Fourth Quarter
Summary
- Net sales decreased 9.8% to $485.6
million
- Comparable store sales decreased
10.0%
- Net loss per diluted share was
$0.91, compared to net loss per diluted share of $0.25 in the prior
year
- Net loss per diluted share, as
adjusted, was $0.47, compared to net loss per diluted share, as
adjusted, of $0.17 in the prior year
hhgregg, Inc. (NYSE: HGG):
Three Months Ended Twelve Months
Ended March 31, March 31,
(unaudited, dollar amounts in thousands,
except per share data)
2015 2014 2015 2014 Net
sales $ 485,603 $ 538,280 $ 2,129,374 $ 2,338,570 Net sales %
decrease (9.8 )% (9.9 )% (8.9 )% (5.5 )%
Comparable store sales % decrease (1)
(10.0 )% (9.9 )% (9.2 )% (7.3 )% Gross profit as % of net sales
28.6 % 28.3 % 28.5 % 28.4 %
Gross profit as % of net sales, as
adjusted (2)
28.6 % 28.7 % 28.5 % 28.5 % SG&A as % of net sales 24.7 % 22.6
% 22.9 % 21.1 % SG&A as % of net sales, as adjusted (2) 24.7 %
22.3 % 22.9 % 21.0 % Net advertising expense as % of net sales 6.1
% 5.7 % 6.0 % 5.3 % Depreciation and amortization expense as % of
net sales 1.8 % 2.0 % 1.9 % 1.8 % (Loss) income from operations as
% of net sales (5.1 )% (2.1 )% (4.7 )% 0.1 % (Loss) income from
operations as % of net sales, as adjusted (2) (4.0 )% (1.4 )% (2.4
)% 0.3 % Net interest expense as % of net sales 0.1 % 0.1 % 0.1 %
0.1 % Net (loss) income $ (25,228 ) $ (7,239 ) $ (132,746 ) $ 228
Net (loss) income, as adjusted (2) $ (13,056 ) $ (4,846 ) $ (37,516
) $ 2,807 Net (loss) income per diluted share $ (0.91 ) $ (0.25 ) $
(4.72 ) $ 0.01
Net (loss) income per diluted share, as
adjusted (2)
$ (0.47 ) $ (0.17 ) $ (1.33 ) $ 0.09 Weighted average shares
outstanding - diluted 27,663,764 28,963,481 28,129,596 30,683,989
Number of stores open at the end of the period 228 228
(1)
Comprised of net sales of stores in
operation for at least 14 full months, including remodeled and
relocated stores, as well as net sales for the Company’s website.
Stores that are closed are excluded from the calculation the month
before closing.
(2)
Fiscal 2015 amounts are adjusted to
exclude the impact of establishing a valuation allowance for
deferred tax assets and fixed asset impairment charges. Fiscal 2014
amounts are adjusted to exclude expense from the write down of
inventory for the exit from the contract-based mobile phone
business, the write-off of store fixtures associated with the
Company’s changing product mix and impairment charges. See the
attached reconciliation of non-GAAP measures.
Dennis May, President and Chief Executive Officer, commented,
“Our fourth quarter results were challenging, however, I am pleased
with the significant progress we have made on our transformational
efforts. Our top fiscal 2016 initiatives are centered on improving
our cost structure through the optimization of our marketing
dollars, the reduction of our operating expenses and more
efficiently managing our working capital, along with reversing our
negative sales trends.” May continued, “On the expense side, we
have identified over $50 million of savings. These savings are
inclusive of both marketing and operating expenses. We plan to
reduce and re-invest advertising dollars to more effective
channels, further reducing our reliance on print media.
Additionally, we have identified several areas throughout the
company where we believe we can be more efficient with our spend.
In addition to operating expenses, we will also be working to
selectively rationalize our footprint and work to free up working
capital through inventory optimization. From a top-line
perspective, we will continue to expand our Fine Lines departments
within the appliance category given the strong results we are
seeing from our Fine Lines business, continue to focus on sales of
larger screen 4K TV’s, and continue to refine our offerings within
our other categories. We remain confident that through the
combination of our savings and revenue initiatives, we will return
to positive adjusted EBITDA in fiscal year 2016.”
