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 ~~June 30,~~December 31, 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 ~~July 28, 2014~~January 26, 2015 was ~~28,394,164~~27,664,318.

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HHGREGG, INC. AND SUBSIDIARIES

Report on Form 10-Q

For the Quarter Ended ~~June 30,~~December 31, 2014



		Page

Part I. Financial Information

Item 1.	Condensed Consolidated Financial Statements (unaudited):

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended ~~June 30,~~December 31, 2014 and 2013	3

	Condensed Consolidated Balance Sheets as of ~~June 30,~~December 31, 2014 and March 31, 2014	4

	Condensed Consolidated Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~June 30,~~December 31, 2014 and 2013	5

	Condensed Consolidated Statement of Stockholders’ Equity for the ~~Three~~Nine Months Ended ~~June 30,~~December 31, 2014	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2021

Item 4.	Controls and Procedures	2021

Part II. Other Information

Item 1.	Legal Proceedings	2122

Item 1A.	Risk Factors	2122

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2122

Item 6.	Exhibits	2223

Signatures		2324

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Part I.	Financial Information



ITEM 1.	Condensed Consolidated Financial Statements

HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended						Three Months Ended						Nine Months Ended
	June 30, 2014			June 30, 2013			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	$	472,293		$	524,922		$	665,616		$	707,053		$	1,643,771		$	1,800,290
Cost of goods sold	331,954			370,157			486,114			517,773			1,176,885			1,288,295
Gross profit	140,339			154,765			179,502			189,280			466,886			511,995
Selling, general and administrative expenses	116,589			119,309			132,563			132,360			368,264			372,059
Net advertising expense	27,224			25,896			38,915			36,964			99,188			93,399
Depreciation and amortization expense	10,475			11,038			10,062			10,785			31,360			32,229
Loss from operations	(13,949		)	(1,478		)
Asset impairment charges							42,987			310			42,987			310
(Loss) income from operations							(45,025		)	8,861			(74,913		)	13,998
Other expense (income):
Interest expense	629			604			615			695			1,922			1,856
Interest income	(5		)	(5		)	(47		)	(2		)	(54		)	(9		)
Total other expense	624			599			568			693			1,868			1,847
Loss before income taxes	(14,573		)	(2,077		)
Income tax benefit	(4,304		)	(817		)
Net loss	$	(10,269	)	$	(1,260	)
Net loss per share
(Loss) income before income taxes							(45,593		)	8,168			(76,781		)	12,151
Income tax expense							41,272			3,120			30,737			4,685
Net (loss) income							$	(86,865	)	$	5,048		$	(107,518	)	$	7,466
Net (loss) income per share
Basic	$	(0.36	)	$	(0.04	)	$	(3.10	)	$	0.17		$	(3.80	)	$	0.24
Diluted	$	(0.36	)	$	(0.04	)	$	(3.10	)	$	0.17		$	(3.80	)	$	0.24
Weighted average shares outstanding-basic	28,444,948			31,263,226			28,008,808			29,915,307			28,282,050			30,617,856
Weighted average shares outstanding-diluted	28,444,948			31,263,226			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)


	June 30, 2014			March 31, 2014			December 31, 2014			March 31, 2014
	(In thousands, except share data)						(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	3,147		$	48,164		$	27,143		$	48,164
Accounts receivable—trade, less allowances of $137 and $132 as of June 30, 2014 and March 31, 2014, respectively	20,026			15,121
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	17,244			16,467			23,564			16,467
Merchandise inventories, net	364,252			298,542			381,692			298,542
Prepaid expenses and other current assets	6,548			6,694			14,918			6,694
Income tax receivable	14,690			1,380			5,900			1,380
Deferred income tax assets	—			6,220
Deferred income taxes							—			6,220
Total current assets	425,907			392,588			474,956			392,588
Net property and equipment	188,229			193,882			135,825			193,882
Deferred financing costs, net	2,200			2,334			1,930			2,334
Deferred income tax assets	37,613			35,182
Deferred income taxes							8,684			35,182
Other assets	2,243			1,977			2,646			1,977
Total long-term assets	230,285			233,375			149,085			233,375
Total assets	$	656,192		$	625,963		$	624,041		$	625,963
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	167,261		$	140,806		$	224,080		$	140,806
Line of credit							—			—
Customer deposits	48,395			41,518			51,553			41,518
Accrued liabilities	54,695			50,898			61,686			50,898
Deferred income tax liabilities	5,339			—
Deferred income taxes							8,684			—
Income tax payable	—			122			—			122
Total current liabilities	275,690			233,344			346,003			233,344
Long-term liabilities:
Deferred rent	71,731			73,493			68,637			73,493
Other long-term liabilities	11,540			11,992			11,818			11,992
Total long-term liabilities	83,271			85,485			80,455			85,485
Total liabilities	358,961			318,829			426,458			318,829
Stockholders’ equity:
Preferred stock, par value $.0001; 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 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 28,394,164 and 28,460,218 outstanding as of June 30, 2014 and March 31, 2014, 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	298,541			297,199			300,447			297,199
Retained earnings	144,609			154,878			47,360			154,878
Common stock held in treasury at cost, 12,763,877 and 12,661,172 shares as of June 30, 2014 and March 31, 2014, respectively	(145,923		)	(144,947		)
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	297,231			307,134			197,583			307,134
Total liabilities and stockholders’ equity	$	656,192		$	625,963		$	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)


