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Gregg Appliances, Inc. Announces Increased Year End Results
Jun 28, 2006
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Gregg Appliances, Inc. reported operating results for its fourth quarter and year ended March 31, 2006. Gregg Appliances reported a 7.7 percent increase in total sales for the fourth quarter ended March 31, 2006, as sales increased to U.S. $221.3 million compared to $205.6 million for the comparable prior year period. This increase in sales was attributable to the addition of nine stores offset by a 2.7 percent decline in comparable stores sales in the fourth quarter of 2006 as compared to the comparable prior year period. The comparable store sales decline was primarily driven by declining consumer demand for big screen projection TVs in favor of plasma and LCD flat panel technology.

Net income for the fourth quarter ended March 31, 2006 was $3.7 million as compared to $14.1 million for the comparable prior year period. Net income for the fourth quarter of fiscal 2006 included $2.4 million in income tax expense while net income for the fourth quarter of fiscal 2005 included an income tax benefit of $14.8 million, $4.7 million in transaction costs related to Gregg Appliances' recapitalization and the recognition of a $2.6 million charge to reflect the increase in fair market value of certain variable stock-based awards.

Sales for the year ended March 31, 2006 increased 12.1 percent to $900.4 million compared to $803.2 million for the comparable prior year period. This increase in sales was attributable to the addition of nine stores and a 1.7 percent increase in comparable stores sales in fiscal 2006. The comparable store sales performance was primarily driven by sales growth in major appliance and video categories, with gains in flat panel TVs outpacing the sales decline in projection and tube TV sales.

Net income for the year ended March 31, 2006 was $22.2 million as compared to $29.2 million for the comparable prior year period. Net income for fiscal 2006 included a $27.9 million gain on the transfer of extended service plan obligations to a third party, partially offset by a $2.4 million pretax charge, in the aggregate, associated with the decision to outsource product service and repair work to third party providers. Net income for fiscal 2006 also included an increase of $15.1 million in pretax interest expense versus the comparable prior year period due to Gregg Appliances' recapitalization, as well as $18.7 million in income tax expense. Net income for fiscal 2005 included the recognition of a $9.3 million charge to reflect the increase in fair market value of certain variable stock-based awards.

Gregg Appliances also announced that its video business is undergoing a transition as a result of declining consumer demand for projection TVs in favor of plasma and LCD flat panel technology, coupled with an industry-wide supply shortage of larger flat screen TVs. The supply of large flat screen TVs has improved sequentially since March and is expected to continue to improve during the second half of calendar 2006. We anticipate that our comparable store sales will range between flat and positive one percent versus the prior year for the first fiscal quarter ending June 30, 2006. During the first fiscal quarter of 2007, we opened two new stores. We expect that earnings before net interest expense, income taxes, depreciation and amortization may decrease during the first fiscal quarter of 2007 due to a shift in the timing of the recognition of vendor rebates designated to support our growth during the first quarter last year.

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