Hastings Entertainment, Inc. Reports Results for the Fourth Quarter of Fiscal 2012
Hastings Entertainment, Inc. Reports Results for the Fourth Quarter of Fiscal
2012
- Reduced pre-tax loss by $3.7 million, or 29.1%, during fiscal year 2012
compared to fiscal year 2011.
- Positive Free Cash Flow of $13.2 million for fiscal year 2012 compared to
negative $20.5 million for fiscal 2011.
- Debt reduced by $11.5 million from the beginning of fiscal year 2012.
- Special dividend of $0.35 per share and annual dividend of $0.02 per share
paid in fourth quarter 2012.
PR Newswire
AMARILLO, Texas, March 18, 2013
AMARILLO, Texas, March 18, 2013 /PRNewswire/ -- Hastings Entertainment,
Inc. (NASDAQ: HAST), a leading multimedia entertainment retailer, today
reported results for the three months and fiscal year ended January 31, 2013.
Net income was approximately $1.2 million, or $0.15 per diluted share, for the
three months ended January 31, 2013 compared to a net loss of approximately
$8.4 million, or $1.00 per diluted share, for the three months ended January
31, 2012. Net loss was approximately $9.3 million, or $1.14 per diluted
share, for the fiscal year ended January 31, 2013 compared to a net loss of
$17.6 million, or $2.05 per diluted share, for the fiscal year ended January
31, 2012.
Earnings before interest, taxes, property and equipment depreciation expense
and amortization ("EBITDA") was approximately $5.2 million for the three
months ended January 31, 2013 compared to $5.8 million for the three months
ended January 31, 2012. Adjusted EBITDA, which excludes gift card breakage
revenue, stock compensation expense, store asset impairment expense, abandoned
lease expense and impairment of goodwill, was approximately $6.8 million for
the three months ended January 31, 2013 compared to $9.2 million for the three
months ended January 31, 2012. EBITDA was approximately $7.1 million for the
fiscal year ended January 31, 2013 compared to $5.7 million for the fiscal
year ended January 31, 2012. Adjusted EBITDA was approximately $9.6 million
for the fiscal year ended January 31, 2013 compared to $9.3 million for the
fiscal year ended January 31, 2012.
Reconciliations of non-GAAP financial measures to comparable GAAP financial
measures are included in the tables following the financial statements in this
release.
"Our revenues continue to be negatively impacted by the increasing popularity
of digital delivery, rental kiosks and subscription-based services, as well as
the longevity of the current video game console cycle" said John Marmaduke,
Chief Executive Officer and Chairman. "In spite of lower revenues, our pre-tax
profit for the fourth quarter increased over the fourth quarter of the prior
year. Further, we reduced our pre-tax loss for the fiscal year by $3.7
million, or 29%, compared to the prior year.
"As of the end of the fiscal year, we have introduced our new product
categories in forty-four of our 137 superstores. These categories include
consumer electronics, music electronics and accessories, hobby, recreation and
lifestyle, vinyl and tablets and were the primary driver in increases in
comparable revenues of 15.1% and 12.9% for the quarter and full fiscal year,
respectively, in our Electronics Department. We are dedicating approximately
600 linear feet per store to these categories and also increasing linear
footage for trends including apparel, kids and seasonal categories along with
a reduction in footprint dedicated to rental, music and books. We are
encouraged by the results of this change to our business model and look
forward to a full year's performance. Additionally, we plan on expanding these
categories to an additional sixty-one stores in fiscal 2013.
"For the full fiscal year, we improved margin rates, improved store execution
and reduced SG&A expenses. Finally, by managing working capital, we were able
to reduce debt by $11.5 million and pay a dividend of approximately $3.1
million for the first time in our history.
"Fiscal 2013 will continue to be a challenge for us as we continue to
transition to our new business model. We do not plan to open or relocate any
existing stores and we plan on closing eight underperforming stores as their
respective leases expire through August 2013. Additionally, we have
significantly reduced expenses at our corporate store support center by a
restructuring and a headcount reduction. With respect to revenues, we are
projecting a low single digit decline in our merchandise comps and a
mid-single digit decline in our rental comps. We are projecting a net loss for
fiscal 2013; however, we expect it will be significantly lower than fiscal
2012.
