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 December 31, ~~2013~~2014



¨	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 January ~~27, 2014~~26, 2015 was ~~29,492,032~~27,664,318.

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HHGREGG, INC. AND SUBSIDIARIES

Report on Form 10-Q

For the Quarter Ended December 31, ~~2013~~2014



		Page

Part I. Financial Information

Item 1.	Condensed Consolidated Financial Statements (unaudited):

	Condensed Consolidated Statements of ~~Income~~Operations for the Three and Nine Months Ended December 31, ~~2013~~2014 and ~~2012~~2013	3

	Condensed Consolidated Balance Sheets as of December 31, ~~2013~~2014 and March 31, ~~2013~~2014	4

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, ~~2013~~2014 and ~~2012~~2013	5

	Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended December 31, ~~2013~~2014	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1312

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2221

Item 4.	Controls and Procedures	2221

Part II. Other Information

Item 1.	Legal Proceedings	2322

Item 1A.	Risk Factors	2322

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2322

Item 6.	Exhibits	2423

Signatures		2524

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Part I.	Financial Information



ITEM 1.	Condensed Consolidated Financial Statements

HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Income~~Operations

(Unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	December 31, 2013			December 31, 2012			December 31, 2013			December 31, 2012			December 31, 2014			December 31, 2013			December 31, 2014			December 31, 2013
	(In thousands, except share and per share data)												(In thousands, except share and per share data)
Net sales	$	707,053		$	799,635		$	1,800,290		$	1,877,127		$	665,616		$	707,053		$	1,643,771		$	1,800,290
Cost of goods sold	517,773			581,450			1,288,295			1,338,136			486,114			517,773			1,176,885			1,288,295
Gross profit	189,280			218,185			511,995			538,991			179,502			189,280			466,886			511,995
Selling, general and administrative expenses	132,360			139,303			372,059			383,871			132,563			132,360			368,264			372,059
Net advertising expense	36,964			38,715			93,399			98,085			38,915			36,964			99,188			93,399
Depreciation and amortization expense	10,785			10,416			32,229			29,673			10,062			10,785			31,360			32,229
Asset impairment charges	310			504			310			504			42,987			310			42,987			310
Income from operations	8,861			29,247			13,998			26,858
(Loss) income from operations													(45,025		)	8,861			(74,913		)	13,998
Other expense (income):
Interest expense	695			704			1,856			1,692			615			695			1,922			1,856
Interest income	(2		)	(3		)	(9		)	(8		)	(47		)	(2		)	(54		)	(9		)
Total other expense	693			701			1,847			1,684			568			693			1,868			1,847
Income before income taxes	8,168			28,546			12,151			25,174
(Loss) income before income taxes													(45,593		)	8,168			(76,781		)	12,151
Income tax expense	3,120			11,157			4,685			9,726			41,272			3,120			30,737			4,685
Net income	$	5,048		$	17,389		$	7,466		$	15,448
Net income per share
Net (loss) income													$	(86,865	)	$	5,048		$	(107,518	)	$	7,466
Net (loss) income per share
Basic	$	0.17		$	0.51		$	0.24		$	0.44		$	(3.10	)	$	0.17		$	(3.80	)	$	0.24
Diluted	$	0.17		$	0.51		$	0.24		$	0.44		$	(3.10	)	$	0.17		$	(3.80	)	$	0.24
Weighted average shares outstanding-basic	29,915,307			33,934,383			30,617,856			35,099,660			28,008,808			29,915,307			28,282,050			30,617,856
Weighted average shares outstanding-diluted	30,387,251			33,985,113			31,117,896			35,168,497			28,008,808			30,387,251			28,282,050			31,117,896

See accompanying notes to condensed consolidated financial statements.

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HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)


	December 31, 2013			March 31, 2013			December 31, 2014			March 31, 2014
	(In thousands, except share data)						(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	2,662		$	48,592		$	27,143		$	48,164
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—trade, less allowances of $557 and $132 as of December 31, 2014 and March 31, 2014, respectively							21,739			15,121
Accounts receivable—other	22,745			18,748			23,564			16,467
Merchandise inventories, net	384,172			315,562			381,692			298,542
Prepaid expenses and other current assets	13,648			5,567			14,918			6,694
Income tax receivable	734			1,414			5,900			1,380
Deferred income taxes	7,093			5,758			—			6,220
Total current assets	454,644			419,912			474,956			392,588
Net property and equipment	204,191			217,911			135,825			193,882
Deferred financing costs, net	2,469			1,992			1,930			2,334
Deferred income taxes	35,249			35,252			8,684			35,182
Other assets	1,652			1,354			2,646			1,977
Total long-term assets	243,561			256,509			149,085			233,375
Total assets	$	698,205		$	676,421		$	624,041		$	625,963
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	150,528		$	150,333		$	224,080		$	140,806
Line of credit	15,000			—			—			—
Customer deposits	46,656			38,042			51,553			41,518
Accrued liabilities	71,324			49,422			61,686			50,898
Deferred income taxes							8,684			—
Income tax payable	4,048			2,145			—			122
Total current liabilities	287,556			239,942			346,003			233,344
Long-term liabilities:
Deferred rent	74,574			77,777			68,637			73,493
Other long-term liabilities	11,816			12,044			11,818			11,992
Total long-term liabilities	86,390			89,821			80,455			85,485
Total liabilities	373,946			329,763			426,458			318,829
Stockholders’ equity:
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
Preferred stock, par value $.0001; 10,000,000 shares authorized; no shares issued and outstanding as of December 31, 2014 and March 31, 2014, respectively							—			—
Common stock, par value $.0001; 150,000,000 shares authorized; 41,158,041 and 41,121,390 shares issued; and 27,661,359 and 28,460,218 outstanding as of December 31, 2014 and March 31, 2014, respectively							4			4
Additional paid-in capital	297,792			287,806			300,447			297,199
Retained earnings	162,116			154,650			47,360			154,878
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		)
Common stock held in treasury at cost, 13,496,682 and 12,661,172 shares as of December 31, 2014 and March 31, 2014, respectively							(150,228		)	(144,947		)
Total stockholders’ equity	324,259			346,658			197,583			307,134
Total liabilities and stockholders’ equity	$	698,205		$	676,421		$	624,041		$	625,963

See accompanying notes to condensed consolidated financial statements.

