Hhgregg Announces Third Fiscal Quarter Operating Results

Other factors that could cause actual results to differ from those implied by the forward-looking statements in this press release are more fully described in the “Risk Factors” sections in the Company’s fiscal 2012 Form 10-K filed May 23, 2012 and Form 10-Q filed November 2, 2012. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this press release are made only as of the date hereof. Except as required by law, hhgregg does not undertake, and specifically declines, any obligation to update any of these statements or to publicly announce the results of any revisions to any of these statements to reflect future events or developments.

HHGREGG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
		Three Months Ended								Nine Months Ended
		December 31, 2012				December 31, 2011				December 31, 2012				December 31, 2011
		(In thousands, except share and per share data)
Net sales		$	799,635			$	829,546			$	1,877,127			$	1,879,603
Cost of goods sold		581,450				603,640				1,338,136				1,346,705
Gross profit		218,185				225,906				538,991				532,898
Selling, general and administrative expenses		139,303				140,609				383,871				371,529
Net advertising expense		38,715				39,488				98,085				90,148
Depreciation and amortization expense		10,416				8,765				29,673				24,236
Asset impairment charges		504				—				504				—
Income from operations		29,247				37,044				26,858				46,985
Other expense (income):
Interest expense		704				881				1,692				1,964
Interest income		(3		)		(1		)		(8		)		(5		)
Total other expense		701				880				1,684				1,959
Income before income taxes		28,546				36,164				25,174				45,026
Income tax expense		11,157				13,686				9,726				17,283
Net income		$	17,389			$	22,478			$	15,448			$	27,743
Net income per share
Basic		$	0.51			$	0.60			$	0.44			$	0.73
Diluted		$	0.51			$	0.60			$	0.44			$	0.72
Weighted average shares outstanding-basic		33,934,383				37,154,446				35,099,660				38,167,304
Weighted average shares outstanding-diluted		33,985,113				37,603,767				35,168,497				38,522,707

HHGREGG, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(AS A PERCENTAGE OF NET SALES)
(UNAUDITED)
		Three Months Ended						Nine Months Ended
		December 31, 2012			December 31, 2011			December 31, 2012			December 31, 2011
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of goods sold		72.7			72.8			71.3			71.6
Gross profit		27.3			27.2			28.7			28.4
Selling, general and administrative expenses		17.4			17.0			20.4			19.8
Net advertising expense		4.8			4.8			5.2			4.8
Depreciation and amortization expense		1.3			1.1			1.6			1.3
Asset impairment charges		0.1			—			—			—
Income from operations		3.7			4.5			1.4			2.5
Other expense (income):		—			—			—			—
Interest expense		0.1			0.1			0.1			0.1
Interest income		—			—			—			—
Total other expense		0.1			0.1			0.1			0.1
Income before income taxes		3.6			4.4			1.3			2.4
Income tax expense		1.4			1.6			0.5			0.9
Net income		2.2			2.7			0.8			1.5

Certain percentage amounts do not sum due to rounding

HHGREGG, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2012, MARCH 31, 2012 AND DECEMBER 31, 2011
(UNAUDITED)
		December 31, 2012			March 31, 2012			December 31, 2011
		(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents		15,522			59,244			5,351
Accounts receivable—trade, less allowances of $25 as of December 31, 2012 and March 31, 2012, and $97 as of December 31, 2011		20,674			19,467			31,627
Accounts receivable—other		30,510			18,630			31,744
Merchandise inventories, net		438,378			282,409			415,901
Prepaid expenses and other current assets		5,083			5,562			5,257
Income tax receivable		1,114			—			—
Deferred income taxes		10,371			9,639			8,203
Total current assets		521,652			394,951			498,083
Net property and equipment		224,026			204,273			207,971
Deferred financing costs, net		2,158			2,656			2,822
Deferred income taxes		34,663			38,970			40,180
Other assets		1,173			1,934			1,219
Total long-term assets		262,020			247,833			252,192
Total assets		783,672			642,784			750,275
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		223,427			122,596			214,093
Line of credit		—			—			28,145
Customer deposits		40,271			28,993			32,234
Accrued liabilities		71,110			43,735			69,022
Income Tax Payable		3,616			4,358			3,729
Total current liabilities		338,424			199,682			347,223
Long-term liabilities:
Deferred Rent		79,438			71,304			74,279
Other long-term liabilities		12,276			12,278			12,604
Total long-term liabilities		91,714			83,582			86,883
Total liabilities		430,138			283,264			434,106
Stockholders’ equity:
Preferred stock, par value $.0001; 10,000,000 shares authorized; no shares issued and outstanding as of December 31, 2012, March 31, 2012 and December 31, 2011, respectively		—			—			—
Common stock, par value $.0001; 150,000,000 shares authorized; 40,611,411, 40,066,005 and 39,955,572 shares issued; and 33,338,522, 36,351,716 and 37,241,283 outstanding as of December 31, 2012, March 31, 2012 and December 31, 2011, respectively		4			4			4
Additional paid-in capital		286,412			277,846			275,555
Retained earnings		144,729			129,281			75,651
Common stock held in treasury at cost, 7,272,889, 3,714,289 and 2,714,289 shares as of December 31, 2012, March 31, 2012 and December 31, 2011, respectively		(77,611	)		(47,570	)		(35,000	)
		353,534			359,561			316,210
Note receivable for common stock		—			(41	)		(41	)
Total stockholders’ equity		353,534			359,520			316,169
Total liabilities and stockholders’ equity		783,672			642,784			750,275