	Three Months Ended						Nine Months Ended
	June 30, 2014			June 30, 2013			December 31, 2014			December 31, 2013
	(In thousands)						(In thousands)
Cash flows from operating activities:
Net loss	$	(10,269	)	$	(1,260	)
Adjustments to reconcile net loss to net cash used in 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	10,475			11,038			31,360			32,229
Amortization of deferred financing costs	134			166			404			469
Stock-based compensation	1,469			1,452			3,375			4,151
Excess tax deficiency from stock based compensation	—			37
Gain on sales of property and equipment	(27		)	—
Excess tax benefit from stock based compensation							—			(21		)
Loss (gain) on sales of property and equipment							188			(437		)
Deferred income taxes	9,128			(779		)	41,402			(1,332		)
Asset impairment charges							42,987			310
Tenant allowances received from landlords	—			555			833			2,101
Changes in operating assets and liabilities:
Accounts receivable—trade	(4,905		)	(13,137		)	(6,618		)	681
Accounts receivable—other	(736		)	505			(7,431		)	(4,072		)
Merchandise inventories	(65,710		)	(33,947		)	(83,150		)	(68,610		)
Income tax receivable	(13,310		)	(1,268		)	(4,520		)	701
Prepaid expenses and other assets	98			(244		)	(8,360		)	(8,379		)
Accounts payable	24,685			10,193			83,342			20,151
Customer deposits	6,877			8,517			10,035			8,614
Income tax payable	(122		)	(2,145		)	(122		)	1,903
Accrued liabilities	3,670			5,444			10,661			21,902
Deferred rent	(1,803		)	(1,646		)	(5,355		)	(5,229		)
Other long-term liabilities	(385		)	(662		)	31			(28		)
Net cash used in operating activities	(40,731		)	(17,181		)
Net cash provided by operating activities							1,544			12,570
Cash flows from investing activities:
Purchases of property and equipment	(4,430		)	(5,360		)	(16,803		)	(19,888		)
Proceeds from sales of property and equipment	33			—			44			221
Purchases of corporate-owned life insurance	(218		)	—			(533		)	—
Net cash used in investing activities	(4,615		)	(5,360		)	(17,292		)	(19,667		)
Cash flows from financing activities:
Purchases of treasury stock	(976		)	(10,311		)	(5,281		)	(39,851		)
Proceeds from exercise of stock options	—			2,174			—			5,814
Excess tax deficiency from stock-based compensation	—			(37		)
Excess tax benefit from stock-based compensation							—			21
Net decrease in bank overdrafts	—			(8,400		)	—			(8,764		)
Net borrowings on inventory financing facility	1,305			13,643
Net cash provided by (used in) financing activities	329			(2,931		)
Net borrowings on line of credit							—			15,000
Net borrowings (repayments) on inventory financing facility							8			(10,107		)
Payment of financing costs							—			(946		)
Net cash used in financing activities							(5,273		)	(38,833		)
Net decrease in cash and cash equivalents	(45,017		)	(25,472		)	(21,021		)	(45,930		)
Cash and cash equivalents
Beginning of period	48,164			48,592			48,164			48,592
End of period	$	3,147		$	23,120		$	27,143		$	2,662
Supplemental disclosure of cash flow information:
Interest paid	$	489		$	428		$	502		$	1,359
Income taxes paid	$	—		$	3,375
Income taxes (received) paid							$	(5,993	)	$	3,412
Capital expenditures included in accounts payable	$	1,533		$	2,074		$	992		$	406

See accompanying notes to condensed consolidated financial statements.

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HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders’ Equity

~~Three~~Nine Months Ended ~~June 30,~~December 31, 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, 2014	28,460,218		$	—	$	4	$	297,199		$	154,878		$	(144,947	)	$	307,134		28,460,218		$	—	$	4	$	297,199		$	154,878		$	(144,947	)	$	307,134
Net loss										(10,269		)				(10,269		)										(107,518		)				(107,518		)
Exercise of stock options and vesting of RSUs	36,651		—		—		(127		)	—			—			(127		)	36,651		—		—		(127		)	—			—			(127		)
Stock compensation expense	—		—		—		1,469			—			—			1,469			—		—		—		3,375			—			—			3,375
Excess tax benefit from stock-based compensation, net																			—		—		—		—			—			—			—
Repurchase of common stock	(102,705	)	—		—		—			—			(976		)	(976		)	(835,510	)	—		—		—			—			(5,281		)	(5,281		)
Balance at June 30, 2014	28,394,164		$	—	$	4	$	298,541		$	144,609		$	(145,923	)	$	297,231
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. (“hhgregg” or the “Company”) 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 multi-regional retailer with ~~229~~228 brick-and-mortar stores in 20 states that also offers market-leading global and 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, 2014, included in the Company’s Annual Report on Form 10-K filed with the SEC on May 20, 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.

~~New Accounting Standards~~

In ~~April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-08,~~ ~~Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity~~. This guidance states that the disposal of a component of an entity is to be reported in discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The pronouncement also requires additional disclosures regarding individually significant disposals of components that do not meet the criteria to be recognized as a discontinued operation as well as additional and expanded disclosures. The guidance will be effective prospectively for interim and annual periods beginning on or after December 15, 2014, with early adoption permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The Company does not expect this standard to have a material impact on the Company's consolidated financial statements upon adoption.

~~In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(Topic 606),~~ ~~to clarify the principles used to recognize revenue for all~~

entities. The new guidance is effective for annual and interim periods beginning after December 15, 2016, with no early adoption permitted. The Company is currently evaluating the impact, if any, the adoption of this guidance will have on its financial position, results of operations or cash flows.