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HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended						Nine Months Ended
	December 31, 2013			December 31, 2012			December 31, 2014			December 31, 2013
	(In thousands)						(In thousands)
Cash flows from operating activities:
Net income	$	7,466		$	15,448
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income							$	(107,518	)	$	7,466
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	32,229			29,673			31,360			32,229
Amortization of deferred financing costs	469			498			404			469
Stock-based compensation	4,151			3,882			3,375			4,151
Excess tax benefit from stock based compensation	(21		)	(585		)	—			(21		)
Gain on sales of property and equipment	(437		)	(216		)
Loss (gain) on sales of property and equipment							188			(437		)
Deferred income taxes	(1,332		)	3,575			41,402			(1,332		)
Asset impairment charges	310			504			42,987			310
Tenant allowances received from landlords	2,101			8,424			833			2,101
Changes in operating assets and liabilities:
Accounts receivable—trade	681			(1,207		)	(6,618		)	681
Accounts receivable—other	(4,072		)	(8,071		)	(7,431		)	(4,072		)
Merchandise inventories	(68,610		)	(155,969		)	(83,150		)	(68,610		)
Income tax receivable	701			(1,356		)	(4,520		)	701
Prepaid expenses and other assets	(8,379		)	1,240			(8,360		)	(8,379		)
Accounts payable	20,151			84,699			83,342			20,151
Customer deposits	8,614			11,278			10,035			8,614
Income tax payable	1,903			3,616			(122		)	1,903
Accrued liabilities	21,902			23,759			10,661			21,902
Deferred rent	(5,229		)	(4,099		)	(5,355		)	(5,229		)
Other long-term liabilities	(28		)	198			31			(28		)
Net cash provided by operating activities	12,570			15,291			1,544			12,570
Cash flows from investing activities:
Purchases of property and equipment	(19,888		)	(50,291		)	(16,803		)	(19,888		)
Proceeds from sales of property and equipment	221			34			44			221
Purchases of corporate-owned life insurance							(533		)	—
Net cash used in investing activities	(19,667		)	(50,257		)	(17,292		)	(19,667		)
Cash flows from financing activities:
Purchases of treasury stock	(39,851		)	(30,041		)	(5,281		)	(39,851		)
Proceeds from exercise of stock options	5,814			4,184			—			5,814
Excess tax benefit from stock-based compensation	21			585			—			21
Net (decrease) increase in bank overdrafts	(8,764		)	12,153
Net decrease in bank overdrafts							—			(8,764		)
Net borrowings on line of credit	15,000			—			—			15,000
Net (repayments) borrowings on inventory financing facility	(10,107		)	4,322
Net borrowings (repayments) on inventory financing facility							8			(10,107		)
Payment of financing costs	(946		)	—			—			(946		)
Payments received on notes receivable-related parties	—			41
Net cash used in financing activities	(38,833		)	(8,756		)	(5,273		)	(38,833		)
Net decrease in cash and cash equivalents	(45,930		)	(43,722		)	(21,021		)	(45,930		)
Cash and cash equivalents
Beginning of period	48,592			59,244			48,164			48,592
End of period	$	2,662		$	15,522		$	27,143		$	2,662
Supplemental disclosure of cash flow information:
Interest paid	$	1,359		$	226		$	502		$	1,359
Income taxes paid	$	3,412		$	7,509
Income taxes (received) paid							$	(5,993	)	$	3,412
Capital expenditures included in accounts payable	$	406		$	873		$	992		$	406

See accompanying notes to condensed consolidated financial statements.

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HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

Nine Months Ended December 31, ~~2013~~2014

(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 Outstanding		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
Net income									7,466					7,466
Balance at March 31, 2014																	28,460,218		$	—	$	4	$	297,199		$	154,878		$	(144,947	)	$	307,134
Net loss																										(107,518		)				(107,518		)
Exercise of stock options and vesting of RSUs	480,647		—		—		5,814		—		—			5,814			36,651		—		—		(127		)	—			—			(127		)
Stock compensation expense	—		—		—		4,151		—		—			4,151			—		—		—		3,375			—			—			3,375
Excess tax benefit from stock-based compensation, net	—		—		—		21		—		—			21			—		—		—		—			—			—			—
Repurchase of common stock	(2,457,068	)	—		—		—		—		(39,851		)	(39,851		)	(835,510	)	—		—		—			—			(5,281		)	(5,281		)
Balance at December 31, 2013	29,492,032		$	—	$	4	$	297,792	$	162,116	$	(135,653	)	$	324,259
Balance at December 31, 2014																	27,661,359		$	—	$	4	$	300,447		$	47,360		$	(150,228	)	$	197,583

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~~(“hhgregg” or the “Company” ~~or “hhgregg”~~) is an appliance, electronics and furniture retailer that is committed to providing customers with a ~~specialty~~truly differentiated purchase experience through superior customer service, knowledgeable sales associates and the highest quality product selections. Founded in 1955, hhgregg is a multi-regional 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~~ ~~December 31, 2013, the Company had~~with 228 brick-and-mortar 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,20 states that also offers market-leading global and ~~Wisconsin~~.local brands at value prices nationwide via hhgregg.com. 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~~2014, included in the Company’s Annual Report on Form 10-K filed with the SEC on May 20, ~~2013~~2014.

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~~value 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~~are 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.

The need for an impairment analysis to be performed was triggered by declining sales and overall profitability in recent periods. The Company has performed a detailed store impairment analysis as of December 31, 2014. For the third quarter 2014 impairment analysis, property and equipment at 48 locations with a net book value of $44.1 million were reduced to estimated aggregate fair value of $1.1 million based on their projected cash flows, discounted at 15%. This resulted in an asset impairment charge of $43.0 million for the three months ended December 31, 2014. The fair values were determined using a probability based cash flow analysis based on management's estimates of future store-level sales, gross margins, and direct expenses.

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

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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~~of $0.4 million and resulted in an asset impairment charge of $0.3 million for the three ~~and nine~~ months ended December 31, ~~2013 and 2012 (in millions):~~2013.

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 December 31, ~~2013~~2014 and March 31, ~~2013~~2014 (in thousands):


	December 31, 2013			March 31, 2013			December 31, 2014			March 31, 2014
Machinery and equipment	$	28,516		$	25,328		$	27,358		$	28,478
Store fixtures and furniture	183,151			175,659			169,344			180,799
Vehicles	2,247			2,269			2,072			2,207
Signs	19,620			19,163			15,569			19,545
Leasehold improvements	178,821			172,952			136,650			178,888
Construction in progress	7,296			5,995			3,194			8,167
	419,651			401,366			354,187			418,084
Less accumulated depreciation and amortization	(215,460		)	(183,455		)	(218,362		)	(224,202		)
Net property and equipment	$	204,191		$	217,911		$	135,825		$	193,882


(4)	Net (Loss) Income per Share

Net (loss) income per basic ~~share is calculated based on the weighted-average number of outstanding common shares. Net income per~~and 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 three and nine months ended December 31, 2014, 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 and such shares would be antidilutive.

