Michael OHara 1 Professor Pritchard Introduction -The chief executive officer of HH Gregg is Dennis L. May.

HH Gregg is headquartered in Indianapolis, Indiana. The fiscal year for HH Gregg ended on March 31, 2011 this year. HH Gregg sells electronics ranging from home appliances to consumer electronics. Geographically speaking HH Gregg has stores in the South Eastern Part of the United States as well as states like Indiana, Ohio, New Jersey, Pennsylvania, and Illinois. KPMG LLP is the company that handles the auditing for HH Gregg. KPMG LLP stated that at the end of the fiscal year for HH Gregg, the financial position of HH Gregg is accurate to what the Internal Controls of HH Gregg have reported. On November 11th at 4:22 PM EST, HH Gregg had stock valued at $16.25 at $0.0001 par value. HH Gregg traditionally has not paid dividends to stockholders. HH Gregg began publicly trading on the New York Stock Exchange on July 20th, 2007.

Industry Situation and Company Plans -As of March 31, 2011, there are 173 HH Gregg stores in the United States. HH Gregg was formed April 22, 2007 for corporate reorganization of the business. On July 19, 2007, all the stockholders that had common stock in Gregg Appliances exchanged their Gregg Appliances for HH Gregg common stock. Gregg Appliances is now an owned-subsidiary of HH Gregg. When HH Gregg was formed, assets and equity were transferred from Gregg Appliances. This transaction was

Michael OHara 2 Professor Pritchard recorded at the carrying amount at the time HH Gregg was formed. HH Gregg focuses on the selling of video and appliance products. The stores floor space displays around 100 flat panel televisions and around 300 home appliances. The wide variety of these products has a range of prices from economical to higher-end. The numerous different brand name products give the customer a wide selection to look at. Advertising expenses as well as marketing HH Gregg focus on the consumer electronics and electronic appliances. Delivery and installation of products for customer is important to the business strategy of HH Gregg. HH Gregg focuses on the purchase experience of the customer. Sales associates educate the customers about the value and quality of the products. HH Gregg also offers the service of delivery and installation for the customer. The company monitors competitor prices so that HH Gregg can compete in the market. HH Gregg strives to help the customer understand the products so that they are more likely to buy something that they can have more use for. An example would be a more expensive television that has more features than a standard one. If HH Gregg can successfully educate the customer on the product that they are looking at then they are more likely to buy that product being more knowledgeable in that product. HH Gregg pushes the sale of the products with more applications because this will result in higher selling prices as well as higher profit margins. HH Gregg focuses on expanding in metropolitan markets so that it will quickly work

Michael OHara 3 Professor Pritchard to the advantage of HH Gregg. The company looks to put stores in locations where there is a high demand of the products it sells. These areas demonstrate above-average economic growth in the area, high household incomes, and new housing starts/renovation. HH Gregg markets are usually in the same markets as its competitors. HH Gregg plans to expand in these types of markets in hopes that it will continue to help with an improvement in market share and operation efficiencies. During the 2011 fiscal year, HH Gregg opened 42 stores in new markets. HH Gregg added the markets of Baltimore, Maryland; Philadelphia, Pennsylvania; Richmond, Virginia; and Washington D.C. in the 2011 fiscal year. Philadelphia, Pennsylvania is home to a new HH Gregg distribution center that opened for the expansion of HH Gregg during the 2011 fiscal year. HH Gregg has a goal of opening between 35-40 new stores during the 2012 fiscal year. The new markets are Miami, Florida; Pittsburgh, Pennsylvania; and Chicago, Illinois. HH Gregg wants the customers to have a store-friendly experience when coming to HH Gregg. All HH Gregg stores are brightly lit and divided into various departments to make it easier for the customer to see products clearly. Sales associates are always in the floor to talk to customers about the products HH Gregg has to offer. HHG Distribution and Gregg appliances have an exemption from reporting under the Securities Act of 1934. This is for a few reasons. HH Gregg does not have independent assets or operations. Debt securities that have been guaranteed by the

Michael OHara 4 Professor Pritchard subsidiary guarantors that are issued by the shelf registration are unconditional and joint in full. The only subsidiaries of HH Gregg are Gregg appliances and HHG Distribution. After the fiscal year for March 31, 2011 ended, HH Gregg consummated 4,025,000 shares of its common stock under the $200 million shelf-registered statement along with a private placement of combining shares of 1,000,000 of its common stock. This gave a result of combined proceeds, net of underwriting and placement fees to HH Gregg of approximately $78.1 million. There are 39,724,737 basic shares outstanding as of March 31, 2011.

