##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended December 31, 2009

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  To

Commission file number 001-33600

LOGO

hhgregg, Inc.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-8819207                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|4151 East 96thStreet Indianapolis, IN                          |  | 46240                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(317)
848-8710

(Registrants telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)





Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes     ̈  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (check one):



|                           |  |                      |  |                                                                        |  |                             
|-------------------------- |  | -------------------- |  | ---------------------------------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated Filer  x |  | Non-accelerated filer   ̈ (Do not check if a smaller reporting
company) |  | Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).     ̈  Yes    x  No

The number of shares of hhgregg, Inc.s common stock outstanding as of January 29, 2010 was 38,441,322.









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##### Table of Contents

HHGREGG, INC. AND SUBSIDIARIES

Report on Form 10-Q

For the Quarter Ended December 31, 2009



|                              |  |                                                                                                                               |  |   
|----------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------- |  | --
|                              |  | Page                                                                                                                         
|Part I. Financial Information |  |                                                                                                                              
|                              |  |                                                                                                                              
|Item 1.                       |  | Condensed Consolidated Financial Statements (unaudited):                                                                      |  |   
|                              |  |                                                                                                                              
|                              |  | Condensed Consolidated Statements of Income for the Three and Nine Months Ended December 31, 2009 and 2008                    |  | 3 
|                              |  |                                                                                                                              
|                              |  | Condensed Consolidated Balance Sheets as of December 31, 2009 and March 31, 2009                                              |  | 4 
|                              |  |                                                                                                                              
|                              |  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2009 and 2008                          |  | 5 
|                              |  |                                                                                                                              
|                              |  | Condensed Consolidated Statement of Stockholders Equity and Comprehensive Income for the Nine Months Ended December 31, 2009 |  | 6 
|                              |  |                                                                                                                              
|                              |  | Notes to Condensed Consolidated Financial Statements                                                                          |  | 7 
|                              |  |                                                                                                                              
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                         |  | 15
|                              |  |                                                                                                                              
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                                    |  | 23
|                              |  |                                                                                                                              
|Item 4.                       |  | Controls and Procedures                                                                                                       |  | 24
|                              | 
|Part II. Other Information    |  |                                                                                                                              
|                              |  |                                                                                                                              
|Item 1.                       |  | Legal Proceedings                                                                                                             |  | 24
|                              |  |                                                                                                                              
|Item 1A.                      |  | Risk Factors                                                                                                                  |  | 24
|                              |  |                                                                                                                              
|Item 6.                       |  | Exhibits                                                                                                                      |  | 24
|                              | 
|Signatures                    |  | 25                                                                                                                           



2



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##### Table of Contents

|Part I: | Financial Information
|------- | ---------------------



|ITEM 1. | Condensed Consolidated Financial Statements
|------- | -------------------------------------------

HHGREGG, INC. AND SUBSIDIARIES

Condensed
Consolidated Statements of Income

(Unaudited)



|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|-------------------------------------------- |  | ----------------------------------------------- | ---------- | - | ----------------- | - | ---------- | ---------------- |  | - | ---------------- | - |  | - | ---------- | -
|                                             |  | Three Months Ended                              |            |   | Nine Months Ended |  
|                                             |  | December 31,2009                                |            |   | December 31,2008  |   |            | December 31,2009 |  |   | December 31,2008 |  
|                                             |  | (In thousands, except share and per share data) |           
|Net sales                                    |  | $                                               | 500,392    |   |                   | $ | 416,106    |                  |  | $ | 1,116,960        |   |  | $ | 1,031,823  |  
|Cost of goods sold                           |  |                                                 | 347,888    |   |                   |   | 285,652    |                  |  |   | 777,461          |   |  |   | 712,404    |  
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Gross profit                                 |  |                                                 | 152,504    |   |                   |   | 130,454    |                  |  |   | 339,499          |   |  |   | 319,419    |  
|Selling, general and administrative expenses |  |                                                 | 92,715     |   |                   |   | 77,998     |                  |  |   | 233,326          |   |  |   | 214,256    |  
|Net advertising expense                      |  |                                                 | 17,189     |   |                   |   | 17,904     |                  |  |   | 42,477           |   |  |   | 49,505     |  
|Depreciation and amortization expense        |  |                                                 | 4,345      |   |                   |   | 3,953      |                  |  |   | 12,324           |   |  |   | 12,049     |  
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Income from operations                       |  |                                                 | 38,255     |   |                   |   | 30,599     |                  |  |   | 51,372           |   |  |   | 43,609     |  
|Other expense (income):                      |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Interest expense                             |  |                                                 | 1,317      |   |                   |   | 1,924      |                  |  |   | 3,972            |   |  |   | 5,725      |  
|Interest income                              |  |                                                 | (4         | ) |                   |   | (2         | )                |  |   | (18              | ) |  |   | (9         | )
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Total other expense                          |  |                                                 | 1,313      |   |                   |   | 1,922      |                  |  |   | 3,954            |   |  |   | 5,716      |  
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Income before income taxes                   |  |                                                 | 36,942     |   |                   |   | 28,677     |                  |  |   | 47,418           |   |  |   | 37,893     |  
|Income tax expense                           |  |                                                 | 14,207     |   |                   |   | 11,557     |                  |  |   | 18,267           |   |  |   | 15,271     |  
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Net income                                   |  | $                                               | 22,735     |   |                   | $ | 17,120     |                  |  | $ | 29,151           |   |  | $ | 22,622     |  
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Net income per share                         |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Basic                                        |  | $                                               | 0.59       |   |                   | $ | 0.53       |                  |  | $ | 0.81             |   |  | $ | 0.70       |  
|Diluted                                      |  | $                                               | 0.57       |   |                   | $ | 0.52       |                  |  | $ | 0.78             |   |  | $ | 0.69       |  
|Weighted average shares outstanding-Basic    |  |                                                 | 38,393,715 |   |                   |   | 32,372,419 |                  |  |   | 36,056,798       |   |  |   | 32,343,995 |  
|Weighted average shares outstanding-Diluted  |  |                                                 | 39,736,739 |   |                   |   | 32,617,557 |                  |  |   | 37,350,450       |   |  |   | 32,997,168 |  

See accompanying notes to condensed consolidated financial statements.



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HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)



|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ------- | - | -------------- | - | ------- | -
|                                                                                                                                                                                |  | December 31, 2009                 |         |   | March 31, 2009 |  
|                                                                                                                                                                                |  | (In thousands, except share data) |        
|Assets                                                                                                                                                                          |  |                                   |         |   |                |   |         |  
|Current assets:                                                                                                                                                                 |  |                                   |         |   |                |   |         |  
|Cash and cash equivalents                                                                                                                                                       |  | $                                 | 99,667  |   |                | $ | 21,496  |  
|Accounts receivabletrade, less allowances of $125 and $219, respectively                                                                                                       |  |                                   | 6,736   |   |                |   | 5,319   |  
|Accounts receivableother, less allowances of $0 and $0, respectively                                                                                                           |  |                                   | 19,893  |   |                |   | 9,038   |  
|Merchandise inventories, net                                                                                                                                                    |  |                                   | 217,376 |   |                |   | 141,610 |  
|Prepaid expenses and other current assets                                                                                                                                       |  |                                   | 4,422   |   |                |   | 4,247   |  
|Deferred income taxes                                                                                                                                                           |  |                                   | 5,635   |   |                |   | 4,421   |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|Total current assets                                                                                                                                                            |  |                                   | 353,729 |   |                |   | 186,131 |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|Net property and equipment                                                                                                                                                      |  |                                   | 107,246 |   |                |   | 83,555  |  
|Deferred financing costs, net                                                                                                                                                   |  |                                   | 3,574   |   |                |   | 2,624   |  
|Deferred income taxes                                                                                                                                                           |  |                                   | 66,737  |   |                |   | 77,564  |  
|Other assets                                                                                                                                                                    |  |                                   | 713     |   |                |   | 501     |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|Total long-term assets                                                                                                                                                          |  |                                   | 178,270 |   |                |   | 164,244 |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|Total assets                                                                                                                                                                    |  | $                                 | 531,999 |   |                | $ | 350,375 |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|Liabilities and Stockholders Equity                                                                                                                                            |  |                                   |         |   |                |   |         |  
|Current liabilities:                                                                                                                                                            |  |                                   |         |   |                |   |         |  
|Accounts payable                                                                                                                                                                |  | $                                 | 99,357  |   |                | $ | 62,265  |  
|Current maturities of long-term debt                                                                                                                                            |  |                                   | 908     |   |                |   | 908     |  
|Customer deposits                                                                                                                                                               |  |                                   | 17,351  |   |                |   | 15,234  |  
|Accrued liabilities                                                                                                                                                             |  |                                   | 46,871  |   |                |   | 32,067  |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|Total current liabilities                                                                                                                                                       |  |                                   | 164,487 |   |                |   | 110,474 |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|Long-term liabilities:                                                                                                                                                          |  |                                   |         |   |                |   |         |  
|Long-term debt, excluding current maturities                                                                                                                                    |  |                                   | 91,018  |   |                |   | 91,700  |  
|Other long-term liabilities                                                                                                                                                     |  |                                   | 35,238  |   |                |   | 23,048  |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|Total long-term liabilities                                                                                                                                                     |  |                                   | 126,256 |   |                |   | 114,748 |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|Total liabilities                                                                                                                                                               |  |                                   | 290,743 |   |                |   | 225,222 |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|                                                                                                                                                                                |  |                                  
|Stockholders equity:                                                                                                                                                           |  |                                   |         |   |                |   |         |  
|Preferred stock, par value $.0001; 10,000,000 shares authorized; no shares issued and outstanding as of December 31, 2009
and March 31, 2009, respectively                      |  |                                   |        |   |                |   |        |  
|Common stock, par value $.0001; 150,000,000 shares authorized; 38,416,989 and 32,744,111 shares issued and outstanding as of
December 31, 2009 and March 31, 2009, respectively |  |                                   | 4       |   |                |   | 3       |  
|Additional paid-in capital                                                                                                                                                      |  |                                   | 252,500 |   |                |   | 165,524 |  
|Accumulated other comprehensive loss                                                                                                                                            |  |                                   | (810    | ) |                |   | (747    | )
|Accumulated deficit                                                                                                                                                             |  |                                   | (10,347 | ) |                |   | (39,498 | )
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|                                                                                                                                                                                |  |                                   | 241,347 |   |                |   | 125,282 |  
|Note receivable for common stock                                                                                                                                                |  |                                   | (91     | ) |                |   | (129    | )
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|Total stockholders equity                                                                                                                                                      |  |                                   | 241,256 |   |                |   | 125,153 |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  
|Total liabilities and stockholders equity                                                                                                                                      |  | $                                 | 531,999 |   |                | $ | 350,375 |  
|                                                                                                                                                                                |  |                                   |         |   |                |   |         |  