The following table presents net (loss) income per basic and diluted share for the three and nine months ended December 31, ~~2013~~2014 and ~~2012~~2013 (in thousands, except share and per share amounts):


	Three Months Ended				Nine Months Ended				Three Months Ended					Nine Months Ended
	December 31, 2013		December 31, 2012		December 31, 2013		December 31, 2012		December 31, 2014			December 31, 2013		December 31, 2014			December 31, 2013
Net income (A)	$	5,048	$	17,389	$	7,466	$	15,448
Net (loss) income (A)									$	(86,865	)	$	5,048	$	(107,518	)	$	7,466
Weighted average outstanding shares of common stock (B)	29,915,307		33,934,383		30,617,856		35,099,660		28,008,808			29,915,307		28,282,050			30,617,856
Dilutive effect of employee stock options and restricted stock units	471,944		50,730		500,040		68,837		—			471,944		—			500,040
Common stock and potential dilutive common shares (C)	30,387,251		33,985,113		31,117,896		35,168,497		28,008,808			30,387,251		28,282,050			31,117,896
Net income per share:
Net (loss) income per share:
Basic (A/B)	$	0.17	$	0.51	$	0.24	$	0.44	$	(3.10	)	$	0.17	$	(3.80	)	$	0.24
Diluted (A/C)	$	0.17	$	0.51	$	0.24	$	0.44	$	(3.10	)	$	0.17	$	(3.80	)	$	0.24

Antidilutive shares not included in the net (loss) income per diluted share calculation for the three and nine months ended December 31, ~~2013~~2014 were ~~936,040~~3,847,140 and ~~937,640~~3,767,923, respectively. Antidilutive shares not included in the net income per diluted share calculation for the three and nine months ended December 31, ~~2012~~2013 were ~~3,663,282~~937,640.

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(5)	Inventories

Net merchandise inventories consisted of the following at December 31, ~~2013~~2014 and March 31, ~~2013~~2014 (in thousands):


	December 31, 2013		March 31, 2013		December 31, 2014		March 31, 2014
Appliances	$	143,666	$	120,972	$	156,512	$	134,053
Consumer electronics	164,949		126,019		171,206		108,193
Computing and wireless	49,613		46,020
Computers and tablets					33,380		36,039
Home products	25,944		22,551		20,594		20,257
Net merchandise inventory	$	384,172	$	315,562	$	381,692	$	298,542


(6)	Debt

A summary of debt at December 31, ~~2013~~2014 and March 31, ~~2013~~2014 is as follows (in thousands):

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



	December 31, 2014		March 31, 2014
Line of credit	$	—	$	—

On July 29, 2013, Gregg Appliances entered into Amendment No. 1 to the Amended and Restated Loan and Security Agreement (the “Amended Facility”) ~~to increase~~. The capacity for borrowings under the ~~maximum credit available to~~Company's Amended Facility is $400 million ~~from $300 million,~~, subject to borrowing base ~~availability, and extend the term of the~~availability. The facility ~~to expire~~expires 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 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 December 31, ~~2013~~2014.

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As of December 31, ~~2013~~2014 and March 31, 2014, Gregg Appliances had ~~$15.0 million of cash~~no borrowings outstanding under the Amended Facility. As of December 31, ~~2013~~2014, Gregg Appliances had $~~5.3~~6.5 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%~~.

2015. As of March 31, ~~2013~~2014, Gregg Appliances had no ~~borrowings outstanding under the Amended Facility. As of~~ ~~March 31, 2013, Gregg Appliances had $4.9~~$5.3 million of letters of credit outstanding, which expire through December 31, ~~2013.~~2014. The total borrowing availability under the Amended Facility was $~~189.8~~230.4 million and $169.5 million as of December 31, 2014 and March 31, ~~2013~~2014., respectively. The interest rate based on the bank’s prime rate was 4.00% and 3.75%as of December 31, 2014 and March 31, ~~2013~~2014 ~~was~~ ~~4.25%~~., respectively.


(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,~~Effective June 20, 2014, 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~~adopted an ~~exercise price per share equal~~Amendment to the ~~greater~~hhgregg, Inc. 2007 Equity Incentive Plan which increases the number of (a) $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 common stock reserved for issuance under 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~~Plan 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 vesting period, in accordance with the Exchange Offer.~~

9,000,000. The following table summarizes the activity under the Company’s ~~Stock Option Plans~~2007 Equity Incentive Plan for the nine months ended December 31, ~~2013~~2014:


	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
Outstanding at March 31, 2014					3,232,208		$	13.61
Granted	1,806,805		13.99		1,031,640		8.81
Exercised	(480,647	)	12.10		—		—
Canceled	(981,328	)	22.19		(271,122	)	11.68
Expired	(27,002	)	23.53		(313,969	)	13.10
Outstanding at December 31, 2013	3,640,290		$	13.60
Outstanding at December 31, 2014					3,678,757		$	12.44

During the nine months ended December 31, ~~2013~~2014, the Company granted options for ~~1,806,805~~1,031,640 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~~4.15 during the nine months ended December 31, ~~2013~~2014, using the Black-Scholes model with the following weighted average assumptions:



Risk-free interest rate	~~0.06%~~1.31% - ~~1.53%~~1.60%
Dividend yield	—
Expected volatility	~~63.0~~57.0	%
Expected life of the options (years)	4.5
Forfeitures	~~7.20~~8.40	%

Time Vested Restricted Stock Units

During the nine months ended December 31, ~~2013~~2014, the Company granted ~~27,237~~40,950 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 ceases~~participant's service to ~~serve as director~~the Company terminates 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 nine months ended December 31, ~~2013~~2014 was $~~14.32~~9.17.

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The following table summarizes RSU vesting activity for the nine months ended December 31, ~~2013~~2014:

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


~~(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.



	Shares		Weighted Average Grant-Date Fair Value
Nonvested at March 31, 2014	143,503		$	12.72
Granted	40,950		9.17
Vested	(56,100	)	14.16
Forfeited	—		—
Nonvested at December 31, 2014	128,353		$	11.07

~~(9)~~(8) Share Repurchase Program

On May ~~16, 2013~~14, 2014, the Company’s Board of Directors authorized a new share repurchase program, which became effective on May ~~22, 2013~~20, 2014 (the “May ~~2013~~2014 Program”), allowing the Company to repurchase up to $5040 million of its common stock. The May ~~2013~~2014 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~~20, 2015. The previous share repurchase program expired on May 21, ~~2013.~~2014.

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The following table shows the number and cost of shares repurchased during the nine months ended December 31, ~~2013~~2014 and ~~2012~~2013, respectively ($ in thousands):


	Nine Months Ended				Nine Months Ended
	December 31, 2013		December 31, 2012		December 31, 2014		December 31, 2013
May 2014 Program
Number of shares repurchased					835,510		—
Cost of shares repurchased					$	5,281	$	—
May 2013 Program
Number of shares repurchased	2,457,068		—		—		2,457,068
Cost of shares repurchased	$	39,851	$	—	$	—	$	39,851
May 2012 Program
Number of shares repurchased	—		3,558,600
Cost of shares repurchased	$	—	$	30,041

As of December 31, ~~2013~~2014, the Company had $~~10.1~~34.7 million remaining under the May ~~2013~~2014 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~~2014, included in our latest Annual Report on Form 10-K, as filed with the SEC on May 20, ~~2013~~2014.

