Exhibit 99.1
CONTACT: | Dan Crow | PR04-107 | ||||
Hastings | Vice President and Chief Financial Officer | |||||
Entertainment, Inc. | (806) 351-2300, ext. 6000 | |||||
www.gohastings.com |
Hastings Entertainment, Inc. Reports Pre-Tax Income of $0.25 per Diluted Share for 1Q 2004 Compared to a Pre-Tax Loss of $0.09 per Share for 1Q 2003, Raises Guidance for Full Year 2004
AMARILLO, Texas, May 24, 2004—Hastings Entertainment, Inc. (NASDAQ: HAST), a leading multimedia entertainment superstore retailer, today reported results for the three months ended April 30, 2004. Net income was approximately $1.8 million, or $0.15 per diluted share, for the first quarter of fiscal year 2004 compared to a net loss of approximately $1.1 million, or $0.09 per share, for the first quarter of fiscal year 2003. Pre-tax income was approximately $3.0 million, or $0.25 per diluted share, for the first quarter of fiscal year 2004 compared to a pre-tax loss of approximately $1.1 million, or $0.09 per share, for the first quarter of fiscal year 2003.
Below is a tabular presentation comparing and reconciling net income (loss) and pre-tax income (loss), and related per diluted share amounts, for the three months ended April 30, 2004 and 2003 (dollars in thousands, except per share amounts):
Three Months Ended April 30, | ||||||||
2004 | 2003 | |||||||
Pre-tax income (loss) | $ | 2,989 | $ | (1,068 | ) | |||
Income tax expense | (1,168 | ) | — | |||||
Net income (loss) | $ | 1,821 | $ | (1,068 | ) | |||
Per diluted share amounts: | ||||||||
Pre-tax income (loss) | $ | 0.25 | $ | (0.09 | ) | |||
Income tax expense | (0.10 | ) | — | |||||
Net income (loss) | $ | 0.15 | $ | (0.09 | ) | |||
Financial Results for the First Quarter of Fiscal Year 2004
Revenues.Total revenues for the first quarter increased $10.1 million, or 8.6%, to $126.9 million compared to $116.8 million for the first quarter of fiscal 2003, resulting principally from an increase of 8.1% in comparable-store revenues (“Comps”). The following is a summary of our revenue results:
Three Months Ended April 30, | ||||||||||||||||||||||||
2004 | 2003 | Increase/(Decrease) | ||||||||||||||||||||||
Percent | Percent | |||||||||||||||||||||||
Revenues | of Total | Revenues | of Total | Dollar | Percent | |||||||||||||||||||
Merchandise revenue | $ | 101,102 | 79.6 | % | $ | 91,456 | 78.3 | % | $ | 9,646 | 10.5 | % | ||||||||||||
Rental video revenue | 25,835 | 20.4 | % | 25,381 | 21.7 | % | 454 | 1.8 | % | |||||||||||||||
Total revenues | $ | 126,937 | 100.0 | % | $ | 116,837 | 100.0 | % | $ | 10,100 | 8.6 | % | ||||||||||||
Comparable-store revenues: | ||||||||||||||||||||||||
Total | 8.1 | % | 1.9 | % | ||||||||||||||||||||
Merchandise | 10.5 | % | -0.1 | % | ||||||||||||||||||||
Rental | -0.2 | % | 9.5 | % |
“We are extremely pleased with our results for the first quarter of fiscal 2004,” said John H. Marmaduke, Chairman and Chief Executive Officer. “In my letter to our shareholders contained in our Fiscal Year 2003 Summary Annual Report, I discussed management initiatives and system enhancements that, while completed in fiscal 2003, would show their first full year of benefit in fiscal 2004. We believe our focus in these areas is a significant contributor to increases in revenue and profits for the first quarter of fiscal 2004.”