See accompanying notes to condensed consolidated financial statements.



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HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                  |  |                   |         |   |                   |   |         |  
|--------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                  |  | Nine Months Ended |        
|                                                                                  |  | December 31, 2009 |         |   | December 31, 2008 |  
|                                                                                  |  | (In thousands)    |        
|Cash flows from operating activities:                                             |  |                   |         |   |                   |   |         |  
|Net income                                                                        |  | $                 | 29,151  |   |                   | $ | 22,622  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                   |         |   |                   |   |         |  
|Depreciation and amortization                                                     |  |                   | 12,324  |   |                   |   | 12,049  |  
|Amortization of deferred financing costs                                          |  |                   | 690     |   |                   |   | 501     |  
|Stock-based compensation                                                          |  |                   | 2,643   |   |                   |   | 1,993   |  
|Excess tax benefits from stock-based compensation                                 |  |                   | (2,460  | ) |                   |   | (161    | )
|Loss on sales of property and equipment                                           |  |                   | 12      |   |                   |   | 46      |  
|Deferred income taxes                                                             |  |                   | 9,656   |   |                   |   | 1,029   |  
|Tenant allowances received from landlords                                         |  |                   | 6,334   |   |                   |   | 500     |  
|Changes in operating assets and liabilities:                                      |  |                   |         |   |                   |   |         |  
|Accounts receivabletrade                                                         |  |                   | (1,417  | ) |                   |   | (2,295  | )
|Accounts receivableother                                                         |  |                   | (4,676  | ) |                   |   | (51     | )
|Merchandise inventories                                                           |  |                   | (75,766 | ) |                   |   | (54,994 | )
|Prepaid expenses and other assets                                                 |  |                   | (387    | ) |                   |   | 216     |  
|Accounts payable                                                                  |  |                   | 5,889   |   |                   |   | 16,256  |  
|Customer deposits                                                                 |  |                   | 2,117   |   |                   |   | 1,165   |  
|Accrued liabilities                                                               |  |                   | 18,508  |   |                   |   | 3,669   |  
|Other long-term liabilities                                                       |  |                   | (1,222  | ) |                   |   | (1,426  | )
|                                                                                  |  |                   |         |   |                   |   |         |  
|Net cash provided by operating activities                                         |  |                   | 1,396   |   |                   |   | 1,119   |  
|                                                                                  |  |                   |         |   |                   |   |         |  
|Cash flows from investing activities:                                             |  |                   |         |   |                   |   |         |  
|Purchases of property and equipment                                               |  |                   | (34,160 | ) |                   |   | (27,841 | )
|Net proceeds from sale leaseback transactions                                     |  |                   | 4,694   |   |                   |   | 10,035  |  
|Deposit on future sale leaseback transactions applied                             |  |                   | (1,043  | ) |                   |   | (2,858  | )
|Proceeds from sales of property and equipment                                     |  |                   | 43      |   |                   |   | 58      |  
|                                                                                  |  |                   |         |   |                   |   |         |  
|Net cash used in investing activities                                             |  |                   | (30,466 | ) |                   |   | (20,606 | )
|                                                                                  |  |                   |         |   |                   |   |         |  
|Cash flows from financing activities:                                             |  |                   |         |   |                   |   |         |  
|Proceeds for issuance of common stock                                             |  |                   | 82,913  |   |                   |   |        |  
|Transaction costs for stock issuance                                              |  |                   | (4,764  | ) |                   |   |        |  
|Proceeds from exercise of stock options                                           |  |                   | 3,725   |   |                   |   | 716     |  
|Excess tax benefits from stock-based compensation                                 |  |                   | 2,460   |   |                   |   | 161     |  
|Net increase in bank overdrafts                                                   |  |                   | 25,191  |   |                   |   | 3,527   |  
|Net borrowings on line of credit                                                  |  |                   |        |   |                   |   | 14,798  |  
|Payments on notes payable                                                         |  |                   | (682    | ) |                   |   |        |  
|Transaction costs for amending ABL Facility                                       |  |                   | (1,640  | ) |                   |   |        |  
|Other, net                                                                        |  |                   | 38      |   |                   |   | 100     |  
|                                                                                  |  |                   |         |   |                   |   |         |  
|Net cash provided by financing activities                                         |  |                   | 107,241 |   |                   |   | 19,302  |  
|                                                                                  |  |                   |         |   |                   |   |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |                   | 78,171  |   |                   |   | (185    | )
|Cash and cash equivalents                                                         |  |                   |         |   |                   |   |         |  
|Beginning of period                                                               |  |                   | 21,496  |   |                   |   | 1,869   |  
|                                                                                  |  |                   |         |   |                   |   |         |  
|End of period                                                                     |  | $                 | 99,667  |   |                   | $ | 1,684   |  
|                                                                                  |  |                   |         |   |                   |   |         |  
|Supplemental disclosure of cash flow information:                                 |  |                   |         |   |                   |   |         |  
|Interest paid                                                                     |  | $                 | 3,411   |   |                   | $ | 6,575   |  
|Income taxes paid                                                                 |  | $                 | 2,529   |   |                   | $ | 12,349  |  

See accompanying notes
to condensed consolidated financial statements.



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##### Table of Contents

HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders Equity and Comprehensive Income

Nine Months Ended December 31, 2009

(in thousands)



|                                                                   |  |                |   |             |   |                          |  |   |                                   |   |  |                    |      |   |                                |   |         |                          |  |   |      |   |  |   |         |  
|------------------------------------------------------------------ |  | -------------- | - | ----------- | - | ------------------------ |  | - | --------------------------------- | - |  | ------------------ | ---- | - | ------------------------------ | - | ------- | ------------------------ |  | - | ---- | - |  | - | ------- | -
|                                                                   |  | PreferredStock |   | CommonStock |   | AdditionalPaid inCapital |  |   | AccumulatedOtherComprehensiveLoss |   |  | AccumulatedDeficit |      |   | Note ReceivableFor CommonStock |   |         | TotalStockholdersEquity | 
|Balance at March 31, 2009                                          |  | $              |  |             | $ | 3                        |  | $ | 165,524                           |   |  | $                  | (747 | ) |                                | $ | (39,498 | )                        |  | $ | (129 | ) |  | $ | 125,153 |  
|Comprehensive income:                                              |  |                |   |             |   |                          |  |   |                                   |   |  |                    |      |   |                                |   |         |                          |  |   |      |   |  |   |         |  
|Net income                                                         |  |                |  |             |   |                         |  |   |                                  |   |  |                    |     |   |                                |   | 29,151  |                          |  |   |     |   |  |   | 29,151  |  
|Unrealized loss on hedge arrangement, net of tax benefit of $42    |  |                |  |             |   |                         |  |   |                                  |   |  |                    | (63  | ) |                                |   |        |                          |  |   |     |   |  |   | (63     | )
|                                                                   |  |                |   |             |   |                          |  |   |                                   |   |  |                    |      |   |                                |   |         |                          |  |   |      |   |  |   |         |  
|Total comprehensive income                                         |  |                |  |             |   |                         |  |   |                                  |   |  |                    | (63  | ) |                                |   | 29,151  |                          |  |   |     |   |  |   | 29,088  |  
|Issuance of common stock                                           |  |                |  |             |   | 1                        |  |   | 82,912                            |   |  |                    |     |   |                                |   |        |                          |  |   |     |   |  |   | 82,913  |  
|Transaction costs for stock issuance                               |  |                |  |             |   |                         |  |   | (4,764                            | ) |  |                    |     |   |                                |   |        |                          |  |   |     |   |  |   | (4,764  | )
|Payments received on notes receivable for issuance of common stock |  |                |  |             |   |                         |  |   |                                  |   |  |                    |     |   |                                |   |        |                          |  |   | 38   |   |  |   | 38      |  
|Exercise of stock options                                          |  |                |  |             |   |                         |  |   | 3,725                             |   |  |                    |     |   |                                |   |        |                          |  |   |     |   |  |   | 3,725   |  
|Excess tax benefits from stock-based compensation                  |  |                |  |             |   |                         |  |   | 2,460                             |   |  |                    |     |   |                                |   |        |                          |  |   |     |   |  |   | 2,460   |  
|Stock-based compensation expense                                   |  |                |  |             |   |                         |  |   | 2,643                             |   |  |                    |     |   |                                |   |        |                          |  |   |     |   |  |   | 2,643   |  
|                                                                   |  |                |   |             |   |                          |  |   |                                   |   |  |                    |      |   |                                |   |         |                          |  |   |      |   |  |   |         |  
|Balance at December 31, 2009                                       |  | $              |  |             | $ | 4                        |  | $ | 252,500                           |   |  | $                  | (810 | ) |                                | $ | (10,347 | )                        |  | $ | (91  | ) |  | $ | 241,256 |  
|                                                                   |  |                |   |             |   |                          |  |   |                                   |   |  |                    |      |   |                                |   |         |                          |  |   |      |   |  |   |         |  