Overview

hhgregg ~~Inc.~~is an appliance, electronics and furniture retailer that is committed to providing customers with a truly differentiated purchase experience through superior customer service, knowledgeable sales associates and the highest quality product selections. Founded in 1955, hhgregg is a ~~specialty~~multi-regional 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~~ ~~December 31, 2013, we operated~~ with 228 brick-and-mortar 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,20 states that also offers market-leading global and ~~Wisconsin~~.local brands at value prices nationwide via hhgregg.com. References to fiscal years in this report relate to the respective 12 month period ended March 31. Our ~~2014~~2015 fiscal year is the 12 month period ending on March 31, ~~2014~~2015.

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 and home furniture products. We ~~display nearly~~carry approximately 350 models of major appliances in stock, and ~~100 models~~a large selection of ~~flat panel televisions in our stores with a broad assortment of models in the middle- to upper-end of product price ranges.~~TVs, as well as, computers, consumer electronics, furniture, mattresses, and tablets. Appliance and consumer electronics sales comprised ~~84%~~87% and ~~83%~~84% of our net sales mix for the three months ended December 31, 2014 and 2013, respectively, and ~~2012,~~87% and 85% ~~and 86%~~ of our net sales mix for the nine months ended December 31, 2014 and 2013, ~~and 2012.~~respectively.

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.

~~For fiscal 2014 we~~We have ~~implemented three major initiatives~~experienced a decline in ~~response to~~ our ~~continuing~~overall comparable store sales, ~~decline~~primarily driven by declines in the consumer electronics and computers and tablets categories as a result of industry pressures and market share losses. The market share losses are primarily driven by products that are smaller in size and easier to ship, which ~~are:~~have increasingly seen larger portions of industry sales made online. In response to ~~reshape~~these declines, we have developed four major initiatives for fiscal 2015. These include continuing to redefine our sales mix, ~~expand~~further differentiating our customer ~~base~~experience, enhancing our e-commerce capabilities and ~~enhance our service offerings.~~launching new customer facing technologies.

Our first initiative for fiscal ~~2014~~2015 is ~~to reshape~~redefining our sales mix through a continued ~~increase in~~investment and focus on the appliance, ~~category as well as~~and furniture categories while stabilizing the ~~introduction of new product categories. Our~~consumer electronics category. In August 2014 we attained the highest overall ranking amongst appliance retailers in the J.D. Power Appliance Retailer Customer Satisfaction Study^SM, and in October 2014 we attained the highest overall ranking amongst appliance retailers in the J.D. Power Appliance Retailer Website Study ^SM. While slightly negative this quarter, our comparable store sales in the appliance category have ~~increased on a comparative basis over~~consistently performed above the ~~past ten quarters,~~

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total chain average, and this category has proven to be ~~a centerpiece~~the cornerstone of our business. ~~To maintain this growth,~~The appliance industry continues to be more promotional as more retailers focus on capturing market share. The changes in the market place are driving us to slightly modify our go to market strategies in future periods to gain market share, specifically investing in an improved multi-channel experience and assortment. We will continue to test and develop new strategies and offerings to maximize our market share in our markets. We are enhancing our displays of complete kitchen solutions, providing a differentiated product assortment based on geography and demographics, more than doubling our current number of Fine Lines locations, and enhancing our special order capabilities. Also, we ~~are placing~~will continue to place a greater emphasis on the appliances category in our ~~in home delivery capabilities for appliances. We also are enhancing our in store cooking~~branding and ~~built-in displays, and providing a product assortment based upon geography and preferences within the geography.~~advertisement messages. The U.S. Census ~~Bureau's~~Bureau’s data on New Residential Construction shows that ~~2013~~2014 U.S. Housing Start-Up’s experienced a ~~12%~~8% increase for the ~~quarterly~~twelve month period ended ~~December 31, 2013~~November 30, 2014 over the prior year comparable period. Additionally, according to the U.S. Department of Commerce - Bureau of Economic Analysis, personal consumption expenditures for home appliances increased 0.9% from $45.7 billion in 2013 to $46.1 billion in 2014. We expect that the appliance industry will experience increases in demand as the U.S. housing market and general economy continues to ~~improve,~~improve. While the ~~appliance industry will experience increases in demand. While this~~new residential construction 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 ~~won't~~will not 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 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 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 ~~however,~~during this fiscal year and beyond. During fiscal 2015, we will continue to ~~place greater emphasis on other areas~~seek to stabilize consumer electronics sales and stem market share loss through further investing in large screen sizes and OLED technology and an expansive selection of ~~our sales mix as we further develop~~ultra HD/4K products. Despite the new ~~categories. As it relates to our computing~~technology and ~~wireless~~innovations in this category, we ~~plan~~expect to ~~provide~~continue to see negative comparable store sales within consumer electronics, driven by continued pressure by competition and overall unit demand declines in the video category.

During our previous fiscal year we rolled out an expanded offering of ~~connected devices,~~furniture products. In the current year we are in the process of optimizing our furniture assortment by increasing the number of brands that we sell, resulting in a greater assortment of furniture merchandise at a variety of price-points, which we believe better match our customers’ preferences. Also, as it relates to the home products category, we are no longer carrying fitness products in our stores 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 utilize these products to drive greater traffic~~dedicated this floor space to our ~~stores. Our ultimate goal~~expanded selection of ~~reshaping~~furniture.

During fiscal 2015 we have continued to develop and enhance 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. Over the past 12 months we have continued to improve the penetration rate of our non-recourse credit offerings, including our private label credit card, ~~penetration has increased 230~~secondary and “lease to own” finance offerings, by approximately 450 basis points to ~~36% of transactions.~~nearly 40%. We continue to encourage the use of the private label card, ~~not only~~ through unique benefits such as in store payment options, ~~but through~~reward offers ~~such as~~and extended financing options. Over the past two years we have grown our ~~5% discount on qualifying merchandise. In addition to our private label~~ credit ~~card, during~~offerings, beginning with the ~~second fiscal quarter~~roll out of ~~2014 we rolled out~~ a “lease to own” option ~~through a third party provider~~ in ~~all~~fiscal 2013, and the roll out 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 secondary finance offering ~~for~~in fiscal 2014, both through third party providers and non-recourse to our business. We are continuing to modify our credit offerings to best meet the ~~lower-middle income consumer.~~ongoing needs of our customers. We believe that ~~enhancing~~continuing to enhance our credit offerings will generate greater brand loyalty, ~~and~~ higher average sales per transaction, ~~resulting~~and increased premium service plan sales.

