UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30,~~December 31, 2013



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33600

hhgregg, Inc.

(Exact name of registrant as specified in its charter)




Delaware		20-8819207
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4151 East 96^th Street Indianapolis, IN		46240
(Address of principal executive offices)		(Zip Code)

(317) 848-8710

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated Filer	ý
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes ý No

The number of shares of hhgregg, Inc.’s common stock outstanding as of ~~October 28, 2013~~January 27, 2014 was ~~30,448,259~~29,492,032.

Table of Contents

HHGREGG, INC. AND SUBSIDIARIES

Report on Form 10-Q

For the Quarter Ended ~~September 30,~~December 31, 2013



		Page

Part I. Financial Information

Item 1.	Condensed Consolidated Financial Statements (unaudited):

	Condensed Consolidated Statements of ~~Operations~~Income for the Three and ~~Six~~Nine Months Ended ~~September 30,~~December 31, 2013 and 2012	3

	Condensed Consolidated Balance Sheets as of ~~September 30,~~December 31, 2013 and March 31, 2013	4

	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~September 30,~~December 31, 2013 and 2012	5

	Condensed Consolidated Statement of Stockholders’ Equity for the ~~Six~~Nine Months Ended ~~September 30,~~December 31, 2013	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1213

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2022

Item 4.	Controls and Procedures	2022

Part II. Other Information

Item 1.	Legal Proceedings	2123

Item 1A.	Risk Factors	2123

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2123

Item 6.	Exhibits	2224

Signatures		2325

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Part I.	Financial Information



ITEM 1.	Condensed Consolidated Financial Statements

HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Operations~~Income

(Unaudited)


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012			December 31, 2013			December 31, 2012			December 31, 2013			December 31, 2012
	(In thousands, except share and per share data)												(In thousands, except share and per share data)
Net sales	$	568,315		$	587,636		$	1,093,237		$	1,077,492		$	707,053		$	799,635		$	1,800,290		$	1,877,127
Cost of goods sold	400,365			413,489			770,522			756,686			517,773			581,450			1,288,295			1,338,136
Gross profit	167,950			174,147			322,715			320,806			189,280			218,185			511,995			538,991
Selling, general and administrative expenses	120,389			125,794			239,698			244,567			132,360			139,303			372,059			383,871
Net advertising expense	30,539			31,754			56,435			59,370			36,964			38,715			93,399			98,085
Depreciation and amortization expense	10,406			9,843			21,444			19,257			10,785			10,416			32,229			29,673
Income (loss) from operations	6,616			6,756			5,138			(2,388		)
Asset impairment charges													310			504			310			504
Income from operations													8,861			29,247			13,998			26,858
Other expense (income):
Interest expense	557			510			1,161			988			695			704			1,856			1,692
Interest income	(2		)	(3		)	(7		)	(5		)	(2		)	(3		)	(9		)	(8		)
Total other expense	555			507			1,154			983			693			701			1,847			1,684
Income (loss) before income taxes	6,061			6,249			3,984			(3,371		)
Income tax expense (benefit)	2,382			2,489			1,565			(1,431		)
Net income (loss)	$	3,679		$	3,760		$	2,419		$	(1,940	)
Net income (loss) per share
Income before income taxes													8,168			28,546			12,151			25,174
Income tax expense													3,120			11,157			4,685			9,726
Net income													$	5,048		$	17,389		$	7,466		$	15,448
Net income per share
Basic	$	0.12		$	0.11		$	0.08		$	(0.05	)	$	0.17		$	0.51		$	0.24		$	0.44
Diluted	$	0.12		$	0.11		$	0.08		$	(0.05	)	$	0.17		$	0.51		$	0.24		$	0.44
Weighted average shares outstanding-basic	30,682,051			35,237,201			30,971,050			35,685,482			29,915,307			33,934,383			30,617,856			35,099,660
Weighted average shares outstanding-diluted	31,240,325			35,291,269			31,427,112			35,685,482			30,387,251			33,985,113			31,117,896			35,168,497

See accompanying notes to condensed consolidated financial statements.

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HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)


	September 30, 2013			March 31, 2013			December 31, 2013			March 31, 2013
	(In thousands, except share data)						(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	38,175		$	48,592		$	2,662		$	48,592
Accounts receivable—trade, less allowances of $25 and $1 as of September 30, 2013 and March 31, 2013, respectively	14,582			24,271
Accounts receivable—trade, less allowances of $45 and $1 as of December 31, 2013 and March 31, 2013, respectively							23,590			24,271
Accounts receivable—other	19,165			18,748			22,745			18,748
Merchandise inventories, net	324,515			315,562			384,172			315,562
Prepaid expenses and other current assets	5,955			5,567			13,648			5,567
Income tax receivable	1,371			1,414			734			1,414
Deferred income taxes	6,220			5,758			7,093			5,758
Total current assets	409,983			419,912			454,644			419,912
Net property and equipment	211,559			217,911			204,191			217,911
Deferred financing costs, net	2,604			1,992			2,469			1,992
Deferred income taxes	34,653			35,252			35,249			35,252
Other assets	1,470			1,354			1,652			1,354
Total long-term assets	250,286			256,509			243,561			256,509
Total assets	$	660,269		$	676,421		$	698,205		$	676,421
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	143,740		$	150,333		$	150,528		$	150,333
Line of credit							15,000			—
Customer deposits	43,552			38,042			46,656			38,042
Accrued liabilities	52,026			49,422			71,324			49,422
Income tax payable	119			2,145			4,048			2,145
Total current liabilities	239,437			239,942			287,556			239,942
Long-term liabilities:
Deferred rent	76,420			77,777			74,574			77,777
Other long-term liabilities	11,673			12,044			11,816			12,044
Total long-term liabilities	88,093			89,821			86,390			89,821
Total liabilities	327,530			329,763			373,946			329,763
Stockholders’ equity:
Preferred stock, par value $.0001; 10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2013 and March 31, 2013, respectively	—			—
Common stock, par value $.0001; 150,000,000 shares authorized; 41,067,889 and 40,640,743 shares issued; and 30,401,424 and 31,468,453 outstanding as of September 30, 2013 and March 31, 2013, respectively	4			4
Preferred stock, par value $.0001; 10,000,000 shares authorized; no shares issued and outstanding as of December 31, 2013 and March 31, 2013, respectively							—			—
Common stock, par value $.0001; 150,000,000 shares authorized; 41,121,390 and 40,640,743 shares issued; and 29,492,032 and 31,468,453 outstanding as of December 31, 2013 and March 31, 2013, respectively							4			4
Additional paid-in capital	295,682			287,806			297,792			287,806
Retained earnings	157,069			154,650			162,116			154,650
Common stock held in treasury at cost, 10,666,465 and 9,172,290 shares as of September 30, 2013 and March 31, 2013, respectively	(120,016		)	(95,802		)
Common stock held in treasury at cost, 11,629,358 and 9,172,290 shares as of December 31, 2013 and March 31, 2013, respectively							(135,653		)	(95,802		)
Total stockholders’ equity	332,739			346,658			324,259			346,658
Total liabilities and stockholders’ equity	$	660,269		$	676,421		$	698,205		$	676,421

See accompanying notes to condensed consolidated financial statements.

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HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			December 31, 2013			December 31, 2012
	(In thousands)						(In thousands)
Cash flows from operating activities:
Net income (loss)	$	2,419		$	(1,940	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income							$	7,466		$	15,448
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	21,444			19,257			32,229			29,673
Amortization of deferred financing costs	334			332			469			498
Stock-based compensation	2,726			2,514			4,151			3,882
Excess tax benefit from stock based compensation	(27		)	(585		)	(21		)	(585		)
Gain on sales of property and equipment	(364		)	(143		)	(437		)	(216		)
Deferred income taxes	137			2,974			(1,332		)	3,575
Asset impairment charges							310			504
Tenant allowances received from landlords	1,390			6,187			2,101			8,424
Changes in operating assets and liabilities:
Accounts receivable—trade	9,689			(10,817		)	681			(1,207		)
Accounts receivable—other	219			(25		)	(4,072		)	(8,071		)
Merchandise inventories	(8,953		)	(57,323		)	(68,610		)	(155,969		)
Income tax receivable	70			(11,613		)	701			(1,356		)
Prepaid expenses and other assets	(504		)	1,609			(8,379		)	1,240
Accounts payable	(358		)	21,361			20,151			84,699
Customer deposits	5,510			9,608			8,614			11,278
Income tax payable	(2,026		)	—			1,903			3,616
Accrued liabilities	2,604			7,117			21,902			23,759
Deferred rent	(3,383		)	(2,640		)	(5,229		)	(4,099		)
Other long-term liabilities	(237		)	284			(28		)	198
Net cash provided by (used in) operating activities	30,690			(13,843		)
Net cash provided by operating activities							12,570			15,291
Cash flows from investing activities:
Purchases of property and equipment	(14,253		)	(35,391		)	(19,888		)	(50,291		)
Proceeds from sales of property and equipment	221			17			221			34
Net cash used in investing activities	(14,032		)	(35,374		)	(19,667		)	(50,257		)
Cash flows from financing activities:
Purchases of treasury stock	(24,214		)	(19,450		)	(39,851		)	(30,041		)
Proceeds from exercise of stock options	5,123			4,023			5,814			4,184
Excess tax benefit from stock-based compensation	27			585			21			585
Net decrease in bank overdrafts	(11,506		)	—
Net borrowings on inventory financing facility	4,441			13,245
Net (decrease) increase in bank overdrafts							(8,764		)	12,153
Net borrowings on line of credit							15,000			—
Net (repayments) borrowings on inventory financing facility							(10,107		)	4,322
Payment of financing costs	(946		)	—			(946		)	—
Payments received on notes receivable-related parties	—			41			—			41
Net cash used in financing activities	(27,075		)	(1,556		)	(38,833		)	(8,756		)
Net decrease in cash and cash equivalents	(10,417		)	(50,773		)	(45,930		)	(43,722		)
Cash and cash equivalents
Beginning of period	48,592			59,244			48,592			59,244
End of period	$	38,175		$	8,471		$	2,662		$	15,522
Supplemental disclosure of cash flow information:
Interest paid	$	838		$	57		$	1,359		$	226
Income taxes paid	$	3,383		$	7,209		$	3,412		$	7,509
Capital expenditures included in accounts payable	$	2,321		$	4,366		$	406		$	873