See accompanying notes to condensed consolidated financial statements.



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##### Table of Contents

HHGREGG, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)



|(1) | Summary of Significant Accounting Policies
|--- | ------------------------------------------

Description of Business

hhgregg, Inc. (the Company or
hhgregg) is a specialty retailer of consumer electronics, home appliances and related products and services operating under the name hhgreggTM. As of December 31, 2009, the Company had 127 stores located in Alabama, Florida, Georgia, Indiana, Kentucky,
Mississippi, North Carolina, Ohio, South Carolina, Tennessee and Virginia. The Company operates in one reportable segment.

Interim
Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the United States Securities and Exchange Commission (the SEC). In the opinion of the Companys management, these unaudited condensed consolidated financial statements reflect all necessary
adjustments, which are of a normal recurring nature, for a fair presentation of such data. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting
principles (GAAP) have been condensed or omitted pursuant to such SEC rules and regulations. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements
of hhgregg, Inc. and the notes thereto for the fiscal year ended March 31, 2009, included in the Companys Annual Report on Form 10-K filed with the SEC on June 2, 2009. The consolidated results of operations, financial position and
cash flows for interim periods are not necessarily indicative of those to be expected for a full year. Further, the Company has made a number of estimates and assumptions relating to the assets and liabilities and the reporting of sales and expenses
to prepare these unaudited condensed consolidated financial statements in conformity with GAAP. Actual results could differ from those estimates.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the
accounts of hhgregg and its wholly-owned subsidiary, Gregg Appliances, Inc. (Gregg Appliances). The unaudited condensed consolidated financial statements of Gregg Appliances include its wholly-owned subsidiary HHG Distributing LLC
(HHG Distributing) which has no assets or operations.

Property and Equipment

The Company sold three and six store locations in the nine months ended December 31, 2009 and 2008, respectively. The Company leased the
buildings back applying the provisions of Accounting Standards Codification (ASC) 840-40 Sale-Leaseback Transactions. Net proceeds from the transactions were $4.7 million and $10 million for the nine months ended December 31,
2009 and 2008, respectively. The Company does not have any continuing ownership interest with the sale leaseback locations and the leases are accounted for as operating leases.



|(2) | Recently Issued Accounting Pronouncements
|--- | -----------------------------------------

In June 2009, the Financial Accounting Standards Board (FASB) issued ASC 105-10 Generally Accepted Accounting Principals. ASC 105-10 is the source of authoritative, nongovernmental
GAAP, except for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative.
This standard was effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The Company began to use the new guidelines and numbering system prescribed by the Codification when referring to
GAAP in the second quarter of fiscal 2010. The Codification was not intended to change or alter existing GAAP and it did not have any impact on the Companys unaudited condensed consolidated financial statements.



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In May 2009, the FASB issued ASC 855-10 Subsequent Events. This standard is
intended to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, this standard sets forth the period
after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC 855-10 was
effective for fiscal years and interim periods ending after June 15, 2009. See discussion of subsequent events at Note 12.

In April 2009, the FASB issued three FASB Staff Positions (FSP) intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and impairments of securities. FSP
No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly provides additional guidelines for estimating fair
value. FSP No. 115-2, Recognition and Presentation of Other-Than-Temporary Impairments, provides additional guidance related to the disclosure of impairment losses on securities and the accounting for impairment losses on debt
securities. FSP No. 115-2 does not amend existing guidance related to other-than-temporary impairments of equity securities. FSP No. 157-4 and FSP No. 115-2 were codified into ASC 820-10 Fair Value Measurements. FSP
No. 107-1 and Accounting Principles Board (APB) Opinion No. 28-1, Interim Disclosures about Fair Value of Financial Instruments, which was codified into ASC 825-10 Financial Instruments, increases the frequency of
fair value disclosures. These FSPs were effective for fiscal years and interim periods ending after June 15, 2009 and were effective for the Company for the first quarter of fiscal 2010. The adoption of these FSPs did not have any impact on the
Companys consolidated financial position or results of operations.



|(3) | Fair Value Measurements
|--- | -----------------------

The Company adopted FSP No. 157-2, Effective Date of FASB Statement No. 157, which was codified into ASC 820 Fair Value Measurements and Disclosures on April 1, 2009. This adoption did not impact the
Companys consolidated results of operations or financial condition. The Company uses a three-tier valuation hierarchy based upon observable and non-observable inputs:

Level 1  unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access.

Level 2 inputs other than quoted market prices included in Level 1 that are observable, either directly or
indirectly, for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 unobservable inputs for the asset or liability, as there is little, if any, market activity at the measurement date.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The fair value hierarchy
requires the use of observable market data when available. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level
input that is significant to the fair value measurement in its entirety. The Companys assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs
specific to the asset or liability.



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The following table sets forth by level within the fair value hierarchy, the Companys
financial assets and liabilities that were accounted for at fair value on a recurring basis at December 31, 2009 according to the valuation techniques the Company used to determine their fair values (in thousands):



|                                                |  |                            |       |                                                   |   |         |  |   |       |  |   |  
|----------------------------------------------- |  | -------------------------- | ----- | ------------------------------------------------- | - | ------- |  | - | ----- |  | - | -
|                                                |  | Fair ValueDecember 31,2009 |       | Fair Value MeasurementsUsing Inputs Considered as
|                                                |  | Level 1                    |       | Level 2                                           |   | Level 3
|Financial instruments classified as liabilities |  |                            |       |                                                   |   |         |  |   |       |  |   |  
|Interest rate swap                              |  | $                          | 1,350 |                                                   | $ |        |  | $ | 1,350 |  | $ | 

The fair
value of the Companys interest rate swap was determined based on LIBOR yield curves at the reporting date.

Assets and Liabilities
that are Measured at Fair Value on a Non-Recurring Basis

Disclosures for nonfinancial assets and liabilities that are
measured at fair value, but are recognized and disclosed at fair value on a nonrecurring basis, were required prospectively beginning April 1, 2009. During the nine months ended December 31, 2009, the Company had no measurements of assets
or liabilities at fair value on a non-recurring basis, such as property and equipment, subsequent to their initial recognition.

Fair
Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivabletrade,
accounts receivableother, accounts payable and customer deposits approximate fair value because of the short maturity of these instruments. The carrying amount of the Term B Facility is carried at fair value as the interest rate is market
based. The Companys senior notes have aggregate fair values of $3.4 million at December 31, 2009 and March 31, 2009. The Company estimated the fair value of the senior notes using a present value calculation based on current market
rates.



|(4) | Derivative Instruments
|--- | ----------------------

The Company only enters into derivative contracts that it intends to designate as a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). For
all hedging relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item, the nature of the risk being hedged, how the
hedging instruments effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method of measuring ineffectiveness. The Company also formally assesses, both at the hedges
inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting cash flows of hedged items.

Cash Flow Hedges

The Company uses variable-rate debt to finance its
operations. The debt obligations expose the Company to variability in interest payments due to changes in interest rates. Management believes that it is prudent to limit the variability of a portion of its interest payments. To meet this objective,
management enters into interest rate swap agreements to manage fluctuations in cash flows resulting from changes in the benchmark interest rate of LIBOR. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash
flows. Under the terms of the interest rate swaps, the Company receives LIBOR based variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt for the notional amount of its debt that
is hedged. The Company entered into an interest-rate related derivative instrument to manage its exposure on $50 million of its senior credit agreement (the Term B Facility) during fiscal 2008. This derivative instrument expired in
October 2009. During the nine months ended December 31, 2009, the Company entered into another derivative instrument to manage its exposure on $75 million of its Term B Facility. This derivative instrument became effective in October 2009 and
expires in October 2011.



