-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AtH1csbiXP2LiHYPT39mSrRmdMQYdrI+MWRmMSSidMBTleK3G2UM8X6JvxLrhp5W r5+7oclCsTuEoKniafcJLw== 0000950134-03-015965.txt : 20031202 0000950134-03-015965.hdr.sgml : 20031202 20031202154000 ACCESSION NUMBER: 0000950134-03-015965 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20031124 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20031202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HASTINGS ENTERTAINMENT INC CENTRAL INDEX KEY: 0001054579 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL- COMPUTER & PRERECORDED TAPE STORES [5735] IRS NUMBER: 751386375 STATE OF INCORPORATION: TX FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24381 FILM NUMBER: 031032652 BUSINESS ADDRESS: STREET 1: 3601 PLANS BLVD STREET 2: SUITE 1 CITY: AMARILLO STATE: TX ZIP: 79102 BUSINESS PHONE: 8063512300 MAIL ADDRESS: STREET 1: P O BOX 35350 CITY: AMARILLO STATE: TX ZIP: 79120-5350 8-K 1 d10992e8vk.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) November 24, 2003 ---------- HASTINGS ENTERTAINMENT, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) TEXAS -------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) 000-24381 75-1386375 ------------------------ --------------------------------------- (Commission File Number) (I.R.S. Employer Identification Number) 3601 PLAINS BLVD, AMARILLO, TEXAS 79102 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (806) 351-2300 ---------------------------------------------------- (Registrant's telephone number, including area code) NONE ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) HASTINGS ENTERTAINMENT, INC. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) EXHIBITS:
Exhibit Number Description ------ ----------- 99.1 Press release issued by Hastings Entertainment, Inc., dated November 24, 2003
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION On November 24, 2003, Hastings Entertainment, Inc. issued a press release announcing, among other things, its results for the fiscal quarter ended October 31, 2003. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K. The information contained in this Current Report on Form 8-K, including the exhibit attached hereto, is being furnished and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. Furthermore, the information contained in this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended. HASTINGS ENTERTAINMENT, INC. 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 hereunto duly authorized. Date: December 2, 2003 Hastings Entertainment, Inc. (Registrant) By: /s/ DAN CROW -------------------------------------------- Dan Crow Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) EX-99.1 3 d10992exv99w1.txt PRESS RELEASE Exhibit 99.1 NEWS RELEASE HASTINGS CONTACT: DAN CROW PR03-102 ENTERTAINMENT, INC. Vice President and CHIEF FINANCIAL OFFICER (806) 351-2300, ext. 6000 www.gohastings.com Hastings Entertainment, Inc. Reports Third Quarter Loss per Share of $0.34 Compared to a Loss of $0.58 in Prior Year AMARILLO, Texas, November 24, 2003--Hastings Entertainment, Inc. (NASDAQ: HAST), a leading multimedia entertainment superstore retailer, today reported results for the three months ended October 31, 2003. Net loss for the third quarter of fiscal 2003 was ($3.8) million, or ($0.34) per share, compared to a net loss of ($6.6) million, or ($0.58) per share, for the same period in the prior year. The current year results include the effect of Emerging Issues Task Force Consensus No. 02-16 (EITF 02-16), which governs the accounting by a customer for certain consideration received from a vendor. The effect of EITF 02-16, which was adopted during the first quarter of fiscal 2003, increased net loss for the third quarter of 2003 by approximately $0.3 million, or $0.03 per share. Total revenues for the third quarter of fiscal 2003 increased approximately $2.2 million, or 2.0%, to $112.8 million compared to $110.6 million during the third quarter of fiscal 2002. This increase was primarily due to an increase in merchandise comparable-store revenues (Comps) of 2.4%, primarily resulting from Comp increases in our sale video, driven by DVD sales, and video game categories for the three months ended October 31, 2003 compared to the same period last year. Increases in total sales of DVDs and video games during the third quarter of fiscal 2003 continued to be the highest among all of our merchandise product lines. DVDs for sale increased approximately 40% for the three months ended October 31, 2003 compared to the three months ended October 31, 2002, as customers continue to convert movie libraries from the VHS format to DVD. Video games for sale increased 34% for the current third quarter when compared to the third quarter of last