See accompanying notes to condensed consolidated financial statements.

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HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

~~Six~~Nine Months Ended ~~September 30,~~December 31, 2013

(Dollars in thousands, Unaudited)


	Common Shares		Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings		Common Stock Held in Treasury			Total Stockholders’ Equity			Common Shares		Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings		Common Stock Held in Treasury			Total Stockholders’ Equity
Balance at March 31, 2013	31,468,453		$	—	$	4	$	287,806	$	154,650	$	(95,802	)	$	346,658		31,468,453		$	—	$	4	$	287,806	$	154,650	$	(95,802	)	$	346,658
Net income									2,419					2,419											7,466					7,466
Exercise of stock options and vesting of RSUs	427,146		—		—		5,123		—		—			5,123			480,647		—		—		5,814		—		—			5,814
Stock compensation expense	—		—		—		2,726		—		—			2,726			—		—		—		4,151		—		—			4,151
Excess tax benefit from stock-based compensation, net	—		—		—		27		—		—			27			—		—		—		21		—		—			21
Repurchase of common stock	(1,494,175	)	—		—		—		—		(24,214		)	(24,214		)	(2,457,068	)	—		—		—		—		(39,851		)	(39,851		)
Balance at September 30, 2013	30,401,424		$	—	$	4	$	295,682	$	157,069	$	(120,016	)	$	332,739
Balance at December 31, 2013																	29,492,032		$	—	$	4	$	297,792	$	162,116	$	(135,653	)	$	324,259

See accompanying notes to condensed consolidated financial statements.

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HHGREGG, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)


(1)	Summary of Significant Accounting Policies

Description of Business

hhgregg, Inc. (the “Company” or “hhgregg”) is a specialty retailer of home appliances, televisions, computers, tablets, wireless devices, consumer electronics, home furniture, mattresses, fitness equipment and related services operating under the name hhgregg^™. As of ~~September 30,~~December 31, 2013, the Company had 228 stores located in Alabama, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Mississippi, Missouri, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, and Wisconsin. The Company operates in one reportable segment.

Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, these unaudited condensed consolidated financial statements reflect all necessary adjustments, which are of a normal recurring nature, for a fair presentation of such data. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of hhgregg and the notes thereto for the fiscal year ended March 31, 2013, included in the Company’s Annual Report on Form 10-K filed with the SEC on May 20, 2013.

The consolidated results of operations, financial position and cash flows for interim periods are not necessarily indicative of those to be expected for a full year. The Company has made a number of estimates and assumptions relating to the assets and liabilities and the reporting of sales and expenses to prepare these unaudited condensed consolidated financial statements in conformity with GAAP. Actual results could differ from those estimates.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of hhgregg and its wholly-owned subsidiary, Gregg Appliances, Inc. (“Gregg Appliances”). Gregg Appliances has a wholly-owned subsidiary, HHG Distributing LLC (“HHG Distributing”), which has no assets or operations.


(2)	Fair Value Measurements

The carrying amounts of cash and cash equivalents, accounts receivable—trade, accounts receivable—other, accounts payable and customer deposits approximate fair value because of the short maturity of these instruments. Any outstanding amount on the Company’s line of credit approximates fair value as the interest rate is market based.

Non-recurring Fair Value Measurements

The Company has property and equipment that are measured at fair value on a non-recurring basis when impairment indicators are present. The assets are adjusted to fair value only when the carrying values exceed the fair values. The categorization of the framework used to price the assets is considered a Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value. Property and equipment fair values were derived using a discounted cash flow model to estimate the present value of net cash flows that the asset or asset group was expected to generate. The key inputs to the discounted cash flow model generally included our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as certain capital expenditures, as well as an appropriate discount rate. For the quarter ended December 31, 2013, the Company entered into a lease modification to downsize a store. In conjunction with the downsize, the Company determined that certain of the assets in use would be abandoned at the time construction to downsize begins, and as a result determined this to be a triggering event for an impairment analysis to be performed in accordance with guidance on impairment of long-lived assets. The estimated undiscounted future cash flows generated by the store was less than its carrying amount, therefore the carrying amount of the assets related to this store were reduced to fair value. For the quarter ended December 31, 2012, the Company had one store whose profit contributions were significantly lower than the chain average due to decreased sales. This decrease in profit triggered the need for an impairment analysis to be performed in accordance with guidance on impairment of long-lived assets. The estimated undiscounted future cash flows generated by the store was less than its carrying amount, therefore the carrying amount of the assets related to this store were reduced to fair value.

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The following table summarizes the fair value remeasurements recorded during the three and nine months ended December 31, 2013 and 2012 (in millions):



	Three and Nine Months Ended
	December 31, 2013		December 31, 2012
Carrying value (pre-asset impairment)	$	0.7	$	0.9
Asset impairment loss (included in income from operations)	0.3		0.5
Remaining net carrying value	$	0.4	$	0.4


(3)	Property and Equipment

Property and equipment consisted of the following at ~~September 30,~~December 31, 2013 and March 31, 2013 (in thousands):


	September 30, 2013			March 31, 2013			December 31, 2013			March 31, 2013
Machinery and equipment	$	27,685		$	25,328		$	28,516		$	25,328
Store fixtures and furniture	180,341			175,659			183,151			175,659
Vehicles	2,247			2,269			2,247			2,269
Signs	19,355			19,163			19,620			19,163
Leasehold improvements	177,415			172,952			178,821			172,952
Construction in progress	9,192			5,995			7,296			5,995
	416,235			401,366			419,651			401,366
Less accumulated depreciation and amortization	(204,676		)	(183,455		)	(215,460		)	(183,455		)
Net property and equipment	$	211,559		$	217,911		$	204,191		$	217,911

~~Table of Contents~~


(4)	Net Income ~~(Loss)~~ per Share

Net income ~~(loss)~~ per basic ~~and~~share is calculated based on the weighted-average number of outstanding common shares. Net income per diluted share is calculated based on the weighted-average number of outstanding common shares plus the effect of potential dilutive common shares. When the Company reports net income, the calculation of net income per diluted share excludes shares underlying outstanding stock options and restricted stock units with exercise prices that exceed the average market price of the Company’s common stock for the period and certain options and restricted stock units with unrecognized compensation cost, as the effect would be antidilutive. Potential dilutive common shares are composed of shares of common stock issuable upon the exercise of stock options and restricted stock units. For the six months ended September 30, 2012, the diluted loss per common share calculation represents the weighted average common shares outstanding with no additional dilutive shares as the Company incurred a net loss for the period.

The following table presents net income ~~(loss)~~ per basic and diluted share for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2013 and 2012 (in thousands, except share and per share amounts):


	Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
	September 30, 2013		September 30, 2012		September 30, 2013		September 30, 2012			December 31, 2013		December 31, 2012		December 31, 2013		December 31, 2012
Net income (loss) (A)	$	3,679	$	3,760	$	2,419	$	(1,940	)
Net income (A)										$	5,048	$	17,389	$	7,466	$	15,448
Weighted average outstanding shares of common stock (B)	30,682,051		35,237,201		30,971,050		35,685,482			29,915,307		33,934,383		30,617,856		35,099,660
Dilutive effect of employee stock options and restricted stock units	558,274		54,068		456,062		—			471,944		50,730		500,040		68,837
Common stock and potential dilutive common shares (C)	31,240,325		35,291,269		31,427,112		35,685,482			30,387,251		33,985,113		31,117,896		35,168,497
Net income (loss) per share:
Net income per share:
Basic (A/B)	$	0.12	$	0.11	$	0.08	$	(0.05	)	$	0.17	$	0.51	$	0.24	$	0.44
Diluted (A/C)	$	0.12	$	0.11	$	0.08	$	(0.05	)	$	0.17	$	0.51	$	0.24	$	0.44

Antidilutive shares not included in the net income per diluted share calculation for the three and nine months ended ~~September 30,~~December 31, 2013 were 936,040 and ~~2012~~ ~~were~~ ~~950,240~~ ~~and~~ ~~3,739,415~~937,640, respectively. Antidilutive shares not included in the net income ~~(loss)~~ per diluted share calculation for the ~~six~~three and nine months ended ~~September 30, 2013~~ ~~and~~December 31, 2012 were ~~1,119,460~~3,663,282 ~~and~~ ~~3,825,746, respectively.~~.