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Changes in the fair value of interest rate swaps designated as hedging instruments that
effectively offset the variability of cash flows associated with variable-rate, long-term debt obligations are reported in accumulated other comprehensive loss. These amounts subsequently are reclassified into interest expense as a yield adjustment
of the hedged interest payments in the same period in which the related interest affects earnings. The ineffective portion of the change in fair value of a derivative instrument that qualifies as a cash-flow hedge is reported currently in earnings.

Summary of Derivative Balances

The following table presents the gross fair values of derivative instruments and the corresponding classification in the Companys unaudited condensed consolidated balance sheet as of
December 31, 2009 (in thousands):



|                |  |                             |  |           |        |  
|--------------- |  | --------------------------- |  | --------- | ------ | -
|                |  | Liabilities                 | 
|Contract Type   |  | Balance SheetClassification |  | FairValue |       
|Cash flow hedge |  | Other Long-term Liabilites  |  | $         | (1,350 | )

For the three and nine
months ended December 31, 2009, $0.2 million and $0.9 million, respectively, was recorded into interest expense for recognized losses on the cash flow hedges. There were no cash flow hedges discontinued prior to their original maturity date in
the nine months ended December 31, 2009 and 2008.

As a result of the use of derivative instruments, the Company is
exposed to risk that the counterparties will fail to meet their contractual obligations. Recent adverse developments in the global financial and credit markets could negatively impact the creditworthiness of the Companys counterparties and
cause one or more of the Companys counterparties to fail to perform as expected. To mitigate the counterparty credit risk, the Company only enters into contracts with carefully selected major financial institutions based upon their credit
ratings and other factors, and continually assesses the creditworthiness of counterparties. To date, all counterparties have performed in accordance with their contractual obligations.



|(5) | Properties and Equipment
|--- | ------------------------

Property and equipment consisted of the following at December 31, 2009 and March 31, 2009 (in thousands):



|                                               |  |                   |         |   |                |   |         |  
|---------------------------------------------- |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                               |  | December 31, 2009 |         |   | March 31, 2009 |  
|Buildings                                      |  | $                 |        |   |                | $ | 2,635   |  
|Machinery and equipment                        |  |                   | 13,595  |   |                |   | 12,357  |  
|Office furniture and equipment                 |  |                   | 78,520  |   |                |   | 68,798  |  
|Vehicles                                       |  |                   | 5,147   |   |                |   | 5,826   |  
|Signs                                          |  |                   | 8,962   |   |                |   | 7,525   |  
|Leasehold improvements                         |  |                   | 60,658  |   |                |   | 48,135  |  
|Construction in progress                       |  |                   | 25,772  |   |                |   | 14,273  |  
|                                               |  |                   |         |   |                |   |         |  
|                                               |  |                   | 192,654 |   |                |   | 159,549 |  
|Less accumulated depreciation and amortization |  |                   | (85,408 | ) |                |   | (75,994 | )
|                                               |  |                   |         |   |                |   |         |  
|Net property and equipment                     |  | $                 | 107,246 |   |                | $ | 83,555  |  
|                                               |  |                   |         |   |                |   |         |  



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|(6) | Net Income per Share
|--- | --------------------

Net
income per basic share is calculated based on the weighted-average number of outstanding common shares in accordance with ASC 260-10 Earnings per Share. Net income per diluted share is calculated based on the weighted-average number of
outstanding common shares plus the effect of potential dilutive common shares. When the Company reports net income, the calculation of net income per diluted share excludes shares underlying outstanding stock options with exercise prices that exceed
the average market price of the Companys common stock for the period and certain options with unrecognized compensation cost, as the effect would be antidilutive. Potential common shares are composed of shares of common stock issuable upon the
exercise of stock options. The following table presents net income per basic and diluted share for the three and nine months ended December 31, 2009 and 2008 (in thousands, except share and per share amounts):



|                                                        |  |                    |            |                   |   |                   |  |                   |            |  |   |           
|------------------------------------------------------- |  | ------------------ | ---------- | ----------------- | - | ----------------- |  | ----------------- | ---------- |  | - | ----------
|                                                        |  | Three Months Ended |            | Nine Months Ended
|                                                        |  | December 31, 2009  |            | December 31, 2008 |   | December 31, 2009 |  | December 31, 2008
|Net income (A)                                          |  | $                  | 22,735     |                   | $ | 17,120            |  | $                 | 29,151     |  | $ | 22,622    
|Weighted average outstanding shares of common stock (B) |  |                    | 38,393,715 |                   |   | 32,372,419        |  |                   | 36,056,798 |  |   | 32,343,995
|Dilutive effect of employee stock options               |  |                    | 1,343,024  |                   |   | 245,138           |  |                   | 1,293,652  |  |   | 653,173   
|                                                        |  |                    |            |                   |   |                   |  |                   |            |  |   |           
|Common stock and common stock equivalents (C)           |  |                    | 39,736,739 |                   |   | 32,617,557        |  |                   | 37,350,450 |  |   | 32,997,168
|Net income per share:                                   |  |                    |            |                   |   |                   |  |                   |            |  |   |           
|Basic (A/B)                                             |  | $                  | 0.59       |                   | $ | 0.53              |  | $                 | 0.81       |  | $ | 0.70      
|Diluted (A/C)                                           |  | $                  | 0.57       |                   | $ | 0.52              |  | $                 | 0.78       |  | $ | 0.69      

Antidilutive shares not included in the net income per diluted share calculation for
the three and nine months ended December 31, 2009 were 737,000 for both periods. Antidilutive shares not included in the net income per diluted share calculation for the three and nine months ended December 31, 2008 were 3,331,329 and
2,154,166, respectively.



|(7) | Inventories
|--- | -----------

Net
merchandise inventories consisted of the following at December 31, 2009 and March 31, 2009 (in thousands):



|           |  |                   |         |                |   |        
|---------- |  | ----------------- | ------- | -------------- | - | -------
|           |  | December 31, 2009 |         | March 31, 2009
|Video      |  | $                 | 116,400 |                | $ | 58,111 
|Appliances |  |                   | 53,338  |                |   | 48,037 
|Other      |  |                   | 47,638  |                |   | 35,462 
|           |  |                   |         |                |   |        
|           |  | $                 | 217,376 |                | $ | 141,610
|           |  |                   |         |                |   |        



|(8) | Debt
|--- | ----

A summary of debt
at December 31, 2009 and March 31, 2009 is as follows (in thousands):



|                                                                                                                      |  |                   |        |                |   |       
|--------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | -------------- | - | ------
|                                                                                                                      |  | December 31, 2009 |        | March 31, 2009
|Senior secured Term B Facility maturing on July 25, 2013, interest due quarterly                                      |  | $                 | 88,568 |                | $ | 89,250
|9.0% Senior notes, interest due in arrears on a semi-annual basis on February 1 and August 1 through
February 3, 2013 |  |                   | 3,358  |                |   | 3,358 
|                                                                                                                      |  |                   |        |                |   |       
|Total debt                                                                                                            |  |                   | 91,926 |                |   | 92,608
|Less current maturities of long-term debt                                                                             |  |                   | 908    |                |   | 908   
|                                                                                                                      |  |                   |        |                |   |       
|Total long-term debt                                                                                                  |  | $                 | 91,018 |                | $ | 91,700
|                                                                                                                      |  |                   |        |                |   |       



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On July 25, 2007, Gregg Appliances entered into a senior credit agreement with a bank
group obtaining a $100 million senior secured term loan B maturing on July 25, 2013 (the Term B Facility). Interest on the borrowings fluctuate and are payable in defined periods, currently monthly, depending on Gregg
Appliances election of the banks prime rate or LIBOR plus an applicable margin, which is currently 200 basis points. The weighted average interest rate on the term loan as of December 31, 2009 was 2.2%. The Company entered into an
interest rate related derivative on $75 million of the Term B Facility which adjusts the effective weighted average interest rate on the Term B Facility at December 31, 2009 to 3.9%. See discussion at Note 4.

On September 15, 2009, Gregg Appliances entered into Amendment No. 1 and Joinder to the Amended and Restated Loan and Security
Agreement (Amendment No. 1) with a bank group, which amended the Amended and Restated Loan and Security Agreement, dated July 25, 2007 (the ABL Facility). Amendment No. 1 increased the maximum amount available
under the ABL Facility from $100 million to $125 million, subject to borrowing base availability. Under the ABL Facility, as amended by Amendment No. 1, borrowings from time to time shall not exceed a defined borrowing base.

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 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. 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.

Under the
ABL Facility, as amended by Amendment No.1, Gregg Appliances is not required to comply with any financial maintenance covenant, unless it has less than $18.75 million of excess availability at any time, (compared to $8.5 million prior to
the amendment) during the continuance of which event Gregg Appliances is subject to compliance with a fixed charge coverage ratio of 1.10 to 1.0. The amendment allows up to $5.0 million of additional availability to be included in the total of
excess availability for the months of October and November.