year. Increased selection of games in popular formats and competitive pricing makes Hastings a favorite among gamers. In addition, our book Comps increased 0.8% during the quarter. Offsetting these increases in merchandise Comps was a decline in our music Comps of 6.3% for the third quarter of fiscal 2003. For the year, the music industry reported a decline of approximately 7.4% in shipments of new release compact discs and continues to battle on-line and physical music piracy. Offsetting the overall increase in merchandise Comps was a decline in rental video Comps of 1.4%, resulting primarily from lower rentals of titles in the VHS and game formats during the quarter. The reduction in game rentals was primarily due to fewer popular titles being released during the current quarter when compared to the same period last year. Financial Results for the Third Quarter of Fiscal 2003 Despite lower than anticipated revenue results, particularly in rental video, operating loss (net loss before income taxes, interest expense and other income) decreased approximately $2.9 million to ($3.3) million for the three months ended October 31, 2003, compared to approximately ($6.2) million for the three months ended October 31, 2002. This reduction is primarily the result of continued improvements in cost controls, particularly those related to costs associated with the distribution and return of product, and higher rental video margins. GUIDANCE "Our net loss for the quarter was slightly better than our internal projections," said Dan Crow, Vice President and Chief Financial Officer. "Cost controls, margin management and costs of operating our distribution center, including the return of product, were better than our projections. However, these improvements were offset by lower than projected rental revenues, which are a high margin category for us. We are also running ahead of our internal projections for the first nine months. Consequently, we are raising our earnings guidance for the year ending January 31, 2004 to a range of $0.45 to $0.50 from a range of $0.27 to $0.32 per diluted share, which we announced on May 21, 2003. Although most forecasters are projecting a robust holiday season we remain concerned about sales for the holiday season, particularly rental revenue, and this concern is a factor in our guidance." This guidance for the fiscal year ending January 31, 2004, as indicated below under "Safe Harbor Statement," reflects current estimates, assumptions and expectations based on information available to us on the date of this press release. This guidance is subject to uncertainty, as the information upon which it is based will change over time and may change substantially as the fiscal year progresses. We undertake no obligation to update this guidance for such changes, but intend to review such guidance on a fiscal quarterly basis to determine whether we are currently in line with such guidance. SAFE HARBOR STATEMENT Certain written and oral statements set forth above or made by Hastings or with the approval of an authorized executive officer of the Company constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, the words "believe," "expect," "intend," "anticipate," "project," "will" and similar expressions identify forward-looking statements which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future, particularly with respect to our earnings guidance for 2003, are forward-looking statements. Such statements are based upon Company management's current estimates, assumptions and expectations, which are based on information available at the time of this disclosure, and are subject to a number of factors and uncertainties, including, but not limited to, our inability to attain such estimates, assumptions and expectations, a downturn in market conditions in any industry, including the current economic state of retailing (relating to the products we inventory, sell or rent) and the effects of or changes in economic conditions in the U.S. or the markets in which we operate. We undertake no obligation to affirm, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. About Hastings Founded in 1968, Hastings Entertainment, Inc. is a leading multimedia entertainment retailer that combines the sale of books, music, software, periodicals, new and used DVDs, videos and video games with the rental of videos, DVDs and video games in a superstore format. We currently operate 148 superstores, averaging approximately 20,000 square feet, primarily in small to medium-sized markets throughout the United States. Hastings also operates an e-commerce Internet Web site that makes available to our customers new and used entertainment products and unique, contemporary gifts and toys. The site features exceptional product and pricing offers as well as an Investor Relations section with links to past press release information and filings with the Securities and Exchange Commission, including officer certification of financial information listed as exhibits to such filings. CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
