hhgregg Inc. (HGG, Financial) filed Quarterly Report for the period ended 2009-12-31.
Hhgregg Inc. has a market cap of $781 million; its shares were traded at around $20.35 with a P/E ratio of 18.3 and P/S ratio of 0.6. HGG is in the portfolios of Ron Baron of Baron Funds, Arnold Van Den Berg of Century Management.
We focus on leveraging our semi-fixed expenditures in advertising, distribution and regional management through closely managing our inventory, working capital and store development expenditures. Our inventory has averaged 7.0 turns per year over the past three fiscal years. Our working capital has averaged 2.4%, expressed as a percentage of sales, over the past three fiscal years. Our net capital expenditures have averaged 1.8%, measured as a percentage of sales, over the past three fiscal years. These factors, combined with our strong store-level profitability, have contributed to the generation of significant free cash flow over the past three fiscal years. Historically, this has enabled us to de-leverage our balance sheet and internally fund our store growth.
According to the most current estimates of the Consumer Electronics Association, or the CEA, consumer electronics factory sales to retailers fell 7.8% for calendar year 2009, the first decline since 2001. Looking ahead, digital displays, Blu-ray players and notebook computers are among the categories that are expected to have growth in sales in calendar 2010, according to the CEA, which is forecasting a 0.3% increase in consumer electronics factory sales to retailers for the calendar year 2010.
Net sales for the three and nine months ended December 31, 2009 increased 20.3% and 8.3%, to $500.4 million and $1.1 billion, respectively, compared to the comparable prior year period. The increase in sales for the three and nine months ended December 31, 2009 was primarily attributable to the net addition of 19 stores during the 12 month period ended December 31, 2009, partially offset by a 0.2% and a 7.2% decrease in comparable store sales, respectively.
Our effective income tax rate for the three months ended December 31, 2009 decreased to 38.5% compared to 40.3% for the comparable prior year period. The decrease in our effective income tax rate for the three months ended December 31, 2009 compared to the comparable prior year period is primarily the result of changes in the expected annual effective state income tax rate.
Borrowings under the credit agreement are subject to a borrowing base calculation based on specified percentages of eligible accounts receivable and inventories. Pursuant to Amendment No. 1, the borrowing base was modified to equal the sum of (i) the lesser of (a) 90% of the net orderly liquidation value of all eligible inventories of Gregg Appliances and (b) 75% of the net book value of such eligible inventory and (ii) 90% of all commercial and credit card receivables of Gregg Appliances, in each case subject to customary reserves and eligibility criteria. Prior to the amendment, the borrowing base equaled the sum of (i) the lesser of (a) 93% (96% during a seasonal period) of the net orderly liquidation value of all eligible inventory of Gregg Appliances and (b) 75% of the net book value of such eligible inventory and (ii) 90% of all commercial and credit card receivables of Gregg Appliances, in each case subject to customary reserves and eligibility criteria. Amendment No. 1 required payment to the incremental lenders of a commitment fee equal to 5.0% of the incremental commitment, or $1,250,000.
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Hhgregg Inc. has a market cap of $781 million; its shares were traded at around $20.35 with a P/E ratio of 18.3 and P/S ratio of 0.6. HGG is in the portfolios of Ron Baron of Baron Funds, Arnold Van Den Berg of Century Management.
Highlight of Business Operations:
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 video and appliance products. We display over 100 models of flat panel televisions and 350 major appliances in our stores with an especially broad assortment of models in the middle- to upper-end of product price ranges. Video and appliance net sales comprised 80% and 82% of our net sales mix for the three months ended December 31, 2009 and 2008, respectively, and 82% and 85% of our net sales for the nine months ended December 31, 2009 and 2008, respectively.We focus on leveraging our semi-fixed expenditures in advertising, distribution and regional management through closely managing our inventory, working capital and store development expenditures. Our inventory has averaged 7.0 turns per year over the past three fiscal years. Our working capital has averaged 2.4%, expressed as a percentage of sales, over the past three fiscal years. Our net capital expenditures have averaged 1.8%, measured as a percentage of sales, over the past three fiscal years. These factors, combined with our strong store-level profitability, have contributed to the generation of significant free cash flow over the past three fiscal years. Historically, this has enabled us to de-leverage our balance sheet and internally fund our store growth.
According to the most current estimates of the Consumer Electronics Association, or the CEA, consumer electronics factory sales to retailers fell 7.8% for calendar year 2009, the first decline since 2001. Looking ahead, digital displays, Blu-ray players and notebook computers are among the categories that are expected to have growth in sales in calendar 2010, according to the CEA, which is forecasting a 0.3% increase in consumer electronics factory sales to retailers for the calendar year 2010.
Net sales for the three and nine months ended December 31, 2009 increased 20.3% and 8.3%, to $500.4 million and $1.1 billion, respectively, compared to the comparable prior year period. The increase in sales for the three and nine months ended December 31, 2009 was primarily attributable to the net addition of 19 stores during the 12 month period ended December 31, 2009, partially offset by a 0.2% and a 7.2% decrease in comparable store sales, respectively.
Our effective income tax rate for the three months ended December 31, 2009 decreased to 38.5% compared to 40.3% for the comparable prior year period. The decrease in our effective income tax rate for the three months ended December 31, 2009 compared to the comparable prior year period is primarily the result of changes in the expected annual effective state income tax rate.
Borrowings under the credit agreement are subject to a borrowing base calculation based on specified percentages of eligible accounts receivable and inventories. Pursuant to Amendment No. 1, the borrowing base was modified to equal the sum of (i) the lesser of (a) 90% of the net orderly liquidation value of all eligible inventories of Gregg Appliances and (b) 75% of the net book value of such eligible inventory and (ii) 90% of all commercial and credit card receivables of Gregg Appliances, in each case subject to customary reserves and eligibility criteria. Prior to the amendment, the borrowing base equaled the sum of (i) the lesser of (a) 93% (96% during a seasonal period) of the net orderly liquidation value of all eligible inventory of Gregg Appliances and (b) 75% of the net book value of such eligible inventory and (ii) 90% of all commercial and credit card receivables of Gregg Appliances, in each case subject to customary reserves and eligibility criteria. Amendment No. 1 required payment to the incremental lenders of a commitment fee equal to 5.0% of the incremental commitment, or $1,250,000.
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