The amendment also modifies the trigger point for the
initiation of cash dominion control. Prior to the amendment, if Gregg Appliances had less than $8.5 million of excess availability, it would, in certain circumstances, become subject to cash dominion control. Pursuant to the Amendment
No. 1, if Gregg Appliances has less than $18.75 million of excess availability, it may, in certain circumstances more specifically described in the ABL Facility, as amended by Amendment No. 1, become subject to cash dominion
control.

As of December 31, 2009 and March 31, 2009, under the ABL Facility, the Company did not have any cash
borrowings outstanding and had $4.8 million and $4.1 million, respectively, of letters of credit outstanding, which expire through December 31, 2010. As of December 31, 2009 and March 31, 2009, the total borrowing availability under
the revolving credit facility was $120.2 million and $91.6 million, respectively. The interest rate based on the banks prime rate as of December 31, 2009 and March 31, 2009 was 3.0%.



|(9) | Stock-based Compensation
|--- | ------------------------

The following table summarizes the activity under the Companys Stock Option Plans:



|                                 |  |                             |   |  |                                         |      
|-------------------------------- |  | --------------------------- | - |  | --------------------------------------- | -----
|                                 |  | Number of SharesOutstanding |   |  | Weighted AverageExercise Priceper Share
|Outstanding at March 31, 2009    |  | 4,549,160                   |   |  | $                                       | 8.21 
|Granted                          |  | 741,000                     |   |  |                                         | 15.00
|Exercised                        |  | (647,878                    | ) |  |                                         | 5.75 
|Canceled                         |  | (6,000                      | ) |  |                                         | 13.86
|                                 |  |                             |   |  |                                         |      
|Outstanding at December 31, 2009 |  | 4,636,282                   |   |  | $                                       | 9.63 
|                                 |  |                             |   |  |                                         |      



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During the nine months ended December 31, 2009, the Company granted options for 741,000
shares of common stock under the 2007 Equity Incentive Plan to certain employees and directors of the Company. The options vest in equal amounts over a three-year period beginning on the first anniversary of the date of grant and expire seven years
from the date of the grant. The fair value of each option grant is estimated on the date of grant and is amortized on a straight-line basis over the vesting period.

The weighted-average estimated fair value of options granted to employees and directors under the 2007 Equity Incentive Plan was $6.68 during the nine months ended December 31, 2009, using the
Black-Scholes model with the following weighted average assumptions:



|                                     |  |       |          
|------------------------------------ |  | ----- | ---------
|Risk-free interest rate              |  | 1.98  | % -2.67 %
|Dividend yield                       |  |      |          
|Expected volatility                  |  | 51.00 | %        
|Expected life of the options (years) |  | 4.5   |          
|Forfeitures                          |  | 5.00  | %        



|(10) | Comprehensive Income
|---- | --------------------

ASC
220 Comprehensive Income establishes standards for the reporting and presentation of comprehensive income and its components. Comprehensive income is computed as net income plus certain other items that are recorded directly to
stockholders equity. In addition to net income, comprehensive income for the three and nine months ended December 31, 2009 and 2008 includes the changes in fair value of the Companys interest rate swaps, net of tax. Comprehensive
income for the three and nine months ended December 31, 2009 and 2008, in thousands, is calculated as follows:



|                                                                                    |  |                    |        |   |                   |   |        |                  |  |   |                  |   |  |   |        |  
|----------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | ---------------- |  | - | ---------------- | - |  | - | ------ | -
|                                                                                    |  | Three Months Ended |        |   | Nine Months Ended |  
|                                                                                    |  | December 31,2009   |        |   | December 31,2008  |   |        | December 31,2009 |  |   | December 31,2008 |  
|Net income, as reported                                                             |  | $                  | 22,735 |   |                   | $ | 17,120 |                  |  | $ | 29,151           |   |  | $ | 22,622 |  
|Reclassification adjustment for loss reclassified into interest expense, net of tax |  |                    | 231    |   |                   |   | 275    |                  |  |   | 864              |   |  |   | 484    |  
|Unrealized loss on hedge arrangements, net of tax                                   |  |                    | (123   | ) |                   |   | (654   | )                |  |   | (927             | ) |  |   | (219   | )
|                                                                                    |  |                    |        |   |                   |   |        |                  |  |   |                  |   |  |   |        |  
|Comprehensive income                                                                |  | $                  | 22,843 |   |                   | $ | 16,741 |                  |  | $ | 29,088           |   |  | $ | 22,887 |  
|                                                                                    |  |                    |        |   |                   |   |        |                  |  |   |                  |   |  |   |        |  



|(11) | Stockholders Equity
|---- | --------------------

During the nine months ended December 31, 2009, the Company consummated an underwritten public offering of 4,025,000 shares of its common stock under a $200 million shelf-registration statement and a private placement of an aggregate
of 1,000,000 shares of its common stock, which resulted in aggregate proceeds, net of underwriting and placement fees, to the Company of approximately $78.1 million.



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The Company filed a universal shelf registration statement which was declared effective on
July 14, 2009, registering $200 million principal amount of its securities which may be sold by hhgregg under such registration statement at any time. Each of Gregg Appliances and HHG Distributing were additional registrants to the shelf
registration statement because each may guaranty any debt securities that are issued by hhgregg under the shelf registration statement. Gregg Appliances and HHG Distributing are exempt from reporting under the Securities Exchange Act of 1934, as
amended (the Exchange Act), pursuant to Rule 12h-5 under the Exchange Act as: (i) hhgregg has no independent assets or operations; (ii) any guarantees of the subsidiary guarantors of debt securities issued under the shelf
registration statement are full and unconditional and joint and several: and (iii) there are no subsidiaries of hhgregg other than Gregg Appliances and HHG Distributing. Gregg Appliances is the borrower under the Term B Facility. The Term B
Facility contains restrictions on the payment of dividends and other transfer of assets to hhgregg.



|(12) | Subsequent Events
|---- | -----------------

In
preparing the accompanying unaudited condensed consolidated financial statements, the Company evaluated the period from December 31, 2009 through February 4, 2010, the date the unaudited condensed consolidated financial statements were
available to be issued, for material subsequent events requiring recognition or disclosure. No such events were identified for this period.



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|ITEM 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a
reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in five
sections:



| |  |  | Overview
| | - |  | --------



| |  |  | Critical Accounting Polices
| | - |  | ---------------------------



| |  |  | Results of Operations
| | - |  | ---------------------



| |  |  | Liquidity and Capital Resources
| | - |  | -------------------------------



| |  |  | Recently Issued Accounting Standards
| | - |  | ------------------------------------

Our MD&A should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes contained herein and the Consolidated Financial Statements for the fiscal
year ended March 31, 2009, included in our latest Annual Report on Form 10-K, as filed with the SEC on June 2, 2009, and other publicly available information.

Overview

hhgregg, Inc. is a specialty retailer of
consumer electronics, home appliances, and related products and services operating under the name hhgreggTM. As of December 31, 2009, we operated 127 stores in Alabama, Florida, Georgia, Indiana, Kentucky, Mississippi,
North Carolina, Ohio, South Carolina, Tennessee and Virginia. Unless otherwise indicated, hhgregg refers solely to hhgregg, Inc., Gregg Appliances refers solely to Gregg Appliances, Inc. and we, us and
our refers to hhgregg, Inc. and its subsidiaries, including Gregg Appliances. References to fiscal year 2010 or fiscal 2010 refer to the fiscal year ending March 31, 2010.

hhgregg was formed in Delaware on April 12, 2007. As part of a corporate reorganization effected on July 19, 2007, the
stockholders of Gregg Appliances contributed all of their shares of Gregg Appliances to hhgregg in exchange for common stock of hhgregg. As a result, Gregg Appliances became a wholly-owned subsidiary of hhgregg.

This overview section is divided into four sub-sections discussing our operating strategy and performance, store development strategy,
business strategy and core philosophies and seasonality.

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 strive to differentiate ourselves through our customer purchase experience starting with a highly-trained, consultative commissioned sales force which educates our customers on the features and benefits of our products, followed by rapid
product delivery and installation, and ending with helpful post-sales support services. We carefully monitor our competition to ensure that our prices are competitive in the market place. Our experience has been that informed customers often choose
to buy a more heavily-featured product once they understand the applicability and benefits of its features. Heavily-featured products typically carry higher average selling prices and higher margins than less-featured, entry-level price point
products.



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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.

Store Development Strategy.Over the past several years, we have adhered closely to a development strategy of adding stores to
metropolitan markets in clusters to achieve rapid market share penetration and more efficiently leverage our distribution network, advertising and regional management costs. Our expansion plans include looking for new markets where we believe there
is significant underlying demand for stores, typically in areas that have historically demonstrated above-average economic growth, strong household incomes and growth in new housing starts and/or remodeling activity. Our markets typically include
most or all of our major competitors. We plan to continue to follow our approach of building store density in each major market and distribution area, which in the past has helped us to improve our market share and realize operating efficiencies.

