Indianapolis-based HHGregg has collected a $40 million payout from a life insurance policy it had taken out on former executive chairman Jerry W. Throgmartin, who died in January after a sudden illness.
The electronics retailer said in a regulatory filing it plans to pay $600,000 to Throgmartin's personal estate in accordance with the terms of an employment agreement and will keep $39.4 million for "general corporate and working capital purposes."
HHGregg may opt to use the life insurance proceeds to purchase company shares owned by Throgmartin's estate, a local wealth adviser suggested. At last report, Throgmartin owned about 2.5 million shares worth about $30 million.
The company did not specifiy its plans, but noted it does not expect any tax expenses related to the insurance windfall.
Companies like HHGregg purchase so called "key man" life insurance policies to protect against potential expenses stemming from the loss of particularly important executives. Lenders may actually require a policy in instances where a company and an executive are particularly intertwined.
Throgmartin, 57, had served as chairman and CEO of the Indianapolis-based company from 2003 to 2009, when he became executive chairman. His grandfather founded the company in 1955. He oversaw explosive growth at the retail chain.
Throgmartin died of complications from meningitis Jan. 22 while visiting his ranch in Colorado.
In filings with the Securities and Exchange Commission, HHGregg has listed its dependence on "key management" as one of the risk factors that could affect the company's results. The filings do not say whether the company has "key man" life insurance policies on other executives.
A common question with such policies is whether to retain them once an executive takes a less active role in a company, as when Throgmartin relinquished the role of CEO in 2009.
Under Throgmartin's leadership, HHGregg grew from a local consumer electronics retailer into a national player with more than $2 billion in annual revenue.