Our second initiative for fiscal 2015 is continuing to enhance and differentiate our customer experience. hhgregg provides customers an educated sales force to assist them in ~~an overall more profitable relationship~~making informed decisions about their purchase. We have continued to refine our selling techniques to embrace technology, and utilize omni-channel strategies to better connect with ~~customers.~~our customer base in store. Our ~~credit offerings~~goal is to better serve and engage our customers by providing a truly differentiated shopping and purchase experience. Additionally, our goal is to eliminate the types of issues that most often frustrate customers who are ~~non-recourse~~buying large products for their homes. We want to ~~us, consequently, we bear no risk for any~~establish consumers’ trust in this experience through a very transparent online price comparison tool that is available inside of the store. We believe that the key to unlocking our brand potential ~~delinquencies.~~is through a differentiated purchase experience.

Our third initiative for fiscal ~~2014~~2015 is enhancing our e-commerce capabilities to ~~enhance~~provide our ~~service offerings, with particular emphasis on~~customers a truly omni-channel shopping experience. This allows our ~~website capabilities.~~customers to move seamlessly across the various mediums including store, web, mobile, social and call center. During fiscal 2015, we invested in infrastructure upgrades, additional web-application capabilities, enhancing our mobile application and adding a greater selection to our product assortment. During fiscal 2014, we ~~have added the following features to our website:~~implemented an ~~expanded aisle~~“expanded aisle” concept which tripled our product assortment online by ~~carrying~~offering many products that are not available in ~~stores; updated~~ our ~~mobile commerce site~~stores. During fiscal 2015 and beyond we plan to grow our current partner base by ~~allowing greater functionality, including transacting through the site~~seeking opportunities with other vendors, and ~~intuitive navigation; omnichannel shopping experience improvements~~adding an in-store kiosk where our associates can assist our customers in purchasing these products. Additional enhancements include improving our nationwide delivery model, adding additional payment options for ~~our customers; and improved~~efficient checkout, and ~~payment options including accepting hhgregg credit card applications on our website. In~~making personalization updates such as profile improvements, recommendations and communication. We are pleased with the continued growth in e-commerce as we have seen nearly 60% sales growth during the fiscal year ~~ahead,~~to date. We know that many consumers start their research online and we ~~expect~~want to continue to ~~expand~~make hhgregg.com an advantage for our ~~online product assortment, integrate~~brand.

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Our fourth initiative for fiscal 2015 is to launch new customer facing technologies. During the ~~omnichannel shopping experience with with~~fiscal second quarter of 2015 we completed the ~~implementation~~roll out of aour new point of sale system. The new system provides operational improvements, customer service improvements and ~~to make social media enhancements.~~a streamlined checkout process. The new point of sale system ~~that we plan to implement will~~ not only ~~have~~has new digital capabilities, but ~~expedite~~expedites the check-out ~~process to decrease the time to complete~~process. Additionally, we implemented a ~~sale. We also intend to improve our~~new delivery ~~service by utilizing new devices that better communicate expected delivery timing with the 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 will be to continue to shift the balance of our focus to sales and profit productivity in our existing store 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 growth of our competencies with our e-commerce platform.

~~In the~~ ~~nine months ended December 31, 2013, we relocated four stores, and began construction on one new store that is planned to open~~tracking system during the first ~~fiscal~~ quarter of fiscal 2015. The goal of the system is to not only provide more efficient delivery routes, but more importantly, to provide an integrated tool that allows for communication before, during and after the delivery process. We understand that having a delivery come to a customer’s house may require a customer to leave work or disrupt their schedule. With that in mind, we deployed a solution that allows constant communication between the delivery team and the customer. This will help ensure that we provide the customer with a seamless, on-schedule, best in class home delivery experience.

Business Strategy and Core Philosophies. Our business strategy is focused around offering our customers a superior customer 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~~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~~capabilities 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~~ For the three ~~month period~~and nine months ended December 31, ~~2013,~~2014, we generated 43% and 50%, respectively, of total product sales ~~for the consumer electronics industry have decreased 8.5%~~ from the ~~comparable prior year period.~~ sale of appliances, compared to 41% and 47%, respectively, in the three and nine months ended December 31, 2013.

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 gradually reduced to drive consumption. Accordingly, there has been consistent price compression in flat panel televisions for equivalent screen sizes in recent years ~~which was further compressed during~~without a widely accepted innovation in technology to offset this compression. As new technology has not been sufficient to keep demand constant, the ~~current quarterly period ended December 31, 2013 as retailers provided increased promotional offerings for~~industry has seen falling demand. For the ~~holiday. According to the NPD TV Market Pulse reports for the~~ three and nine months ended December 31, ~~2013, flat-panel TV~~2014, we generated 44% and 37%, respectively of total product sales ~~units were 1% less than~~from the comparable prior year period, and the average selling price has 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. Othersale of consumer electronics, ~~categories have also experienced significant demand pressure. Cameras, camcorders, mp3 players,~~compared to 43% 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 offerings38%, respectively, 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.~~three and nine months ended December 31, 2013.

~~The computing and wireless product category drives traffic into our stores. As a result,~~During fiscal 2014 we ~~have enhanced~~expanded 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~~by adding room settings, additional mattresses and ~~fitness equipment.~~dinette sets. We ~~will continue~~continued to refine our assortment ~~in this category as we learn more about their success in~~of furniture by expanding 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~~selection from one brand 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,~~several brands, 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.~~make modifications.

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~~2014 in our latest Annual Report on Form 10-K filed with the SEC on May 20, ~~2013~~2014. There have been no significant changes in our critical accounting policies and estimates since the end of fiscal ~~2013~~2014.

