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Share Name | Share Symbol | Market | Type |
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HHGREGG Inc (CE) | USOTC:HGGGQ | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.0012 | 0.00 | 01:00:00 |
hhgregg, Inc. (NYSE: HGG) ("hhgregg" or the "Company") today announced operating results for the fourth quarter and full year ended March 31, 2016 as compared to the fourth quarter and full year ended March 31, 2015.
Fourth Quarter Summary
Fiscal Year 2016 Summary
Robert Riesbeck, Chief Financial Officer and Interim President and Chief Executive Officer, commented, “We strengthened the company in fiscal 2016 and enter fiscal 2017 with significantly improved EBITDA and cost savings that exceeded our target. Our primary focus this year is on driving revenue. We finished our fourth quarter with improved momentum, specifically in appliances where we achieved a positive 4.9% comparable store sales increase over February and March combined. We will be as passionate and focused on revenue growth in fiscal 2017 as we were on cost reductions in fiscal 2016, and believe that our past and future investments will help us significantly improve our net sales and profitability this fiscal year."
Three Months Ended Twelve Months Ended March 31, March 31, (unaudited, amounts in thousands, except share and per share data) 2016 2015 2016 2015 Net sales $ 438,840 $ 485,603 $ 1,959,998 $ 2,129,374 Net sales % decrease (9.6 )% (9.8 )% (8.0 )% (8.9 )% Comparable store sales % decrease (1) (9.3 )% (10.0 )% (7.7 )% (9.2 )% Gross profit as a % of net sales 28.7 % 28.6 % 28.3 % 28.5 % SG&A as a % of net sales 24.2 % 24.7 % 22.8 % 22.9 % Net advertising expense as a % of net sales 4.9 % 6.1 % 5.4 % 6.0 % Depreciation and amortization expense as a % of net sales 1.6 % 1.8 % 1.6 % 1.9 % Asset impairment charges as a % of net sales — % 1.0 % 1.1 % 2.2 % Loss from operations as a % of net sales (2.1 )% (5.1 )% (2.6 )% (4.7 )% Net interest expense as a % of net sales 0.2 % 0.1 % 0.1 % 0.1 % Income tax benefit (expense) as a % of net sales 0.2 % n/m n/m (1.4 )% Net loss $ (9,085 ) $ (25,228 ) $ (54,879 ) $ (132,746 ) Net loss, as adjusted (2) $ (7,675 ) $ (17,371 ) $ (26,522 ) $ (38,685 ) Net loss per diluted share $ (0.33 ) $ (0.91 ) $ (1.98 ) $ (4.72 ) Net loss per diluted share, as adjusted (2) $ (0.28 ) $ (0.63 ) $ (0.96 ) $ (1.38 ) Adjusted EBITDA (3) $ 16 $ (7,838 ) 8,241 (6,589 ) Weighted average shares outstanding—diluted 27,707,978 27,663,764 27,701,055 28,129,596 Number of stores open at the end of period 226 228(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 the Company’s e-commerce site.
(2)
Amounts are adjusted in both the three and twelve months ended March 31, 2016 and 2015 to exclude the impact of severance due to our transformation efforts, consulting expenses paid to outside parties to assist with our transformation efforts and fixed asset impairment charges. Amounts are adjusted in the three months ended March 31, 2016 for monetizing a federal tax credit that was previously reserved. Amounts are adjusted in the twelve months ended March 31, 2016 for the federal tax credit previously discussed, as well as expenses associated with the Internal Revenue Service's settlement of a prior year tax matter. Amounts are adjusted in the twelve months ended March 31, 2015 for establishing a valuation allowance for deferred tax asset. See the attached reconciliation of non-GAAP measures to GAAP measures.
(3)
Amounts are adjusted in both the current and prior year to exclude the impact of severance due to our transformation efforts, consulting expenses paid to outside parties to assist with our transformation efforts and fixed asset impairment charges See the attached reconciliation of non-GAAP measures to GAAP measures.