HIGHLIGHTS FOR THE FOURTH QUARTER
Revenue Highlights
Our revenue performance in the quarter was driven primarily by a
comparable store sales decline. Net sales mix and comparable store
sales percentage changes by product category for the three-, and
12-month periods ended March 31, 2015 and 2014 were as
follows:
Net Sales Mix Summary Comparable
Store Sales Summary Three Months Ended Twelve
Months Ended Three Months Ended Twelve Months
Ended March 31, March 31, March 31,
March 31, 2015 2014 2015
2014 2015 2014 2015
2014 Appliances 51 % 48 % 51 % 47 % (5.0 )% 0.5 % (3.1 )%
3.0 %
Consumer electronics (1)
38 % 38 % 37 % 38 % (9.8 )% (18.9 )% (10.9 )% (18.8 )% Computers
and tablets 6 % 8 % 7 % 10 % (37.6 )% (22.6 )% (34.0 )% (14.7 )%
Home products (2)
5 % 6 % 5 % 5 % (12.5 )% (0.4 )% (4.7 )% 35.8 % Total 100 % 100 %
100 % 100 % (10.0 )% (9.9 )% (9.2 )% (7.3 )% (1) Primarily
consists of televisions, audio, personal electronics and
accessories. (2) Primarily consists of furniture and mattresses.
Our comparable store sales drivers for the three months ended
March 31, 2015 are summarized below:
Comparable Store
Comparable Store
Sales Excluding
Sales
Mobile and Fitness
Average Selling Price
Sales Volume Appliances (5.0 )% (5.0 )% Decrease Decrease
Consumer electronics (1)
(9.8 )% (9.8 )% Increase Decrease Computers and tablets (37.6 )%
(33.4 )% Decrease Decrease Home products (2) (12.5 )% (2.6 )%
Increase Decrease Total (10.0 )% (9.0 )% (1) Primarily
consists of televisions, audio, personal electronics and
accessories. (2) Primarily consists of furniture and mattresses.
Gross Margin Highlights
Our gross profit margin was reasonably stable in the fourth
quarter. On a reported basis, our gross profit margin, expressed as
gross profit as a percentage of net sales, increased approximately
27 basis points for the three month period ended March 31,
2015 to 28.6% from 28.3% for the comparable prior year period. On
an adjusted basis, our gross profit margin decreased by 10 basis
points.
- In the three month period ended
March 31, 2014, we incurred an approximately $1.7 million
charge related to the write down of inventory for the exit from the
contract-based mobile phone business.
- In the three month period ended
March 31, 2015, our slight decrease in gross profit margin, as
adjusted, for the period was a result of decreases in gross profit
margin rates for the appliances and consumer electronics
categories, partially offset by a favorable product sales mix
shift.
Expense Management Highlights
We continue to manage our cost structure to more closely align
with our lower sales levels and to enhance our ability to reverse
our recent sales trends and to position our company for growth.
- Selling, general and administrative
expense (“SG&A”) in the three month period ended March 31,
2014 includes a $1.9 million charge for the write-off of store
fixtures associated with the Company’s changing product mix.
- The increase in SG&A as a
percentage of net sales to 24.7% from 22.3% for the comparable
prior period was a result of:
- 62 basis point increase in bank
transactions fees associated with higher cost financing options
offered to the customer and higher private label credit card
penetration;
- 41 basis point increase in occupancy
costs due to the deleveraging effect of our net sales decline;
- 32 basis point increase, or $1.6
million, in consulting expenses to assist in rationalizing our
marketing spend, optimizing our logistics network and accelerating
our transformation efforts. The impact of these expenses
was $0.06 of net loss per diluted share;
- 16 basis point increase in product
services from a higher percentage of home delivery; and
- increases in other SG&A expenses as
a percentage of net sales primarily due to the deleveraging effect
of the net sales decline.
- The increase in net advertising expense
as a percentage of net sales was primarily due to the deleveraging
effect of the net sales decline. We plan to reduce advertising
spend and rebalance our spending among the different advertising
mediums in the future.
HIGHLIGHTS FOR THE FISCAL YEAR
Revenue Highlights
Our revenue performance for the year was driven primarily by our
comparable store sales decline.
