bluestem Group Inc. before amortization of acquired intangible assets, stock-based compensation expense, (gain) loss from derivatives in our own equity, acquisition transaction costs and costs related to the Centerbridge Investment Agreement. Non-GAAP diluted income (loss) per share, as we present it, represents diluted income (loss) per share before amortization of acquired intangible assets, stock-based compensation expense, (gain) loss from derivatives in our own equity, acquisition transaction costs and costs related to the Centerbridge Investment Agreement. 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 Bluestem Group Inc.'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 Adjusted EBITDA, 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 26 Weeks Ended July 31, 2015 August 1, 2014 July 31, 2015 August 1, 2014 Adjusted EBITDA reconciliation to GAAP net (loss) income:. Net (loss) income attributable to Bluestem Group Inc. $ (13,798) $ 10,852 $ (37,317) $ 6,416 Retail interest expense 8,754-16,274 - Income tax (benefit) expense (27) Amortization and depreciation expense. 15, , Stock-based compensation expense. 1, , (Gain) loss from derivatives in our own equity. (411) - 7,814 - Acquisition transaction costs. 6,610-8,422 - Costs related to Centerbridge Investment Agreement. - 1,913-5,444 Adjusted EBITDA. $ 17,761 $ 13,445 $ 25,901 $ 13,313 GAAP net (loss) income attributable to Bluestem Group Inc.. $ (13,798) $ 10,852 $ (37,317) $ 6,416 Adjustments:. Amortization of acquired intangible assets. 10,133-17,836 - Stock-based compensation expense. 1, , (Gain) loss from derivatives in our own equity. (411) - 7,814 - Acquisition transaction costs. 6,610-8,422 - Costs related to Centerbridge Investment Agreement. - 1,913-5,444 Tax effect of adjustments Non-GAAP net income (loss) attributable to Bluestem Group Inc.. $ 4,061 $ 13,215 $ (298) $ 12,760 GAAP diluted (loss) income per share available to common stockholders. $ (0.10) $ 0.11 $ (0.27) $ 0.06 Adjustments: Amortization of acquired intangible assets Stock-based compensation expense (Gain) loss from derivatives in our own equity. (0.00) Acquisition transaction costs Costs related to Centerbridge Investment Agreement Tax effect of adjustments Non-GAAP diluted income (loss) per share available to common stockholders. $ 0.03 $ 0.13 $ (0.00) $ 0.13 Fully diluted weighted-average shares outstanding. 136,140, ,072, ,132, ,448,306 10

11 BLUESTEM BRANDS, INC. Consolidated Statements of Operations and Selected Operating Data (unaudited in thousands, except average order size) Successor Predecessor (13 Weeks Ended) (13 Weeks Ended) July 31, 2015 (a) August 1, 2014 Change (b) Net sales $ 301,375 $ 230, % Cost of sales 169, , % Gross profit 131,840 97, % Sales and marketing expenses 65,070 42, % Net credit expense (income) 9, n/m General and administrative expenses 46,431 31, % Amortization and depreciation not included in cost of sales (c) 14,758 3, % Interest expense, net (d) 8,754 4, % (Loss) income before income taxes (12,982) 15,401 n/m Income tax (benefit) expense (288) 5,510 n/m Net (loss) income $ (12,694) $ 9,891 n/m Margins and Expenses as a Percentage of Net Sales: Gross profit rate 43.7 % 42.4 % 139 bp Sales and marketing expenses 21.6 % 18.7 % 294 bp Pro forma net credit expense (income) (e) $ 9,809 $ 2, % As a percentage of net sales 3.3 % 1.2 % 209 bp Pro forma contribution margin (e) $ 56,961 $ 51, % As a percentage of net sales 18.9 % 22.5 % (364) bp Adjusted general and administrative expenses (e) $ 36,922 $ 25, % As a percentage of net sales 12.3 % 11.1 % 112 bp Adjusted EBITDA (e) $ 20,519 $ 29,402 (30.2%) As a percentage of net sales 6.8 % 12.8 % (595) bp Adjusted pro forma EBITDA (e) $ 20,519 $ 26,659 (23.0%) As a percentage of net sales 6.8 % 11.6 % (476) bp Selected Operating Data: Fingerhut and Gettington.com revolving new customer credit accounts (f) (2.0%) Fingerhut FreshStart new customer credit accounts (f) % PayCheck