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(5)	Inventories

Net merchandise inventories consisted of the following at ~~September 30,~~December 31, 2013 and March 31, 2013 (in thousands):


	September 30, 2013		March 31, 2013		December 31, 2013		March 31, 2013
Appliances	$	126,041	$	120,972	$	143,666	$	120,972
Consumer electronics	142,011		126,019		164,949		126,019
Computing and wireless	31,329		46,020		49,613		46,020
Home products	25,134		22,551		25,944		22,551
Net merchandise inventory	$	324,515	$	315,562	$	384,172	$	315,562


(6)	Debt

A summary of debt at ~~September 30,~~December 31, 2013 and March 31, 2013 is as follows (in thousands):



	~~September 30,~~ ~~2013~~		~~March 31,~~ ~~2013~~
~~Amended Facility~~	$	—	$	—



	December 31, 2013		March 31, 2013
Line of credit	$	15,000	$	—

On July 29, 2013, Gregg Appliances entered into Amendment No. 1 to the Amended and Restated Loan and Security Agreement (the “Amended Facility”)~~. The capacity for borrowings under~~ to increase the ~~Company’s Amended Facility is~~maximum credit available to $400 million, from $300 million, subject to borrowing base ~~availability. In conjunction with~~availability, and extend the ~~amendment,~~term of the ~~Company capitalized~~ ~~$0.9 million~~ ~~in financing fees. The~~ facility ~~expires~~to expire on July 29, 2018. The facility was set to expire on March 29, 2016.

~~Table of Contents~~

rate borrowings is payable on the last day of each “interest period” applicable to such borrowing or on the three month anniversary of the beginning of such “interest period” for interest periods greater than three months. The unused line rate is determined based on the amount of the daily average of the outstanding borrowings for the immediately preceding calendar quarter period (the “Daily Average”). For a Daily Average greater than or equal to 50% of the defined borrowing base, the unused line rate is 0.25%. For a Daily Average less than 50% of the defined borrowing base, the unused line rate is 0.375%. The Amended Facility is guaranteed by Gregg Appliances’ wholly-owned subsidiary, HHG Distributing, which has no assets or operations. The guarantee is full and unconditional and Gregg Appliances has no other subsidiaries.

Pursuant to the Amended Facility, the borrowing base is equal to the sum of (i) 90% of the amount of the eligible commercial accounts, (ii) 90% of the amount of eligible commercial and credit card receivables of Gregg Appliances and (iii) 90% of the net recovery percentage multiplied by the value of eligible inventory consistent with the most recent appraisal of such eligible inventory.

Under the Amended Facility, Gregg Appliances is not required to comply with any financial maintenance covenant unless “excess availability” is less than the greater of (i) 10.0% of the lesser of (A) the defined borrowing base or (B) the defined maximum credit or (ii) $20.0 million during the continuance of which event Gregg Appliances is subject to compliance with a fixed charge coverage ratio of 1.0 to 1.0.

Pursuant to the Amended Facility, if Gregg Appliances has “excess availability” of less than 12.5% of the lesser of (A) the defined borrowing base or (B) the defined maximum credit, it may, in certain circumstances more specifically described in the Amended Facility, become subject to cash dominion control.

The Amended Facility places limitations on the ability of Gregg Appliances to, among other things, incur debt, create other liens on its assets, make investments, sell assets, pay dividends, undertake transactions with affiliates, enter into merger transactions, enter into unrelated businesses, open collateral locations outside of the United States, or enter into consignment assignments or floor plan financing arrangements. The Amended Facility also contains various customary representations and warranties, financial and collateral reporting requirements and other affirmative and negative covenants. Gregg Appliances was in compliance with the restrictions and covenants of the Amended Facility at ~~September 30,~~December 31, 2013.

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As of December 31, 2013, Gregg Appliances had $15.0 million of cash borrowings outstanding under the Amended Facility. As of December 31, 2013, Gregg Appliances had $5.3 million of letters of credit outstanding, which expire through December 31, 2014. The total borrowing availability under the Amended Facility was $224.4 million as of December 31, 2013. The interest rate based on the bank’s prime rate as of December 31, 2013 was 3.75%.

As of~~September 30, 2013~~ ~~and~~ March 31, 2013, Gregg Appliances had no borrowings outstanding under the Amended Facility. As of ~~September 30, 2013~~ ~~and~~ March 31, 2013, Gregg Appliances had ~~$4.9~~$4.9 million of letters of credit outstanding, which expire through December 31, ~~2013~~.2013. The total borrowing availability under the Amended Facility was $~~185.9 million~~ ~~and~~ $189.8 million as of ~~September 30, 2013~~ ~~and~~ March 31, 2013~~, respectively.~~. The interest rate based on the bank’s prime rate as of ~~September 30, 2013~~ ~~was~~ ~~4.0%, and as of~~ March 31, 2013 was 4.25%.


(7)	Stock-based Compensation

Stock Options

On April 2, 2013, the Company’s Board of Directors approved a one-time voluntary stock option exchange program (the “Offer”), as amended on April 17, 2013. On April 2, 2013, the Company commenced the Offer, which allowed employees to surrender all outstanding and unexercised stock options, whether vested or unvested, that were granted subsequent to July 18, 2007 (the “Eligible Options”), in a one-for-one exchange for new options (the “New Options”). Under the Offer, employees who chose to participate would receive New Options with an exercise price per share equal to the greater of (a) ~~$10.00~~$10.00 or (b) the closing price of the Company’s Common Stock as reported on the New York Stock Exchange on the New Option grant date. Additionally, the Offer did not allow partial tenders of any one particular option grant, however employees could choose to exchange some but not all Eligible Option grants held by any optionee. Options granted prior to July 19, 2007 were not eligible for exchange.

The Offer expired on April 30, 2013. Pursuant to the Offer, a total of 58 eligible participants tendered, and the Company accepted for cancellation, options to purchase an aggregate of 898,665 shares of the Company’s common stock. The eligible stock options that were accepted for cancellation represented approximately 31% of the options eligible for participation in the Exchange Offer. Pursuant to the terms and conditions of the Amended Exchange Offer, on May 1, 2013, the Company issued 898,665 New Options in exchange for the tendered stock options. The Company will recognize the incremental expense resulting from this exchange, aggregating $1.4 million, over the ~~three-year~~three-year vesting period, in accordance with the Exchange Offer.

~~Table of Contents~~

The following table summarizes the activity under the Company’s Stock Option Plans for the ~~six~~nine months ended ~~September 30,~~December 31, 2013:


	Number of Options Outstanding		Weighted Average Exercise Price per Share		Number of Options Outstanding		Weighted Average Exercise Price per Share
Outstanding at March 31, 2013	3,322,462		$	15.81	3,322,462		$	15.81
Granted	1,732,805		14.00		1,806,805		13.99
Exercised	(427,146	)	11.99		(480,647	)	12.10
Canceled	(930,328	)	22.70		(981,328	)	22.19
Expired	(17,002	)	20.72		(27,002	)	23.53
Outstanding at September 30, 2013	3,680,791		$	13.62
Outstanding at December 31, 2013					3,640,290		$	13.60

During the ~~six~~nine months ended ~~September 30,~~December 31, 2013, the Company granted options for ~~1,732,805~~1,806,805 shares of common stock under the 2007 Equity Incentive Plan to certain employees and directors of the Company. The options vest in equal amounts over a three-year period beginning on the first anniversary of the date of grant and expire 7 years from the date of the grant. The fair value of each option grant is estimated on the date of grant and is amortized on a straight-line basis over the vesting period.

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The weighted average estimated fair value of options granted to employees and directors under the 2007 Equity Incentive Plan was $7.09 during the ~~six~~nine months ended ~~September 30,~~December 31, 2013, using the Black-Scholes model with the following weighted average assumptions:



Risk-free interest rate	~~0.58%~~0.06% - ~~1.53~~1.53%
Dividend yield	—
Expected volatility	~~63.2~~63.0	%
Expected life of the options (years)	4.5
Forfeitures	7.20	%

Time Vested Restricted Stock Units

During the ~~six~~nine months ended ~~September 30,~~December 31, 2013, the Company granted 27,237 time vested restricted stock units (“RSUs”) under the 2007 Equity Incentive Plan to certain directors of the Company. The RSUs vest three years from the date of grant. Upon vesting, the outstanding number of RSUs will be converted into shares of common stock. RSUs are forfeited if they have not vested before the participant ~~terminates~~ceases to serve as director for any reason other than death or total permanent disability or certain other circumstances as described in such participant’s RSU agreement. Upon death or disability, the participant is entitled to receive a portion of the award based upon the period of time lapsed between the date of grant of the RSU and the termination of service as a director. The fair value of RSU awards is based on the Company’s stock price at the close of the market on the date of grant. The weighted average grant date fair value for the RSUs issued during the ~~six~~nine months ended ~~September 30,~~December 31, 2013 was $14.32.