HHGREGG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 2012 AND 2011
(UNAUDITED)
		Nine Months Ended
		December 31, 2012				December 31, 2011
		(In thousands)
Cash flows from operating activities:
Net income		$	15,448			$	27,743
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		29,673				24,236
Amortization of deferred financing costs		498				498
Stock-based compensation		3,882				4,541
Excess tax benefits from stock based compensation		(585		)		(419		)
Gain on sales of property and equipment		(216		)		(195		)
Deferred income taxes		3,575				9,608
Asset impairment charges		504				—
Tenant allowances received from landlords		8,424				17,097
Changes in operating assets and liabilities:
Accounts receivable—trade		(1,207		)		(22,696		)
Accounts receivable—other		(8,071		)		(8,277		)
Merchandise inventories		(155,969		)		(203,893		)
Income tax receivable		(1,356		)		—
Prepaid expenses and other assets		1,240				5,626
Accounts payable		84,699				94,207
Customer deposits		11,278				10,443
Accrued liabilities		27,375				23,979
Deferred rent		(4,099		)		(1,719		)
Other long-term liabilities		198				323
Net cash provided by (used in) operating activities		15,291				(18,898		)
Cash flows from investing activities:
Purchases of property and equipment		(50,291		)		(74,996		)
Proceeds from sales of property and equipment		34				4
Net cash used in investing activities		(50,257		)		(74,992		)
Cash flows from financing activities:
Purchases of treasury stock		(30,041		)		(35,000		)
Proceeds from exercise of stock options		4,184				1,880
Excess tax benefits from stock-based compensation		585				419
Net increase in bank overdrafts		12,153				31,091
Net borrowings on line of credit		—				28,145
Net borrowings on inventory financing facility		4,322				—
Payment of financing costs		—				(88		)
Payments received on notes receivable-related parties		41				—
Net cash (used in) provided by financing activities		(8,756		)		26,447
Net decrease in cash and cash equivalents		(43,722		)		(67,443		)
Cash and cash equivalents
Beginning of period		59,244				72,794
End of period		$	15,522			$	5,351
Supplemental disclosure of cash flow information:
Interest paid		$	226			$	445
Income taxes paid		$	7,509			$	5,542
Capital expenditures included in accounts payable		$	873			$	1,013

HHGREGG, INC. AND SUBSIDIARIES
NON-GAAP RECONCILATION OF NET INCOME, AS ADJUSTED AND
DILUTED NET INCOME PER SHARE, AS ADJUSTED
(UNAUDITED)
		Three Months Ended December 31,								Nine Months Ended December 31,
(Amounts in thousands, except share data)		2012				2011				2012				2011
Net income as reported		$	17,389			$	22,478			$	15,448			$	27,743
Adjustments to net income:
Asset impairment charges		504				—				504				—
Tax impact of adjustments to net income		(202		)		—				(202		)		—
Net income, as adjusted		$	17,691			$	22,478			$	15,750			$	27,743
Weighted average shares outstanding – Diluted		33,985,113				37,603,767				35,168,497				38,522,707
Diluted net income per share as reported		$	0.51			$	0.60			$	0.44			$	0.72
Tax adjusted impact of above adjustments		$	0.01			$	—			$	0.01			$	—
Diluted net income per share, as adjusted		$	0.52			$	0.60			$	0.45			$	0.72

HHGREGG, INC. AND SUBSIDIARIES
Store Count by Quarter for Fiscal Years 2011, 2012 and 2013
(Unaudited)
		FY2011												FY2012												FY2013
		Q1			Q2			Q3			Q4			Q1			Q2			Q3			Q4			Q1			Q2			Q3
Beginning Store Count		131			157			169			173			173			180			204			208			208			210			223
Store Openings		26			12			4			1			7			24			4			—			2			13			5
Store Closures		—			—			—			(1	)		—			—			—			—			—			—
Ending Store Count		157			169			173			173			180			204			208			208			210			223			228

Note: hhgregg, Inc. ’s fiscal year is comprised of four quarters ending June 30th, September 30th, December 31st and March 31st.

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