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| Hastings Entertainment
Files 1999 Form 10-K; Amends Long-Term Debt Agreements and Reports Fiscal 1999 Results |
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AMARILLO, Texas, June 14, 2000--Hastings Entertainment,
Inc. (NASDAQ: HASTE), a leading multimedia entertainment superstore retailer, filed its
1999 Form 10-K with the Securities and Exchange Commission. The company also reported its
financial results for the year ended January 31, 2000, and announced it has successfully
negotiated amendments to its long-term debt agreements. Total revenues for fiscal 1999 increased by $48 million to $447.2 million
compared to $399.2 million for fiscal 1998. The company reported a net loss of $2.2
million, or $0.19 per diluted share, for the period, compared to a net loss of $4.3
million, or $0.41 per diluted share, for the same period of fiscal 1998. As previously
announced, the company's results of operations for the first three quarters of fiscal 1999
and the prior four fiscal years were restated to reflect accounting adjustments related to
the understatement of merchandise cost of revenue and cost of returns. The total of these
pre-tax, non-cash accounting adjustments amounted to $31.5 million during these periods.
Unrelated to the accounting adjustments, the company's fiscal 1999 results include a
fourth quarter pretax charge of $5.1 million related to the closing of seven stores and a
pre-tax charge of $3.5 million for the write down of inventory.
John H. Marmaduke, chairman and chief executive officer, said,
"Despite our fiscal 1999 net loss, which was negatively affected by the fourth
quarter charges noted above, Hastings' remains in good financial condition. We have
working capital of $67.3 million and we generated cash flow from operations of $39.3
million. Total shareholders' equity remains a solid $90.1 million reflecting a book value
of $7.75 per share. We are focused on delivering positive results for fiscal 2000 and the
coming years."
The company further reported that it has entered into amendments to
both its revolving credit facility (the "Facility") and its Series A Senior
notes. The Facility, as amended, allows for maximum borrowings of up to $50 million. The
aggregate amount outstanding under the Facility and the Series A Senior notes (currently
$15 million) is limited to a borrowing base predicated on eligible inventory, as defined,
and rental video assets, net. The combined borrowings under both agreements are jointly
collateralized on a pari passu basis by substantially all of the assets of the company.
"We are very pleased to announce the amendments of our
long-term debt agreements with the same group of lenders," commented Gaines L.
Godfrey, senior vice president and chief financial officer. "This achievement
reflects confidence in our ability to generate positive returns going forward, as a result
of enhancing our internal systems to exert tighter controls on overall operations."
The company expects to file its first quarter Form 10-Q with the SEC
on or about June 19th and will release first quarter earnings at that time. Following the
first quarter release, management will host a conference call to discuss the results. The
Company believes the filing of the Company's fiscal 1999 Form 10-K will result in
cancellation of the scheduled hearing with The Nasdaq National Market, the withdrawal of
the proposed delisting and the deletion of the "E" recently added to Hastings'
stock symbol.
Founded in 1968, Hastings Entertainment, Inc. is a 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 United States.
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 the Company at this site.
Certain statements set forth above are forward-looking statements
within the meaning of the Securities Exchange Act of 1934. Such statements are based upon
Hastings Entertainment management’s current estimates, assumptions and expectations
and are subject to a number of factors and uncertainties, any of which could cause actual
results to differ materially from those described herein. The forward-looking statements
set forth above are also subject to the factors and uncertainties set forth under the
heading "Risk Factors" in the company’s Form 10-K for the fiscal year ended
January 31,2000. |
|
-tables follow- Hastings Entertainment,
Inc.
Statement of Operations
Years Ended January 31, 2000, 1999, 1998, 1997 and 1996
(Dollars in thousands, except per share
data)
|
|
|
Fiscal Year |
|
 |
|
|
|
1999 |
|
|
1998 |
|
|
1997 |
|
|
1996 |
|
|
1995 |
|
|
|
|
|
|
As
Restated
(1) |
|
|
As
Restated
(1) |
|
|
As
Restated
(1) |
|
|
As
Restated
(1) |
|
|
Income
Statement Data: |
|
Total revenues |
$ |
447,155 |
|
$ |
399,163 |
|
$ |
357,765 |
|
$ |
323,796 |
|
$ |
298,912 |
|
Total cost of revenues(2)
(3) |
|
288,212 |
|
|
271,224 |
|
|
225,094 |
|
|
202,933 |
|
|
199,727 |
|
Gross profit |