The following table summarizes RSU vesting activity for the ~~six~~nine months ended ~~September 30,~~December 31, 2013:


Nonvested RSU’s	Shares		Weighted Average Grant-Date Fair Value
					Shares		Weighted Average Grant-Date Fair Value
Nonvested at March 31, 2013	155,600		$	12.38	155,600		$	12.38
Granted	27,237		14.32		27,237		14.32
Vested	—		—		—		—
Forfeited	(6,292	)	13.52		(14,692	)	12.96
Nonvested at September 30, 2013	176,545		$	12.64	168,145		$	12.64

~~Table of Contents~~


(8)	Stockholders’ Equity

The Company filed a universal shelf registration statement which was declared effective on July 3, 2013, registering $300 million principal amount of its securities, which may be sold by hhgregg under such registration statement at any time. Each of Gregg Appliances and HHG Distributing were additional registrants to the shelf registration statement because each may guarantee any debt securities that are issued by hhgregg under the shelf registration statement. Gregg Appliances and HHG Distributing are exempt from reporting under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), pursuant to Rule 12h-5 under the Exchange Act as: (i) hhgregg has no independent assets or operations; (ii) any guarantees of the subsidiary guarantors of debt securities issued under the shelf registration statement are full and unconditional and joint and several; and (iii) there are no subsidiaries of hhgregg other than Gregg Appliances and HHG Distributing.

(9) Share Repurchase Program

On May 16, 2013, the Company’s Board of Directors authorized a new share repurchase program, which became effective on May 22, 2013 (the “May 2013 Program”), allowing the Company to repurchase up to $50 million of its common stock. The May 2013 Program allows the Company to purchase its common stock on the open market or in privately negotiated transactions in accordance with applicable laws and regulations, and expires on May 22, 2014. The previous share repurchase program expired on May 21, 2013.

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The following table shows the number and cost of shares repurchased during the ~~six~~nine months ended ~~September 30,~~December 31, 2013 and 2012, respectively ($ in thousands):


	Six Months Ended				Nine Months Ended
	September 30, 2013		September 30, 2012		December 31, 2013		December 31, 2012
May 2013 Program
Number of shares repurchased	1,494,175		—		2,457,068		—
Cost of shares repurchased	$	24,214	$	—	$	39,851	$	—
May 2012 Program
Number of shares repurchased	—		2,274,511		—		3,558,600
Cost of shares repurchased	$	—	$	19,450	$	—	$	30,041

As of ~~September 30,~~December 31, 2013, the Company had $~~25.8~~10.1 million remaining under the May 2013 Program. The repurchased shares are classified as treasury stock within stockholders’ equity in the accompanying condensed consolidated balance sheets.

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ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in five sections:

Overview

Critical Accounting Polices

Results of Operations

Liquidity and Capital Resources

Contractual Obligations

Our MD&A should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes contained herein and the Consolidated Financial Statements for the fiscal year ended March 31, 2013, included in our latest Annual Report on Form 10-K, as filed with the SEC on May 20, 2013.

Overview

hhgregg, Inc. is a specialty retailer of home appliances, televisions, computers, tablets, wireless devices, consumer electronics, home furniture, mattresses, fitness equipment and related services operating under the name hhgregg^™. As of ~~September 30,~~December 31, 2013, we operated 228 stores in Alabama, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Mississippi, Missouri, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, and Wisconsin. References to fiscal years in this report relate to the respective 12 month period ended March 31. Our 2014 fiscal year is the 12 month period ending on March 31, 2014.

Throughout our MD&A, we refer to comparable store sales. Comparable store sales is comprised of net sales at stores in operation for at least 14 full months, including remodeled and relocated stores, as well as net sales for our e-commerce site. The method of calculating comparable store sales varies across the retail industry, and our method of calculating comparable store sales may not be the same as other retailers’ methods.

This overview section is divided into four sub-sections discussing our operating strategy and performance, store development strategy, business strategy and core philosophies and seasonality.

Operating Strategy and Performance. We focus the majority of our floor space, advertising expense and distribution infrastructure on the marketing, delivery and installation of a wide selection of premium appliance and consumer electronics products. We display nearly 350 models of major appliances and 100 models of flat panel televisions in our stores with a broad assortment of models in the middle- to upper-end of product price ranges. Appliance and consumer electronics sales comprised ~~86%~~84% and 83% of our net sales mix for the three ~~and six~~ months ended ~~September 30,~~December 31, 2013 and ~~88%~~2012, and 85% and 86% of our net sales mix for the ~~three and six~~nine months ended ~~September 30,~~December 31, 2013 and 2012.

We strive to differentiate ourselves through our customer purchase experience starting with a highly-trained, consultative commissioned sales force which educates our customers on the features and benefits of our products, followed by rapid product delivery and installation, and ending with post-sales support services. We carefully monitor our competition to ensure that our prices are competitive in the market place. Our experience has been that informed customers often choose to buy a more heavily-featured product once they understand the applicability and benefits of its features. Heavily-featured products typically carry higher average selling prices and higher margins than less-featured, entry-level price point products.

InFor fiscal 2014 we have implemented three major initiatives in response to ~~the declines in~~ our ~~overall~~continuing comparable store sales ~~largely resulting from the performance of the consumer electronics category, we have developed three major initiatives for fiscal 2014,~~decline which are: to reshape our sales mix, expand our customer base and enhance our service offerings.

Our first initiative for fiscal 2014 is to reshape our sales mix through a continued increase in focus on the appliance category as well as the introduction of new product categories. Our sales in the appliance category have increased on a comparative basis over the past ~~nine quarters.~~ten quarters, and this category has proven to be a centerpiece of our business. To maintain this growth, we ~~plan to continue to place~~are placing greater emphasis on ~~appliances~~our in home delivery capabilities for appliances. We also are enhancing our ~~marketing strategies~~in store cooking and ~~continue to improve on our service offerings~~built-in displays, and providing a product assortment based upon geography and preferences within the ~~appliance category. We will also focus~~geography. The U.S. Census Bureau's data on ~~increasing our average sales price through~~New Residential Construction shows that 2013 U.S. Housing Start-Up’s experienced a 12% increase for the ~~promotion of kitchen packages. We also plan to increase our sales in this category through~~quarterly period ended December 31, 2013 over the ~~promotion of hhgregg rebate gift card incentives for customers to use on future purchases.~~prior year comparable period. We expect that as the U.S. housing market and general economy continues to improve, ~~as indicated by June 2013 U.S. Housing Start-Up’s experiencing a 18% increase for the quarterly period ended June 30, 2013 over the prior year comparable period,~~ the appliance industry will experience increases in demand. ~~Additionally, during fiscal 2013, we tested~~While this data indicates that the housing market has improved year over year, there is no guarantee that the improvement in the housing market will continue and ~~launched new products~~won't be impacted in the future by factors such as rising interest rates.

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Additionally, during our previous fiscal year, we tested and launched new products and categories, including home ~~entertainment~~ furniture and home fitness products. Based on the success of testing an expanded furniture assortment, we rolled out an expanded offering of furniture products. Additionally, we ~~expect to rollout~~rolled out new mid-price product offerings of bedding and fitness equipment. The consumer electronics category will continue to be an important category for ~~us.~~us, however, we will continue to place greater emphasis on other areas of our sales mix as we further develop new categories. As it relates to ~~video~~ our ~~emphasis will be on providing a greater assortment of larger screen sizes~~computing and ~~rationalizing the SKU count for smaller screen sizes. Within the consumer electronics~~wireless category, we ~~plan to improve our balance of gross profit and market share through positioning our new assortment strategy. We~~ plan to provide an expanded offering of connected devices, and have fully rolled out the Apple iPad and iPod to all stores. We expect that with the continued innovations to connected devices, we will ~~be able~~utilize these products to ~~generate~~drive greater traffic to our stores. Our ultimate goal of reshaping our sales mix is to lift the average sales units of our stores.