Our comparable store sales drivers for the fiscal year 2015 are
summarized below:
Comparable Store
Comparable Store
Sales Excluding
Sales
Mobile and Fitness
Average Selling Price
Sales Volume Appliances (3.1 )% (3.1 )% Decrease Decrease
Consumer electronics (1)
(10.9 )% (10.9 )% Increase Decrease Computers and tablets (34.0 )%
(28.6 )% Decrease Decrease
Home products (2)
(4.7 )% 0.5 % Increase Decrease Total (9.2 )% (8.3 )% (1)
Primarily consists of televisions, audio, personal electronics and
accessories. (2) Primarily consists of furniture and mattresses.
Gross Margin Highlights
Our gross profit margin for the fiscal year 2015 was in line
with fiscal year 2014. On a reported basis, our gross profit
margin, expressed as gross profit as a percentage of net sales,
increased slightly for fiscal year 2015 to 28.5% from 28.4% for
fiscal year 2014. On an adjusted basis, our gross profit margin did
not change from the prior year.
- For fiscal 2014, we incurred an
approximately $1.7 million charge related to the write down of
inventory for the exit from the contract-based mobile phone
business.
- For fiscal year 2015, we experienced a
favorable sales mix shift to product categories with higher gross
profit margin rates and an increase in gross profit margin for the
video category due to an increase in sales of larger screen and
more premium featured televisions, offset by a decrease in gross
profit margin rates across the remaining categories.
Expense Management Highlights
Throughout the year, we had an unrelenting focus on managing our
cost structure to more closely align with our lower sales levels.
We did this while simultaneously working on initiatives to enhance
our ability to reverse our comparable store sales trends and to
position our company for growth.
- SG&A in fiscal 2014 includes a $1.9
million charge for the write-off of store fixtures associated with
the Company’s changing product mix.
- The increase in SG&A as a
percentage of net sales was a result of:
- 43 basis point increase in occupancy
costs as a percentage of net sales due to the deleveraging effect
of the net sales decline;
- 26 basis point increase in bank
transactions fees associated with higher cost financing options to
the customer and higher private label credit card penetration;
- 19 basis point increase in product
services from a higher percentage of home delivery;
- 18 basis point increase, or $3.2
million, in consulting expenses to assist in rationalizing our
marketing spend, optimizing our logistics network and accelerating
our transformation efforts. The impact of these expenses
was $0.11 of net loss per diluted share; and
- Increases in other SG&A expenses
primarily due to the deleveraging effect of the net sales
decline.
- The increase in net advertising expense
as a percentage of net sales was primarily due to the deleveraging
effect of the net sales decline and less vendor support due to
programs being based on a percentage of sales. We plan to reduce
advertising spend and rebalance our spending among the different
advertising mediums in fiscal 2016.
Asset Impairment and Other Charges
During three month period ended March 31, 2015, we recorded
$4.9 million of pre-tax, non-cash charges related to impairment of
property, plant and equipment. For the 2015 fiscal year, our total
pre-tax, non-cash impairment was $47.9 million.
During fiscal year 2014, we recorded $4.3 million ($2.6 million
after-tax) of charges related to the write down of inventory for
the planned exit from the contract-based mobile phone business, the
write-off of store fixtures associated with changing our product
mix and the impairment of one store. We fully exited the
contract-based mobile phone business in the first quarter of fiscal
2015.
There were no charges associated with our exit of the fitness
equipment business, which took place in the third quarter of fiscal
2015.
Tax Valuation Allowance
During the three-month period ended March 31, 2015, we recorded
an increase in our valuation allowance of $9.2 million. For the
fiscal year 2015, we recorded $66.1 million of non-cash charges to
establish a full valuation allowance on our deferred tax assets.
This reduced 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. 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 the Company 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 and the unfavorable shift in our
business could not be overcome by considering other sources of
taxable income in recent periods, 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.
Stock Repurchase Plan
During the three months ended March 31, 2015, the Company
did not repurchase any shares. During the fiscal year ended
March 31, 2015, the Company repurchased 0.8 million shares for
$5.3 million at an average price of $6.32 per share. The shares
were repurchased under the Company’s $40 million share
repurchase program that was authorized by the Company’s Board of
Directors on May 20, 2014 and expires on May 20,
2015. As of March 31, 2015, the Company had available
approximately $34.7 million authorized to repurchase shares of
common stock under the current share repurchase program.