(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 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 are derived using a discounted cash flow model to estimate the present value of net cash flows that the 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 the fair value of $0.4 million and resulted in an asset impairment charge of $0.3 million for the three months ended December 31, 2013.


(3)	Property and Equipment

Property and equipment consisted of the following at ~~June 30,~~December 31, 2014 and March 31, 2014 (in thousands):


	June 30, 2014			March 31, 2014			December 31, 2014			March 31, 2014
Machinery and equipment	$	28,361		$	28,478		$	27,358		$	28,478
Store fixtures and furniture	182,131			180,799			169,344			180,799
Vehicles	2,206			2,207			2,072			2,207
Signs	19,640			19,545			15,569			19,545
Leasehold improvements	180,871			178,888			136,650			178,888
Construction in progress	8,831			8,167			3,194			8,167
	422,040			418,084			354,187			418,084
Less accumulated depreciation and amortization	(233,811		)	(224,202		)	(218,362		)	(224,202		)
Net property and equipment	$	188,229		$	193,882		$	135,825		$	193,882


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

Net ~~loss~~(loss) income per basic and diluted share is calculated based on the weighted-average number of outstanding 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 ~~June 30,~~December 31, 2014, ~~and~~ ~~2013~~, 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 ~~respective periods~~period and such shares would be antidilutive.

The following table presents net ~~loss~~(loss) income per basic and diluted share for the three and ~~three~~nine months ended ~~June 30,~~December 31, 2014 and 2013 (in thousands, except share and per share amounts):


	Three Months Ended						Three Months Ended					Nine Months Ended
	June 30, 2014			June 30, 2013			December 31, 2014			December 31, 2013		December 31, 2014			December 31, 2013
Net loss (A)	$	(10,269	)	$	(1,260	)
Net (loss) income (A)							$	(86,865	)	$	5,048	$	(107,518	)	$	7,466
Weighted average outstanding shares of common stock (B)	28,444,948			31,263,226			28,008,808			29,915,307		28,282,050			30,617,856
Dilutive effect of employee stock options and restricted stock units	—			—			—			471,944		—			500,040
Common stock and potential dilutive common shares (C)	28,444,948			31,263,226			28,008,808			30,387,251		28,282,050			31,117,896
Net loss per share:
Net (loss) income per share:
Basic (A/B)	$	(0.36	)	$	(0.04	)	$	(3.10	)	$	0.17	$	(3.80	)	$	0.24
Diluted (A/C)	$	(0.36	)	$	(0.04	)	$	(3.10	)	$	0.17	$	(3.80	)	$	0.24

Antidilutive shares not included in the net ~~loss~~(loss) income per diluted share calculation for the three and nine months ended ~~June 30,~~December 31, 2014 ~~and 2013~~ were ~~3,527,896~~3,847,140 and ~~2,006,645,~~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, 2013 were 937,640.

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(5)	Inventories

Net merchandise inventories consisted of the following at ~~June 30,~~December 31, 2014 and March 31, 2014 (in thousands):


	June 30, 2014		March 31, 2014		December 31, 2014		March 31, 2014
Appliances	$	169,660	$	134,053	$	156,512	$	134,053
Consumer electronics	139,890		108,193		171,206		108,193
Computers and tablets	31,144		36,039		33,380		36,039
Home products	23,558		20,257		20,594		20,257
Net merchandise inventory	$	364,252	$	298,542	$	381,692	$	298,542

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(6)	Debt

A summary of debt at ~~June 30,~~December 31, 2014 and March 31, 2014 is as follows (in thousands):



	~~June 30,~~ 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.

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 ~~June 30,~~December 31, 2014.

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As of ~~June 30,~~December 31, 2014 and March 31, 2014, Gregg Appliances had no borrowings outstanding under the Amended ~~Facility and~~Facility. As of December 31, 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~~ ~~$212.4 million~~ ~~as of~~ ~~June 30, 2014. The interest rate based on the bank’s prime rate as of~~ ~~June 30, 2014~~ ~~was~~ ~~3.75%~~.

2015. As of March 31, 2014, Gregg Appliances hadno ~~borrowings outstanding under the Amended Facility and~~ $5.3 million of letters of credit outstanding, which expire through December 31, 2014. The total borrowing availability under the Amended Facility was $230.4 million and $169.5 million as of December 31, 2014 and March 31, 2014., respectively. The interest rate based on the bank’s prime rate was 4.00% and 3.75%as ofDecember 31, 2014 and March 31, 2014 ~~was~~ ~~3.75%~~., respectively.

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(7)	Stock-based Compensation

Stock Options

Effective June 20, 2014, the Company adopted an Amendment to the hhgregg, Inc. 2007 Equity Incentive Plan which increases the number of shares of common stock reserved for issuance under the Plan to 9,000,000. The following table summarizes the activity under the Company’s ~~Stock Option Plans~~2007 Equity Incentive Plan for the ~~three~~nine months ended ~~June 30,~~December 31, 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, 2014	3,232,208		$	13.61	3,232,208		$	13.61
Granted	915,640		9.09		1,031,640		8.81
Exercised	—		—		—		—
Canceled	(47,298	)	13.23		(271,122	)	11.68
Expired	(109,668	)	13.11		(313,969	)	13.10
Outstanding at June 30, 2014	3,990,882		$	12.59
Outstanding at December 31, 2014					3,678,757		$	12.44

During the ~~three~~nine months ended ~~June 30,~~December 31, 2014, the Company granted options for ~~915,640~~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.