Our second initiative for fiscal 2014 is to expand our customer base through increased credit ~~offerings and by creating a new advertising campaign.~~offerings. Over the past 12 months, our non-recourse private label credit card penetration has increased ~~332~~230 basis points to ~~34%~~36% of transactions. We continue to encourage the use of the card, not only through in store payment options, but through offers such as our 5% discount on qualifying ~~purchases.~~merchandise. In addition to our private label credit card, during the second fiscal quarter of 2014 we rolled out a “lease to own” option through a third party provider ~~chain-wide.~~in all of our stores. This allows us to provide an alternative credit offering to customers who historically had been turned down for credit through our private label card. Additionally, during the third fiscal quarter we rolled out a ~~seamless~~ secondary finance offering for the lower-middle income consumer. We believe that enhancing our credit offerings will generate greater brand loyalty and higher average sales per transaction, resulting in an overall more profitable relationship with customers. Our credit offerings are non-recourse to us, consequently, we bear no risk for any potential delinquencies. ~~To supplement our initiatives to expand our customer base we selected a new advertising agency which is now assisting us in delivering the marketing messages necessary to execute on our initiatives.~~

Our third initiative for fiscal 2014 is to enhance our service offerings, with particular emphasis on our website capabilities. ~~By partnering with a third party,~~During fiscal 2014 we ~~expect~~have added the following features to ~~more than double~~our website: an expanded aisle concept which tripled our product assortment online ~~through an expanded aisle concept~~ by carrying products ~~online~~ that are not available in ~~stores. We also have~~stores; updated our mobile commerce site by allowing greater functionality, including transacting through the ~~site. Additionally,~~site and intuitive navigation; omnichannel shopping experience improvements for our customers; and improved checkout and payment options including accepting hhgregg credit card applications on our website. In the year ahead, we ~~plan~~expect to ~~enhance~~continue to expand our online product assortment, integrate the ~~in-store customer~~omnichannel shopping experience ~~by implementing~~with with the implementation of a new point of sale system, ~~which~~and to make social media enhancements. The new point of sale system that we plan to implement will not only have new digital capabilities, but expedite the check-out process to decrease the time to complete a sale. We also ~~plan to continue~~intend to improve our ~~customer~~delivery service by ~~raising~~utilizing new devices that better communicate expected delivery timing with the ~~standards of execution by our sales team members.~~consumer.

Store Development Strategy. Over the past several years, we have adhered closely to a development strategy of adding stores to metropolitan markets in clusters to achieve rapid market share penetration and more efficiently leverage our distribution network, advertising and regional management costs. Our long-term expansion plans include looking for new markets where we believe there is significant underlying demand for stores, typically in areas that have historically demonstrated above-average economic growth, strong household incomes and growth in new housing starts and/or remodeling activity. Our markets typically include most or all of our major competitors. We plan to continue to follow our approach of building store density in each major market and distribution area, which in the past has helped us to improve our market share and realize operating efficiencies.

Our near term expectations ~~for the current fiscal year~~ will be to ~~significantly slow our store growth compared~~continue to ~~prior years and~~ shift the balance of our focus to sales and profit productivity in our existing store ~~base.~~base before we resume store growth and expansion plans. We plan to enhance our store productivity within our existing markets through growth in both new and existing businesses, increased focus on large deliverable home products, and ~~growing~~growth of our competencies with our e-commerce platform.

In the ~~six~~nine months ended ~~September 30,~~December 31, 2013, we relocated ~~three~~four stores, and began construction ~~for one store relocation in the third fiscal quarter, as well as~~on one new store ~~opening in~~that is planned to open during the ~~fourth~~first fiscal ~~quarter.~~quarter of 2015.

Business Strategy and Core Philosophies. Our business strategy is focused around offering our customers a superior purchase experience. From the time the customers walk in the door, they experience a well-designed, customer-friendly store. Our stores are brightly lit and have clearly distinguished departments that allow our customers to find what they are looking for. We greet and assist our customers with our highly-trained consultative sales force, who educate the customers about the different product features.

We believe our products are rich in features and innovation. We believe that customers find it helpful to have someone explain the features and benefits of a product as this assistance allows them the opportunity to buy the product that most closely matches their needs. We focus our product assortment on big box items requiring in-home delivery and installation in order to utilize our service offerings. We follow up on the customer purchase experience by offering next-day delivery on many of our products and in-home installation service.

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While we believe many of our product offerings are considered essential items by our customers, other products and certain features are viewed as discretionary purchases. As a result, our results of operations are susceptible to a challenging macro-economic environment. Factors such as changes in consumer confidence, unemployment, and consumer credit availability ~~and the condition of the housing market~~ have negatively impacted our core product categories and added volatility to our overall business. As consumers show a more cautious approach to purchases of discretionary items, customer traffic and spending patterns continue to be difficult to predict. By providing a knowledgeable consultative sales force, delivery capabilities, credit offerings and expanded product offerings, we believe we offer our customers a differentiated value proposition.

Retail appliance sales are correlated to the housing industry and housing turnover. As more people purchase existing homes in the market, appliance sales tend to trend upward. Conversely, when demand in the housing market declines, appliance sales are also negatively impacted. The appliance industry has benefited from increased innovation in energy efficient products. While these energy efficient products typically carry a higher average selling price than traditional products, they save the consumer significant dollars in annual energy savings. Average unit selling prices of major appliances are not expected to change dramatically in the foreseeable future.

According to the NPD Consumer Electronics Data for the three month period ended December 31, 2013, sales for the consumer electronics industry have decreased 8.5% from the comparable prior year period. The consumer electronics industry depends on new product innovations to drive sales and profitability. Innovative, heavily-featured products are typically introduced at relatively high price points. Over time, price points are reduced to drive consumption. Accordingly, there has been consistent price compression in flat panel televisions for equivalent screen sizes in recent ~~years. As new technology~~years, which was further compressed during the current quarterly period ended December 31, 2013 as retailers provided increased promotional offerings for the holiday. According to the NPD TV Market Pulse reports for the three months ended December 31, 2013, flat-panel TV sales units were 1% less than the comparable prior year period, and the average selling price has ~~not been sufficient to keep demand constant, the~~decreased by approximately 4%. The industry has seen falling demand as new technology innovation has been insufficient, which has resulted in gross margin rate declines, and average selling price declines. Over the past few months, we have proactively shifted our focus towards larger screen sizes with higher profit margins, which has resulted in lower comparable store sales and lost market share in the consumer electronics category, as we offered fewer smaller screen size televisions. Other consumer electronics categories have also experienced significant demand pressure. Cameras, camcorders, mp3 players, and GPS devices have been largely replaced by the use of smart phones. As such, we continue to shift our product mix away from these categories and into the computing and wireless category. In future years, we will continue to evaluate our mix of product offerings in the consumer electronics category to maximize profit margins without significant loss of market share, while also featuring key opening price points to drive traffic.

The computing and wireless product category drives traffic into our stores. As a result, we ~~plan to continue to enhance~~have enhanced our offerings of such products. We have fully rolled out the offering of Apple iPod and Apple iPad products to all stores.

In addition to testing new products in existing categories, we have also expanded our product assortment within the home products category, which fit our core competencies, including home furniture and fitness equipment. We will continue to refine our assortment in this category as we learn more about their success in our stores.

We also rolled out additional credit offerings for our consumers. As over one-third of our sales today are transacted on the hhgregg private label credit card, we want to expand our consumer base to allow new consumers to shop in our stores. We added a “lease to own” program through a third party provider chain-wide, and added a secondary financing offer for the lower-middle income consumer. These programs are non-recourse to the Company through the use of third party solutions.

Seasonality. Our business is seasonal, with a higher portion of net sales and operating profit realized during the quarter that ends December 31 due to the overall demand for consumer electronics during the holiday shopping season. Appliance revenue is impacted by seasonal weather patterns, but is less seasonal than our consumer electronics business and helps to offset the seasonality of our overall business.

Critical Accounting Policies

We describe our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended March 31, 2013 in our latest Annual Report on Form 10-K filed with the SEC on May 20, 2013. There have been no significant changes in our critical accounting policies and estimates since the end of fiscal 2013.

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Results of Operations

Operating Performance. The following table presents selected unaudited condensed consolidated financial data (in thousands, except share amounts, per share amounts, and store count data):


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						December 31,						December 31,
(unaudited)	2013			2012			2013			2012			2013			2012			2013			2012
Net sales	$	568,315		$	587,636		$	1,093,237		$	1,077,492		$	707,053		$	799,635		$	1,800,290		$	1,877,127
Net sales % (decrease) increase	(3.3		)%	(5.0		)%	1.5		%	2.6		%
Net sales % decrease													(11.6		)%	(3.6		)%	(4.1		)%	(0.1		)%
Comparable store sales % decrease ⁽¹⁾	(6.2		)%	(8.8		)%	(3.0		)%	(7.2		)%	(11.2		)%	(9.7		)%	(6.4		)%	(8.3		)%
Gross profit as a % of net sales	29.6		%	29.6		%	29.5		%	29.8		%	26.8		%	27.3		%	28.4		%	28.7		%
SG&A as a % of net sales	21.2		%	21.4		%	21.9		%	22.7		%	18.7		%	17.4		%	20.7		%	20.4		%
Net advertising expense as a % of net sales	5.4		%	5.4		%	5.2		%	5.5		%	5.2		%	4.8		%	5.2		%	5.2		%
Depreciation and amortization expense as a % of net sales	1.8		%	1.7		%	2.0		%	1.8		%	1.5		%	1.3		%	1.8		%	1.6		%
Income (loss) from operations as a % of net sales	1.2		%	1.1		%	0.5		%	(0.2		)%
Income from operations as a % of net sales													1.3		%	3.7		%	0.8		%	1.4		%
Net interest expense as a % of net sales	0.1		%	0.1		%	0.1		%	0.1		%	0.1		%	0.1		%	0.1		%	0.1		%
Net income (loss)	$	3,679		$	3,760		$	2,419		$	(1,940	)
Net income (loss) per diluted share	$	0.12		$	0.11		$	0.08		$	(0.05	)
Net income													$	5,048		$	17,389		$	7,466		$	15,448
Net income per diluted share													$	0.17		$	0.51		$	0.24		$	0.44
Weighted average shares outstanding—diluted	31,240,325			35,291,269			31,427,112			35,685,482			30,387,251			33,985,113			31,117,896			35,168,497
Number of stores open at the end of period	228			223									228			228


⁽¹⁾	Comprised of net sales at stores in operation for at least 14 full months, including remodeled and relocated stores, as well as net sales for our e-commerce site.