"Finally, we are projecting in fiscal 2013 positive cash flow from operations,
a reduction in debt and the payment of an annual dividend."
Financial Results for the Fourth Quarter of Fiscal Year 2012
Revenues. Total revenues for the fourth quarter decreased approximately $11.5
million, or 7.5%, to $141.6 million compared to $153.1 million for the fourth
quarter of fiscal 2011. As of January 31, 2013, we operated three fewer
Hastings superstores, as compared to January 31, 2012. The following is a
summary of our revenues results (dollars in thousands):
Three Months Ended January 31,
2013 2012 Decrease
Percent Percent
Revenues Of Total Revenues Of Total Dollar Percent
Merchandise $ 125,992 89.0% $ 135,213 88.3% $ (9,221) -6.8%
Revenue
Rental Revenue 15,608 11.0% 17,634 11.5% (2,026) -11.5%
Gift Card
Breakage 40 0.0% 244 0.2% (204) -83.6%
Revenue
Total $ 141,640 100.0% $ 153,091 100.0% $ (11,451) -7.5%
Revenues
Stores open at 140 143 (3) -2.1%
period end
Comparable-store revenues ("Comp")
Total -5.7%
Merchandise -5.1%
Rental -10.1%
Below is a summary of the Comp results for our major merchandise categories:
Three Months Ended January 31,
2013 2012
Electronics 15.1% 6.6%
Hardback Cafe 10.7% 4.4%
Trends 6.2% 9.5%
Movies -0.8% -10.7%
Consumables -1.7% -3.3%
Books -4.5% 2.4%
Music -12.9% -9.8%
Video Games -22.0% -7.8%
Electronics Comps increased 15.1% for the quarter, primarily due to the
success of the 44 stores participating in the consumer electronics reset whose
comparable sales as a group, performed 38.8% better than the chain, and as a
whole, sales of tablets, headphones, turntables and iPhone accessories showed
strong growth. Hardback Cafe Comps increased 10.7% for the quarter, primarily
due to increased sales in specialty coffee and blended drinks, as well as
increased sales of Jones soda drinks. Trends Comps increased 6.2%, primarily
due to increased sales in comic books, skateboard and other action sports
items and novelty gifts and toys, partially offset by decreased sales in
boutique apparel items. Movies Comps decreased 0.8% for the quarter,
primarily due to decreased sales in used and previously viewed movies,
partially offset by increased sales in new DVD and Blu-ray movies, as well as
DVD boxed sets. Consumable Comps decreased 1.7% for the quarter, primarily
due to lower sales of snacks and candies. Book Comps decreased 4.5% for the
quarter, primarily due to decreased sales in new and used books and magazines,
partially offset by strong holiday sales of Nextbook tablets. Book Comps,
excluding digital sales, decreased 5.1% for the quarter. Music Comps
decreased 12.9% for the quarter, while music unit sales decreased at a lower
rate of 8.2% for the quarter, as a result of lower average unit retail prices
and the fact that consumers are increasingly using digital delivery of their
music purchases. Video Game Comps decreased 22.0% for the quarter, primarily
due to decreased sales in new and used video games and video game hardware,
primarily resulting from the longevity of the current console cycle, as well
as the fact that overall industry sales of Nintendo's Wii U system were weaker
than expected.
Rental Comps decreased 10.1% during the quarter, primarily due to fewer
rentals of DVDs and video games, partially offset by an increase in rentals of
Blu-ray movies. Rental Movie Comps decreased 7.7% for the fourth quarter, an
improvement from the first three quarters of the year in which comps decreased
11.6%. Movie rentals continue to be affected by competitor rental kiosks and
subscription-based rental services. Rental Video Game Comps, which are also
impacted by the longevity of the current console cycle, decreased 27.0%.
Gross Profit – Merchandise. For the fourth quarter, total merchandise gross
profit dollars decreased approximately $3.0 million, or 7.3%, to $37.9 million
from $40.9 million for the same quarter in the prior year, primarily due to
lower revenues and a slightly decreased merchandise margin rate. As a
percentage of total merchandise revenue, merchandise gross profit decreased to
30.1% for the quarter compared to 30.2% for the same quarter in the prior
year, resulting primarily from a shift in mix of revenues by category and
increased freight costs as a result of increased internet sales, partially
offset by reduced shrinkage expense and reduced merchandise markdowns.