Teleconference and Webcast
The Company will be conducting a conference call to discuss
operating results for the three and 12 month periods ended
March 31, 2015, on Friday, May 15, 2015 at 9:00 a.m. (Eastern
Time). Our call will be hosted by Dennis May, our President and
CEO, Robert Riesbeck, our CFO, and Andrew Giesler, our SVP of
Finance.
Interested investors and other parties may listen to a
simultaneous web cast of the conference call by logging onto our
website at www.hhgregg.com. The on-line replay will be available
for a limited time immediately following the call. The call can
also be accessed live over the phone by dialing (877) 304-8963.
Callers should reference the hhgregg earnings call.
Non-GAAP to GAAP Reconciliation
Attached is a reconciliation of non-GAAP measures used in this
earnings release including gross profit to gross profit, as
adjusted, net (loss) income to net (loss) income, as adjusted and
diluted net (loss) income per share to diluted net (loss) income
per share, as adjusted, and SG&A to SG&A, as adjusted. The
Company has adjusted these measures in order to reflect the results
of operations going forward by excluding the impact of certain
charges related to establishing a valuation allowance for deferred
tax assets, the exit of the contract-based mobile phone business,
asset write-offs due to the product mix shift and fixed asset
impairments. Definitions and reconciliations of non-GAAP financial
measures that will be discussed on the hhgregg investor earnings
call, including gross profit, as adjusted, net (loss) income, as
adjusted, diluted net (loss) income per share, as adjusted, and
SG&A, as adjusted, can be found at www.hhgregg.com on the
investor relations page.
About hhgregg
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
currently with 226 stores in 20 states that also offers
market-leading global and local brands at value prices nationwide
via hhgregg.com.
Forward Looking Statements
The following is a Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995:
This press release includes forward-looking statements,
including with respect to the Company’s financial performance,
ability to manage costs, innovation in 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 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 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 in legal and/or trade regulations, currency
fluctuations and prevailing interest rates and the potential for
litigation.
Other factors that could cause actual results to differ from
those implied by the forward-looking statements in this press
release are more fully described in the “Risk Factors” section in
the Company’s Annual Report on Form 10-K filed May 15,
2015. Given these risks and uncertainties, you are cautioned not to
place undue reliance on these forward-looking statements. The
forward-looking statements included in this press release are made
only as of the date hereof. hhgregg does not undertake, and
specifically declines, any obligation to update any of these
statements or to publicly announce the results of any revisions to
any of these statements to reflect future events or
developments.
HHGREGG, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS THREE AND TWELVE MONTHS ENDED MARCH
31, 2015 AND 2014 (UNAUDITED)
Three Months Ended Twelve Months Ended March 31,
2015 March 31, 2014 March 31, 2015
March 31, 2014 (In thousands, except share and per share
data) Net sales $ 485,603 $ 538,280 $ 2,129,374 $ 2,338,570
Cost of goods sold 346,651 385,736 1,523,536
1,674,031 Gross profit 138,952 152,544 605,838 664,539
Selling, general and administrative expenses 120,127 121,892
488,391 493,950 Net advertising expense 29,638 30,780 128,826
124,179 Depreciation and amortization expense 8,840 10,891 40,200
43,120 Asset impairment charges 4,882 303 47,869
613 (Loss) income from operations (24,535 ) (11,322 )
(99,448 ) 2,677 Other expense (income): Interest expense 678 609
2,600 2,465 Interest income (9 ) (1 ) (63 ) (10 ) Total other
expense 669 608 2,537 2,455 (Loss)
income before income taxes (25,204 ) (11,930 ) (101,985 ) 222
Income tax expense (benefit) 24 (4,691 ) 30,761 (6 )
Net (loss) income $ (25,228 ) $ (7,239 ) $ (132,746 ) $ 228