Financial Statements HH Gregg has a multistep format for its income statement. In 2011, Gross Profit for HH Gregg was $629,760. The income from operations for 2011 was $86,271. Net income in 2011 was $48,208. In 2010, the Gross Profit for HH Gregg was $466,941. Income from operations in 2010 was $68,791. Net Income in 2010 was $39,198. Comparing the income statements for HH Gregg between 2010 and 2011 shows that there was an increase in Gross Profit, Income from Operations, and Net Income from 2010 to 2011. Total assets for HH Gregg in 2011 were valued at $549,645. Total liabilities for HH Gregg in 2011 were valued at $233,059. Total Stockholders Equity for 2011 were valued at $316,586.

Michael OHara 5 Professor Pritchard 2011 Balance Sheet

2010 Balance Sheet

Accounting Policies HH Gregg prepares financial statements using the U.S. Generally Accepted Accounting Principles. The Accounts Receivable is recorded at invoice price than can be subject to finance charges. HH Gregg uses an Allowance for Doubtful Accounts to estimate the potential bad debt expenses they can have in a fiscal year. HH Gregg goes over the allowance for doubtful accounts on a monthly basis. If a balance is past due over 90 days then HH Gregg will review the account for collectability. HH Gregg values its inventory at the lower of cost or market value by markdown and inventory loss reserves. The markdown reserve is the excess of the average cost over the amount it takes to from the sale or the disposal of the inventory. HH Gregg uses the straight-line method to determine the depreciation and useful life of its property and equipment. The cash for HH Gregg is mainly cash and bank deposits. The cash equivalents for HH Gregg are mainly money market accounts along with investments with a high liquidity and

Michael OHara 6 Professor Pritchard maturity of 3 months or less when purchased. HH Gregg recognizes revenue when from the sale of the product results in the customer taking possession of the product. HH Gregg will honor returns within a 14-day period from the date of the sale with sales returns and allowances derived from the historical cost. The costs of goods sold for HH Gregg is the cost of gross inventory sold, this includes handling charges, freight out expense, and inventory losses. Financial Analysis -Liquidity Ratios for 2011 a). Working Capital 2011: b). Current Ratio 2011: Liquidity Ratios for 2010 a). Working Capital 2010: b). Current Ratio 2010: In 2010, HH Gregg had more working capital than it did during the 2011 fiscal year. The ratio was also greater in 2010 compared to 2011. Working capital is the amount that the company has at its disposal to spend. Working capital was much greater in 2010 vs. 2011. The current ratio is for determining if a company has enough money to pay off its debts in the next year. Typically in a business as long as the ratios are

Michael OHara 7 Professor Pritchard above 1 then the company is in good standings as far as paying off its debts with current assets. -Profitability Ratios a). Profit Margin 2011 Profit Margin 2010

The profit margin shows the percentage of each revenue or sales dollar that results in net income. HH Gregg had a greater profit margin in 2010. b). Asset Turnover 2011 Asset Turnover 2010

An asset turnover shows the efficiency of assets being used to produce sales. The asset turnover was higher for HH Gregg in 2011. c). Return on Assets 2011 Return on Assets 2010 Return on Assets shows how well assets are producing income. There was a higher return on assets in 2011. d).

Michael OHara 8 Professor Pritchard Debt to Equity 2011 Debt to Equity 2010

Debt to equity ratio shows the proportion of a companys assets financed by creditors over the proportion financed by stockholders. Debt to equity was higher in 2010. e). Return on Equity 2011 Return on Equity 2010

Return on equity is the amount that shows how much is earned on investing in a business. The return on equity was greater in 2010.