The Company's net sales performance in the quarter and fiscal year ended March 31, 2016 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 twelve months ended March 31, 2016 and 2015 were as follows:
Net Sales Mix Summary Comparable Store Sales SummaryThree Months EndedMarch 31,
Twelve Months EndedMarch 31,
Three Months EndedMarch 31,
Twelve Months EndedMarch 31,
2016 2015 2016 2015 2016 2015 2016 2015 Appliances 56 % 51 % 53 % 51 % (0.4 )% (5.0 )% (3.2 )% (3.1 )% Consumer electronics (1) 34 % 38 % 36 % 37 % (19.6 )% (9.8 )% (10.3 )% (10.9 )% Home products (2) 6 % 5 % 6 % 5 % 2.8%
(12.5 )% 5.4%
(4.7 )% Computers and tablets 4 % 6 % 5 % 7 % (32.2 )% (37.6 )% (35.0 )% (34.0 )% Total 100 % 100 % 100 % 100 % (9.3 )% (10.0 )% (7.7 )% (9.2 )%(1)
Primarily consists of televisions, audio, personal electronics and accessories.
(2)
Primarily consists of furniture and mattresses.
FOURTH QUARTER FINANCIAL RESULTS
The Company's comparable store sales drivers for the three months ended March 31, 2016 are summarized below:
Comparable StoreSales
Average Selling Price Sales Unit Volume Appliances (0.4 )% Increase Decrease Consumer electronics (1) (19.6 )% Decrease Decrease Home products (2) 2.8%
Increase Decrease Computers and tablets (32.2 )% Decrease Decrease Total (9.3 )%(1)
Primarily consists of televisions, audio, personal electronics and accessories.
(2)
Primarily consists of furniture and mattresses.
The Company's gross profit margin, expressed as gross profit as a percentage of net sales, increased for the three month period ended March 31, 2016 to 28.7% from 28.6% for the comparable prior year period.
Cost Structure Highlights
The Company managed its cost structure to align with its sales levels and to keep the Company positioned for positive adjusted EBITDA.
Income Taxes
During the fourth quarter of fiscal 2016 the Company recorded $0.8 million of income tax benefit due to the monetizing of a federal tax credit that was previously reserved.
FISCAL YEAR FINANCIAL RESULTS
The Company's comparable store sales drivers for fiscal year 2016 are summarized below:
Comparable StoreSales
Average Selling Price Sales Unit Volume Appliances (3.2 )% Increase Decrease Consumer electronics (1) (10.3 )% Increase Decrease Home products (2) 5.4%
Increase Increase Computers and tablets (35.0 )% Decrease Decrease Total (7.7 )%(1)
Primarily consists of televisions, audio, personal electronics and accessories.
(2)
Primarily consists of furniture and mattresses.
The Company's gross profit margin, expressed as gross profit as a percentage of net sales, decreased 20 basis points for the twelve month period ended March 31, 2016 to 28.3% from 28.5% for the comparable prior year period.
Cost Structure Highlights
The Company managed its cost structure to align with its sales levels and to position the Company for positive adjusted EBITDA.
Asset Impairment
During fiscal 2016, the Company recorded $20.9 million of pre-tax, non-cash charges related to impairment of property, plant and equipment. For the 2015 fiscal year, total pre-tax, non-cash impairment charge was $47.9 million.
Income Taxes
In fiscal 2016, the Company recorded $0.4 million of income tax expense compared to $30.8 million recorded in fiscal 2015. For the current year, the income tax expense recorded was due primarily to the settlement of an Internal Revenue Service examination for the prior year, partially offset by monetizing a federal tax credit that was previously fully reserved. There was no income tax expense or benefit related to results of the current year operations due to the Company's full valuation allowance. In the prior year, the Company 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.
Teleconference and Webcast
hhgregg will be conducting a conference call to discuss operating results for the fiscal year ended March 31, 2016, on Thursday, May 19, 2016 at 9:00 a.m. (Eastern Time). Our call will be hosted by Robert Riesbeck, our Interim President and Chief Executive Officer and Chief Financial Officer, and Lance Peterson, our Director of Finance & Investor Relations.
Interested investors and other parties may listen to a simultaneous webcast of the conference call by logging onto hhgregg’s website at www.hhgregg.com (to access webcast registration directly click here). 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.