Net (loss) income per share Basic $ (0.91 ) $ (0.25 ) $ (4.72 ) $
0.01 Diluted $ (0.91 ) $ (0.25 ) $ (4.72 ) $ 0.01 Weighted average
shares outstanding-basic 27,663,764 28,963,481 28,129,596
30,209,928 Weighted average shares outstanding-diluted
27,663,764 28,963,481 28,129,596 30,683,989
HHGREGG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND TWELVE
MONTHS ENDED MARCH 31, 2015 AND 2014
(AS A PERCENTAGE OF NET SALES)
(UNAUDITED)
Three Months Ended Twelve Months
Ended March 31, 2015 March 31, 2014
March 31, 2015 March 31, 2014 Net sales 100.0
% 100.0 % 100.0 % 100.0 % Cost of goods sold 71.4 71.7
71.5 71.6 Gross profit 28.6 28.3 28.5 28.4
Selling, general and administrative expenses 24.7 22.6 22.9 21.1
Net advertising expense 6.1 5.7 6.0 5.3 Depreciation and
amortization expense 1.8 2.0 1.9 1.8 Asset impairment charges 1.0
0.1 2.2 — (Loss) income from operations
(5.1 ) (2.1 ) (4.7 ) 0.1 Other expense (income): Interest expense
0.1 0.1 0.1 0.1 Interest income — — — —
Total other expense 0.1 0.1 0.1 0.1
(Loss) income before income taxes (5.2 ) (2.2 ) (4.8 ) — Income tax
expense(benefit) — (0.9 ) 1.4 — Net (loss)
income (5.2 )% (1.3 )% (6.2 )% 0.0 %
Certain percentage amounts do not sum due
to rounding
HHGREGG, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS MARCH 31, 2015 AND 2014
(UNAUDITED) 2015 2014
(In thousands, except share data)
Assets
Current assets: Cash $ 30,401 $ 48,164 Accounts receivable—trade,
less allowances of $19 and $132, respectively 11,901 15,121
Accounts receivable—other 16,715 16,467 Merchandise inventories,
net 257,469 298,542 Prepaid expenses and other current assets 6,581
6,694 Income tax receivable 5,326 1,380 Deferred income taxes —
6,220 Total current assets 328,393 392,588
Net property and equipment 128,107 193,882 Deferred
financing costs, net 1,796 2,334 Deferred income taxes 6,489 35,182
Other assets 2,844 1,977 Total long-term assets
139,236 233,375 Total assets $ 467,629 $
625,963
Liabilities and Stockholders’
Equity
Current liabilities: Accounts payable $ 112,143 $ 140,806 Customer
deposits 48,742 41,518 Accrued liabilities 46,723 50,898 Deferred
income taxes 6,489 — Income tax payable — 122 Total
current liabilities 214,097 233,344 Long-term
liabilities: Deferred rent 67,935 73,493 Other long-term
liabilities 12,009 11,992 Total long-term liabilities
79,944 85,485 Total liabilities 294,041
318,829 Stockholders’ equity: Preferred stock, par value
$.0001; 10,000,000 shares authorized; no shares issued and
outstanding as of March 31, 2015 and March 31, 2014, respectively —
— Common stock, par value $.0001; 150,000,000 shares authorized;
41,161,753 and 41,121,390 shares issued; and 27,665,071 and
28,460,218 outstanding as of March 31, 2015 and March 31, 2014,
respectively 4 4 Additional paid-in capital 301,680 297,199
Retained earnings 22,132 154,878 Common stock held in treasury at
cost, 13,496,682 and 12,661,172 shares as of March 31, 2015 and
March 31, 2014, respectively (150,228 ) (144,947 ) Total
stockholders’ equity 173,588 307,134 Total
liabilities and stockholders’ equity $ 467,629 $ 625,963
HHGREGG, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED MARCH
31, 2015 AND 2014 (UNAUDITED)
2015 2014
(In thousands)
Cash flows from operating activities: Net (loss) income $ (132,746
) $ 228 Adjustments to reconcile net (loss) income to net cash
provided by operating activities: Depreciation and amortization
40,200 43,120 Amortization of deferred financing costs 538 604
Stock-based compensation 4,623 4,428 Excess tax deficiency from
stock based compensation — 849 Loss on sales of property and
equipment 252 1,646 Deferred income taxes 41,402 (392 ) Asset
impairment charges 47,869 613 Tenant allowances received from
landlords 986 2,705 Changes in operating assets and liabilities:
Accounts receivable—trade 3,220 9,150 Accounts receivable—other 384
2,407 Merchandise inventories 41,073 17,020 Income tax receivable
(3,946 ) (815 ) Prepaid expenses and other assets (108 ) (1,066 )
Accounts payable (26,882 ) 6,125 Customer deposits 7,224 3,476
Income tax payable (122 ) (2,023 ) Accrued liabilities (4,317 )
1,476 Deferred rent (7,176 ) (7,115 ) Other long-term liabilities
289 215 Net cash provided by operating activities