Net income was $~~3.7~~5.0 million for the three months ended ~~September 30,~~December 31, 2013, or $~~0.12~~0.17 per diluted share, compared with net income of $~~3.8~~17.4 million, or $~~0.11~~0.51 per diluted share, for the comparable prior year period. For the ~~six month period~~nine months ended ~~September 30,~~December 31, 2013, net income was $~~2.4~~7.5 million, or $~~0.08~~0.24 per diluted share, compared with a net ~~loss~~income of $~~1.9~~15.4 million, or $~~0.05~~0.44 per diluted share for the comparable prior year period. The decrease in net income for the three months ended ~~September 30,~~December 31, 2013 was largely due to a comparable store sales decrease of ~~6.2%, partially offset by a~~ ~~decrease~~11.2% and a decrease in ~~SG&A as a percentage of net sales.~~gross margin. The ~~increase~~decrease in net income for the ~~six~~nine month period ended December 31, 2013 was largely ~~the result of an increase in net sales~~ due to ~~the net addition~~a comparable store sales decrease of ~~five stores during the past 12 months, a decrease in SG&A expense as a percentage of net sales,~~6.4% and a decrease in ~~net advertising as a percentage of net sales, partially offset by a decrease in~~ gross ~~profit as a percentage of net sales.~~margin.

Net sales for the three months ended ~~September 30,~~December 31, 2013 decreased ~~3.3%~~11.6% to $~~568.3~~707.1 million from $~~587.6~~799.6 million in the comparable prior year period. The decrease in net sales for the three month period was the result of a comparable store sales decrease of ~~6.2%~~11.2%. Net sales for the ~~six~~nine months ended ~~September 30,~~December 31, 2013 ~~increased~~ ~~1.5%~~ decreased 4.1% to $~~1.09~~1.80 billion from $~~1.08~~1.88 billion in the comparable prior year period. The ~~increase~~decrease in net sales for the ~~six~~nine month period was ~~attributable to~~ the ~~net addition~~result of ~~five stores during the past 12 months partially offset by~~ a comparable store sales decrease of ~~3.0%~~6.4%.

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Net sales mix and comparable store sales percentage changes by product category for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2013 and 2012 were as follows:


	Net Sales Mix Summary								Comparable Store Sales Summary								Net Sales Mix Summary								Comparable Store Sales Summary
	Three Months Ended September 30,				Six Months Ended September 30,				Three Months Ended September 30,				Six Months Ended September 30,				Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended December 31,				Nine Months Ended December 31,
	2013		2012		2013		2012		2013		2012		2013		2012		2013		2012		2013		2012		2013		2012		2013		2012
Appliances	50	%	46	%	51	%	47	%	2.6	%	1.1	%	5.0	%	3.5	%	41	%	35	%	47	%	42	%	1.5	%	6.1	%	3.8	%	4.4	%
Consumer electronics ⁽¹⁾	36	%	42	%	35	%	41	%	(20.4	)%	(20.4	)%	(18.0	)%	(19.4	)%	43	%	48	%	38	%	44	%	(19.7	)%	(24.1	)%	(18.8	)%	(21.7	)%
Computing and wireless ⁽²⁾	9	%	9	%	9	%	9	%	(7.2	)%	10.8	%	1.8	%	9.7	%	12	%	14	%	10	%	11	%	(24.5	)%	15.1	%	(12.4	)%	12.7	%
Home products ⁽³⁾	5	%	3	%	5	%	3	%	69.1	%	(6.9	)%	75.8	%	(6.9	)%	4	%	3	%	5	%	3	%	36.1	%	23.4	%	57.7	%	5.4	%
Total	100	%	100	%	100	%	100	%	(6.2	)%	(8.8	)%	(3.0	)%	(7.2	)%	100	%	100	%	100	%	100	%	(11.2	)%	(9.7	)%	(6.4	)%	(8.3	)%

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⁽¹⁾	Primarily consists of accessories, audio, personal electronics and televisions.


⁽²⁾	Primarily consists of computers, mobile phones and tablets.


⁽³⁾	Primarily consists of fitness equipment, furniture and mattresses.

The decrease in comparable store sales for the three months ended ~~September 30,~~December 31, 2013 was driven primarily by a decrease in comparable store sales in the consumer electronics and computing and wireless categories, partially offset by an increase in the appliance and home products categories. The appliance category increase in comparable store sales was driven by an increase in ~~the average selling price.~~units sold. The home products category increase in comparable store sales was ~~primarily~~ a result of sales ~~from the introduction~~ of furniture and fitness equipment. The consumer electronics category comparable store sales decline was driven primarily by a double digit comparable store sales decrease in ~~televisions,~~video, largely resulting from our strategy of ~~offering fewer entry level models.~~not fully participating in the increased promotional offerings that occurred across a variety of retail formats during the three months ended December 31, 2013. The computing and wireless category decrease in comparable store sales was ~~led~~driven by a ~~decline~~decrease in ~~sales of~~demand for laptop computers and mobile phones and ~~notebook computers, partially offset by the continuing increased demand~~a lower average selling price for tablets.

Three Months Ended ~~September 30,~~December 31, 2013 Compared to Three Months Ended ~~September 30,~~December 31, 2012

Gross profit margin, expressed as gross profit as a percentage of net sales, ~~remained unchanged at~~ ~~29.6%~~decreased for the three months ended ~~September 30,~~December 31, 2013 ~~compared~~ to26.8% from 27.3% for the comparable prior year ~~period, largely~~period. The decrease is due to a ~~result~~decline in gross profit margin rates across all categories primarily due to the promotional nature of ~~a favorable product sales mix shift offset by modest gross margin rate declines within most of the categories.~~this holiday season.

SG&A expense, as a percentage of net sales, ~~decreased 22~~increased 130 basis points for the three months ended ~~September 30,~~December 31, 2013 compared to the prior year period. The ~~decrease~~increase in SG&A as a percentage of net sales was ~~largely~~ a result of ~~decreases~~increases in wage expense, ~~employee benefit expense~~occupancy costs, and ~~bank and credit card fees~~product services as a percentage of net ~~sales. The decrease was~~sales, primarily due to ~~continued cost cutting measures that were initially implemented throughout~~ the ~~second quarter~~deleveraging effect of the ~~prior fiscal year.~~net sales decline.

Net advertising expense, as a percentage of net sales, ~~remained unchanged~~increased 39 basis points during the three months ended ~~September 30,~~December 31, 2013 compared to the prior year period. While we reduced our gross advertising spend from the prior year, the increase as a percentage of net sales was primarily due to the deleveraging effect of the net sales decline.

Depreciation expense, as a percentage of net sales, increased 1622 basis points for the three months ended ~~September 30,~~December 31, 2013 compared to the prior year period. The increase as a percentage of net sales was primarily due to the ~~capital spend associated with the five new stores opened during the past 12 months and the~~ deleveraging effect of the net sales decline.

Our effective income tax rate for the three months ended ~~September 30,~~December 31, 2013 decreased to ~~39.3%~~38.2% from ~~39.8%~~39.1% in the comparable prior year period. The decrease in our effective income tax rate ~~was~~is primarily the result of an ~~unfavorable adjustment to~~increase in federal and state income ~~taxes~~tax credits recognized incompared to the ~~second quarter of fiscal 2013. No such adjustment was made in the current~~comparable prior year period.

~~Six~~Nine Months Ended ~~September 30,~~December 31, 2013 Compared to ~~Six~~Nine Months Ended ~~September 30,~~December 31, 2012

Gross profit margin, expressed as gross profit as a percentage of net sales, decreased for the ~~six~~nine months ended ~~September 30,~~December 31, 2013 to ~~29.5%~~28.4% from ~~29.8%~~28.7% for the comparable prior year period. The decrease ~~was due to~~ is a result of decreases in gross profit margin rates inacross the ~~appliances, consumer electronics and home products~~majority of our categories, partially offset by a ~~slight increase in gross profit margin rate in the computing and wireless category.~~favorable product sales mix shift.