During the past 12 months, we opened a net total of 19 new stores of which 14 were opened in new markets, including Tampa,
Florida; Memphis, Tennessee; and Richmond, Virginia. In July 2009, we announced our intention to open between 20 and 22 new stores during fiscal 2010 and accelerate our growth strategy by opening between 40 to 45 new stores during fiscal 2011. Over
half of these stores are expected to open during the first fiscal quarter of 2011, with the vast majority of the remaining stores expected to open prior to the calendar 2010 holiday selling season. Due to the timing of these store openings, we
expect a negative impact of approximately $0.07 of net income per diluted share on our fourth fiscal quarter earnings. This negative impact on earnings is associated with pre-opening expenses and growth investments related to our Mid-Atlantic
growth. We expect a negative impact on net income per diluted share during each of the first two fiscal quarters of 2011 related to the associated pre-opening expenses and growth investments.

Business Strategy and Core Philosophies.Our business strategy is focused around offering our customers a superior customer purchase
experience. From the time the customers walk in the door, they will experience a well-designed, customer-friendly store. Our stores are brightly lit and have clearly distinguished departments that allow our customers to find what they are looking
for. We greet and assist our customers with our highly trained consultative sales force, who educate the customers about the different product features.

Our products are rich in features and innovations and are ever-changing. We find that customers find it helpful to have someone explain the features and benefits of a product. We believe this assistance
allows them the opportunity to buy the product that most closely matches their needs. We follow up on the customer purchase experience by offering same-day delivery on many of our products and a high quality, in-home installation service. We offer
all of this at a competitive price, under our philosophy, Price and Advice, Guaranteed.

The consumer electronics
industry depends on new products to drive sales and profitability. Innovative, heavily-featured products are typically introduced at relatively high price points. Over time, price points are gradually reduced to drive consumption. For example, as
prices for large flat-panel high definition television products fall below the $2,000 range, more of our customers purchase them.

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.

In the past, certain product innovations in certain consumer electronic product categories such as
notebook computers, camcorders and audio products, have not been sufficient to maintain average selling prices. These mature products have become commoditized and have experienced price declines and reduced margins. As certain of our products become
commodities, we focus on selling the next generation of these affected products, carefully managing the depth and breadth of commoditized products that we offer and introducing all-together new product lines that are complementary to our existing
product mix.



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During our fourth fiscal quarter, the video industry is expected to transition to new
product lines which feature 3-D and IP Ready technologies, which is earlier than previous years. Due to the industry transition, we expect to have inventory shortages in certain screen sizes and technologies which is expected to negatively impact
sales and average selling prices of televisions during the fourth fiscal quarter of the current year.

The appliance industry
has benefited greatly from increased innovation in energy efficient products. While these energy efficient products typically carry a higher average selling price than traditional products, they save the consumer significant dollars in annual energy
savings. Additionally, form and aesthetics have become an increasingly important factor in major appliance purchase decisions. Accordingly, the rise in average unit selling prices of major appliances from which we have benefited for the past four
fiscal years is not expected to change dramatically for the foreseeable future.

Conversely, retail appliance sales are highly
correlated to the housing industry and housing turnover. As more people purchase existing homes in the market, appliance sales tend to trend upward. As the recent demand in the housing market has been relatively low, our appliance sales traffic has
suffered significantly. The Association of Home Appliance Manufacturers reported that shipments of major appliances fell 11.9% for the nine months ended December 31, 2009, while our comparable store sales for appliances for the same period were
down 6.3%. Management does not expect this trend in appliance traffic to substantially improve until the housing market begins to turn positive.

Seasonality.Our business is seasonal, with a higher portion of net sales and operating profit realized during the quarter that ends December 31 due to the overall demand for consumer
electronics during the holiday shopping season. Appliance revenue is impacted by seasonal weather patterns but is less seasonal than our electronics business and helps to offset the seasonality of our overall business.

Critical Accounting Policies

We describe our critical accounting policies and estimates in Managements Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended March 31, 2009 in our latest Annual Report on Form 10-K
filed with the SEC on June 2, 2009. There have been no significant changes in our critical accounting policies and estimates since the end of fiscal 2009.

Results of Operations

Operating Performance.The following table
presents selected unaudited condensed consolidated financial data (dollars in thousands, except per share amounts and number of stores):



|                                                          |  |                    |         |    |                   |   |         |                  |  |   |                  |    |  |   |           |   
|--------------------------------------------------------- |  | ------------------ | ------- | -- | ----------------- | - | ------- | ---------------- |  | - | ---------------- | -- |  | - | --------- | --
|                                                          |  | Three Months Ended |         |    | Nine Months Ended |  
|(unaudited)                                               |  | December 31,2009   |         |    | December 31,2008  |   |         | December 31,2009 |  |   | December 31,2008 |   
|Net sales                                                 |  | $                  | 500,392 |    |                   | $ | 416,106 |                  |  | $ | 1,116,960        |    |  | $ | 1,031,823 |   
|Net sales % increase                                      |  |                    | 20.3    | %  |                   |   | 6.6     | %                |  |   | 8.3              | %  |  |   | 10.7      | % 
|Comparable store sales % decrease(1)                      |  |                    | (0.2    | )% |                   |   | (13.2   | )%               |  |   | (7.2             | )% |  |   | (8.9      | )%
|Gross profit as a % of net sales                          |  |                    | 30.5    | %  |                   |   | 31.4    | %                |  |   | 30.4             | %  |  |   | 31.0      | % 
|SG&A as a % of net sales                                  |  |                    | 18.5    | %  |                   |   | 18.7    | %                |  |   | 20.9             | %  |  |   | 20.8      | % 
|Net advertising expense as a % of net sales               |  |                    | 3.4     | %  |                   |   | 4.3     | %                |  |   | 3.8              | %  |  |   | 4.8       | % 
|Depreciation and amortization expense as a % of net sales |  |                    | 0.9     | %  |                   |   | 0.9     | %                |  |   | 1.1              | %  |  |   | 1.2       | % 
|Income from operations as a % of net sales                |  |                    | 7.6     | %  |                   |   | 7.4     | %                |  |   | 4.6              | %  |  |   | 4.2       | % 
|Net interest expense as a % of net sales                  |  |                    | 0.3     | %  |                   |   | 0.5     | %                |  |   | 0.4              | %  |  |   | 0.6       | % 
|Net income                                                |  | $                  | 22,735  |    |                   | $ | 17,120  |                  |  | $ | 29,151           |    |  | $ | 22,622    |   
|Net income per diluted share                              |  | $                  | 0.57    |    |                   | $ | 0.52    |                  |  | $ | 0.78             |    |  | $ | 0.69      |   
|Number of stores open at the end of period                |  |                    | 127     |    |                   |   | 108     |                  |  |   |                  |    |  |   |           |   



|(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 our e-commerce site.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net income was $22.7 million for the three months ended December 31, 2009, or $0.57 of net income per
diluted share, compared with net income of $17.1 million, or $0.52 of net income per diluted share, for the three months ended December 31, 2008. For the nine months ended December 31, 2009, net income was $29.2 million, or net income per
diluted share of $0.78, compared with net income of $22.6 million, or $0.69 of net income per diluted share, for the comparable prior year period. The 32.8% and 28.9% increase in net income for the three and nine month periods ended
December 31, 2009, respectively, was the result of an increase in net sales, a modest decrease in operating expenses as a percentage of net sales, partially offset by a decline in gross margin.



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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.

Net sales mix and comparable store sales percentage changes by product category for the three and nine months ended December 31, 2009 and 2008 were as follows:



|           |  |                                |   |  |                                |   |  |                                |   |  |                               |   |  |      |    |  |       |    |  |       |    |  |       |   
|---------- |  | ------------------------------ | - |  | ------------------------------ | - |  | ------------------------------ | - |  | ----------------------------- | - |  | ---- | -- |  | ----- | -- |  | ----- | -- |  | ----- | --
|           |  | Net Sales Mix Summary          |   |  | Comparable Store Sales Summary |  
|           |  | Three Months EndedDecember 31, |   |  | Nine Months EndedDecember 31,  |   |  | Three Months EndedDecember 31, |   |  | Nine Months EndedDecember 31, |  
|           |  | 2009                           |   |  | 2008                           |   |  | 2009                           |   |  | 2008                          |   |  | 2009 |    |  | 2008  |    |  | 2009  |    |  | 2008  |   
|Video      |  | 50                             | % |  | 54                             | % |  | 46                             | % |  | 48                            | % |  | (7.5 | )% |  | (6.9  | )% |  | (12.4 | )% |  | (2.1  | )%
|Appliances |  | 30                             | % |  | 28                             | % |  | 36                             | % |  | 37                            | % |  | 7.5  | %  |  | (21.9 | )% |  | (6.3  | )% |  | (15.6 | )%
|Other(1)   |  | 20                             | % |  | 18                             | % |  | 18                             | % |  | 15                            | % |  | 9.6  | %  |  | (14.6 | )% |  | 6.5   | %  |  | (10.5 | )%
|           |  |                                |   |  |                                |   |  |                                |   |  |                               |   |  |      |    |  |       |    |  |       |    |  |       |   
|Total      |  | 100                            | % |  | 100                            | % |  | 100                            | % |  | 100                           | % |  | (0.2 | )% |  | (13.2 | )% |  | (7.2  | )% |  | (8.9  | )%
|           |  |                                |   |  |                                |   |  |                                |   |  |                               |   |  |      |    |  |       |    |  |       |    |  |       |   



|(1) | Primarily consists of audio, furniture and accessories, mattresses, notebook computers and personal electronics.
|--- | ----------------------------------------------------------------------------------------------------------------

Our 0.2% and 7.2% comparable store sales decreases for the three and nine months ended December 31, 2009, respectively, primarily
reflect continued weakness in consumer demand in the video category. For the three and nine month periods, the decrease in comparable store sales for the video category was due primarily to a decline in average selling prices partially offset by an
increase in units sold. Net sales in the appliance category saw significant improvement across all categories in the three months ended December 31, 2009, resulting in positive comparable store sales of 7.5% for the three month period and a
comparable store sales decline of 6.3% for the nine month period ended December 31, 2009. For the three and nine months ended December 31, 2009, the comparable store sales increase in the other category was due primarily to continued
strength in the computer category offset by a double digit comparable store sales decrease in the mattress category.