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, ability to execute the Company's 2017 initiatives, 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 the Company's strategies and initiatives, particularly in returning the Company to profitable growth; the Company's ability to increase customer traffic and conversion; competition in the retail industry; the Company's ability to maintain a positive brand perception and recognition; the Company's ability to attract and retain qualified personnel; the Company's ability to maintain the security of customer, associate and Company information; rules, regulations, contractual obligations, compliance requirements and fees associated with accepting a variety of payment methods; the Company's ability to effectively achieve cost cutting initiatives; the Company's ability to generate strong cash flows to support its operating activities; the Company's relationships and operations of its key suppliers; the Company's ability to generate sufficient cash flows to recover the fair value of long-lived assets; the Company's ability to maintain and upgrade its information technology systems; the fluctuation of the Company's comparable store sales; the effect of general and regional economic and employment conditions on the Company's net sales; the Company's ability to meet financial performance guidance; disruption in the Company's supply chain; changes in trade regulation, 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 for fiscal year 2016 filed May 19, 2016. 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 SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)
Three Months Ended Twelve Months Ended March 31, 2016 March 31, 2015 March 31, 2016 March 31, 2015 (In thousands, except share and per share data) Net sales $ 438,840 $ 485,603 $ 1,959,998 $ 2,129,374 Cost of goods sold 313,090 346,651 1,406,216 1,523,536 Gross profit 125,750 138,952 553,782 605,838 Selling, general and administrative expenses 106,392 120,127 447,508 488,391 Net advertising expense 21,570 29,638 105,046 128,826 Depreciation and amortization expense 6,928 8,840 32,043 40,200 Asset impairment charges — 4,882 20,910 47,869 Loss from operations (9,140 ) (24,535 ) (51,725 ) (99,448 ) Other expense (income): Interest expense 776 678 2,742 2,600 Interest income (13 ) (9 ) (22 ) (63 ) Total other expense 763 669 2,720 2,537 Loss before income taxes (9,903 ) (25,204 ) (54,445 ) (101,985 ) Income tax (benefit) expense (818 ) 24 434 30,761 Net loss $ (9,085 ) $ (25,228 ) $ (54,879 ) $ (132,746 ) Net loss per share Basic and diluted $ (0.33 ) $ (0.91 ) $ (1.98 ) $ (4.72 ) Weighted average shares outstanding-basic and diluted 27,707,978 27,663,764 27,701,055 28,129,596HHGREGG, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(AS A PERCENTAGE OF NET SALES)(UNAUDITED)
Three Months Ended Twelve Months EndedMarch 31,2016
March 31,2015
March 31, 2016 March 31, 2015 Net sales 100.0%
100.0%
100.0%
100.0%
Cost of goods sold 71.3 71.4 71.7 71.5 Gross profit 28.7 28.6 28.3 28.5 Selling, general and administrative expenses 24.2 24.7 22.8 22.9 Net advertising expense 4.9 6.1 5.4 6.0 Depreciation and amortization expense 1.6 1.8 1.6 1.9 Asset impairment charges — 1.0 1.1 2.2 Loss from operations (2.1 ) (5.1 ) (2.6 ) (4.7 ) Other expense (income): Interest expense 0.2 0.1 0.1 0.1 Interest income — — — — Total other expense 0.2 0.1 0.1 0.1 Loss before income taxes (2.3 ) (5.2 ) (2.8 ) (4.8 ) Income tax (benefit) expense (0.2 ) — — 1.4 Net loss (2.1 )% (5.2 )% (2.8 ) (6.2 )%Certain percentage amounts do not sum due to rounding
HHGREGG, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSMARCH 31, 2016 AND 2015(UNAUDITED)