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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						Nine Months Ended						Three Months Ended						Nine Months Ended
	December 31,						December 31,						December 31,						December 31,
(unaudited)	2013			2012			2013			2012			2014			2013			2014			2013
Net sales	$	707,053		$	799,635		$	1,800,290		$	1,877,127		$	665,616		$	707,053		$	1,643,771		$	1,800,290
Net sales % decrease	(11.6		)%	(3.6		)%	(4.1		)%	(0.1		)%	(5.9		)%	(11.6		)%	(8.7		)%	(4.1		)%
Comparable store sales % decrease ⁽¹⁾	(11.2		)%	(9.7		)%	(6.4		)%	(8.3		)%	(6.3		)%	(11.2		)%	(9.1		)%	(6.4		)%
Gross profit as a % of net sales	26.8		%	27.3		%	28.4		%	28.7		%	27.0		%	26.8		%	28.4		%	28.4		%
SG&A as a % of net sales	18.7		%	17.4		%	20.7		%	20.4		%	19.9		%	18.7		%	22.4		%	20.7		%
Net advertising expense as a % of net sales	5.2		%	4.8		%	5.2		%	5.2		%	5.8		%	5.2		%	6.0		%	5.2		%
Depreciation and amortization expense as a % of net sales	1.5		%	1.3		%	1.8		%	1.6		%	1.5		%	1.5		%	1.9		%	1.8		%
Income from operations as a % of net sales	1.3		%	3.7		%	0.8		%	1.4		%
Asset impairment charges as a % of net sales													6.5		%	—		%	2.6		%	—		%
(Loss) income from operations as a % of net sales													(6.8		)%	1.3		%	(4.6		)%	0.8		%
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	$	5,048		$	17,389		$	7,466		$	15,448
Net income per diluted share	$	0.17		$	0.51		$	0.24		$	0.44
Income tax expense as a % of net sales													6.2		%	0.4		%	1.9		%	0.3		%
Net (loss) income													$	(86,865	)	$	5,048		$	(107,518	)	$	7,466
Net (loss) income per diluted share													$	(3.10	)	$	0.17		$	(3.80	)	$	0.24
Weighted average shares outstanding—diluted	30,387,251			33,985,113			31,117,896			35,168,497			28,008,808			30,387,251			28,282,050			31,117,896
Number of stores open at the end of period	228			228									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~~loss was $~~5.0~~86.9 million for the three months ended December 31, ~~2013~~2014, or $~~0.17~~3.10 per diluted share, compared with net income of $~~17.4~~5.0 million, or $~~0.51~~0.17 per diluted share, for the comparable prior year period. For the nine months ended December 31, ~~2013~~2014, net ~~income~~loss was $~~7.5~~107.5 million, or $~~0.24~~3.80 per diluted share, compared with net income of $~~15.4~~7.5 million, or $~~0.44~~0.24 per diluted share for the comparable prior year period. The decrease in net income for the three months ended December 31, ~~2013~~2014 was largely due to a comparable store sales decrease of ~~11.2%~~6.3%, an asset impairment charge of $43.0 million pre-tax for property, plant and equipment and $56.9 million related to establishing a ~~decrease in gross margin.~~valuation allowance for deferred tax assets, which was comprised of $40.9 million of tax expense for previously recognized deferred tax assets and $16.0 million of tax benefits not recognized related to losses incurred during the current quarter. The decrease in net income for the nine ~~month period~~months ended December 31, ~~2013~~2014 was largely due to a comparable store sales decrease of ~~6.4%~~9.1%, an asset impairment charge of $43.0 million pre-tax for property, plant and equipment and the impact of establishing a ~~decrease in gross margin.~~valuation allowance for deferred tax assets.

Net sales for the three months ended December 31, ~~2013~~2014 decreased ~~11.6%~~5.9% to $~~707.1~~665.6 million from $~~799.6~~707.1 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 ~~11.2%~~6.3%. Net sales for the nine months ended December 31, ~~2013~~2014 decreased ~~4.1%~~8.7% to $~~1.80~~1.64 billion from $~~1.88~~1.80 billion in the comparable prior year period. The decrease in net sales for the nine month period was the result of a comparable store sales decrease of ~~6.4%~~9.1%. We experienced a 60% increase in comparable sales on our e-commerce site for the three and nine months ended December 31, 2014.

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Net sales mix and comparable store sales percentage changes by product category for the three and nine months ended December 31, ~~2013~~2014 and ~~2012~~2013 were as follows:


	Net Sales Mix Summary								Comparable Store Sales Summary								Net Sales Mix Summary								Comparable Store Sales Summary
	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended December 31,				Nine Months Ended December 31,				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		2014		2013		2014		2013		2014		2013		2014		2013
Appliances	41	%	35	%	47	%	42	%	1.5	%	6.1	%	3.8	%	4.4	%	43	%	41	%	50	%	47	%	(0.1	)%	1.5	%	(2.6	)%	3.8	%
Consumer electronics ⁽¹⁾	43	%	48	%	38	%	44	%	(19.7	)%	(24.1	)%	(18.8	)%	(21.7	)%	44	%	43	%	37	%	38	%	(3.9	)%	(19.7	)%	(11.3	)%	(18.8	)%
Computing and wireless ⁽²⁾	12	%	14	%	10	%	11	%	(24.5	)%	15.1	%	(12.4	)%	12.7	%
Computers and tablets																	8	%	12	%	8	%	10	%	(35.0	)%	24.5	%	(33.2	)%	(12.4	)%
Home products ⁽³⁾⁽²⁾	4	%	3	%	5	%	3	%	36.1	%	23.4	%	57.7	%	5.4	%	5	%	4	%	5	%	5	%	(9.2	)%	36.1	%	(2.0	)%	57.7	%
Total	100	%	100	%	100	%	100	%	(11.2	)%	(9.7	)%	(6.4	)%	(8.3	)%	100	%	100	%	100	%	100	%	(6.3	)%	(11.2	)%	(9.1	)%	(6.4	)%


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


⁽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 December 31, ~~2013~~2014 was driven primarily by adecreases in consumer electronics, computers and tablets and home products. The decrease in comparable store sales infor the ~~consumer electronics~~three months ended December 31, 2014 was 6.3%. Excluding mobile phones and ~~computing and wireless categories, partially offset by an increase in~~fitness equipment, due to the ~~appliance and home products categories. The appliance category increase~~exit from these product lines, the decrease in comparable store sales for the three months ended December 31, 2014 was ~~driven by an increase in units sold.~~5.1%. The ~~home products category increase in~~ comparable store sales ~~was a result~~ of ~~sales of furniture and fitness equipment.~~the appliance category remained relatively flat with no significant change in average selling price or demand. The consumer electronics category comparable store sales decline was ~~driven~~ primarily bydue to a double digit ~~comparable store~~decline in units sold within the video category offset slightly by an increase in average selling price, which was driven by an increase in sales of larger screen and more premium featured televisions. The decrease ~~in video, largely resulting from our strategy~~ of 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 decrease35% in comparable store sales for the computers and tablets category for the three month period was driven by a decrease in demand for ~~laptop~~ computers and tablets as well as a decrease in the average selling prices for computers and tablets and the exit from the contract-based mobile phone business. Excluding mobile phones, the decrease in comparable sales for the three months ended December 31, 2014 for the computers and tablets category was 29.6%. The decrease of 9.2% in comparable store sales for the home products category was largely a result of the exit from fitness equipment and a ~~lower~~double digit unit demand decline within the TV stands, recliner and sofa product lines, offset slightly by increased average selling ~~price~~prices among nearly all product lines within this category and increased unit demand within mattresses. Excluding fitness equipment, the decrease in comparable store sales for ~~tablets.~~the three months ended December 31, 2014 for the home products category was 2.7%.

Three Months Ended December 31, ~~2013~~2014 Compared to Three Months Ended December 31, ~~2012~~2013

Gross profit margin, expressed as gross profit as a percentage of net sales, ~~decreased~~increased for the three months ended December 31, ~~2013~~2014 to ~~26.8%~~27.0% from ~~27.3%~~26.8% for the comparable prior year period. The ~~decrease is~~increase was due to a ~~decline~~favorable sales mix shift to product categories with higher gross profit margin rates and an increase in gross profit margin ~~rates across all categories primarily~~for the video category due to ~~the promotional nature~~an increase in sales of ~~this holiday season.~~larger screen and more premium featured televisions.