Direct new customer credit accounts (f) % Orchard Portfolio new gross customers (g) 94 n/a n/m Fingerhut and Gettington.com revolving active accounts (h) 1,682 1, % Orchard Portfolio active customers (i) 8,000 n/a n/m PayCheck Direct eligible client employees (j) 4,316 2, % (a) Orchard Portfolio results are presented for the period from July 10, 2015 through July 31, (b) Changes in rates are presented as the basis point (bp) increase (decrease) from the prior period. (c) 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. (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 initially included in FreshStart new customer credit accounts when their initial order was made. (g) Customers who have made a first time purchase from a particular brand within the Orchard Portfolio during the period presented. (h) 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. (i) Customers that have made at least one purchase within the previous twelve fiscal months. (j) 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. 11

12 BLUESTEM BRANDS, INC. Consolidated Statements of Operations and Selected Operating Data (unaudited in thousands, except average order size) Successor Predecessor (26 Weeks Ended) (26 Weeks Ended) July 31, 2015 (a) August 1, 2014 Change (b) Net sales $ 507,550 $ 401, % Cost of sales 289, , % Gross profit 217, , % Sales and marketing expenses 107,787 80, % Net credit expense (income) 16,108 (12,532) n/m General and administrative expenses 80,187 65, % Amortization and depreciation not included in cost of sales (c) 26,809 6, % Interest expense, net (d) 16,274 9, % (Loss) income before income taxes (29,410) 21,826 n/m Income tax (benefit) expense (5,447) 7,815 n/m Net (loss) income $ (23,963) $ 14,011 n/m Margins and Expenses as a Percentage of Net Sales: Gross profit rate 42.9 % 42.3 % 56 bp Sales and marketing expenses 21.2 % 20.0 % 128 bp Pro forma net credit expense (income) (e) $ 16,108 $ 5, % As a percentage of net sales 3.2 % 1.5 % 169 bp Pro forma contribution margin (e) $ 93,860 $ 83, % As a percentage of net sales 18.5 % 20.9 % (241) bp Adjusted general and administrative expenses (e) $ 67,296 $ 51, % As a percentage of net sales 13.3 % 12.9 % 34 bp Adjusted EBITDA (e) $ 27,444 $ 51,741 (47.0%) As a percentage of net sales 5.4 % 12.9 % (747) bp Adjusted pro forma EBITDA (e) $ 27,444 $ 32,774 (16.3%) As a percentage of net sales 5.4 % 8.2 % (275) bp Selected Operating Data: Fingerhut and Gettington.com revolving new customer credit accounts (f) % Fingerhut FreshStart new customer credit accounts (f) % PayCheck Direct new customer credit accounts (f) % Orchard Portfolio new gross customers (g) 94 n/a n/m Fingerhut and Gettington.com revolving active accounts (h) 1,682 1, % Orchard Portfolio active customers (i) 8,000 n/a n/m PayCheck Direct eligible client employees (j) 4,316 2, % (a) Orchard Portfolio results are presented for the period from July 10, 2015 through July 31, (b) Changes in rates are presented as the basis point (bp) increase (decrease) from the prior period. (c) 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. (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 initially included in FreshStart new customer credit accounts when their initial order was made. (g) Customers who have made a first time purchase from a particular brand within the Orchard Portfolio during the period presented. (h) 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. (i) Customers that have made at least one purchase within the previous twelve fiscal months. (j) 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. 12

