The company had previously announced its belief that accounting adjustments, related to understatement of merchandise cost of revenue, would result in a non-cash charge to earnings for fiscal 1999 and four prior years aggregating, on a pre-tax basis, as much as $27 million for all the years involved, after certain off-setting adjustments. As a result of work with the company's outside auditors in trying to determine more precisely the amount and fiscal period allocation of these charges, the company now believes that certain other accounting adjustments, related to costs of returns and refused product returns and other matters, will also be required.

The company currently estimates the pre-tax charge of all these accounting adjustments, including the additional adjustments and the previously announced adjustments, could total approximately $28 to $32 million for all the periods, of which approximately, $25 to $28 million would be non-cash charges. The company believes a portion of these charges can be utilized to reduce current tax liability and to amend its tax returns for the tax years 1996-1998 which would result in a tax refund to the company of approximately $6.8 million. It is not possible at this time to predict the precise amount or timing of such tax refund.

"As we previously announced," said John H. Marmaduke, President, "most of these adjustments do not affect the company's current cash flow from operations. The effort required to complete the process of determining the amounts of the adjustments and their fiscal period allocation, coupled with the additional work to determine the additional adjustments, has been even more difficult and time consuming than we first thought. We cannot, however, complete our 1999 financial statements or file our 10-K report until the process is completed. Substantially all our accounting resources have been and continue to be devoted to resolve these issues."

The company presently believes these adjustments (including the additional adjustments), together with unrelated previously announced fourth fiscal quarter 1999 pre-tax charges and inventory write-downs, have resulted in the violation of a tangible net worth financial covenant in its $60 million revolving credit facility, under which the company presently has outstanding borrowings of approximately $18.4 million, and a fixed charges coverage ratio covenant under the company's 7.75% Series A Senior Notes due June 13, 2003, of which there is outstanding an aggregate principal amount of $20 million. The revolving credit facility financial covenant with which the company is not in compliance is a $98 million tangible net worth requirement at the end of each fiscal quarter. The company believes that, after the adjustments referred to above, the company's tangible net worth is approximately $90 million. The revolving credit facility lenders have waived compliance with the tangible net worth financial covenant and with certain other reporting covenants. The waiver is in effect until June 1, 2000, prior to which the company will negotiate with such lenders for an amendment to the credit facility. During the waiver period, the waiver imposes a maximum limit on borrowings under the revolver of $26 million, requires the company to collateralize the facility and, effective as of March 13, 2000, increases the annual interest rate on borrowings to LIBOR plus two percent or the base rate plus one-half percent. The holder of the 7.75% Series A Senior Notes has also waived non-compliance with the fixed charges ratio covenant, effective until June 1, 2000, prior to which the company will negotiate with the holder for a similar amendment. The Senior Notes waiver increases the annual interest on the Senior Notes to 10.25%, effective as of March 13, 2000, and requires the company to collateralize the Senior Notes. The Senior Notes will be collateralized on a pari passu basis with the revolving credit facility debt.

Additionally, the company announced that a director of the company since 1991, Gaines L. Godfrey, has been named Senior Vice President and Chief Financial Officer. Mr. Godfrey, a member and past chairman of the company's audit committee, is a former Vice President--Finance and chief financial officer for Mesa Petroleum Co. Thomas D. Nugent, former Chief Financial Officer, will remain with the company in a consulting position.

Founded in 1968, Hastings Entertainment, Inc. is the leading multimedia entertainment retailer that combines the sale of books, music, software, periodicals, DVDs, videos and video games with the rental of videos, DVDs and video games in a superstore format. The company currently operates 143 superstores, averaging 21,500 square feet, primarily in small to medium- sized markets throughout the United States. The company plans to slow new store growth in fiscal 2000 to three to five new units.

Hastings also operates www.gohastings.com, an e-commerce Internet Web site that makes available to its customers new and used entertainment products and unique, contemporary gifts and toys. The site features exceptional product and pricing offers, including best-selling books at up to 50% off list price. In addition, investors and customers can review general and financial information about Hastings at this site.