SG&A expense, as a percentage of net sales, increased ~~130~~120 basis points for the three months ended December 31, ~~2013~~2014 compared to the prior year period. The increase in SG&A as a percentage of net sales was a result of a 26 basis points increase in product services from a higher percentage of home delivery, a 23 basis points increase in occupancy costs due to the deleveraging effect of the net sales decline, a 13 basis points increase in consulting expenses to assist in rationalizing our marketing spend, optimizing our logistics network and accelerating our transformation efforts, and increases in ~~wage expense, occupancy costs, and product services as a percentage of net sales,~~other SG&A expenses primarily due to the deleveraging effect of the net sales decline. During the quarter, we incurred $1.2 million in fees associated with consulting expenses to assist in the transformation efforts.

Net advertising expense, as a percentage of net sales, increased 3962 basis points during the three months ended December 31, ~~2013~~2014 compared to the prior year period. ~~While we reduced our gross advertising spend~~The increase from the prior year ~~the increase as a percentage of net sales~~ was ~~primarily~~ due to increased gross advertising spend, coupled with the deleveraging effect of the net sales decline.

Depreciation expense, as a percentage of net sales, ~~increased~~ ~~22 basis points~~remained relatively flat for the three months ended December 31, ~~2013~~2014 compared to the prior year period. ~~The~~ ~~increase~~ ~~as a percentage of net sales was primarily due to the deleveraging effect of the net sales decline.~~

~~Our effective income tax rate~~We recorded $43.0 million in asset impairment charges for the three months ended December 31, ~~2013decreased~~2014. Declining sales and overall profitability in recent periods triggered the need for an impairment analysis to ~~38.2%~~ ~~from~~ ~~39.1%~~be performed, resulting in the ~~comparable prior year period.~~charge. We recorded $0.3 million in asset impairment charges for the three months ended December 31, 2013, due to a lease modification to downsize a store.

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As of December 31, 2014, we have recognized income tax expense on a pretax loss resulting from the full valuation allowance that was recorded to reduce the net deferred tax assets of the company to zero. We evaluate our deferred income tax assets and liabilities quarterly to determine whether or not a valuation allowance is necessary. We are required to assess the available positive and negative evidence to estimate if sufficient income will be generated to utilize deferred tax assets. The ~~decrease~~establishment of valuation allowances requires significant judgment and is impacted by various estimates. A significant piece of negative evidence that we consider is cumulative losses in recent periods. Such evidence is a significant piece of objective negative evidence that is difficult to overcome. While management believes positive evidence exists with regard to the realizability of these deferred tax assets, it is not considered sufficient to outweigh the objectively verifiable negative evidence. The significant negative evidence of our losses generated before income taxes in recent periods and the unfavorable shift in our ~~effective~~business could not be overcome by considering other sources of taxable income, which included tax ~~rate is primarily the result~~planning strategies. The full valuation allowance will remain until there exists significant objective positive evidence, such as sustained achievement of ~~an increase in federal and state income tax credits recognized compared to the comparable prior year period.~~cumulative profits.

Nine Months Ended December 31, ~~2013~~2014 Compared to Nine Months Ended December 31, ~~2012~~2013

Gross profit margin, expressed as gross profit as a percentage of net sales, ~~decreased~~remained relatively flat for the nine months ended December 31, ~~2013~~2014 toand 2013 at 28.4% ~~from~~ ~~28.7%~~ ~~for the comparable prior year period.~~. The decrease ~~is a result of decreases~~ in gross profit margin rates ~~across~~in all categories except the ~~majority of our categories, partially~~consumer electronics category, was offset by a favorable ~~product~~ sales mix ~~shift.~~shift to product categories with higher gross profit margin rates.

SG&A expense, as a percentage of net sales, increased 22174 basis points for the nine months ended December 31, ~~2013~~2014 compared to the prior year period. The increase in SG&A as a percentage of net sales was a result of ana 43 basis points increase in ~~product services and~~ occupancy costs ~~as a percentage of net sales~~ due to the deleveraging effect of the net sales decline, ~~partially offset by~~a 43 basis points increase in wage and benefit expense due to increased medical expense coupled with the ~~decrease~~deleveraging effect of the net sales decline, a 20 basis points increase in ~~bank transaction fees and employee benefits as~~product services from a higher percentage of home delivery, a 14 basis points increase in consulting expenses to assist in rationalizing our marketing spend, optimizing our logistics network and accelerating our transformation efforts, and increases in other SG&A expenses primarily due to the deleveraging effect of the net sales ~~due~~decline. During the nine months ended December 31, 2014, we incurred $1.6 million in fees associated with consulting expenses to ~~cost cutting measures.~~assist in the transformation efforts.

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Net advertising expense, as a percentage of net sales, ~~remained consistent for~~increased 85 basis points during the nine months ended December 31, ~~2013~~2014 compared to the prior year period. ~~This~~The increase from the prior year was ~~driven largely by decreased~~due to increased gross advertising spend ~~in comparable markets, offset by~~coupled with the deleveraging effect of the net sales decline.

Depreciation expense, as a percentage of net sales, increased 2112 basis points for the nine months ended December 31, ~~2013~~2014 compared to the prior year period. The increase ~~as a percentage of net sales~~ was ~~primarily~~ due to the deleveraging effect of the net sales ~~decline.~~decline, coupled with capital expenditures placed in service.

~~Our effective income tax rate remained unchanged at~~ ~~38.6%~~We recorded $43.0 million in asset impairment charges for the nine months ended December 31, ~~2013~~2014 ~~compared~~. Declining sales and overall profitability in recent periods triggered the need for an impairment analysis to be performed, resulting in the ~~comparable prior year period.~~ charge. We recorded $0.3 million in asset impairment charges for the three months ended December 31, 2013, due to a lease modification to downsize a store.

Liquidity and Capital Resources

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


	Nine Months Ended						Nine Months Ended
	December 31, 2013			December 31, 2012			December 31, 2014			December 31, 2013
Net cash provided by operating activities	$	12,570		$	15,291		$	1,544		$	12,570
Net cash used in investing activities	(19,667		)	(50,257		)	(17,292		)	(19,667		)
Net cash used in financing activities	(38,833		)	(8,756		)	(5,273		)	(38,833		)

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,~~existing and new stores along with our e-commerce business and the related supply chain infrastructure, which includes, among other things, investments in new stores and new distribution facilities, remodeling and relocation of existing stores, enhancements to our e-commerce site, as well as information technology and other infrastructure-related projects.

During the first nine months of fiscal ~~2014,~~2015, we ~~relocated four stores, and began construction on~~opened one new store, ~~that is planned~~relocated several stores, downsized one store, added several Fine Lines to ~~open during the first fiscal quarter of 2015.~~existing stores, and moved one regional distribution center. In addition, we ~~plan to continue~~continued to invest in our infrastructure, including management information systems, e-commerce and distribution capabilities, as well as incur

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capital remodeling and improvement costs. Capital expenditures for fiscal ~~2014~~2015 ~~will be~~have been funded through cash and cash equivalents, cash generated from operations, borrowings under our Amended Facility described below and tenant allowances from landlords.