March 31, 2016 March 31, 2015 (In thousands, except share data) Assets Current assets: Cash and cash equivalents $ 3,703 $ 30,401 Accounts receivable—trade, less allowances of $5 and $19, respectively 11,106 11,901 Accounts receivable—other 14,937 16,715 Merchandise inventories, net 256,559 257,469 Prepaid expenses and other current assets 6,333 6,581 Income tax receivable 1,130 5,326 Total current assets 293,768 328,393 Net property and equipment 87,472 128,107 Deferred financing costs, net 1,257 1,796 Deferred income taxes — 6,489 Other assets 2,855 2,844 Total long-term assets 91,584 139,236 Total assets $ 385,352 $ 467,629 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 107,474 $ 112,143 Line of credit — — Customer deposits 43,235 48,742 Accrued liabilities 43,370 46,723 Deferred income taxes — 6,489 Total current liabilities 194,079 214,097 Long-term liabilities: Deferred rent 59,101 67,935 Other long-term liabilities 10,818 12,009 Total long-term liabilities 69,919 79,944 Total liabilities 263,998 294,041 Stockholders’ equity: Preferred stock, par value $.0001; 10,000,000 shares authorized; no shares issued and outstanding as of March 31, 2016 and March 31, 2015, respectively — — Common stock, par value $.0001; 150,000,000 shares authorized; 41,204,660 and 41,161,753 shares issued; and 27,707,978 and 27,665,071 outstanding as of March 31, 2016 and March 31, 2015, respectively 4 4 Additional paid-in capital 304,325 301,680 Retained earnings (accumulated deficit) (32,747 ) 22,132 Common stock held in treasury at cost, 13,496,682 shares as of March 31, 2016 and March 31, 2015, respectively (150,228 ) (150,228 ) Total stockholders’ equity 121,354 173,588 Total liabilities and stockholders’ equity $ 385,352 $ 467,629HHGREGG, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED MARCH 31, 2016 AND 2015(UNAUDITED)
2016 2015 (In thousands) Cash flows from operating activities: Net loss $ (54,879 ) $ (132,746 ) Adjustments to reconcile net loss to net cash provided by (used by) operating activities: Depreciation and amortization 32,043 40,200 Amortization of deferred financing costs 539 538 Stock-based compensation 2,709 4,623 Loss (gain) on sales of property and equipment (19 ) 252 Deferred income taxes — 41,402 Asset impairment charges 20,910 47,869 Tenant allowances received from landlords 812 986 Changes in operating assets and liabilities: Accounts receivable—trade 795 3,220 Accounts receivable—other 986 384 Merchandise inventories 910 41,073 Income tax receivable 4,196 (3,946 ) Prepaid expenses and other assets 454 (108 ) Accounts payable (12,537 ) (26,882 ) Customer deposits (5,507 ) 7,224 Income tax payable — (122 ) Accrued liabilities (3,417 ) (4,317 ) Deferred rent (8,854 ) (7,176 ) Other long-term liabilities (923 ) 289 Net cash provided by (used in) operating activities (21,782 ) 12,763 Cash flows from investing activities: Purchases of property and equipment (12,828 ) (22,522 ) Proceeds from sales of property and equipment 117 45 Purchases of corporate-owned life insurance (217 ) (646 ) Net cash used in investing activities (12,928 ) (23,123 ) Cash flows from financing activities: Purchases of treasury stock — (5,281 ) Net borrowings (repayments) on inventory financing facility 8,012 (2,122 ) Net cash provided by (used in) financing activities 8,012 (7,403 ) Net decrease in cash and cash equivalents (26,698 ) (17,763 ) Cash and cash equivalents Beginning of period 30,401 48,164 End of period $ 3,703 $ 30,401 Supplemental disclosure of cash flow information: Interest paid $ 2,205 $ 2,085 Income taxes received $ (3,523 ) $ (6,411 ) Capital expenditures included in accounts payable $ 1,265 $ 1,409HHGREGG, INC. AND SUBSIDIARIESNON-GAAP RECONCILIATION OF NET LOSS, AS ADJUSTED ANDDILUTED NET LOSS PER SHARE, AS ADJUSTED,(UNAUDITED)
Three Months EndedMarch 31, 2016
Twelve Months EndedMarch 31, 2016
(Amounts in thousands, except share data) 2016 2015 2016 2015 Net loss as reported $ (9,085 ) $ (25,228 ) $ (54,879 ) $ (132,746 ) Non-cash adjustments to net loss: Asset impairment charges — 4,882 20,910 47,869 Valuation allowance for deferred tax assets — — — 41,402 Cash adjustments to net loss: Severance (1) 2,215 1,323 2,526 1,515 Consulting fees (2) 13 1,652 4,487 3,275 Income tax (benefit) expense (3) (818 ) — 434 — Net loss, as adjusted $ (7,675 ) $ (17,371 ) $ (26,522 ) $ (38,685 ) Weighted average shares outstanding – Diluted 27,707,978 27,663,764 27,701,055 28,129,596 Net loss per diluted share as reported $ (0.33 ) $ (0.91 ) $ (1.98 ) $ (4.72 ) Net loss per diluted share, as adjusted $ (0.28 ) $ (0.63 ) $ (0.96 ) $ (1.38 )(1)
Expense for severance due to the transformation efforts.