SG&A expense, as a percentage of net sales, ~~decreased~~increased 7722 basis points for the ~~six~~nine months ended ~~September 30,~~December 31, 2013 compared to the prior year period. The ~~decrease~~increase in SG&A as a percentage of net sales was ~~largely~~ a result of ~~decreases~~an increase in ~~wage expense~~product services and ~~employee benefit expense~~occupancy costs as a percentage of net ~~sales. The decrease was~~sales due to ~~continued cost cutting measures initially implemented in~~ the ~~second quarter of the prior fiscal year, coupled with the leveraging~~deleveraging effect of the net sales ~~increase.~~decline, partially offset by the decrease in bank transaction fees and employee benefits as a percentage of net sales due to cost cutting measures.

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Net advertising expense, as a percentage of net sales, ~~decreased 35 basis points during~~remained consistent for the ~~six~~nine months ended ~~September 30,~~December 31, 2013 compared to the prior year period. ~~The decrease as a percentage of net sales~~This was driven largely by decreased advertising spend in comparable markets, ~~coupled with~~offset by the ~~leveraging~~deleveraging effect of the net sales ~~increase.~~decline.

Depreciation expense, as a percentage of net sales, increased 1721 basis points for the ~~six~~nine months ended ~~September 30,~~December 31, 2013 compared to the prior year period. The increase as a percentage of net sales was primarily due to the ~~capital spend associated with the five new stores opened during the past 12 months, and 11 stores which opened near the end~~deleveraging effect of the ~~fiscal second quarter of 2013.~~net sales decline.

Our effective income tax rate remained unchanged at 38.6%for the ~~six~~nine months ended ~~September 30,~~December 31, 2013 ~~decreased~~compared to~~39.3%~~ ~~from~~ ~~42.5%~~ in the comparable prior year period. The decrease in our effective income tax rate was primarily the result of higher state income tax credits recognized in fiscal 2013. The additional state income tax credits increased our effective income tax rate for the six months ended September 30, 2012 due to the net loss recognized.

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Liquidity and Capital Resources

The following table presents a summary on a consolidated basis of our net cash provided by (used in) operating, investing and financing activities (dollars are in thousands):


	Six Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			December 31, 2013			December 31, 2012
Net cash provided by (used in) operating activities	$	30,690		$	(13,843	)
Net cash provided by operating activities							$	12,570		$	15,291
Net cash used in investing activities	(14,032		)	(35,374		)	(19,667		)	(50,257		)
Net cash used in financing activities	(27,075		)	(1,556		)	(38,833		)	(8,756		)

Our liquidity requirements arise primarily from our need to fund working capital requirements and capital expenditures. We make capital expenditures principally to fund our expansion strategy, which includes, among other things, investments in new stores and new distribution facilities, remodeling and relocation of existing stores, as well as information technology and other infrastructure-related projects.

During fiscal 2014,, we ~~plan to relocate~~relocated four stores, ~~of which three have been relocated as of September 30, 2013. We plan to open~~and began construction on one new store that is planned to open during the ~~fourth~~first fiscal ~~quarter.~~quarter of 2015. In addition, we plan to continue to invest in our infrastructure, including management information systems and distribution capabilities, as well as incur capital remodeling and improvement costs. Capital expenditures for fiscal 2014 will be funded through cash and cash equivalents, borrowings under our Amended Facility described below and tenant allowances from landlords.

Cash Provided by ~~(Used in)~~ Operating Activities. Net cash provided by ~~(used in)~~ operating activities primarily consists of net income as adjusted for increases or decreases in working capital and non-cash charges such as depreciation, deferred taxes and stock compensation expense. Cash provided by ~~(used in)~~ operating activities was $~~30.7~~12.6 million and $~~(13.8)~~15.3 million for the ~~six~~nine months ended ~~September 30,~~December 31, 2013 and 2012, respectively. The decrease in cash ~~used in~~provided by operating activities is primarily due to a decrease in ~~our~~ net ~~investment~~income, a decrease in accounts payable due to the timing of payments and overall lower inventory requirements as compared to the prior year, an increase in the percentage of owned merchandise ~~inventories (merchandise inventories less accounts payable) and~~inventory despite the lower inventory levels previously mentioned, the net change in our other current operating assets and liabilities, and the decrease in cash received from landlords for tenant allowances due to opening ~~less~~fewer stores in the current period compared to the prior period, and the impact of the net change in our income tax receivable/payable due to the net income experienced in the current quarter compared to the net loss experienced in the previous comparable quarter.period. The net change in other current operating assets and liabilities was primarily a result of differences in timing of customer sales and vendor payments.

Cash Used In Investing Activities. Net cash used in investing activities was $~~14.0~~19.7 million and $~~35.4~~50.3 million for the ~~six~~nine months ended ~~September 30,~~December 31, 2013 and 2012, respectively. The decrease in cash used in investing activities is due to less purchases of property and equipment associated with the opening of new stores. In the ~~six~~nine months ended ~~September 30,~~December 31, 2013, we relocated ~~three~~four stores, ~~and began construction for one store relocating in the third fiscal quarter,~~ and began construction on one new store opening in the ~~fourth~~first fiscal ~~quarter.~~quarter of 2015. In the ~~six~~nine months ended ~~September 30,~~December 31, 2012, we opened 1520 new stores.

Cash Used In Financing Activities. Net cash used in financing activities was $~~27.1~~38.8 million and $~~1.6~~8.8 million for the ~~six~~nine months ended ~~September 30,~~December 31, 2013 and 2012, respectively. The increase in cash used in financing activities is primarily due to a decrease in funds provided by bank overdrafts of $~~11.5~~20.9 million, a decrease in net borrowings on an inventory financing facility of ~~$8.8~~$14.4 million, an increase in funds used for treasury stock repurchases of $~~4.8~~9.8 million, and funds used for payment of financing costs of $0.9 million, offset by an increase in borrowings under the Amended Facility described below of $15.0 million and an increase in funds provided by the exercise of stock options of ~~$1.1~~$1.6 million.

Amended Facility. On July 29, 2013, Gregg Appliances, Inc. (“Gregg Appliances”), our wholly-owned subsidiary, entered into Amendment No. 1 to its Amended and Restated Loan and Security Agreement (the “Amended Facility”) to increase the

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maximum credit available to $400 million from $300 million, subject to borrowing base availability, and extend the term of the facility to expire on July 29, 2018. The facility was set to expire on March 29, 2016.

Interest on borrowings (other than Eurodollar rate borrowings) is payable monthly at a fluctuating rate based on the bank’s prime rate or LIBOR plus an applicable margin based on the average quarterly excess availability. Interest on Eurodollar rate borrowings is payable on the last day of each “interest period” applicable to such borrowing or on the three month anniversary of the beginning of such “interest period” for interest periods greater than three months. The unused line rate was determined based on the amount of the daily average of the outstanding borrowings for the immediately preceding calendar quarter period (the “Daily Average”). For a Daily Average greater than or equal to 50% of the defined borrowing base, the unused line rate was 0.25%. For a Daily Average less than 50% of the defined borrowing base, the unused line rate was

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0.375%. The Amended Facility is guaranteed by Gregg Appliances’ wholly-owned subsidiary, HHG Distributing, which has no assets or operations. The guarantee is full and unconditional and Gregg Appliances has no other subsidiaries.

Pursuant to the Amended Facility, the borrowing base is equal to the sum of (i) 90% of all commercial accounts, (ii) 90% of all commercial and credit card receivables of Gregg Appliances and (iii) 90% of the net recovery percentage of the eligible inventory multiplied by the value of such eligible inventory consistent with the most recent appraisal of such eligible inventory, in each case subject to customary reserves and eligibility criteria.

As of ~~September 30,~~December 31, 2013 ~~and~~, Gregg Appliances had $15.0 million of cash borrowings outstanding under the Amended Facility. As of December 31, 2013, Gregg Appliances had $5.3 million of letters of credit outstanding, which expire through December 31, 2014. The total borrowing availability under the Amended Facility was $224.4 million as of December 31, 2013. The interest rate based on the bank’s prime rate as of December 31, 2013 was 3.75%.

As of March 31, 2013, Gregg Appliances had no borrowings outstanding under the Amended Facility. As of ~~September 30, 2013~~ ~~and~~ March 31, 2013, Gregg Appliances had ~~$4.9~~$4.9 million of letters of credit outstanding, which expire through December 31, ~~2013~~.2013. The total borrowing availability under the Amended Facility was $~~185.9 million~~ ~~and~~ $189.8 million as of ~~September 30, 2013~~ ~~and~~ March 31, 2013~~, respectively.~~. The interest rate based on the bank’s prime rate as of ~~September 30, 2013~~ ~~was~~ ~~4.0%, and as of~~ March 31, 2013 was 4.25%.

Inventory Financing Facility. We have an inventory financing facility, which is a $20 million unsecured credit line that is non-interest bearing and is not collateralized with the inventory purchased. The facility includes customary covenants as well as customary events of default.