13 BLUESTEM BRANDS, INC. Condensed Consolidated Balance Sheets (in thousands) July 31, 2015 (a) January 30, 2015 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 8,349 $ 59,222 Restricted cash 11,345 13,425 Customer accounts receivable net of allowance for doubtful accounts of $10,152 and $10,457, respectively 46,731 40,928 Merchandise inventories 225,571 96,431 Promotional material inventories 50,012 13,976 Deferred income taxes 11,473 14,914 Prepaid expenses and other assets 19,920 19,008 Total current assets 373, ,904 Property and equipment net 98,799 49,755 Intangible assets net 360, ,892 Goodwill 506, ,642 Other assets Total Assets $ 1,339,605 $ 887,203 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 181,101 $ 82,037 Current income taxes payable 8,469 18,567 Accrued costs and other liabilities 92,785 65,109 Short-term debt 31,179 17,764 Total current liabilities 313, ,477 Long-term debt 508, ,802 Deferred income taxes 151, ,119 Other long-term liabilities 4,648 5,187 Stockholders' equity: Common stock - - Additional paid-in capital 369, ,602 Retained earnings (7,947) 16,016 Total stockholders' equity 361, ,618 Total Liabilities and Stockholders Equity $ 1,339,605 $ 887,203 (a) Orchard Portfolio results are presented as of July 31,

14 BLUESTEM BRANDS, INC. Condensed Consolidated Statement of Cash Flows (unaudited in thousands) Successor Predecessor (26 Weeks Ended) (26 Weeks Ended) July 31, 2015 (a) August 1, 2014 Cash flows from operating activities: Net (loss) income $ (23,963) $ 14,011 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Amortization and depreciation expense 27,444 7,314 Amortization of deferred charges and original issue discount 1,914 1,197 Provision (benefit) for doubtful accounts 7,157 (8,598) Provision for merchandise returns 13,852 11,574 Deferred income taxes (820) (780) Stock-based compensation expense 1,947 1,424 Inventory obsolescence and other reserves 14,836 10,944 Other, net Net change in assets and liabilities which provided (used) cash: Customer accounts receivable (33,521) (13,480) Merchandise inventories 1,978 (10,377) Promotional material inventories (5,452) 166 Prepaid expenses and other assets 3,659 9,546 Current income taxes payable (7,195) (10,135) Accounts payable and other liabilities 5,492 5,283 Net cash provided by operating activities 8,246 18,089 Cash flows from investing activities: Purchase of customer accounts receivable (475,031) (422,344) Proceeds from sale of customer accounts receivable 475, ,336 Acquisition of Orchard Brands, net (392,158) - Net purchase of property and equipment (15,223) (11,271) Net decrease (increase) in restricted cash 2,080 (5,121) Net cash used in investing activities (405,154) (15,400) Cash flows from financing activities: Borrowings on revolving credit facilities 192, ,641 Repayments on revolving credit facilities (194,944) (210,430) Borrowings on Successor Term Loan, net of financing fees 269,453 - Repayments on Successor Term Loan (20,750) - Repayments on Predecessor Term Loan - (40,000) Cash equity contributions from parent 100,000 - Issuance of Predecessor common stock Net cash provided by (used in) financing activities 346,035 (40,297) Net Decrease in Cash and Cash Equivalents (50,873) (37,608) Cash and Cash Equivalents, Beginning of Period 59, ,388 Cash and Cash Equivalents, End of Period $ 8,349 $ 94,780 (a) Orchard Portfolio results are presented for the period from July 10, 2015 through July 31,

15 BLUESTEM BRANDS, INC. Supplemental Financial Information (unaudited in thousands) Successor (13 Weeks Ended) July 31, 2015 Change Total sales by merchandise category: (a) Home $ 131, % $ 110, % 19.1 % Entertainment 101, % 96, % 5.7 % Fashion 85, % 34, % % Total merchandise sales (b) 319, % 241, % 32.0 % Returns and allowances (26,556) (15,885) 67.2 % Commissions and other revenue 8,492 4, % Net sales $ 301,375 $ 230, % Gross profit rate 43.7% 42.4% 139 bp Sales and marketing expense 21.6% 18.7% 294 bp Contribution margin rate (c) 18.9% 23.6% (473) bp Average order size (d) $ 238 $ % Fingerhut sales by merchandise category: Home $ 111, % $ 103, % 8.4 % Entertainment 88, % 82, % 7.2 % Fashion 35, % 32, % 7.9 % Total merchandise sales (b) 235, % 218, % 7.9 % Returns and allowances (16,834) (14,411) 16.8 % Commissions 4,794 4, % Net sales $ 223,680 $ 