October 31, October 31, January 31, 2003 2002 2003 ------------ ------------ ------------ (Unaudited) (Unaudited) Assets Current Assets Cash $ 3,566 $ 3,421 $ 4,447 Merchandise inventories, net 153,252 166,269 148,395 Income tax receivable 539 24 552 Other current assets 5,705 4,635 5,969 ------------ ------------ ------------ Total current assets 163,062 174,349 159,363 Property and equipment, net 78,237 76,163 76,283 Deferred income taxes 1,036 946 971 Intangible assets, net 652 676 717 Other assets 189 37 188 ------------ ------------ ------------ Total assets $ 243,176 $ 252,171 $ 237,522 ============ ============ ============ Liabilities and Shareholders' Equity Current liabilities Current maturities on capital lease obligations $ 218 $ 169 $ 193 Trade accounts payable 82,915 100,535 75,712 Accrued expenses & other current liabilities 30,758 30,342 32,543 ------------ ------------ ------------ Total current liabilities 113,891 131,046 108,448 Long-term debt, excluding current maturities 51,479 46,475 46,519 Other liabilities 3,315 4,925 3,399 Commitments and contingencies -- -- -- Shareholders' equity: Preferred stock -- -- -- Common stock 119 119 119 Additional paid-in capital 36,635 36,763 36,749 Retained earnings 40,568 35,688 45,259 Treasury stock, at cost (2,831) (2,845) (2,971) ------------ ------------ ------------ Total shareholders' equity 74,491 69,725 79,156 ------------ ------------ ------------ Total liabilities and shareholders' equity $ 243,176 $ 252,171 $ 237,522 ============ ============ ============
CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data) (Unaudited)
Three months ended Nine months ended October 31, October 31, -------------------------- -------------------------- 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Merchandise revenue $ 88,901 $ 86,445 $ 269,904 $ 267,026 Rental video revenue 23,942 24,191 75,173 71,493 ---------- ---------- ---------- ---------- Total revenues 112,843 110,636 345,077 338,519 Merchandise cost of revenue 65,774 66,370 200,029 199,408 Rental video cost of revenue 8,668 10,222 27,708 29,387 ---------- ---------- ---------- ---------- Total cost of revenues 74,442 76,592 227,737 228,795 ---------- ---------- ---------- ---------- Gross profit 38,401 34,044 117,340 109,724 Selling, general and administrative expenses 41,684 40,117 120,449 117,030 Pre-opening expenses 53 150 234 331 ---------- ---------- ---------- ---------- Operating loss (3,336) (6,223) (3,343) (7,637) Other income (expense): Interest expense (547) (481) (1,579) (1,497) Interest income -- 24 -- 1,290 Other, net 73 53 232 164 ---------- ---------- ---------- ---------- Loss before income taxes (3,810) (6,627) (4,690) (7,680) Income tax benefit -- -- -- -- ---------- ---------- ---------- ---------- Net loss $ (3,810) $ (6,627) $ (4,690) $ (7,680) ========== ========== ========== ========== Basic and diluted loss per share $ (0.34) $ (0.58) $ (0.41) $ (0.68) ========== ========== ========== ========== Weighted-average common shares outstanding: Basic and diluted 11,317 11,364 11,319 11,341 ========== ========== ========== ==========
CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Three months ended Nine months ended October 31, October 31, ------------------------- ------------------------- 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Cash flows from operating activities: Net loss $ (3,810) $ (6,627) $ (4,690) $ (7,680) Adjustments to reconcile net loss to net cash provided by operations: Depreciation expense 9,591 10,232 28,396 29,078 Amortization expense 22 (60) 65 (30) Loss on rental videos, lost, stolen and defective 966 1,283 3,237 4,001 Loss on disposal of other assets 162 187 802 253 Non-cash compensation -- (17) 90 133 Changes in operating assets and liabilities: Merchandise inventory (12,576) (26,799) (1,796) (13,599) Other current assets 125 596 264 697 Trade accounts payable 15,098 28,059 7,203 17,118 Accrued expenses and other liabilities 520 (1,293) (1,785) 549 Income taxes receivable (6) 6,757 (52) 5,497 Other assets and liabilities, net (187) (245) (85) (966) ---------- ---------- ---------- ---------- Net cash provided by operations 9,905 12,073 31,649 35,051 ---------- ---------- ---------- ---------- Cash flows from investing activities: Purchases of rental video (6,965) (11,960) (20,756) (27,992) Purchases of property and equipment (5,608) (7,699) (16,693) (21,100) ---------- ---------- ---------- ---------- Net