12,763 82,651 Cash flows from investing activities:
Purchases of property and equipment (22,522 ) (22,257 ) Proceeds
from sales of property and equipment 45 217 Purchases of
corporate-owned life insurance (646 ) (684 ) Net cash used in
investing activities (23,123 ) (22,724 ) Cash flows from financing
activities: Purchases of treasury stock (5,281 ) (49,145 ) Proceeds
from exercise of stock options — 5,814 Excess tax deficiency from
stock-based compensation — (849 ) Net decrease in bank overdrafts —
(11,506 ) Net repayments on inventory financing facility (2,122 )
(3,723 ) Payment of financing costs — (946 ) Net cash used
in financing activities (7,403 ) (60,355 ) Net decrease in cash and
cash equivalents (17,763 ) (428 ) Cash and cash equivalents
Beginning of period 48,164 48,592 End of period $
30,401 $ 48,164 Supplemental disclosure of cash flow
information: Interest paid $ 2,085 $ 1,881 Income taxes (received)
paid $ (6,411 ) $ 3,418 Capital expenditures included in accounts
payable $ 1,409 $ 1,068
We believe that the non-GAAP measures described below provide
meaningful information to assist shareholders in understanding our
financial results and assessing our prospects for future
performance. Management believes gross profit, as adjusted,
adjusted net (loss) income, adjusted diluted net (loss) income per
share, SG&A, as adjusted, EBITDA and Adjusted EBITDA are
important indicators of our operations because they exclude items
that may not be indicative of or are unrelated to our core
operating results and provide a baseline for analyzing trends in
our underlying businesses. Management makes standard adjustments
for items such as non-cash asset impairments and valuation
allowance on deferred tax assets, as well as adjustments for other
items that may arise during the period and have a meaningful impact
on comparability.
The below information provides reconciliations from gross
profit, net (loss) income, and SG&A expense, the most
comparable financial measures calculated and presented in
accordance with accounting principles generally accepted in the
U.S. (“GAAP”), to non-GAAP financial measures. The Company has
provided non-GAAP financial measures, which are not calculated or
presented in accordance with GAAP, as information supplemental and
in addition to the financial measures presented in the accompanying
earnings release that are calculated and presented in accordance
with GAAP. Such non-GAAP financial measures should not be
considered superior to, as a substitute for, or as an alternative
to, and should be considered in conjunction with, the GAAP
financial measures presented in the earnings release. The non-GAAP
financial measures in the accompanying earnings release may differ
from similar measures used by other companies.
HHGREGG, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF GROSS
PROFIT, AS ADJUSTED
(UNAUDITED) Three Months Ended March
31, Twelve Months Ended March 31,
(Amounts in thousands)
2015 2014 2015 2014 Gross
profit as reported $ 138,952 $ 152,544 $ 605,838 $ 664,539 Gross
profit as % of net sales 28.6 % 28.3 % 28.5 % 28.4 % Adjustments to
gross profit: Mobile inventory write-down — 1,740 —
1,740 Gross profit, as adjusted $ 138,952 $ 154,284 $
605,838 $ 666,279 Gross profit as % of net sales, as adjusted 28.6
% 28.7 % 28.5 % 28.5 %
We have presented gross profit, as adjusted to exclude the
impact of certain non-recurring charges related to the exit of the
contract-based mobile phone business as we believe that these
transactions do not reflect our core business. We also believe that
gross profit, as adjusted provides a better year-over-year
comparison and will be used by analysts, investors and other
interested parties in the evaluation of our company to other
companies in our industry. Gross profit, as adjusted is not a
measure of performance under GAAP and should not be considered as a
substitute for gross profit prepared in accordance with GAAP. Gross
profit, as adjusted has limitations as an analytical tool, and you
should not consider it in isolation or as a substitute for analysis
of gross profit as reported under GAAP. We compensate for these
limitations by relying primarily on our GAAP results and using
gross profit, as adjusted only as a supplement.