208, % Gross profit rate 43.8% 44.5% (72) bp Sales and marketing expense 19.2% 19.0% 15 bp Contribution margin rate (c) 20.7% 25.6% (487) bp Average order size (d) $ 235 $ % Orchard sales by merchandise category: (a) Home $ 5, % Fashion 47, % Total merchandise sales (b) 52, % Returns and allowances (7,711) Commissions and other revenue 3,307 Net sales $ 48,441 Gross profit rate 53.9% Sales and marketing expense 36.3% Contribution margin rate (c) 17.5% Average order size (d) $ 75 Predecessor (13 Weeks Ended) August 1, 2014 Other sales by merchandise category: (e) Home $ 14, % $ 7, % 90.0 % Entertainment 13, % 13, % (3.5)% Fashion 3, % 2, % 55.7 % Total merchandise sales (b) 30, % 23, % 31.8 % Returns and allowances (2,011) (1,474) 36.4 % Commissions % Net sales $ 29,254 $ 22, % Gross profit rate 26.9% 22.5% 445 bp Sales and marketing expense 15.5% 15.1% 46 bp Contribution margin rate (c) 7.1% 5.0% 208 bp Average order size (d) $ 259 $ % (a) Orchard Portfolio results are presented for the period from July 10, 2015 through July 31, (b) Total merchandise sales includes shipping and handling revenue and is net of sales discounts. (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. (d) 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. (e) Other includes Gettington.com and Paycheck Direct. 15

16 BLUESTEM BRANDS, INC. Supplemental Financial Information (unaudited in thousands) Successor Predecessor (26 Weeks Ended) (26 Weeks Ended) July 31, 2015 August 1, 2014 Change Total sales by merchandise category: (a) Home $ 233, % $ 191, % 21.8 % Entertainment 183, % 165, % 10.6 % Fashion 118, % 62, % 90.0 % Total merchandise sales (b) 535, % 419, % 27.5 % Returns and allowances (40,504) (26,487) 52.9 % Commissions and other revenue 12,545 8, % Net sales $ 507,550 $ 401, % Gross profit rate 42.9% 42.3% 56 bp Sales and marketing expense 21.2% 20.0% 127 bp Contribution margin rate (c) 18.5% 25.5% (701) bp Average order size (d) $ 230 $ % Fingerhut sales by merchandise category: Home $ 203, % $ 179, % 13.5 % Entertainment 159, % 142, % 11.7 % Fashion 65, % 58, % 12.1 % Total merchandise sales (b) 428, % 380, % 12.6 % Returns and allowances (29,376) (24,020) 22.3 % Commissions 8,515 7, % Net sales $ 407,455 $ 364, % Gross profit rate 43.7% 44.3% (59) bp Sales and marketing expense 20.0% 20.4% (40) bp Contribution margin rate (c) 20.2% 27.3% (710) bp Average order size (d) $ 228 $ % Orchard sales by merchandise category: (a) Home $ 5, % Fashion 47, % Total merchandise sales (b) 52, % Returns and allowances (7,711) Commissions and other revenue 3,307 Net sales $ 48,441 Gross profit rate 53.9% Sales and marketing expense 36.3% Contribution margin rate (c) 17.5% Average order size (d) $ 75 Other sales by merchandise category: (e) Home $ 24, % $ 12, % 94.5 % Entertainment 24, % 23, % 4.0 % Fashion 5, % 3, % 53.4 % Total merchandise sales (b) 54, % 39, % 37.5 % Returns and allowances (3,417) (2,467) 38.5 % Commissions % Net sales $ 51,654 $ 37, % Gross profit rate 26.3% 23.4% 284 bp Sales and marketing expense 16.6% 15.5% 110 bp Contribution margin rate (c) 6.0% 8.1% (210) bp Average order size (d) $ 252 $ % (a) Orchard Portfolio results are presented for the period from July 10, 2015 through July 31, (b) Total merchandise sales includes shipping and handling revenue and is net of sales discounts. (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. (d) 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. (e) Other includes Gettington.com and Paycheck Direct. 16