The higher merchandise Comps were primarily the result of Comp increases in our video for sale, book and music categories. Below is a summary of the Comp results for those categories:
Three Months Ended April 30, | ||||||||
2004 | 2003 | |||||||
Video for sale | 24.6 | % | 22.7 | % | ||||
Books | 8.0 | % | -5.4 | % | ||||
Music | 5.9 | % | -11.8 | % |
Gross Profit.For the first quarter, total gross profit dollars increased approximately 15.8% to $44.5 million from $38.5 million for the same period last year, primarily as a result of higher revenues and increases in merchandise margin rates. As a percentage of total revenues, gross profit increased to 35.1% for the quarter compared to 32.9% for the same quarter in the prior year.
Selling, general and administrative expenses (“SG&A”).SG&A increased approximately $2.2 million to $41.2 million for the current quarter compared to $39.0 million for the same quarter in the prior year, due primarily to higher human resource and occupancy costs associated with the operation of a greater number of new, expanded and relocated superstores. As a percentage of total revenues, SG&A decreased to 32.4% for the current quarter compared to 33.3% for the same quarter in the prior year.
Stock Repurchase
On September 18, 2001, we announced a stock repurchase program of up to $5.0 million of our common stock. During the first quarter of fiscal year 2004, we purchased a total of 29,500 shares at a cost of approximately $191,000, or $6.48 per share. As of April 30, 2004, a total of 825,923 shares had been purchased under the program at a cost of approximately $3.964 million, for an average cost of $4.80 per share.
Fiscal Year 2004 Guidance
“In our press release dated March 29, 2004, we issued guidance of $0.70 to $0.76 per diluted share on a pre-tax income basis and $0.44 to $0.48 per share on a diluted net income basis,” said Dan Crow, Vice President of Finance and Chief Financial Officer. “Our revenue and gross profit rate for the first quarter exceeded our internal forecast, which is the basis for our guidance. Consequently, we are raising our guidance to a range of $0.80 to $0.85 per diluted share on a pre-tax income basis and a range of $0.50 to $0.53 per share on a diluted net income basis.”
This guidance, as indicated below under “Safe Harbor Statement,” reflects current estimates, assumptions and expectations, based on information available 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 on track with such guidance. Weighted average diluted shares outstanding at April 30, 2004 were approximately 11.8 million.
New Stores
Since September 17, 2003, which is the date we last reported our new superstore activity, we have opened superstores with our new 3-Across layout in the following communities:
Selling | ||||||||||||
Community | Population | Square Footage | Date Opened | |||||||||
Canyon, TX | 13,000 | 10,000 | 10/20/03 | |||||||||
Clovis, NM | 33,000 | 18,000 | 11/17/03 | |||||||||
Canon City, CO | 15,000 | 18,000 | 04/26/04 | |||||||||
Emporia, KS | 27,000 | 15,000 | 05/17/04 |
Hastings’ 3-Across store format enables us to merchandise more product, provide better customer service, satisfy a more diverse customer base and promote more logical product adjacencies for improved customer traffic flow.
