hhgregg Inc. (HGG, Financial) filed Quarterly Report for the period ended 2008-12-31.
hhgregg Inc. is a leading specialty retailer of premium video products appliances audio products and accessories. hhgregg currently operates seventy nine stores in Alabama Georgia Indiana Kentucky North Carolina Ohio South Carolina and Tennessee. hhgregg Inc. has a market cap of $265.41 million; its shares were traded at around $8.2 with a P/E ratio of 8.9 and P/S ratio of 0.21.
Other expense decreased $24.7 million compared to the comparable prior year period. This decrease was largely due to a $21.7 million loss on early extinguishment of debt in the prior year period and a decrease of $3.0 million in net interest expense primarily arising from our debt refinancing completed in July 2007.
Capital Expenditures. We make capital expenditures principally to fund our expansion strategy, which includes, among other things, investments in new stores and new distribution facilities, remodeling and relocation of existing stores, as well as information technology and other infrastructure-related projects that support our expansion. Gross capital expenditures were $29.1 million and $25.4 million for the nine months ended December 31, 2008 and 2007, respectively. The increase in gross capital expenditures during the nine months ended December 31, 2008 was primarily attributable to a greater number of store openings during the current year period. We opened 18 new stores during the nine months ended December 31, 2008 compared to eight stores in the prior year period. We plan to open two additional stores during the fiscal year ending March 31, 2009. In addition, we plan to continue to invest in our infrastructure, including our management information systems and distribution capabilities, as well as incur capital remodeling and improvement costs. We expect capital expenditures, net of anticipated sale and leaseback proceeds, to range between $24 million and $26 million for fiscal 2009.
The loans under the Term B Facility were originally scheduled to be repaid in consecutive quarterly installments of $250,000 each with a balloon payment at maturity, but as Gregg Appliances made an optional $10 million prepayment during fiscal 2008, the remaining scheduled quarterly principal installments are reduced to $227,099 each with a balloon payment at maturity. In accordance with the Term B Facility, the next principal payment is due on June 30, 2009. In addition, Gregg Appliances is also required to prepay the outstanding loans, subject to certain exceptions, with annual excess cash flow and certain other proceeds (as defined in the Term B Facility). As of December 31, 2008, $89.25 million of term loans were outstanding.
Revolving Credit Facility. On July 25, 2007, Gregg Appliances entered into an Amended and Restated Loan and Security Agreement with a bank group for up to $100 million. Borrowings under the credit agreement are subject to a borrowing base calculation based on specified percentages of eligible accounts receivable and inventories. Interest on borrowings are payable monthly at a fluctuating rate based on the banks prime rate or LIBOR plus an applicable margin. Under the amended agreement the annual commitment fee is 1/4% on the unused portion of the facility and 1.25% for outstanding letters of credit. The asset backed credit facility does not require Gregg Appliances to comply with any financial maintenance covenant, unless it has less than $8.5 million of excess availability at any time, during the continuance of which event Gregg Appliances is subject to compliance with a fixed charge coverage ratio of 1.1 to 1.0. In addition, if Gregg Appliances has less than $5.0 million of excess availability, it may, in certain circumstances more specifically described in the Amended and Restated Loan and Security Agreement, become subject to cash dominion control. The credit agreement is guaranteed by Gregg Appliances wholly-owned subsidiary, HHG Distributing LLC (HHG), which had no assets or operations. The guarantee is full and unconditional and Gregg Appliances has no other subsidiaries. In addition, there are no restrictions on HHGs ability to pay dividends under the arrangement. Gregg Appliances was in compliance with the restrictions and covenants in the debt agreements at December 31, 2008.
As of December 31, 2008, Gregg Appliances had approximately $14.8 million of borrowings outstanding under the revolving credit facility and $4.1 million of letters of credit outstanding which expire through December 31, 2009. As of December 31, 2008, the net borrowing availability under the revolving credit facility was $81.1 million. The weighted average interest rate of the $14.8 million of cash borrowings outstanding at December 31, 2008 was 3.4%.
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hhgregg Inc. is a leading specialty retailer of premium video products appliances audio products and accessories. hhgregg currently operates seventy nine stores in Alabama Georgia Indiana Kentucky North Carolina Ohio South Carolina and Tennessee. hhgregg Inc. has a market cap of $265.41 million; its shares were traded at around $8.2 with a P/E ratio of 8.9 and P/S ratio of 0.21.