The weighted average estimated fair value of options granted to employees and directors under the 2007 Equity Incentive Plan was $4.15during the ~~three~~nine months ended ~~June 30,~~December 31, 2014 ~~was~~ ~~$4.28~~, ~~calculated~~ using the Black-Scholes model with the following weighted average assumptions:



Risk-free interest rate	1.31% - ~~1.47%~~1.60%
Dividend yield	—
Expected volatility	57.0	%
Expected life of the options (years)	4.5
Forfeitures	8.40	%

Time Vested Restricted Stock Units

During the ~~three~~nine months ended ~~June 30,~~December 31, 2014, the Company granted 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 ~~three~~nine months ended ~~June 30,~~December 31, 2014 was $9.17.

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The following table summarizes RSU vesting activity for the ~~three~~nine months ended ~~June 30,~~December 31, 2014:


	Shares		Weighted Average Grant-Date Fair Value		Shares		Weighted Average Grant-Date Fair Value
Nonvested at March 31, 2014	143,503		$	12.72	143,503		$	12.72
Granted	40,950		9.17		40,950		9.17
Vested	(50,500	)	14.20		(56,100	)	14.16
Forfeited	(1,400	)	10.86		—		—
Nonvested at June 30, 2014	132,553		$	11.08
Nonvested at December 31, 2014					128,353		$	11.07

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(8) Share Repurchase Program

On May 14, 2014, the Company’s Board of Directors authorized a new share repurchase program, which became effective on May 20, 2014 (the “May 2014 Program”), allowing the Company to repurchase up to $40 million of its common stock. The May 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 20, 2015. The previous share repurchase program expired on May ~~19, 2014.~~21, 2014.

The following table shows the number and cost of shares repurchased during the ~~three~~nine months ended ~~June 30,~~December 31, 2014 and 2013, respectively ($ in thousands):


	Three Months Ended				Nine Months Ended
	June 30, 2014		June 30, 2013		December 31, 2014		December 31, 2013
May 2014 Program
Number of shares repurchased	102,705		—		835,510		—
Cost of shares repurchased	$	976	$	—	$	5,281	$	—
May 2013 Program
Number of shares repurchased	—		698,369		—		2,457,068
Cost of shares repurchased	$	—	$	10,311	$	—	$	39,851

As of ~~June 30,~~December 31, 2014, the Company had $~~39.0~~34.7 million remaining under the May 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, 2014, included in our latest Annual Report on Form 10-K, as filed with the SEC on May 20, 2014.

Overview

hhgregg 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 multi-regional retailer with ~~229~~228 brick-and-mortar stores in 20 states that also offers market-leading global and 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 2015 fiscal year is the 12 month period ending on March 31, 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 ~~three~~four sub-sections discussing our operating strategy and performance, 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, consumer electronics and home furniture products. We carry approximately 350 models of major appliances in stock, and a large selection of TVs, as well as, computers, consumer electronics, furniture, mattresses, and tablets. Appliance and consumer electronics sales comprised ~~88%~~87% and ~~86%~~84% of our net sales mix for the three months ended ~~June 30,~~ December 31, 2014 and 2013, respectively, and 87% and 85% of our net sales mix for the nine months ended December 31, ~~2013~~2014, and 2013, 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.

~~In recent quarters we~~We have experienced a decline in our overall comparable store sales, 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 ~~have~~are primarily ~~come in~~driven by products that are smaller in size and easier to ship, which have increasingly seen larger portions of industry sales made online. In response to these declines, we have developed four major initiatives for fiscal 2015. These include continuing to redefine our sales mix, further differentiating our customer experience, enhancing our e-commerce capabilities and launching new customer facing technologies. We also developed a “purpose” statement, “To inspire and delight our customers with a truly differentiated purchase experience to help bring their homes to life.” We believe that our fiscal 2015 initiatives support this “purpose”, and that the success of these strategies will result in consumers recognizing hhgregg as a “home products” retailer.

Our first initiative for fiscal 2015 is redefining our sales mix through a continued investment and focus on the appliance, and furniture categories while stabilizing the 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 consistently performed above the

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total chain average, and this category has proven to be the cornerstone of our business. ToThe 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 ~~drive growth, we~~test and develop new strategies and offerings to maximize our market share in our markets. We are enhancing our displays of complete kitchen solutions, p

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~~roviding~~providing a differentiated product assortment based on geography and demographics, more than doubling our current number of ~~five~~ Fine Lines locations, and enhancing our special order capabilities. ~~In addition,~~Also, we will continue to place a greater emphasis on the appliances category in our branding and advertisement messages. The U.S. Census Bureau’s data on New Residential Construction shows that 2014 U.S. Housing ~~Start-up’s~~Start-Up’s experienced a 9%8% increase for the twelve month period ended ~~May 31,~~November 30, 2014 over the prior year comparable period. Additionally, according to the U.S. Department of Commerce - Bureau of Economic Analysis, ~~annualized~~ personal consumption expenditures for home appliances ~~decreased~~increased 0.9% from ~~$45.5~~$45.7 billion in 2013 to ~~$45.1~~$46.1 billion ~~through the first quarter of~~in 2014. ~~Despite the minor decline noted, we~~We expect that the appliance industry will experience increases in demand as the U.S. housing market and general economy continues to improve. While the 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 will not be impacted in the future by factors such as rising interest rates. During our previous fiscal year we rolled out an expanded offering of furniture products. In the current year we are in the process of transitioning 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’ taste. While we do not expect to dedicate any incremental floor space to this new selection of furniture at this time, we will continue to optimize our floor space that is already dedicated to furniture.