(2)
Costs paid to outside consultants to assist with the Company's transformation efforts.
(3)
Included in the amount for three months ended March 31, 2016 is $0.8 million for monetizing a federal tax credit that was previously reserved. Included in the twelve months ended March 31, 2016 amount is the $0.8 million income tax benefit previously discussed, as well as expenses of $1.2 million charged in the current period associated with the Internal Revenue Service's settlement of a prior year tax matter.
HHGREGG, INC. AND SUBSIDIARIESNON-GAAP RECONCILIATION OF EBITDA ANDADJUSTED EBITDA (UNAUDITED)
Three Months EndedMarch 31, 2016
Twelve Months EndedMarch 31, 2016
(Amounts in thousands) 2016 2015 2016 2015 Net loss as reported $ (9,085 ) $ (25,228 ) $ (54,879 ) $ (132,746 ) Adjustments: Depreciation and amortization 6,928 8,840 32,043 40,200 Interest expense, net 763 669 2,720 2,537 Income tax (benefit) expense (818 ) 24 434 30,761 EBITDA $ (2,212 ) $ (15,695 ) $ (19,682 ) $ (59,248 ) Non-cash asset impairment charges — 4,882 20,910 47,869 Severance 2,215 1,323 2,526 1,515 Consulting Fees 13 1,652 4,487 3,275 Adjusted EBITDA $ 16 $ (7,838 ) $ 8,241 $ (6,589 )We believe that the non-GAAP measures described above provide meaningful information to assist shareholders in understanding our financial results and assessing our prospects for future performance. Management believes adjusted net loss, adjusted net loss per diluted share, 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, valuation allowance on deferred tax assets, severance, consulting fees, income taxes recorded in current period related to prior year periods, as well as adjustments for other items that may arise during the period and have a meaningful impact on comparability.
The above information provides reconciliations from net (loss), the most comparable financial measure calculated and presented in accordance with accounting principles generally accepted in 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.
EBITDA represents net loss before income tax expense, interest income, interest expense, depreciation and amortization. The Company has presented EBITDA and Adjusted EBITDA because it considers it an important supplemental measure of its performance and believes it is frequently used by analysts, investors and other interested parties in the evaluation of companies in its industry. Management uses EBITDA and Adjusted EBITDA as a measurement tool for evaluating its actual operating performance compared to budget and prior periods. EBITDA and Adjusted EBITDA is not a measure of performance under US GAAP and should not be considered as a substitute for net loss prepared in accordance with GAAP. EBITDA and Adjusted EBITDA has limitations as an analytical tool, and you should not consider these in isolation or as a substitute for analysis of the Company's results as reported under GAAP.
Some of the limitations of EBITDA and Adjusted EBITDA measures are:
The Company compensates for these limitations by relying primarily on its GAAP results and using EBITDA and Adjusted EBITDA only as a supplement.
HHGREGG, INC. AND SUBSIDIARIESStore Count by Quarter for Fiscal Years 2014, 2015 and 2016(Unaudited)
FY2014 FY2015 FY2016 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Beginning Store Count 228 228 228 228 228 229 228 228 228 227 227 227 Store Openings — — — — 1 — — — 1 — — — Store Closings — — — — — (1 ) — — (2 ) — — (1 ) Ending Store Count 228 228 228 228 229 228 228 228 227 227 227 226Note: hhgregg, Inc.’s fiscal year is comprised of four quarters ending June 30th, September 30th, December 31st and March 31st.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160519005585/en/
hhgregg, Inc.Lance Peterson, 317-848-8710Director, Finance & Investor Relationsinvestorrelations@hhgregg.com
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