cash used in investing activities (12,573) (19,659) (37,449) (49,092) ---------- ---------- ---------- ---------- Cash flows from financing activities: Borrowings under revolving credit facility 121,552 125,311 362,112 372,911 Repayments under revolving credit facility (119,070) (122,052) (356,985) (359,573) Payments under long-term debt and capital lease obligations (52) (42) (143) (124) Purchase of treasury stock -- (187) (235) (355) Proceeds from exercise of stock options 167 114 170 284 ---------- ---------- ---------- ---------- Net cash provided by financing activities 2,597 3,144 4,919 13,143 ---------- ---------- ---------- ---------- Net decrease in cash (71) (4,442) (881) (898) Cash at beginning of period 3,637 7,863 4,447 4,319 ---------- ---------- ---------- ---------- Cash at end of period $ 3,566 $ 3,421 $ 3,566 $ 3,421 ========== ========== ========== ==========
Balance Sheet, Cash Flow and Other Ratios (1) (Dollars in thousands, except per share amounts)
October 31, October 31, 2003 2002 ------------ ------------ Merchandise inventories, net $ 153,252 $ 166,269 Inventory turns, trailing 12 months (2) 1.83 1.79 Long-term debt $ 51,479 $ 46,475 Long-term debt to total capitalization (3) 40.9% 40.0% Book value (4) $ 74,491 $ 69,725 Book value per share (5) $ 6.58 $ 6.15
Three months ended October 31, Nine months ended October 31, ------------------------------- ------------------------------ 2003 2002 2003 2002 ------------ ------------ ------------ ------------ EBITDA (6) $ 6,350 $ 4,026 $ 25,350 $ 22,865 Adjusted EBITDA (6) $ (615) $ (7,934) $ 4,594 $ (5,127) Comparable-store total revenues (7) 1.6% 6.1% 1.0% 5.4% Comparable-store merchandise revenues (7) 2.4% 4.0% 0.2% 5.3% Comparable-store rental revenues (7) -1.4% 14.2% 4.0% 5.9%
(1) Calculations may differ in the method employed from similarly titled measures used by other companies. (2) Calculated as merchandise cost of goods sold for twelve months ended October 31, 2003 divided by average merchandise inventory for the twelve months ended October 31, 2003. (3) Defined as long-term debt divided by long-term debt plus total shareholders' equity (book value). (4) Defined as total shareholders' equity. (5) Defined as total shareholders' equity divided by weighted average shares outstanding for the six-month period. (6) It is important to note that EBITDA and Adjusted EBITDA are supplemental non-GAAP measures. EBITDA is defined as "net income before interest, taxes, depreciation and amortization" and is a widely used indicator of a company's ability to service debt. Adjusted EBITDA is defined as "net income before interest, taxes, depreciation and amortization" less "expenditures for rental video assets" and could be viewed as an indicator of our ability to service debt following the procurement of rental video assets. Neither EBITDA nor Adjusted EBITDA are intended to represent or to be considered as alternatives to operating income or cash flows from operations. The following table reconciles EBITDA to our unaudited consolidated financial statements contained herein:
Three months ended October 31, Nine months ended October 31, ------------------------------ ------------------------------ 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Net loss $ (3,810) $ (6,627) $ (4,690) $ (7,680) Interest expense 547 481 1,579 1,497 Income tax expense (benefit) -- -- -- -- Depreciation expense 9,591 10,232 28,396 29,078 Amortization expense 22 (60) 65 (30) ------------ ------------ ------------ ------------ EBITDA $ 6,350 $ 4,026 $ 25,350 $ 22,865 ============ ============ ============ ============
The following table reconciles Adjusted EBITDA to our unaudited consolidated financial statements contained herein:
Three months ended October 31, Nine months ended October 31, ------------------------------ ------------------------------ 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Net income (loss) $ (3,810) $ (6,627) $ (4,690) $ (7,680) Interest expense 547 481 1,579 1,497 Income tax expense (benefit) -- -- -- -- Depreciation expense 9,591 10,232 28,396 29,078 Amortization expense 22 (60) 65 (30) Purchase of rental video assets (6,965) (11,960) (20,756) (27,992) ------------ ------------ ------------ ------------ Adjusted EBITDA $ (615) $ (7,934) $ 4,594 $ (5,127) ============ ============ ============ ============
(7) Stores included in the comparable-store revenues calculation are those stores that have been open for a minimum of 60 weeks. Also included are stores that are remodeled or relocated. Sales via the internet are not included and closed stores are removed from each comparable period for the purpose of calculating comparable-store revenues. -----END PRIVACY-ENHANCED MESSAGE-----