The consumer electronics category will continue to be an important category for us during this fiscal year and beyond. During fiscal 2015, we will continue to seek to stabilize consumer electronics sales and stem market share loss through further investing in large screen sizes and OLED technology and ~~having~~ an expansive selection of ultra HD/4K products. Despite the new technology and innovations in this category, we expect to 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 furniture products. In the ~~first quarter~~current year we ~~exited~~are in the ~~contract-based mobile phone business,~~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 ~~now refer~~have dedicated this floor space to ~~this category as computers and tablets. Historically, the mobile business negatively impacted~~ our ~~overall operating profitability, and the decision to exit this business better aligns with our long-term strategic initiatives.~~expanded selection of furniture.

During fiscal 2015 we ~~plan to continue~~have continued to develop and enhance our 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 342~~secondary and “lease to own” finance offerings, by approximately 450 basis points to ~~37%~~nearly 40%. We continue to encourage the use of the private label card, through unique benefits such as in store payment options, reward offers and extended financing options. Over the past two years we have grown our credit offerings, beginning with the roll out of a “lease to own” option in fiscal 2013, and the roll out of a secondary finance offering in fiscal 2014, both through third party providers and non-recourse to our business. We are continuing to ~~tailor~~modify our credit offerings to best meet the ongoing needs of our customers. We believe that continuing to enhance our credit offerings will generate greater brand loyalty, higher average sales per transaction, 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 making informed decisions about their ~~purchases.~~purchase. We ~~are continuing~~have continued to refine our selling techniques to embrace technology, and utilize omni-channel strategies to better connect with our customer base in store. Our goal ~~will be~~is to better serve and engage our customers by providing a truly differentiated shopping and purchase experience. Additionally, our goal ~~will be~~is to eliminate the types of issues that most often frustrate customers who are buying large products for their homes. We ~~plan~~want to establish ~~consumers'~~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 is through a ~~truly~~ differentiated purchase experience.

Our third initiative for fiscal 2015 is enhancing our e-commerce capabilities to provide our customers a truly omni-channel shopping experience. This ~~will allow them~~allows our customers to move seamlessly across the various mediums including store, web, mobile, social and call center. During fiscal 2015, we ~~plan to invest~~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 implemented an ~~"expanded aisle"~~“expanded aisle” concept which tripled our product assortment online by offering many products that are not available in our stores. During fiscal 2015 and beyond we plan to grow our current partner base by seeking opportunities with other vendors, and 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 efficient checkout, and 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 ~~64%~~60% sales growth during the ~~first quarter of the~~ fiscal ~~year.~~year to date. We know that many consumers start their research online and we want to continue to make hhgregg.com an advantage for our brand.

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Our fourth initiative for fiscal 2015 is to launch new customer facing technologies. ~~We are currently implementing~~During the fiscal second quarter of 2015 we completed the roll out of our new point of sale ~~system, and expect to be completed by the end of the fiscal second quarter of 2015.~~system. The new system ~~will provide~~provides operational improvements, customer service improvements and 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. Additionally, we implemented a new delivery tracking system during the first 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

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customer to leave work or disrupt their schedule. With that in mind, we ~~will be deploying~~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 service offerings. We follow up on the customer purchase experience by offering delivery capabilities ~~on many of our products~~ and in-home installation service.

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, 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 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. For the ~~first fiscal quarter~~three and nine months ended ~~June 30,~~December 31, 2014, we generated ~~57%~~43% and 50%, respectively, of total product sales from the sale of ~~home~~ appliances, compared to ~~52%~~41% and 47%, respectively, in the ~~fiscal quarter~~three and nine months ended ~~June 30,~~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 without a widely accepted innovation in technology to offset this compression. As new technology has not been sufficient to keep demand constant, the industry has seen falling ~~demand, gross margin rate declines, and average selling price declines.~~demand. For the ~~first fiscal quarter~~three and nine months ended ~~June 30,~~December 31, 2014, we generated ~~38%~~44% and 37%, respectively of total product sales from the sale of consumer electronics, ~~and computers and tablets,~~ compared to 43% and 38%, respectively, in the ~~fiscal quarter~~three and nine months ended ~~June 30,~~December 31, 2013.