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 are not necessarily 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 items contained in our guidance for fiscal year 2004, 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 150 superstores, averaging approximately 20,000 square feet, primarily in small to medium-sized markets in 20 states, primarily in the Western and Midwestern 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. 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)
April 30, | April 30, | January 31, | ||||||||||
2004 | 2003 | 2004 | ||||||||||
(unaudited) | (unaudited) | |||||||||||
Assets | ||||||||||||
Current Assets | ||||||||||||
Cash | $ | 4,297 | $ | 2,895 | 7,124 | |||||||
Merchandise inventories, net | 144,755 | 137,596 | 138,552 | |||||||||
Income tax receivable | 195 | 569 | 511 | |||||||||
Deferred income taxes, current | 1,935 | — | 1,779 | |||||||||
Prepaid expenses and other current assets | 6,763 | 6,108 | 6,585 | |||||||||
Total current assets | 157,945 | 147,168 | 154,551 | |||||||||
Property and equipment, net | 78,061 | 76,000 | 79,633 | |||||||||
Deferred income taxes, net of valuation allowance at April 30, 2003 | — | 971 | 1,246 | |||||||||
Intangible assets, net | 608 | 696 | 630 | |||||||||
Other assets | 16 | 188 | 188 | |||||||||
Total assets | $ | 236,630 | $ | 225,023 | 236,248 | |||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Current liabilities | ||||||||||||
Current maturities on capital lease obligations | $ | 168 | $ | 199 | 221 | |||||||
Trade accounts payable | 76,900 | 67,963 | 82,072 | |||||||||
Accrued expenses and other current liabilities | 29,230 | 31,020 | 34,308 | |||||||||
Total current liabilities | 106,298 | 99,182 | 116,601 | |||||||||
Long-term debt, excluding current maturities | 38,513 | 44,074 | 29,623 | |||||||||
Deferred income taxes | 78 | — | — | |||||||||
Other liabilities | 3,039 | 3,668 | 3,031 | |||||||||
Commitments and contingencies | — | — | — | |||||||||
Shareholders’ equity: | ||||||||||||
Preferred stock | — | — | — | |||||||||
Common stock | 119 | 119 | 119 | |||||||||
Additional paid-in capital | 36,557 | 36,740 | 36,598 | |||||||||
Retained earnings | 54,830 | 44,191 | 53,009 | |||||||||
Treasury stock, at cost | (2,804 | ) | (2,951 | ) | (2,733 | ) | ||||||
Total shareholders’ equity | 88,702 | 78,099 | 86,993 | |||||||||
Total liabilities and shareholders’ equity | $ | 236,630 | $ | 225,023 | 236,248 | |||||||
Consolidated Statements of Operations (unaudited)
(Dollars in thousands, except per share data)
Three months ended | ||||||||
April 30, | ||||||||
2004 | 2003 | |||||||
Merchandise revenue | $ | 101,102 | $ | 91,456 | ||||
Rental video revenue | 25,835 | 25,381 | ||||||
Total revenues | 126,937 | 116,837 | ||||||
Merchandise cost of revenue | 71,896 | 68,481 | ||||||
Rental video cost of revenue | 10,530 | 9,903 | ||||||
Total cost of revenues | 82,426 | 78,384 | ||||||
Gross profit | 44,511 | 38,453 | ||||||
Selling, general and administrative expenses | 41,171 | 38,976 | ||||||
Pre-opening expenses | 94 | 113 | ||||||
Operating income (loss) | 3,246 | (636 | ) | |||||
Other income (expense): | ||||||||
Interest expense | (365 | ) | (490 | ) | ||||
Other, net | 108 | 58 | ||||||
Income (loss) before income taxes | 2,989 | (1,068 | ) | |||||
Income tax expense | 1,168 | — | ||||||
Net income (loss) | $ | 1,821 | $ | (1,068 | ) | |||
Basic income (loss) per share | $ | 0.16 | $ | (0.09 | ) | |||
Diluted income (loss) per share | $ | 0.15 | $ | (0.09 | ) | |||
Consolidated Statements of Cash Flows (unaudited)
(Dollars in thousands)
Three months ended | ||||||||
April 30, | ||||||||
2004 | 2003 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 1,821 | $ | (1,068 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operations: | ||||||||
Depreciation expense | 10,710 | 9,838 | ||||||
Amortization expense | 22 | 21 | ||||||
Loss on rental videos, lost, stolen and defective | 1,253 | 1,219 | ||||||
Loss on disposal of other assets | 187 | 299 | ||||||
