($ in millions)

Statement of operations data:

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses

Goodwill impairments(1)

Asset impairments(2)

Operating (loss) earnings

Interest income

Interest expense

(Loss) earnings from continuing operations before income taxes

Income tax expense

Net (loss) income from continuing operations

(Loss) income from discontinued operations, net of tax(3)

Net (loss) income

Cash flow data:

Net cash flows (used in) provided by operating activities

Net cash flows (used in) provided by investing activities

Net cash flows (used in) provided by financing activities

Capital expenditures

Balance sheet data (end of year):

Cash and cash equivalents

Receivables, net

Merchandise inventories, net

Total assets

Total debt

Total liabilities

Total stockholders’ equity

Other operating and financial data

Comparable store sales (decrease) increase

Number of stores at fiscal year end

Adjusted EBITDA(4)

As adjusted financial data(5)

Ratio of Adjusted EBITDA to interest expense(4)

Ratio of total debt to Adjusted EBITDA(4)

During the second quarter of fiscal 2019, we determined that a triggering event occurred as a result of a sustained decline in our market capitalization; therefore, we performed an interim impairment test for our goodwill. As a result of the interim impairment test, we recognized a goodwill impairment charge totaling $363.9 million related to our United States segment. We have no remaining goodwill as a result of the impairment charge. In fiscal 2018, we recognized goodwill impairment charges of $970.7 million related to our continuing operations. No goodwill impairment charges related to continuing operations were recognized in fiscal 2017.

We recognized store and other asset impairment charges of $10.7 million, $2.1 million and $2.8 million in fiscal 2019, fiscal 2018 and fiscal 2017, respectively. Store and other asset impairment charges relate to our evaluation of store property, equipment and other assets in situations where an asset’s carrying value was not expected to be recovered by its future cash flows over its remaining useful life. Additionally, we recognized a $8.7 million corporate aircraft impairment charge in fiscal 2019.

On January 16, 2019, we completed the sale of all of the equity interest in our wholly-owned subsidiary Spring Communications Holding, Inc. (“Spring Mobile”) to Prime Acquisition Company, LLC (“Prime”), a wholly-owned subsidiary of Prime Communications, L.P., pursuant to an equity purchase agreement dated as of November 21, 2018 (the “Equity Purchase Agreement”). The net cash proceeds received from the sale totaled $727.9 million. The net proceeds received at closing consisted of the purchase price of $700.0 million less $10.5 million of transaction costs, plus preliminary adjustments totaling $38.4 million for working capital and indebtedness. We recognized a gain on sale of $100.8 million ($65.4 million, net of tax) during fiscal 2018. During fiscal 2019, we were unable to settle on proposed working capital adjustments with Prime and, as a result, the proposed adjustments were submitted to arbitration proceedings under the terms of the Equity Purchase Agreement. During the fourth quarter of fiscal 2019, we recognized a charge of $5.5 million ($4.2 million, net of tax) related to the final working capital adjustments settled through arbitration proceedings. We have no significant contingencies or continuing involvement with Spring Mobile. The historical results of Spring Mobile, including the gain on sale, are reported as discontinued operations in our consolidated statements of operations for all periods presented.

Adjusted EBITDA is a supplemental financial measure of the Company’s performance that is not required by, or presented in accordance with, GAAP. We believe that the presentation of this non-GAAP financial measure provides useful information to investors in assessing our financial condition and results of operations. We define Adjusted EBITDA as net income (loss) before income taxes, plus interest expense, net and depreciation and amortization, excluding stock-based compensation, transformation costs, business divestitures, asset impairments, severance and other non-cash charges. Net income (loss) is the GAAP financial measure most directly comparable to Adjusted EBITDA. Our non-GAAP financial measures should not be considered as an alternative to the most directly comparable GAAP financial measure. Furthermore, non-GAAP financial measures have limitations as an analytical tool because they exclude some but not all items that affect the most directly comparable GAAP financial measures. Some of these limitations include:

certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure;

Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and

our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

($ in millions)

Reconciliation of Adjusted EBITDA to Net (Loss) Income

Net (loss) income

Loss (income) from discontinued operations, net of tax

Net (loss) income from continuing operations

Interest expenses, net

Depreciation and amortization

Income tax expense

EBITDA

Stock-based compensation

Goodwill impairments

Asset impairments(a)

Transformation costs(b)

Business divestiture and other(c)

Severance and other(d)

Adjusted EBITDA(e)

See “footnote (2)” for a description of asset impairment charges.

Relates primarily to professional fees incurred in connection with our Project Reboot initiative.

Fiscal 2019 reflects the sale of Simply Mac and our efforts to wind down operations in Denmark, Norway and Sweden.

Relates primarily to executive severance and accelerated stock compensation and other corporate severance payments.

Does not reflect run rate cost savings.

As adjusted financial data gives pro forma effect to the Exchange Offer, assuming participation by 70% of the aggregate principal amount of the Existing Notes prior to the Early Tender Date and no participation thereafter.