Three Months Ended
December 31, 2009 Compared to Three Months Ended December 31, 2008

Gross profit, as a percentage of net sales,
declined approximately 90 basis points for the three months ended December 31, 2009 versus the comparable prior year period. The decrease in the gross margin percentage for the period was due to a reduction in appliance and video margins
coupled with a sales mix shift into lower margin categories. The appliance and video gross profit margins exceeded our Company average, as a percentage of sales, during the three month period ended December 31, 2009. The other category profit
margin was less than our Company average as a result of a higher mix of notebook computers which carry a gross margin percentage that is significantly less than the Company average.

SG&A, as a percentage of net sales, decreased approximately 20 basis points for the three months ended December 31, 2009, compared
with the prior year period. SG&A was $92.7 million for the three months ended December 31, 2009 compared to $78.0 million for the comparable prior year period. Occupancy costs, which include rent, property taxes and utilities, remained
consistent year over year as a percentage of net sales for the three months ended December 31, 2009. Occupancy costs increased $3.3 million compared to the prior year period, due to the net addition of 19 stores in the last 12 months. Expense
and payroll control from various cost initiatives and our commissioned sales structure allowed our other SG&A categories as a percentage of net sales to remain relatively consistent with the comparable prior year period.

Net advertising expense, as a percentage of net sales, decreased approximately 90 basis points during the three month period ended
December 31, 2009, compared with the comparable prior year period. Despite the comparable store sales declines during the three month period, decreases in net advertising expense as a percentage of net sales were driven by reduced advertising
rates and greater support from vendors.



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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.

Nine Months Ended December 31, 2009 Compared to Nine
Months Ended December 31, 2008

Gross profit, as a percentage of net sales, declined approximately 55 basis points for
the nine months ended December 31, 2009 versus the comparable prior year period. The appliance and video gross profit margin exceeded our Company average as a percentage of sales during the nine month period ended December 31, 2009. The
other category gross profit margins were below our Company average as a result of a higher mix of notebook computers, which carry a gross margin percentage significantly less than our Company average.

SG&A expense, as a percentage of net sales, increased by approximately 10 basis points for the nine months ended December 31, 2009
compared to the comparable prior year period. SG&A was $233.3 million for the nine months ended December 31, 2009 compared to $214.3 million for the comparable prior year period. Occupancy costs as a percentage of net sales increased
approximately 50 basis points, as a result of the decline in comparable store sales. Occupancy costs increased $9.5 million for the nine months ended December 31, 2009 compared to the prior year period, due to the net addition of 19 stores in
the last 12 months. Strong expense and payroll control from various cost initiatives and our commissioned sales structure allowed our other SG&A categories, as a percentage of net sales, to remain relatively consistent compared to the comparable
prior year period.

Net advertising expense as a percentage of net sales decreased approximately 100 basis points, or $7.0
million, for the nine months ended December 31, 2009 to $42.5 million compared to $49.5 million for the nine months ended December 31, 2008. Despite the comparable store sales declines for the nine month period, decreases in net
advertising expense as a percentage of net sales were driven by reduced advertising rates and greater support from vendors.

Income tax expense increased to $18.3 million for the nine months ended December 31, 2009 compared to $15.3 million for the comparable prior year period. This increase was the result of an increase in income before income taxes in the
current year compared to the comparable prior year period. Our effective income tax rate for the nine months ended December 31, 2009 decreased to 38.5% from 40.3% for the comparable prior year period. The decrease in our effective income
tax rate for the nine months ended December 31, 2009 is primarily the result of changes in the expected annual effective state income tax rate.

Liquidity and Capital Resources

The following table presents a summary on a consolidated basis of our net cash
(used in) provided by operating, investing and financing activities (dollars are in thousands):



|                                          |  |                   |         |   |                   |   |         |  
|----------------------------------------- |  | ----------------- | ------- | - | ----------------- | - | ------- | -
|                                          |  | Nine Months Ended |        
|                                          |  | December 31, 2009 |         |   | December 31, 2008 |  
|Net cash provided by operating activities |  | $                 | 1,396   |   |                   | $ | 1,119   |  
|Net cash used in investing activities     |  |                   | (30,466 | ) |                   |   | (20,606 | )
|Net cash provided by financing activities |  |                   | 107,241 |   |                   |   | 19,302  |  

Our liquidity
requirements arise primarily from our need to fund working capital requirements and capital expenditures.



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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. Capital expenditures were $34.2 million and $27.8 million for the nine months ended December 31, 2009 and 2008, respectively. For each of the nine month periods ended December 31, 2009 and 2008, we opened 18 new stores. We plan
on opening between 20 and 22 new stores during fiscal 2010, of which 18 stores have already been opened. In addition, we plan to continue to invest in our infrastructure, including management information systems and distribution capabilities, as
well as incur capital remodeling and improvement costs. We expect capital expenditures, before sale and leaseback proceeds and excluding tenant allowances from landlords, for fiscal 2010 store openings and relocations as well as a portion of fiscal
2011 store openings, to range between $55 million and $60 million for fiscal 2010. Capital expenditures for fiscal 2010 and 2011 will be funded through cash and cash equivalents, borrowings on our revolving credit facility, sale and leaseback
proceeds and tenant allowances from landlords. In addition, to help fund our growth, we completed an underwritten public offering, consummated on July 24, 2009, and a private placement transaction of our common stock consummated on
August 4, 2009. Proceeds from these transactions, net of underwriting and placement fees, totaled approximately $78.1 million.

Cash Provided by Operating Activities. Cash provided by operating activities primarily consists of net income as adjusted for increases or decreases in working capital and non-cash depreciation and amortization. Cash provided by
operating activities was $1.4 million and $1.1 million for the nine months ended December 31, 2009 and 2008, respectively. The slight increase in cash provided by operating activities is due to increases in net income, tenant allowances
received from landlords, and deferred taxes. These increases are partially offset by the change in inventory and accounts payable.

Cash Used in Investing Activities. Cash used in investing activities was $30.5 million and $20.6 million for the nine months ended December 31, 2009 and 2008, respectively. The increase
in cash used in investing activities for the nine months ended December 31, 2009 as compared to the nine months ended December 31, 2008 was due to increased purchases of property and equipment associated with the opening of new stores in
the current fiscal year, partially offset by a decrease in deposits and proceeds from sale-leaseback transactions.

Cash
Provided by Financing Activities. Financing activities provided $107.2 million and $19.3 million in cash for the nine months ended December 31, 2009 and 2008, respectively. The change in cash provided by financing activities for the
nine months ended December 31, 2009 as compared to the nine months ended December 31, 2008 is due to the fact that we completed a stock offering during the nine months ended December 31, 2009 which provided proceeds of approximately
$78.1 million, net of transaction costs, and an increase in book overdrafts offset by the fact that we have no borrowings on our line of credit for the nine months ended December 31, 2009.

Senior Secured Term Loan. On July 25, 2007, Gregg Appliances entered into a senior credit agreement (the Term B
Facility) with a bank group obtaining $100 million senior secured term loan B maturing on July 25, 2013. Interest on borrowings is payable in defined periods, currently monthly, depending on our election of the banks prime rate or
LIBOR plus an applicable margin, currently 200 basis points.

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 with a balloon payment at maturity. As provided in the senior credit agreement, the prepayment was first applied to the next four scheduled principal installments of the loan occurring in fiscal 2009 and secondly applied on a pro
rata basis to reduce the remaining scheduled principal installments of the loans. In accordance with the Term B Facility, we made principal payments on June 30, 2009, September 30, 2009 and December 31, 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, 2009, $88.6 million was outstanding on
the Term B Facility.



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The Term B Facility contains customary representations and warranties and customary
affirmative and negative covenants, including, among other things, restrictions on incurrence of additional debt, liens, dividends and other restricted payments, asset sales, investments, mergers and acquisitions and affiliate transactions. The only
financial covenant included in the Term B Facility is a maximum leverage ratio. Events of default under the Term B Facility include, among others, nonpayment of principal or interest, covenant defaults, material breaches of representations and
warranties, bankruptcy and insolvency events, cross defaults and a change of control. Gregg Appliances was in compliance with the restrictions and covenants in the debt agreement at December 31, 2009.