Deferred income taxes | 1,168 | — | ||||||
Non-cash compensation | — | 10 | ||||||
Changes in operating assets and liabilities: | ||||||||
Merchandise inventory | (4,188 | ) | 11,927 | |||||
Prepaid expenses and other current assets | (178 | ) | (139 | ) | ||||
Trade accounts payable | (5,172 | ) | (7,749 | ) | ||||
Accrued expenses and other liabilities | (5,078 | ) | (1,523 | ) | ||||
Income taxes receivable/payable | 316 | (17 | ) | |||||
Other assets and liabilities, net | 180 | 269 | ||||||
Net cash provided by operations | 1,041 | 13,087 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of rental video | (8,351 | ) | (6,356 | ) | ||||
Purchases of property and equipment | (4,242 | ) | (5,844 | ) | ||||
Net cash used in investing activities | (12,593 | ) | (12,200 | ) | ||||
Cash flows from financing activities: | ||||||||
Borrowings under revolving credit facility | 144,096 | 118,222 | ||||||
Repayments under revolving credit facility | (135,209 | ) | (120,615 | ) | ||||
Payments under long-term debt and capital lease obligations | (50 | ) | (46 | ) | ||||
Purchase of treasury stock | (191 | ) | — | |||||
Proceeds from exercise of stock options | 79 | — | ||||||
Net cash provided by (used in) financing activities | 8,725 | (2,439 | ) | |||||
Net decrease in cash | (2,827 | ) | (1,552 | ) | ||||
Cash at beginning of period | 7,124 | 4,447 | ||||||
Cash at end of period | $ | 4,297 | $ | 2,895 | ||||
Balance Sheet, Cash Flow and Other Ratios (A)
(Dollars in thousands, except per share amounts)
April 30, | April 30, | |||||||
2004 | 2003 | |||||||
Merchandise inventories, net | $ | 144,755 | $ | 137,596 | ||||
Inventory turns, trailing 12 months (B) | 1.93 | 1.83 | ||||||
Long-term debt | $ | 38,513 | $ | 44,074 | ||||
Long-term debt to total capitalization (C) | 30.3 | % | 36.1 | % | ||||
Book value (D) | $ | 88,702 | $ | 78,099 | ||||
Book value per share (E) | $ | 7.52 | $ | 6.89 |
Three months ended April 30, | ||||||||
2004 | 2003 | |||||||
EBITDA (F) | $ | 14,086 | $ | 9,281 | ||||
Adjusted EBITDA (F) | $ | 5,735 | $ | 2,925 | ||||
Comparable-store total revenues (G) | 8.1 | % | 1.9 | % | ||||
Comparable-store merchandise revenues (G) | 10.5 | % | -0.1 | % | ||||
Comparable-store rental revenues (G) | -0.2 | % | 9.5 | % |
(A) | Calculations may differ in the method employed from similarly titled measures used by other companies. | |||
(B) | Calculated as merchandise cost of goods sold for the twelve months ended April 30, 2004 divided by average merchandise inventory for the twelve months ended April 30, 2004. | |||
(C) | Defined as long-term debt divided by long-term debt plus total shareholders’ equity (book value). | |||
(D) | Defined as total shareholders’ equity. | |||
(E) | Defined as total shareholders’ equity divided by weighted average diluted shares outstanding as of April 30, 2004. | |||
(F) | 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 April 30, | ||||||||
2004 | 2003 | |||||||
Net income (loss) | $ | 1,821 | $ | (1,068 | ) | |||
Interest expense | 365 | 490 | ||||||
Income tax expense | 1,168 | — | ||||||
Depreciation expense | 10,710 | 9,838 | ||||||
Amortization expense | 22 | 21 | ||||||
EBITDA | $ | 14,086 | $ | 9,281 | ||||
The following table reconciles Adjusted EBITDA to our unaudited consolidated financial statements contained herein: |
Three months ended April 30, | ||||||||
2004 | 2003 | |||||||
Net income (loss) | $ | 1,821 | $ | (1,068 | ) | |||
Interest expense | 365 | 490 | ||||||
Income tax expense | 1,168 | — | ||||||
Depreciation expense | 10,710 | 9,838 | ||||||
Amortization expense | 22 | 21 | ||||||
Purchase of rental video assets | (8,351 | ) | (6,356 | ) | ||||
Adjusted EBITDA | $ | 5,735 | $ | 2,925 | ||||
(G) | 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 during the comparable period. Sales via the Internet are not included and closed stores are removed from each comparable period for the purpose of calculating comparable-store revenues. |
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