17 BLUESTEM BRANDS, INC. Supplemental Financial Information (unaudited in thousands, except average balance outstanding) Successor Predecessor (13 Weeks Ended) (13 Weeks Ended) July 31, 2015 August 1, 2014 Change Net credit expense (income): Finance charge and fee income $ (202) $ 1,949 (110.4)% Provision (benefit) for doubtful accounts 1,891 (1,225) (254.4)% Credit management costs 18,107 17, % Portfolio profit sharing and servicing fee income (9,987) (18,227) (45.2)% Net credit expense (income) $ 9,809 $ 174 n/m Serviced Portfolio Selected Credit Data: (13 Weeks Ended) July 31, 2015 Revolving (a) FreshStart (b) PCD Installment (c) Balance active accounts 1, Average balance outstanding $ 688 $ 104 $ 545 Customer accounts receivable (d) $ 1,237,579 $ 14,094 $ 17,318 Balances 30+ days delinquent (e) $ 201,406 $ 5,804 $ 1,521 Balances 30+ days delinquent as a percentage of total customer accounts receivable (f) 16.3 % 41.2% 8.8 % Average customer accounts receivable $ 1,252,998 $ 16,852 $ 16,574 Finance charge and fee income (expense) 90,072 (620) n/a Finance charge and fee income rate (g) 28.8 % -3.1% n/a Net principal charge-offs $ 60,863 $ 7,219 $ 378 Net principal charge-off rate (h) 19.4 % 36.1% 9.1% (13 Weeks Ended) August 1, 2014 Revolving (a) FreshStart (b) PCD Installment (c) Balance active accounts 1, Average balance outstanding $ 622 $ 105 $ 670 Customer accounts receivable (d) $ 1,035,927 $ 11,502 $ 6,646 Balances 30+ days delinquent (e) $ 173,326 $ 4,591 $ 144 Balances 30+ days delinquent as a percentage of total customer accounts receivable (f) 16.7 % 39.9% 2.2 % Average customer accounts receivable $ 1,035,569 $ 12,040 $ 5,136 Finance charge and fee income $ 78,645 $ (237) n/a Finance charge and fee income rate (g) 30.4 % -1.9% n/a Net principal charge-offs $ 39,852 $ 4,201 $ 140 Net principal charge-off rate (h) 15.4 % 33.4% 10.9% (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 July 31, 2015 and August 1, 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 July 31, 2015 and August 1, (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 July 31, 2015 and August 1, 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 July 31, 2015 and August 1,

18 BLUESTEM BRANDS, INC. Supplemental Financial Information (unaudited in thousands, except average balance outstanding) Successor Predecessor (26 Weeks Ended) (26 Weeks Ended) July 31, 2015 August 1, 2014 Change Net credit expense (income): Finance charge and fee income $ (4,182) $ 7,271 (157.5)% Provision (benefit) for doubtful accounts 7,157 (8,598) (183.2)% Credit management costs 37,202 34, % Portfolio profit sharing and servicing fee income (24,069) (45,250) (46.8)% Net credit expense (income) $ 16,108 $ (12,532) n/m Serviced Portfolio Selected Credit Data: (26 Weeks Ended) July 31, 2015 Revolving (a) FreshStart (b) PCD Installment (c) Balance active accounts 1, Average balance outstanding $ 688 $ 104 $ 545 Customer accounts receivable (d) $ 1,237,579 $ 14,094 $ 17,318 Balances 30+ days delinquent (e) $ 201,406 $ 5,804 $ 1,521 Balances 30+ days delinquent as a percentage of total customer accounts receivable (f) 16.3 % 41.2% 8.8 % Average customer accounts receivable $ 1,247,272 $ 19,630 $ 16,858 Finance charge and fee income 182,257 1,683 n/a Finance charge and fee income rate (g) 29.2 % 5.3% n/a Net principal charge-offs $ 113,704 $ 10,265 $ 1,065 Net principal charge-off rate (h) 18.2 % 32.6% 12.6% (26 Weeks Ended) August 1, 2014 Revolving (a) FreshStart (b) PCD Installment (c) Balance active accounts 1, Average balance outstanding $ 622 $ 105 $ 670 Customer accounts receivable (d) $ 1,035,927 $ 11,502 $ 6,646 Balances 30+ days delinquent (e) $ 173,326 $ 4,591 $ 144 Balances 30+ days delinquent as a percentage of total customer accounts receivable (f) 16.7 % 39.9% 2.2 % Average customer accounts receivable $ 1,022,708 $ 13,074 $ 4,519 Finance charge and fee income $ 152,366 $ 1,492 n/a Finance charge and fee income rate (g) 29.8 % 7.2% n/a Net principal charge-offs $ 77,672 $ 6,559 $ 157 Net principal charge-off rate (h) 15.2 % 31.5% 6.9% (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 26 weeks ended July 31, 2015 and August 1, 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 26 weeks of FreshStart related sales five months prior to the 26 weeks ended July 31, 2015 and August 1, (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 26 weeks ended July 31, 2015 and August 1, 2014 annualized to 52-week periods for comparability. FreshStart net principal charge-off rate represents net principal charge-offs as a percentage of the 26 weeks of FreshStart related sales five months prior to the 26 weeks ended July 31, 2015 and August 1,