HHGREGG, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF NET (LOSS)
INCOME, AS ADJUSTED AND
DILUTED NET (LOSS) INCOME PER SHARE, AS ADJUSTED
(UNAUDITED) Three Months Ended March
31, Twelve Months Ended March 31,
(Amounts in thousands, except share
data)
2015 2014 2015 2014 Net
(loss) income as reported $ (25,228 ) $ (7,239 ) $ (132,746 ) $ 228
Adjustments to net (loss) income: Asset impairment charges 4,882
303 47,869 613 Valuation allowance for deferred tax assets 9,243 —
66,122 — Mobile inventory write-down — 1,740 — 1,740 Mobile fixed
assets write-off — 1,114 — 1,114 Product mix fixed assets write-off
— 831 — 831
Tax impact of adjustments to net (loss)
income (1)
(1,953 ) (1,595 ) (18,761 ) (1,719 ) Net (loss) income, as adjusted
$ (13,056 ) $ (4,846 ) $ (37,516 ) $ 2,807 Weighted average shares
outstanding – Diluted 27,663,764 28,963,481 28,129,596 30,683,989
Diluted net (loss) income per share as reported $ (0.91 ) $ (0.25 )
$ (4.72 ) $ 0.01
Tax adjusted impact of above adjustments
(1)
$ 0.44 $ 0.08 $ 3.39 $ 0.08 Diluted net (loss) income per share, as
adjusted $ (0.47 ) $ (0.17 ) $ (1.33 ) $ 0.09
(1) Amounts may not recalculate due to
rounding.
We have presented net (loss) income, as adjusted and net (loss)
income per diluted share, as adjusted to exclude the impact of
certain non-recurring charges related to asset impairment charges,
the valuation allowance for deferred tax assets, the exit of the
contract-based mobile phone business and asset write-offs due to
the product mix shift as we believe that these transactions do not
reflect our core business. We also believe that net (loss) income,
as adjusted and net (loss) income per diluted share, as adjusted
provide better year-over-year comparisons and will be used by
analysts, investors and other interested parties in the evaluation
of our company to other companies in our industry. Net (loss)
income, as adjusted and net (loss) income per diluted share, as
adjusted are not measures of performance under GAAP and should not
be considered as a substitute for net (loss) income or net (loss)
income per diluted share prepared in accordance with GAAP. Net
(loss) income, as adjusted and net (loss) income per diluted share,
as adjusted, have limitations as analytical tools, and you should
not consider them in isolation or as a substitute for analysis of
the our results as reported under GAAP. We compensate for these
limitations by relying primarily on our GAAP results and using net
(loss) income, as adjusted, and net (loss) income per diluted
share, as adjusted only as a supplement.
HHGREGG, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION OF SG&A
EXPENSES, AS ADJUSTED
(UNAUDITED) Three Months Ended March
31, Twelve Months Ended March 31,
(Amounts in thousands)
2015 2014 2015 2014
SG&A expenses as reported $ 120,127 $ 121,892 $ 488,391 $
493,950 SG&A as % of net sales 24.7 % 22.6 % 22.9 % 21.1 %
Adjustments to SG&A expenses: Mobile fixed assets write-off —
1,114 — 1,114 Product mix fixed assets write-off — 831
— 831 SG&A expenses, as adjusted $ 120,127
$ 119,947 $ 488,391 $ 492,005 SG&A as % of net sales, as
adjusted 24.7 % 22.3 % 22.9 % 21.0 %
We have presented SG& A expenses, as adjusted to exclude the
impact of certain non-recurring charges related to the exit of the
contract-based mobile phone business and asset write-offs due to
the product mix shift as we believe that these transactions do not
reflect our core business. We also believe that SG&A expenses,
as adjusted provide a better year-over-year comparison and will be
used by analysts, investors and other interested parties in the
evaluation of our company to other companies in our industry.
SG&A expenses, as adjusted is not a measure of performance
under GAAP and should not be considered as a substitute for
SG&A expenses prepared in accordance with GAAP. SG&A
expenses, as adjusted, has limitations as an analytical tool, and
you should not consider it in isolation or as a substitute for
analysis of our results as reported under GAAP. We compensate for
these limitations by relying primarily on our GAAP results and
using SG&A expenses, as adjusted only as a supplement.