During fiscal 2014 we expanded our offerings within the home products category by adding room settings, additional mattresses and dinette sets. We ~~will continue~~continued to refine our assortment of furniture by expanding our selection from one brand to several brands, and ~~we plan to expand our offerings in the home products category during fiscal 2015.~~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 ~~sales are~~revenue is impacted by seasonal weather patterns, but ~~are~~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, 2014 in our latest Annual Report on Form 10-K filed with the SEC on May 20, 2014. There have been no significant changes in our critical accounting policies and estimates since the end of fiscal 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						Three Months Ended						Nine Months Ended
	June 30,						December 31,						December 31,
(unaudited)	2014			2013			2014			2013			2014			2013
Net sales	$	472,293		$	524,922		$	665,616		$	707,053		$	1,643,771		$	1,800,290
Net sales % (decrease) increase	(10.0		)%	7.2		%
Comparable store sales % (decrease) increase ⁽¹⁾	(10.2		)%	0.8		%
Net sales % decrease							(5.9		)%	(11.6		)%	(8.7		)%	(4.1		)%
Comparable store sales % decrease ⁽¹⁾							(6.3		)%	(11.2		)%	(9.1		)%	(6.4		)%
Gross profit as a % of net sales	29.7		%	29.5		%	27.0		%	26.8		%	28.4		%	28.4		%
SG&A as a % of net sales	24.7		%	22.7		%	19.9		%	18.7		%	22.4		%	20.7		%
Net advertising expense as a % of net sales	5.8		%	4.9		%	5.8		%	5.2		%	6.0		%	5.2		%
Depreciation and amortization expense as a % of net sales	2.2		%	2.1		%	1.5		%	1.5		%	1.9		%	1.8		%
Loss from operations as a % of net sales	(3.0		)%	(0.3		)%
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		%
Net loss	$	(10,269	)	$	(1,260	)
Net loss per diluted share	$	(0.36	)	$	(0.04	)
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	28,444,948			31,263,226			28,008,808			30,387,251			28,282,050			31,117,896
Number of stores open at the end of period	229			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 loss was $~~10.3~~86.9 million for the three months ended ~~June 30,~~December 31, 2014, or $~~0.36~~3.10 per diluted share, compared with net ~~loss~~income of $~~1.3~~5.0 million, or $~~0.04~~0.17 per diluted share, for the comparable prior year period. ~~Net sales for~~For the ~~three~~nine months ended ~~June 30,~~December 31, 2014~~decreased~~, net loss was ~~10.0%~~$107.5 million, or $3.80 toper diluted share, compared with net income of $~~472.3~~7.5 million ~~from~~, or $~~524.9 million~~0.24 inper diluted share for the comparable prior year period. The ~~increase~~decrease in net ~~loss and decrease in net sales~~income for the three months ended ~~June 30,~~December 31, 2014 ~~were~~was largely due to a comparable store sales decrease of ~~10.2%~~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 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 months ended December 31, 2014 was largely due to a comparable store sales decrease of 9.1%, an asset impairment charge of $43.0 million pre-tax for property, plant and equipment and the impact of establishing a valuation allowance for deferred tax assets.

Net sales for the three months ended December 31, 2014decreased5.9% to $665.6 million from $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 6.3%. Net sales for the nine months ended December 31, 2014 decreased 8.7% to $1.64 billion from $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 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 ~~three~~nine months ended ~~June 30,~~December 31, 2014 and 2013 were as follows:


	Net Sales Mix Summary				Comparable Store Sales Summary				Net Sales Mix Summary								Comparable Store Sales Summary
	Three Months Ended June 30,				Three Months Ended June 30,				Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended December 31,				Nine Months Ended December 31,
	2014		2013		2014		2013		2014		2013		2014		2013		2014		2013		2014		2013
Appliances	57	%	52	%	(2.0	)%	7.5	%	43	%	41	%	50	%	47	%	(0.1	)%	1.5	%	(2.6	)%	3.8	%
Consumer electronics ⁽¹⁾	31	%	34	%	(18.7	)%	(15.0	)%	44	%	43	%	37	%	38	%	(3.9	)%	(19.7	)%	(11.3	)%	(18.8	)%
Computers and tablets	7	%	9	%	(29.5	)%	13.2	%	8	%	12	%	8	%	10	%	(35.0	)%	24.5	%	(33.2	)%	(12.4	)%
Home products ⁽²⁾	5	%	5	%	(0.5	)%	84.5	%	5	%	4	%	5	%	5	%	(9.2	)%	36.1	%	(2.0	)%	57.7	%
Total	100	%	100	%	(10.2	)%	0.8	%	100	%	100	%	100	%	100	%	(6.3	)%	(11.2	)%	(9.1	)%	(6.4	)%


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


⁽²⁾	Primarily consists of furniture ~~mattresses~~ and ~~fitness equipment.~~mattresses.

The decrease in comparable store sales ~~within the appliance category~~ for the three months ended ~~June 30,~~December 31, 2014 was driven primarily by ~~a decrease~~decreases in ~~units sold~~consumer electronics, computers and ~~a slight decrease in average selling price.~~tablets and home products. The decrease in comparable ~~stores~~store sales for the three months ended December 31, 2014 was 6.3%. Excluding mobile phones and fitness equipment, due to the exit from these product lines, the decrease in comparable store sales for the three months ended December 31, 2014 was 5.1%. The comparable store sales of the appliance category remained relatively flat with no significant change in average selling price or demand. The consumer electronics category ~~for the~~ ~~three months ended June 30, 2014~~comparable store sales decline was primarily due ~~primarily~~ to a double digit 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 of 35% in comparable store sales for the computers and tablets category for the three ~~months ended June 30, 2014~~month period was driven by ~~the exit from the contract-based mobile phone business,~~ a decrease in demand for computers and tablets ~~and~~as well as a decrease in the average selling prices for computers ~~partially~~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 double digit unit demand decline within the TV stands, recliner and sofa product lines, offset slightly by ~~a higher~~increased average selling ~~price for tablets. The~~prices among nearly all product lines within this category and increased unit demand within mattresses. Excluding fitness equipment, the decrease in comparable store sales ~~within~~for the three months ended December 31, 2014 for the home products category was driven by a decrease in the demand for ready to assemble television stands and a decrease in sales of mattresses, offset partially by a double digit increase in sales of sofas, recliners and dinette sets.2.7%.