19 BLUESTEM BRANDS, INC. Non-GAAP Financial Measures (unaudited in thousands) 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): Pro forma net credit expense (income), as presented, is defined as net credit expense (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 2014 fiscal year. No pro forma adjustments were necessary for the 13 weeks and 26 weeks ended July 31, 2015 as the sale of receivables was fully transitioned by the end of fiscal 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. Pro forma contribution margin, as presented, is defined as net sales less cost of sales, sales and marketing expenses and pro forma net credit expense (income) assuming that the SCUSA credit financing arrangement had been in place and all revolving customer accounts receivable were sold to SCUSA prior to the 2014 fiscal year. No pro forma adjustments were necessary for the 13 weeks and 26 weeks ended July 31, 2015 as the sale of receivables was fully transitioned by the end of fiscal Adjusted general and administrative expense, as presented, is defined as general and administrative expenses adjusted for dividend equivalent expense, stock-based compensation expense, 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 Bluestem Group that are subject to limited indemnification by Bluestem's former stockholders. 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, 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 Bluestem Group that are subject to limited indemnification by Bluestem's former stockholders. Adjusted pro forma EBITDA, as presented, represents net (loss) income, assuming that the SCUSA credit financing arrangement had been in place and all revolving customer accounts receivable were sold to SCUSA prior to the 2014 fiscal year, before interest expense, income tax (benefit) expense, amortization and depreciation expense, stock-based compensation expense, dividend equivalent expense, 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. No pro forma adjustments were necessary for the 13 weeks and 26 weeks ended July 31, 2015 as the sale of receivables was fully transitioned by the end of fiscal 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 pro forma net credit expense (income), contribution margin, pro forma contribution margin, adjusted general and administrative expense, 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 pro forma Net Credit Expense (Income) to the nearest GAAP performance measure, which is net credit expense (income): 13 Weeks Ended 26 Weeks Ended July 31, 2015 (a) August 1, 2014 July 31, 2015 (a) August 1, 2014 Pro forma Net Credit Expense (Income): Net credit expense (income) $ 9,809 $ 174 $ 16,108 $ (12,532) Less: Finance charge and fee income adjustment (b) - (1,712) - (8,763) Provision for doubtful accounts adjustment (b) - 3,519-14,157 Servicing income adjustment (c) - (98) - (274) Profit sharing adjustment (c) ,369 Total net credit expense (income) pro forma adjustments - 2,503-18,489 Pro forma Net Credit Expense (Income) $ 9,809 $ 2,677 $ 16,108 $ 5,957 Pro forma net credit expense (income) % of net sales 3.3% 1.2% 3.2% 1.5% (a) No pro forma adjustments were necessary for the 13 weeks and 26 weeks ended July 31, 2015 as the sale of receivables was fully transitioned by the end of fiscal (b) Finance charge and fee income and provision for doubtful accounts shifted to SCUSA for all revolving receivables. Bluestem Brands, Inc. retains finance charge and fee income and provision for doubtful accounts for retained receivables (FreshStart and PayCheck Direct). (c) Bluestem Brands, Inc. receives a 2% servicing fee and profit sharing (based on Risk Adjusted Margin) from SCUSA. 19