HHGREGG, INC. AND SUBSIDIARIES NON-GAAP
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA (UNAUDITED)
Three Months Ended March 31, Twelve
Months Ended March 31,
(Amounts in thousands)
2015 2014 2015 2014 Net
(loss) income as reported $ (25,228 ) $ (7,239 ) $ (132,746 ) $ 228
Adjustments: Depreciation and amortization 8,840 10,891 40,200
43,120 Interest expense, net 669 608 2,537 2,455 Income tax expense
24 (4,691 ) 30,761 (6 ) EBITDA $ (15,695 ) $ (431 ) $
(59,248 ) $ 45,797 Non-cash asset impairment charges 4,882
303 47,869 613 Mobile inventory write-down $ — $ 1,740 $ — $ 1,740
Mobile fixed assets write-off $ — $ 1,114 $ — $ 1,114 Product mix
fixed assets write-off $ — $ 831 $ — $ 831
Adjusted EBITDA $ (10,813 ) $ 3,557 $ (11,379 ) $ 50,095
EBITDA represents net (loss) income before income tax expense,
interest income, interest expense, depreciation and amortization.
Adjusted EBITDA is defined as EBITDA, without giving effect to
asset impairment charges, the exit of the contract-based mobile
phone business and asset write-offs due to the product mix shift.
We have presented Adjusted EBITDA because we believe that the
exclusion of these non-recurring items are necessary to provide the
most accurate and consistent measure of our core operating results
and as a means to analyze period-to-period changes in operating
results. We have presented EBITDA and Adjusted EBITDA because we
consider it an important supplemental measure of our performance
and believe it is frequently used by analysts, investors and other
interested parties in the evaluation of companies in our industry.
Management uses EBITDA and Adjusted EBITDA as a measurement tool
for evaluating our actual operating performance compared to budget
and prior periods. EBITDA and Adjusted EBITDA are not a measure of
performance under generally accepted accounting principles (GAAP)
and should not be considered as a substitute for net (loss) income
prepared in accordance with GAAP. EBITDA and Adjusted EBITDA have
limitations as an analytical tool, and you should not consider
these in isolation or as a substitute for analysis of our results
as reported under GAAP.
Some of the limitations of EBITDA and Adjusted EBITDA measures
are:
- EBITDA and Adjusted EBITDA do not
reflect our cash expenditures, or future requirements, for capital
expenditures or contractual commitments;
- EBITDA and Adjusted EBITDA do not
reflect interest expense or the cash requirements necessary to
service interest payments on our debt;
- EBITDA and Adjusted EBITDA do not
reflect tax expense or the cash requirements necessary to pay for
tax obligations; and
- Although depreciation and amortization
are non-cash charges, the asset being depreciated and amortized
will often have to be replaced in the future, and EBITDA and
Adjusted EBITDA do not reflect any cash requirements for such
replacements.
- Although asset impairment charges are
non-cash, the asset being impaired will often have to be replaced
in the future, and EBITDA and Adjusted EBITDA do not reflect any
cash requirements for such replacements.
We compensate for these limitations by relying primarily on our
GAAP results and using EBITDA and Adjusted EBITDA only as a
supplement.
HHGREGG, INC. AND SUBSIDIARIES Store Count by
Quarter for Fiscal Years 2013, 2014 and 2015 (Unaudited)
FY2013
FY2014 FY2015 Q1 Q2
Q3 Q4 Q1 Q2
Q3 Q4 Q1 Q2
Q3 Q4 Beginning Store Count 208 210 223 228
228 228 228 228 228 229 228 228 Store Openings 2 13 5 — — — — — 1 —
— — Store Closures — — — — — —
— — — (1 ) — — Ending Store
Count 210 223 228 228 228 228
228 228 229 228 228 228
Note: hhgregg, Inc.’s fiscal year is comprised of four quarters
ending
June 30th, September 30th, December 31st
and March 31st.
hhgregg, Inc.Andy Giesler, Senior Vice President of Finance,
317-848-8710investorrelations@hhgregg.com
HHGREGG (CE) (USOTC:HGGGQ)
Historical Stock Chart
From Mar 2024 to Apr 2024
HHGREGG (CE) (USOTC:HGGGQ)
Historical Stock Chart
From Apr 2023 to Apr 2024