Highlight of Business Operations:
Net income was $17.1 million, or $0.52 per diluted share, for the three months ended December 31, 2008, compared to net income of $15.1 million, or $0.45 per diluted share, for the comparable prior year period. Net income for the nine months ended December 31, 2008 was $22.6 million, or $0.69 per diluted share, compared to net income of $11.1 million, or $0.35 per diluted share, for the nine months ended December 31, 2007, which included a pre-tax loss on the early extinguishment of debt of $21.7 million, or $0.41 net loss per diluted share. The increase in our third quarter earnings primarily reflected an improvement in our gross profit margins which more than offset the effect of a 13.2% comparable store sales decrease coupled with investments in distribution and management infrastructure to support our new store growth in Florida.Other expense decreased $24.7 million compared to the comparable prior year period. This decrease was largely due to a $21.7 million loss on early extinguishment of debt in the prior year period and a decrease of $3.0 million in net interest expense primarily arising from our debt refinancing completed in July 2007.
Capital Expenditures. We make capital expenditures principally to fund our expansion strategy, which includes, among other things, investments in new stores and new distribution facilities, remodeling and relocation of existing stores, as well as information technology and other infrastructure-related projects that support our expansion. Gross capital expenditures were $29.1 million and $25.4 million for the nine months ended December 31, 2008 and 2007, respectively. The increase in gross capital expenditures during the nine months ended December 31, 2008 was primarily attributable to a greater number of store openings during the current year period. We opened 18 new stores during the nine months ended December 31, 2008 compared to eight stores in the prior year period. We plan to open two additional stores during the fiscal year ending March 31, 2009. In addition, we plan to continue to invest in our infrastructure, including our management information systems and distribution capabilities, as well as incur capital remodeling and improvement costs. We expect capital expenditures, net of anticipated sale and leaseback proceeds, to range between $24 million and $26 million for fiscal 2009.
The loans under the Term B Facility were originally scheduled to be repaid in consecutive quarterly installments of $250,000 each with a balloon payment at maturity, but as Gregg Appliances made an optional $10 million prepayment during fiscal 2008, the remaining scheduled quarterly principal installments are reduced to $227,099 each with a balloon payment at maturity. In accordance with the Term B Facility, the next principal payment is due on June 30, 2009. In addition, Gregg Appliances is also required to prepay the outstanding loans, subject to certain exceptions, with annual excess cash flow and certain other proceeds (as defined in the Term B Facility). As of December 31, 2008, $89.25 million of term loans were outstanding.
Revolving Credit Facility. On July 25, 2007, Gregg Appliances entered into an Amended and Restated Loan and Security Agreement with a bank group for up to $100 million. Borrowings under the credit agreement are subject to a borrowing base calculation based on specified percentages of eligible accounts receivable and inventories. Interest on borrowings are payable monthly at a fluctuating rate based on the banks prime rate or LIBOR plus an applicable margin. Under the amended agreement the annual commitment fee is 1/4% on the unused portion of the facility and 1.25% for outstanding letters of credit. The asset backed credit facility does not require Gregg Appliances to comply with any financial maintenance covenant, unless it has less than $8.5 million of excess availability at any time, during the continuance of which event Gregg Appliances is subject to compliance with a fixed charge coverage ratio of 1.1 to 1.0. In addition, if Gregg Appliances has less than $5.0 million of excess availability, it may, in certain circumstances more specifically described in the Amended and Restated Loan and Security Agreement, become subject to cash dominion control. The credit agreement is guaranteed by Gregg Appliances wholly-owned subsidiary, HHG Distributing LLC (HHG), which had no assets or operations. The guarantee is full and unconditional and Gregg Appliances has no other subsidiaries. In addition, there are no restrictions on HHGs ability to pay dividends under the arrangement. Gregg Appliances was in compliance with the restrictions and covenants in the debt agreements at December 31, 2008.
As of December 31, 2008, Gregg Appliances had approximately $14.8 million of borrowings outstanding under the revolving credit facility and $4.1 million of letters of credit outstanding which expire through December 31, 2009. As of December 31, 2008, the net borrowing availability under the revolving credit facility was $81.1 million. The weighted average interest rate of the $14.8 million of cash borrowings outstanding at December 31, 2008 was 3.4%.
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