Senior Notes. In connection with our recapitalization on February 3, 2005, we issued $165 million in unsecured 9% senior notes
(senior notes). Interest on the senior notes is payable in arrears twice a year on February 1 and August 1. The senior notes will mature on February 3, 2013. As of December 31, 2009 we had $3.4 million of senior notes
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 (ABL Facility) which expires on July 25, 2012. On September 15, 2009, Gregg Appliances entered into Amendment No. 1 and Joinder to the Amended and
Restated Loan and Security Agreement (Amendment No. 1), which increased the maximum amount available under the ABL Facility from $100 million to $125 million, subject to borrowing base availability. Under the ABL Facility, as
amended by Amendment No. 1, borrowings from time to time shall not exceed a defined borrowing base.

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.

Under the ABL Facility, as amended by Amendment No.1, Gregg Appliances is not required to comply with any financial maintenance covenant, unless it has less than $18.75 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 1.10 to 1.0. The amendment allows up to $5.0 million of additional availability to be included in
the total of excess availability for the months of October and November. Under the ABL Facility, as amended by Amendment No. 1, if Gregg Appliances has less than $18.75 million of excess availability, it may, in certain
circumstances more specifically described in the ABL Facility, as amended by Amendment No. 1, become subject to cash dominion control.

The ABL Facility is guaranteed by Gregg Appliances wholly-owned subsidiary, HHG Distributing LLC (HHG Distributing), which has no assets or operations. The guarantee is full and
unconditional and Gregg Appliances has no other subsidiaries. In addition, there are no restrictions on the ability of HHG Distributing to pay dividends under the arrangement. Gregg Appliances was in compliance with the restrictions and covenants in
the debt agreement at December 31, 2009.

As of December 31, 2009 and March 31, 2009, under the ABL Facility,
Gregg Appliances did not have any cash borrowings outstanding and had $4.8 million and $4.1 million, respectively, of letters of credit outstanding, which expire through December 31, 2010. As of December 31, 2009 and March 31,
2009, the total borrowing availability under the revolving credit facility was $120.2 million and $91.6 million, respectively. The interest rate based on the banks prime rate as of December 31, 2009 and March 31, 2009 was 3.0%.



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Long Term Liquidity. Anticipated cash flows from operations and funds available from
our credit facilities, together with cash on hand, including proceeds received from our public offering of 4,025,000 shares of our common stock consummated on July 24, 2009, and the private placement of 1,000,000 shares of our common stock
consummated on August 4, 2009, should provide sufficient funds to finance our accelerated operations and our growth strategy for at least the next 12 months. As a normal part of our business, we consider opportunities to refinance our existing
indebtedness, based on market conditions. Although we may refinance all or part of our existing indebtedness in the future, there can be no assurances that we will do so. Changes in our operating plans, lower than anticipated sales, increased
expenses, acquisitions or other events may require us to seek additional debt or equity financing. There can be no guarantee that financing will be available on acceptable terms or at all. Additional debt financing, if available, could impose
additional cash payment obligations and additional covenants and operating restrictions. Pursuant to the terms of our Term B Facility, we also have the capacity to repurchase our outstanding Senior Notes at our discretion so long as we have excess
availability of $10,000,000 after the repurchase.

Our credit ratings and outlooks as of December 31, 2009 are summarized
below:



|                |  |        |  |        
|--------------- |  | ------ |  | -------
|Rating Agency   |  | Rating |  | Outlook
|Standard & Poor |  | B+     |  | Stable 
|Moodys         |  | Ba3    |  | Stable 

Factors that can affect our credit ratings include changes in our operating
performance, the general economic environment, conditions in the retail and consumer electronics industries, our financial position, and changes in our business strategy.

Cash Flow Hedge.During fiscal 2008, we entered into an interest-rate related derivative instrument to manage our exposure on our debt instruments. This derivative instrument expired in October
2009. During the nine months ended December 31, 2009 we entered into another derivative instrument that became effective October 2009 and expires in October 2011.

We assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging
opportunities. We maintain risk management control systems to monitor interest rate cash flow risk attributable to both our outstanding or forecasted debt obligations as well as our offsetting hedge positions. The risk management control systems
involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on our future cash flows.

We use variable-rate debt to finance our operations. The debt obligations expose us to variability in interest payments due to changes in interest rates. We believe that it is prudent to limit the
variability of a portion of our interest payments. To meet this objective, we entered into an interest rate swap agreement to manage fluctuations in cash flows resulting from changes in the benchmark interest rate of LIBOR on $50 million of our Term
B Facility in fiscal 2008. This interest rate swap agreement expired in October 2009. Therefore during the nine months ended December 31, 2009 we entered into another interest rate swap agreement for $75 million effective October 2009 and
expiring October 2011. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, we receive LIBOR based variable interest rate payments and make fixed interest
rate payments, thereby creating the equivalent of fixed-rate debt for the notional amount of the debt that is hedged.

Changes
in the fair value of interest rate swaps designated as hedging instruments that effectively offset the variability of cash flows associated with variable-rate, long-term debt obligations are reported in accumulated other comprehensive loss. These
amounts subsequently are reclassified into interest expense as a yield adjustment of the hedged interest payments in the same period in which the related interest affects earnings.

For the nine months ended December 31, 2009, the hedges were considered effective and $0.9 million was recorded into interest expense
for recognized losses on the cash flow hedge.



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Recently Issued Accounting Standards

See Note 2 to the unaudited condensed consolidated financial statements of this report for further details of recently issued accounting
standards.

Forward-Looking Statements

Some of the statements in this document and any documents incorporated by reference constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act
of 1934, as amended. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our businesses or our industries actual results, levels of
activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. Such statements include, in particular, statements about our plans, strategies, prospects, changes, outlook and
trends in our business and the markets in which we operate under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations. In some cases, you can identify forward-looking statements by
terminology such as may, will, could, would, should, expect, plan, anticipate, intend, tends, believe,
estimate, predict, potential or continue or the negative of those terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially because of
market conditions in our industries or other factors. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under Managements Discussion and Analysis of Financial Condition and
Results of Operations herein, Managements Discussion and Analysis of Financial Condition and Results of Operations in our latest Annual Report on Form 10-K filed with the SEC on June 2, 2009, the risk factors sent forth
in our Final Prospectus Supplement filed with the SEC on July 21, 2009, and any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking
statements. The forward-looking statements are made as of the date of this document or the date of the documents incorporated by reference in this document, as the case may be, and we assume no obligation to update the forward-looking statements or
to update the reasons why actual results could differ from those projected in the forward-looking statements.



|ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk.
|------- | -----------------------------------------------------------

In addition to the risks inherent in our operations, we are exposed to certain market risks, including interest rate risk.

Interest Rate Risk

Our short-term and long-term debt consists of a
revolving credit facility, our Term B Facility and our senior notes.

Interest on borrowings under our revolving credit
facility is payable monthly at a fluctuating rate based on the banks prime rate or LIBOR plus an applicable margin. As of December 31, 2009, we had no cash borrowings under our revolving credit facility.

As of December 31, 2009, we had $88.6 million outstanding on our Term B Facility. Interest on
our Term B Facility is payable in defined periods, currently monthly, depending on our election of the banks prime rate or LIBOR plus an applicable margin. We are not subject to material interest rate risk as $75.0 million
of the outstanding amount of Term B Facility is subject to an interest rate hedge. A hypothetical 100 basis point increase in the banks prime rate would decrease our annual pre-tax income by approximately $0.1 million. There is no interest
rate risk associated with our senior notes as the interest rate is fixed at 9.0%.



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|ITEM 4. | Controls and Procedures.
|------- | ------------------------

Disclosure
Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), to allow timely decisions regarding required disclosure. We have established a Disclosure
Committee, consisting of certain members of management, to assist in this evaluation. Our Disclosure Committee meets on a quarterly basis and more often if necessary.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
promulgated under the Exchange Act), as of December 31, 2009. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2009, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended December 31, 2009, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

Part II- Other Information



|ITEM 1. | Legal Proceedings
|------- | -----------------

We are
engaged in various legal proceedings in the ordinary course of business and have certain unresolved claims pending. The ultimate liability, if any, for the aggregate amounts claimed cannot be determined at this time. However, management believes,
based on the examination of these matters and experiences to date, that the ultimate liability, if any, in excess of amounts already provided for in the unaudited condensed consolidated financial statements is not likely to have a material effect on
our unaudited consolidated financial position, results of operations or cash flows.



|ITEM 1A. | Risk Factors
|-------- | ------------

There have
been no material changes to the risk factors set forth in the section entitled Risk Factors in our Final Prospectus Supplement filed with the SEC on July 21, 2009.



|ITEM 6. | Exhibits
|------- | --------



|     |  |                                                                                                                                                                                                       
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|31.1 |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|     | 
|31.2 |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|     | 
|32.1 |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                
|     | 
|32.2 |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

HHGREGG, INC.By:

/s/ Jeremy J. AguilarJeremy J. Aguilar Principal
Financial Officer


Dated: February 4, 2010



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