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Three Months Ended ~~June 30,~~December 31, 2014 Compared to Three Months Ended ~~June 30,~~December 31, 2013

Gross profit margin, expressed as gross profit as a percentage of net sales, increased for the three months ended ~~June 30,~~December 31, 2014 to ~~29.7%~~27.0% from ~~29.5%~~26.8% for the comparable prior year period. The increase was due to a favorable ~~product~~ sales mix shift to product categories with higher gross profit margin rates ~~partially offset by decreases~~and an increase in gross profit margin ~~rates~~for the video category due to an increase in ~~all categories except the consumer electronics category.~~sales of larger screen and more premium featured televisions.

SG&A expense, as a percentage of net sales, increased ~~205~~120 basis points for the three months ended ~~June 30,~~December 31, 2014 compared to the prior year period. The increase in SG&A as a percentage of net sales was ~~largely~~ a result of a 6626 basis ~~point~~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 6513 basis ~~point~~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 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 62 basis points during the three months ended December 31, 2014 compared to the prior year period. The increase from the prior year was due to increased gross advertising spend, coupled with the deleveraging effect of the net sales decline.

Depreciation expense, as a percentage of net sales, remained relatively flat for the three months ended December 31, 2014 compared to the prior year period.

We recorded $43.0 million in asset impairment charges for the three months ended December 31, 2014. Declining sales and overall profitability in recent periods triggered the need for an impairment analysis to be performed, resulting in the 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 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 business could not be overcome by considering other sources of taxable income, which included tax planning strategies. The full valuation allowance will remain until there exists significant objective positive evidence, such as sustained achievement of cumulative profits.

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

Gross profit margin, expressed as gross profit as a percentage of net sales, remained relatively flat for the nine months ended December 31, 2014 and 2013 at 28.4%. The decrease in gross profit margin rates in all categories except the consumer electronics category, was offset by a favorable sales mix shift to product categories with higher gross profit margin rates.

SG&A expense, as a percentage of net sales, increased 174 basis points for the nine months ended December 31, 2014 compared to the prior year period. The increase in SG&A as a percentage of net sales was a result of a 43 basis points increase in occupancy costs due to the deleveraging effect of the net sales decline, a 43 basis points increase in wage and benefit expense due to increased medical expense coupled with the deleveraging effect of the net sales decline, ~~and~~ a 2320 basis ~~point~~points increase in product services from a higher percentage of home delivery, ~~expense~~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 ~~a higher~~the deleveraging effect of the net sales ~~mix of deliverable product.~~decline. During the nine months ended December 31, 2014, we incurred $1.6 million in fees associated with consulting expenses to assist in the transformation efforts.

Net advertising expense, as a percentage of net sales, increased 8385 basis points during the ~~three~~nine months ended ~~June 30,~~December 31, 2014 compared to the prior year period. The increase ~~as a percentage of net sales~~from the prior year was ~~primarily~~ due to increased gross advertising spend coupled with the deleveraging effect of the net sales ~~decline and an increase in advertising spend for the new branding campaign.~~decline.

Depreciation expense, as a percentage of net sales, increased 12 basis points for the ~~three~~nine months ended ~~June 30,~~December 31, 2014 compared to the prior year period. The increase ~~as a percentage of net sales~~ was due to the deleveraging effect of the net sales ~~decline.~~decline, coupled with capital expenditures placed in service.

~~Our effective income tax rate~~We recorded $43.0 million in asset impairment charges for the nine months ended December 31, 2014. Declining sales and overall profitability in recent periods triggered the need for an impairment analysis to be performed, resulting in the charge. We recorded $0.3 million in asset impairment charges for the three months ended ~~June 30,~~December 31, 2013, due to a lease modification to downsize a store.

As of December 31, 2014,~~decreased~~ to ~~29.5%~~ ~~from~~ ~~39.3%~~ ~~in the comparable prior year period. The~~ ~~decrease~~ ~~in our effective income tax rate is primarily the result of a non-cash charge to~~ we have recognized income tax expense ~~related to stock options that expired during the current quarter. Due to the~~on a pretax loss ~~for~~resulting from the ~~quarter, this charge~~full valuation allowance that was recorded to ~~income~~reduce the net deferred tax ~~expense reduced our overall income tax benefit recorded for~~assets of the ~~quarter and as a result, decreased our effective income tax rate.~~company to zero.

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):

Three Months Ended
June 30, 2014 June 30, 2013
Net cash used in operating activities $ (40,731 ) $ (17,181 )
Net cash used in investing activities (4,615 ) (5,360 )
Net cash provided by (used in) financing activities 329
(2,931 )



	Nine Months Ended
	December 31, 2014			December 31, 2013
Net cash provided by operating activities	$	1,544		$	12,570
Net cash used in investing activities	(17,292		)	(19,667		)
Net cash used in financing activities	(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 2015, we ~~plan to open two~~opened one new ~~stores, relocate~~store, relocated several stores, ~~downsize~~downsized one store, ~~add~~added several Fine Lines to existing stores, and ~~move~~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 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.

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Cash ~~Used in~~Provided by Operating Activities. Net cash ~~used in~~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 ~~used in~~provided by operating activities was $~~40.7~~1.5 million and $~~17.2~~12.6 million for the ~~three~~nine months ended ~~June 30,~~December 31, 2014 and 2013, respectively. The ~~increase~~decrease in cash ~~used in~~provided by operating activities is primarily due to the net loss experienced in the current year compared to the net income experienced in the previous comparable period, as adjusted for the increase in income tax expense and asset impairment. The net change in other current operating assets and liabilities was primarily a result of ~~an increase~~differences in ~~net cash used by working capital~~timing of customer sales and ~~an increase in net loss, offset by an increase in cash provided by other operating activities. Net cash used by working capital was $51.6 million for the~~ ~~three months ended June 30, 2014, an increase of $23.2 million from the comparable prior year period. Adjustments for other operating activities positively impacted operating cash flows by $21.2 million for the~~ ~~three months ended June 30, 2014~~, an increase of $8.7 million from the comparable prior year period, primarily due to an increase of $9.9 million in our deferred income tax provision, offset by a decrease of $0.6 million in cash received from landlords for tenant allowances due to opening fewer stores in the current period compared to the prior period and various decreases in other operating activities.vendor payments.