Long Term Liquidity. Anticipated cash flows from operations and funds available from our Amended Facility, together with cash on hand, should provide sufficient funds to finance our operations for the foreseeable future. Our cash on hand has decreased from $48.6 million as of March 31, 2013 to $2.6 million as of December 31, 2013, which is primarily a result of the timing of purchases of inventory and an increase in the level of owned inventory due to purchases for the holiday season. There have been no changes to the terms of our purchase agreements with inventory suppliers. As a normal part of our business, we consider opportunities to refinance our existing indebtedness, based on market conditions. Although we may refinance all or part of our existing indebtedness in the future, there can be no assurances that we will do so. Changes in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may require us to seek additional debt or equity financing. There can be no guarantee that financing will be available on acceptable terms or at all. Additional debt financing, if available, could impose additional cash payment obligations, additional covenants and operating restrictions. ~~We also have an inventory financing facility. Our inventory financing facility is a $20 million unsecured credit line~~

~~that is non-interest bearing and is not collateralized with the inventory purchased. The facility includes customary covenants as~~

~~well as customary events of default.~~

Contractual Obligations

We entered into lease commitments totaling approximately $12.0 million over their respective lease terms during the three months ended December 31, 2013. There have been no ~~material~~other significant changes in our contractual obligations during the period covered by this report. See our “Management’s Discussion and Analysis of Financial Condition and Results of

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Operations” for the fiscal year ended March 31, 2013 in our latest Annual Report on Form 10-K filed with the SEC on May 20, 2013 and our Quarterly Report on Form 10-Q filed with the SEC on August 1, 2013 for additional information regarding our contractual obligations.

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Cautionary Note Regarding Forward-Looking Statements

Some of the statements in this document constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our business’ or our industry’s actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. Such statements include, in particular, statements about our plans, strategies, prospects, changes, outlook and trends in our business and the markets in which we operate; customer preferences; the impact of our fiscal 2014 initiatives; the impact of ~~our marketing efforts, including our~~enhanced in store cooking and built-in displays on appliance ~~category;~~sales; the impact of competition on prices; refinements to our product mix and to customer services and service offerings, including in our appliance category and on our website and mobile site; ~~increasing our average sales price through the promotion of kitchen packages; efforts to increase sales through the promotion of hhgregg rebate gift card incentives;~~ expectations around the U.S. housing market and general economy; efforts to increase the use of our private label credit card and supplemental credit programs; ~~timing of our “lease to own” financing options; the outcome of tests of other secondary finance offerings;~~ the impact of our enhanced credit offerings and non-recourse nature of such offerings; how we entice discretionary purchases; shifts in product mix of consumer electronics and home products including, ~~home entertainment~~ furniture, ~~bedroom furniture, dinette sets and~~ fitness equipment, and computing and wireless; steps to improve our balance of gross profit and market share of our consumer electronics category through our new assortment strategy; the impact of our new advertising agency assisting in delivering the marketing messages necessary to execute on our initiatives and the timing of the new advertising campaign, including around consumer electronics; investments in our delivery and installation capabilities; the success of our general initiatives and initiatives in our consumer electronics category and strategies to offset declines in that category; ~~increases in our appliance category market share; changes in our store operating model to improve close rates and drive market share;~~ variations and enhancements of our product offerings; ~~roll out and timing of our expanded offerings of expanded furniture product assortment;~~ updates and refinements to our ~~multi-channel~~omni-channel experience, including our e-commerce site and timing and the impact of our new point of sale system; the impact of our initiatives to drive sales; our long term and near term store development ~~strategy; plans to build store density; our~~and expansion ~~plans into new markets;~~strategies; steps to slow store growth and enhance store productivity in existing markets; the impact of our customer purchase experience; ~~our plans to raise our sales’ teams standards of execution;~~ predictions around customer spending patterns; factors impacting our gross profit rate; impact of consumer demand and pricing pressures on certain products; outlook for sales of major appliances, including price changes; factors impacting the decrease in consumer electronics sales, gross margin rate declines, and average selling price declines for the industry, including, the steps taken by retailers in the current period to further compress prices of televisions, insufficient innovations in consumer electronics to maintain demand, and the obsolescence of certain devices which have been replaced by smart phones; the seasonality of our business; our income tax rate; plans to refinance our indebtedness or seek additional financing and ability to secure additional debt financing; plans regarding new store openings and investment in our infrastructure; the impact of litigation; and our expected capital expenditures and expected sources of funding found under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “tends,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of those terms or other comparable terminology. These statements are only predictions. We have based these forward-looking statements on its current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, these forward looking statements are projections only and involve known and unknown risks and uncertainties, many of which are beyond our control. Actual events or results may differ materially because of market conditions in our industry or other factors. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our latest Annual Report on Form 10-K filed with the SEC on May 20, 2013 and the Risk Factors set forth in this Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K filed with the SEC on May 20, 2013. The forward-looking statements are made as of the date of this document and we assume no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

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ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk

In addition to the risks inherent in our operations, we are exposed to certain market risks, including interest rate risk.

As of ~~September 30,~~December 31, 2013, our debt was comprised of our Amended Facility.

Interest on borrowings under our Amended Facility is payable monthly at a fluctuating rate based on the bank’s prime, LIBOR, or Eurodollar rates plus an applicable margin based on the average quarterly excess availability. As of ~~September 30,~~December 31, 2013, we had no$15.0 million in outstanding borrowings on our Amended Facility. A hypothetical 100 basis point increase in the bank's prime rate would decrease our annual pre-tax income by approximately $0.2 million.



ITEM 4.	Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), as appropriate to allow timely decisions regarding required disclosure. We have established a Disclosure Committee, consisting of certain members of management, to assist in this evaluation. Our Disclosure Committee meets on a quarterly basis and more often if necessary.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act), as of ~~September 30,~~December 31, 2013. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September 30,~~December 31, 2013, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended ~~September 30,~~December 31, 2013, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II.	Other Information



ITEM 1.	Legal Proceedings

We are engaged in various legal proceedings in the ordinary course of business and have certain unresolved claims pending. The ultimate liability, if any, for the aggregate amounts claimed cannot be determined at this time. However, management believes, based on the examination of these matters and experiences to date, that the ultimate liability, if any, in excess of amounts already provided for in the unaudited condensed consolidated financial statements is not likely to have a material effect on our consolidated financial position, results of operations or cash flows.



ITEM 1A.	Risk Factors

~~There~~Except for the new risk factor below, there have been no material changes to the risk factors set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on May 20, 2013. The risks disclosed in our Annual Report on Form 10-K , and below are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.

We could incur charges due to impairment of long-lived assets.

At December 31, 2013, we had long-lived asset balances of $204.2 million, which are subject to periodic testing for impairment. See Note 2 of Notes to Condensed Consolidated Financial Statements for further information. A significant amount of judgment is involved in the periodic testing. Failure to achieve sufficient levels of cash flow generated from operations at individual store locations could result in impairment charges for the related fixed assets, which could have a material adverse effect on our reported results of operations. Impairment charges, if any, resulting from the periodic testing are non-cash.



ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth the information with respect to repurchases of our common stock for the three months ended ~~September 30,~~December 31, 2013 (in thousands, except share and per share amounts):

Period
Total Number of
Shares Purchased

Average Price Paid
Per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)

Approximate
Maximum Dollar Value
of Shares that May Yet
Be Purchased Under
the Plans or Programs
(1)
July 1, 2013 to July 31, 2013 —
—
—
$ 39,689
August 1, 2013 to August 31, 2013 647,034
$ 17.50
647,034
28,364
September 1, 2013 to September 30, 2013 148,772
17.33
148,772
25,786
Total 795,806
$ 17.47
795,806
$ 25,786



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
October 1, 2013 to October 31, 2013	—	—		—	$	25,786
November 1, 2013 to November 30, 2013	962,893	$	16.24	962,893	10,149
December 1, 2013 to December 31, 2013	—	—		—	10,149
Total	962,893	$	16.24	962,893	$	10,149


(1)	All of the above repurchases were made on the open market at prevailing market rates plus related expenses under our May 2013 Program, which authorized the repurchase of up to $50 million of our common stock. The May 2013 Program was authorized by our Board of Directors on May 16, 2013 and expires on May 22, 2014.

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ITEM 6.	Exhibits



10.36	Employment Agreement, dated May 20, 2013, between Gregg Appliances, Inc. and Andrew S. Giesler.

31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	The following materials from hhgregg, Inc.’s Form 10-Q for the quarterly period ended ~~September 30,~~December 31, 2013, formatted in an XBRL Interactive Data File: (i) Condensed Consolidated Statements of Operations-unaudited; (ii) Condensed Consolidated Balance Sheets-unaudited; (iii) Condensed Consolidated Statements of Cash Flows-unaudited; (iv) Condensed Consolidated Statement of Stockholders’ Equity-unaudited; and (v) Notes to Condensed Consolidated Financial Statements-unaudited.



*	This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




	HHGREGG, INC.

By:	/s/ Jeremy J. Aguilar
	Jeremy J. Aguilar Chief Financial Officer (Principal Financial Officer)

Dated: ~~October 31, 2013~~January 30, 2014

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