Cash Provided by Operating Activities. Net cash provided by operating activities primarily consists of net (loss) income as adjusted for increases or decreases in working capital and non-cash charges such as depreciation, asset impairment, deferred taxes and stock compensation expense. Cash provided by operating activities was $~~12.6~~1.5 million and $~~15.3~~12.6 million for the nine months ended December 31, ~~2013~~2014 and ~~2012~~2013, respectively. The decrease in cash provided by operating activities is primarily due to ~~a decrease~~the net loss experienced in ~~net income, a decrease in accounts payable due to~~ the ~~timing of payments and overall lower inventory requirements as~~current year compared to the ~~prior year, an~~net income experienced in the previous comparable period, as adjusted for the increase in ~~the percentage of owned merchandise inventory despite the lower inventory levels previously mentioned, the net change in our other current operating assets~~income tax expense and ~~liabilities, and the decrease in cash received from landlords for tenant allowances due to opening fewer stores in the current period compared to the prior period.~~asset impairment. 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 $~~19.7~~17.3 million and $~~50.3~~19.7 million for the nine months ended December 31, ~~2013~~2014 and ~~2012~~2013, 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.~~stores and management’s intent to reduce spending. In the nine months ended December 31, 2014, we opened one new store, relocated two stores, relocated a distribution center, opened five Fine Lines additions and began construction related to two store relocations which will be completed during the fourth quarter of fiscal 2015. In the nine months ended December 31, 2013, we relocated four stores, and began construction on one new store opening in the first fiscal quarter of 2015. ~~In the~~ ~~nine months ended December 31, 2012, we opened 20 new stores.~~

Cash Used In Financing Activities. Net cash used in financing activities was $~~38.8~~5.3 million and $~~8.8~~38.8 million for the nine months ended December 31, ~~2013~~2014 and ~~2012~~2013, respectively. The ~~increase~~decrease in cash used in financing activities is ~~primarily~~ due to a decrease ~~in funds provided by bank overdrafts of~~ ~~$20.9 million, a decrease in net borrowings on an inventory financing facility of $14.4 million, an increase~~ in funds used for treasury stock repurchases of $~~9.8~~34.6 million, a decrease in net repayments on an inventory financing facility of $10.1 million, and a decrease in funds used ~~for payment~~by bank overdrafts of ~~financing costs of $0.9~~$8.8 million, offset by ~~an increase~~a decrease in borrowings under the Amended Facility described below of $15.0 million and ~~an increase~~a decrease in funds provided by the exercise of stock options of ~~$1.6~~$5.8 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 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~~the amount of the eligible commercial accounts, (ii) 90% of ~~all~~the amount of eligible 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.~~inventory.

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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 December 31, ~~2013~~2014.

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~~is expected to 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.next 12 months. 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.

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 ~~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~~2014 in our latest Annual Report on Form 10-K filed with the SEC on May 20, ~~2013~~2014 and our Quarterly Report on Form 10-Q filed with the SEC on ~~August 1, 2013~~July 31, 2014 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, the Company's estimates of cash flows for purposes of impairment charges, the Company's ability to manage costs, innovation in ~~particular,~~the video industry, the impact and amount of non-cash charges, and shifts in the Company's sales mix. hhgregg has based these forward-looking statements ~~about our plans,~~on its current expectations, assumptions, estimates and projections. While hhgregg believes these expectations, assumptions, estimates and projections are reasonable, these forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control. These and other important factors may cause hhgregg's actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the key factors that could cause actual results to differ from hhgregg's expectations are: the ability to successfully execute its strategies ~~prospects,~~and initiatives, particularly in the sales mix shift and consumer electronics category; its ability to maintain a positive brand perception and recognition; the failure of manufacturers to introduce new products and technologies; competition in existing, adjacent and new metropolitan markets; its ability to maintain the security of customer, associate and Company information; its ability to roll out new financing offers to customers; its ability to effectively manage and monitor its operations, costs and service quality; its ability to maintain and upgrade its information technology systems; its ability to maintain and develop multi-channel sales and marketing strategies; competition from internet retailers; its ability to meet delivery schedules; the effect of general and regional economic and employment conditions on its net sales; its ability to attract and retain qualified sales personnel; its ability to meet financial performance guidance; its ability to generate sufficient cash flows to recover the fair value of long-lived assets and recognize deferred tax assets; its reliance on a small number of suppliers; its ability to negotiate with its suppliers to provide product on a timely basis at competitive prices; changes ~~outlook~~in legal and/or trade regulations, currency fluctuations and ~~trends in our business~~prevailing interest rates; and the markets in which we operate; customer preferences; the impact of our fiscal 2014 initiatives; the impact of enhanced in store cooking and built-in displays on appliance 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; 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; 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, furniture, fitness equipment, and computing and wireless; 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; variations and enhancements of our product offerings; updates and refinements to our 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 and expansion strategies; steps to slow store growth and enhance store productivity in existing markets; the impact of our customer purchase experience; predictions around customer spending patterns; factors impacting our gross profit rate; impact of consumer demand and pricing pressures on certain products; outlookpotential 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.”litigation. 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~~our 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~~2014 and the Risk Factors set forth in ~~this~~the Quarterly ~~Reports~~Report on Form 10-Q filed with the SEC on July 31, 2014 and our Annual Report on Form 10-K filed with the SEC on May 20, ~~2013~~2014. 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 December 31, ~~2013~~2014, 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 December 31, ~~2013~~2014, we had ~~$15.0 million in~~no 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 December 31, ~~2013~~2014. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, ~~2013~~2014, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended December 31, ~~2013~~2014, 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

~~Except for the new risk factor below, there~~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~~2014., except for the risk factor described on Form 10-Q filed with the SEC on July 31, 2014. The risks disclosed in our Annual Report on Form 10-K , and ~~below~~Quarterly Report on Form 10-Q 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 December 31, ~~2013~~2014 (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)
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



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, 2014 to October 31, 2014	—	—		—	$	39,024
November 1, 2014 to November 30, 2014	732,805	$	5.88	732,805	34,718
December 1, 2014 to December 31, 2014	—	—		—	34,718
Total	732,805	$	5.88	732,805	$	34,718


(1)	All of the above repurchases were made on the open market at prevailing market rates plus related expenses under our May ~~2013~~2014 Program, which authorized the repurchase of up to $5040 million of our common stock. The May ~~2013~~2014 Program was authorized by our Board of Directors on May ~~16, 2013~~14, 2014 and expires on May ~~22, 2014~~20, 2015.

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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 December 31, ~~2013,~~2014, 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~~Robert J. ~~Aguilar~~Riesbeck
	~~Jeremy~~Robert J. ~~Aguilar~~Riesbeck Chief Financial Officer (Principal Financial Officer)

Dated: January ~~30, 2014~~29, 2015

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	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



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