|
158,943 |
|
|
127,939 |
|
|
132,671 |
|
|
120,863 |
|
|
99,185 |
|
Selling, general and
administrative expenses (4) |
|
157,283 |
|
|
130,378 |
|
|
120,794 |
|
|
107,626 |
|
|
89,820 |
|
Development expenses |
|
— |
|
|
— |
|
|
— |
|
|
2,421 |
|
|
2,791 |
|
Pre-opening expenses |
|
1,681 |
|
|
1,474 |
|
|
1,071 |
|
|
404 |
|
|
165 |
|
Operating income (loss) |
|
(21) |
|
|
(3,913) |
|
|
10,806 |
|
|
10,412 |
|
|
6,409 |
|
Interest expense, net |
|
(3,708) |
|
|
(3,727) |
|
|
(4,228) |
|
|
(3,585) |
|
|
(2,588) |
|
Gain (loss) on sale of mall
stores(5) |
|
— |
|
|
454 |
|
|
1,734 |
|
|
(2,500) |
|
|
— |
|
Other, net |
|
205 |
|
|
232 |
|
|
139 |
|
|
187 |
|
|
221 |
|
Income (loss) before income taxes |
|
(3,524) |
|
|
(6,954) |
|
|
8,451 |
|
|
4,514 |
|
|
4,042 |
|
Income tax expense (benefit) (6) |
|
(1,359) |
|
|
(2,649) |
|
|
3,347 |
|
|
1,736 |
|
|
5,514 |
|
Net income (loss) |
$ |
(2,165) |
|
$ |
(4,305) |
|
$ |
5,104 |
|
$ |
2,778 |
|
$ |
(1,472) |
|
Basic income (loss) per share |
$ |
(0.19) |
|
$ |
(0.41) |
|
$ |
0.60 |
|
$ |
0.32 |
|
$ |
(0.17) |
|
Diluted income (loss) per share |
$ |
(0.19) |
|
$ |
(0.41) |
|
$ |
0.58 |
|
$ |
0.32 |
|
$ |
(0.17) |
|
Weighted-average common shares outstanding – basic
|
|
11,621 |
|
|
10,436 |
|
|
8,520 |
|
|
8,552 |
|
|
8,529 |
|
Weighted-average common shares outstanding – diluted
|
|
11,621 |
|
|
10,436 |
|
|
8,736 |
|
|
8,757 |
|
|
|
|
Store
Data: |
|
Comparable-store revenues
increase(7) |
|
4.0% |
|
|
5.5% |
|
|
7.0% |
|
|
5.9% |
|
|
4.1% |
|
January 31, |
|
|
|
|
2000 |
|
1999 |
|
1998 |
|
1997 |
|
1996 |
|
|
As
Restated
(1) |
|
As
Restated
(1) |
|
As
Restated
(1) |
|
As
Restated
(1) |
|
Balance
Sheet Data: |
|
Working capital |
$ |
67,295 |
|
$ |
64,866 |
|
$ |
29,500 |
|
$ |
41,455 |
|
$ |
23,690 |
|
Total assets |
|
247,933 |
|
|
233,479 |
|
|
217,948 |
|
|
183,019 |
|
|
165,189 |
|
Total long-term debt, including current maturities
|
|
54,260 |
|
|
44,979 |
|
|
51,612 |
|
|
51,873 |
|
|
38,916 |
|
Total shareholders' equity |
|
90,091 |
|
|
91,869 |
|
|
51,971 |
|
|
46,816 |
|
|
41,871 |
Notes:
The Company has made adjustments to restate its
previously reported results of operations for the first three quarters of fiscal 1999 and
the prior four fiscal years.
The Company recorded a pre-tax charge of approximately $3.5 million
in the fourth quarter of fiscal year 1999 for the write down of inventory to the lower of
cost or market. As a result of this charge, fiscal year 1999 net loss and diluted loss per
share were reduced by $2.2 million and $0.19 per share, respectively.
The Company adopted a new, accelerated method of amortizing its
rental video assets in the fourth quarter of fiscal 1998. The adoption of the new
amortization method was accounted for as a change in accounting estimate effected by a
change in accounting principle and, accordingly, the Company recorded a non-cash,
non-recurring, pre-tax charge of $18.5 million in rental video cost of revenues in the
fourth quarter of fiscal 1998, reducing net loss and diluted loss per share for fiscal
1998 by $11.5 million and $1.10 per share, respectively.
The Company recorded a pre-tax charge of approximately $5.1 million
in the fourth quarter of fiscal year 1999 related to the closing of two of its superstores
in the fourth quarter of fiscal 1999 and five of its stores during the first quarter of
fiscal year 2000. This charge includes the net present value of future minimum lease
payments, write-off of property and equipment, and other costs associated with the closing
of these locations. As a result of this charge, fiscal year 1999 net loss and diluted loss
per share were increased by $3.1 million and $0.27 per share, respectively.
In fiscal 1996, the Company established a reserve of $2.5 million
($1.6 million after-tax charge) to cover potential losses related to certain mall store
leases that were sold prior to fiscal 1995 to Camelot Music, Inc., which filed for
bankruptcy protection in August 1996. In fiscal 1997, the reserve was reduced to $0.5
million, and $1.7 million was included in Gain on sale of mall stores. In fiscal 1998, the
Company was released from any contingent liability on the remaining leases by order of a
U.S. Bankruptcy Court. Accordingly, the Company reduced the remaining $0.5 million reserve
to zero as of January 31, 1999, thereby decreasing net loss and diluted loss per share for
fiscal 1998 by $0.3 million and $.03 per share, respectively.
Fiscal year 1998, 1997 and 1996 reflect adjustments recorded to
current income tax expense (benefit) resulting from the accounting restatements for which
the Company will recover previously paid income taxes upon filing amended income tax
returns. Fiscal 1995 does not reflect the tax benefits for the accounting restatements as
the statute of limitations has expired.
Stores open a minimum of 60 weeks.
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and 