Cash Used In Investing Activities. Net cash used in investing activities was $~~4.6~~17.3 million and $~~5.4~~19.7 million for the ~~three~~nine months ended ~~June 30,~~December 31, 2014 and 2013, respectively. The decrease in cash used in investing activities is due to ~~the timing of~~less purchases of property and equipment associated with ~~various projects in~~ the ~~current year compared to the prior year~~opening of new stores and ~~management's~~management’s intent to reduce spending. In the ~~three~~nine months ended ~~June 30,~~December 31, 2014, we opened one new store, relocated two stores, relocated a distribution center, opened five Fine Lines additions and began construction ~~for three stores relocating in~~related to two store relocations which will be completed during the ~~second fiscal~~fourth quarter of ~~2015, began construction for one distribution center relocating in~~fiscal 2015. In the ~~second fiscal quarter of 2015,~~nine months ended December 31, 2013, we relocated four stores, and began construction on ~~the addition of Fine Lines to three existing stores; however, a portion of the spend on these projects was incurred during fiscal 2014. In the~~ ~~three months ended June 30, 2013, we relocated~~ one new store ~~and began construction for three stores relocating~~opening in the ~~second~~first fiscal quarter of ~~2014.~~2015.

Cash ~~Provided by (Used In)~~Used In Financing Activities. Net cash ~~provided by (used in)~~used in financing activities was $~~0.3~~5.3 million and ~~($2.9)~~$38.8 million for the ~~three~~nine months ended ~~June 30,~~December 31, 2014 and 2013, respectively. The ~~increase~~decrease in cash ~~provided by~~used in financing activities is ~~primarily~~ due to ~~a decrease in funds used in bank overdrafts of~~ ~~$8.4 million~~ ~~and~~ a decrease in funds used for treasury stock repurchases of $~~9.3~~34.6 million, a decrease in net repayments on an inventory financing facility of $10.1 million, and a decrease in funds used by bank overdrafts of $8.8 million, offset by a decrease in ~~net~~ borrowings ~~on an inventory financing facility~~under the Amended Facility described below of ~~$12.3~~$15.0 million and a decrease in funds provided by the exercise of stock options of ~~$2.2~~$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 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.

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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 ~~June 30,~~December 31, 2014.

As of ~~June 30,~~December 31, 2014 and March 31, 2014, Gregg Appliances had no borrowings outstanding under the Amended Facility. As of ~~June 30,~~December 31, 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~~ ~~$212.4 million~~ ~~as of~~ ~~June 30, 2014. The interest rate based on the bank’s prime rate as of~~ ~~June 30, 2014~~ ~~was~~ ~~3.75%~~.

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

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 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 $2.9 million over their respective lease terms during the three months ended~~ ~~June 30, 2014~~. 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 Operations” for the fiscal year ended March 31, 2014 in our latest Annual Report on Form 10-K filed with the SEC on May 20, 2014. and our Quarterly Report on Form 10-Q filed with the SEC on 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 computers and tablets; 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, 2014 and the Risk Factors set forth in ~~this~~the Quarterly 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, 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 ~~June 30,~~December 31, 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 ~~June 30,~~December 31, 2014, we had no outstanding borrowings ~~under~~on our Amended Facility.



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 ~~June 30,~~December 31, 2014. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~June 30,~~December 31, 2014, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended ~~June 30,~~December 31, 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, 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.

~~Our financial results may be adversely affected by a valuation allowance on our deferred tax assets.~~

The Company has a significant amount of deferred tax assets. Our ability to recognize these deferred tax assets is dependent upon our ability to determine whether it is more likely than not that we will be able to realize, or actually use, these deferred tax assets. That determination depends primarily on our ability to generate future U.S. taxable income. Our judgments regarding future profitability may change due to future market conditions, changes in U.S. tax laws and other factors. These changes, if any, may require possible material adjustments to the deferred tax assets. A valuation allowance against our deferred tax assets would result in an increase in our effective tax rate and have an adverse impact on future operating results.



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 ~~June 30,~~December 31, 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)
April 1, 2014 to April 30, 2014 —
$ —
—
$ 40,000
May 1, 2014 to May 31, 2014 —
—
—
40,000
June 1, 2014 to June 30, 2014 102,705
9.50
102,705
39,024
Total 102,705
$ 9.50
102,705
$ 39,024



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 2014 Program, which authorized the repurchase of up to $40 million of our common stock. The May 2014 Program was authorized by our Board of Directors on May 14, 2014, and expires on May 20, 2015 ~~and replaced our previous share repurchase program that expired on May 19, 2014.~~.

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ITEM 6.	Exhibits



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 ~~June 30,~~December 31, 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/ ~~Andrew S. Giesler~~Robert J. Riesbeck
	~~Andrew S. Giesler~~Robert J. Riesbeck ~~Interim~~ Chief Financial Officer (Principal Financial Officer)

Dated: ~~July 31, 2014~~January 29, 2015

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