Gross Profit – Rental. For the fourth quarter, total rental gross profit
dollars decreased approximately $1.0 million, or 9.2%, to $9.9 million from
$10.9 million for the same quarter in the prior year, due to lower revenues,
partially offset by an increased rental margin rate. As a percentage of total
rental revenue, rental gross profit increased to 63.2% for the quarter
compared to 62.0% for the same quarter in the prior year, primarily due to a
significant reduction in rental asset purchases based on lower anticipated
rental revenues which, in turn, resulted in lower depreciation.
Selling, General and Administrative Expenses ("SG&A"). As a percentage of
total revenue, SG&A decreased to 32.6% for the fourth quarter compared to
33.0% for the same period in the prior year due to a significant reduction in
SG&A expenses. SG&A decreased approximately $4.3 million during the quarter,
or 8.5%, to $46.2 million compared to $50.5 million for the same quarter last
year. This is primarily due to a $2.3 million reduction in abandoned lease
expense, reduced depreciation and write-off expense of $1.0 million, reduced
store occupancy expense of $0.5 million and reduced advertising expense of
$0.4 million. The reduction in depreciation and occupancy expenses are
primarily the result of operating fewer stores.
Interest Expense. For the fourth quarter, interest expense decreased
approximately $0.1 million, or 25.0%, to $0.3 million, compared to $0.4
million for the fourth quarter of fiscal 2011 due to lower average debt levels
during the current quarter and a lower average interest rate. The average
rate of interest charged for the fourth quarter decreased to 2.5% compared to
2.7% for the same quarter in the prior year.
Income Taxes. The effective tax rate for the fourth quarter was 9.3%
primarily due to Texas state income tax, which is based primarily on gross
margin. For further details, see the Income Tax Expense notes in the section
covering Financial Results for the Fiscal Year Ended January 31, 2013.
Financial Results for the Fiscal Year Ended January 31, 2013
Revenues. Total revenues for the fiscal year ended January 31, 2013 decreased
approximately $33.9 million, or 6.8%, to $462.5 million compared to $496.4
million for the fiscal year ended January 31, 2012. The following is a
summary of our revenues results (dollars in thousands):
Fiscal Year Ended January 31,
2013 2012 Decrease
Percent Percent
Revenues Of Total Revenues Of Total Dollar Percent
Merchandise $ 402,735 87.1% $ 425,142 85.6% $ (22,407) -5.3%
Revenue
Rental Revenue 59,846 12.9% 70,426 14.2% (10,580) -15.0%
Gift Card
Breakage (80) 0.0% 819 0.2% (899) NM
Revenue
Total $ 462,501 100.0% $ 496,387 100.0% $ (33,886) -6.8%
Revenues
Stores open at 140 143 (3) -2.1%
period end
Comparable-store revenues ("Comp")
Total -5.1%
Merchandise -3.7%
Rental -12.9%
Below is a summary of the Comp results for our major merchandise categories:
Fiscal Year Ended January 31,
2013 2012
Electronics 12.9% 3.7%
Hardback Cafe 11.1% 4.8%
Trends 8.7% 10.4%
Consumables 1.5% -6.3%
Movies -1.1% -8.2%
Books -1.3% -4.8%
Music -12.0% -4.5%
Video Games -21.8% -5.1%
Electronics Comps increased 12.9% for fiscal 2012, primarily due to the
success of the 44 stores participating in the consumer electronics reset.
Sales of tablets, tablet accessories, turntables and headphones were strong
during the fiscal year. Hardback Cafe Comps increased 11.1% for fiscal 2012,
primarily due to higher sales of coffee and specialty drinks. Trends Comps
increased 8.7% for fiscal 2012, primarily due to strong sales in boutique
apparel, toys and gifts, comic books, as well as skateboarding equipment and
other action sports items. Consumable Comps increased 1.5% for fiscal 2012,
primarily due to increased sales in candies, snacks and bottled beverages.
Movie Comps decreased 1.1% for fiscal 2012, primarily due to decreased sales
in used and previously viewed movies, partially offset by increased sales in
new DVDs and Blu-ray movies. Book Comps decreased 1.3%, primarily due to
lower sales in new and bargain books and magazines, partially offset by strong
sales of the 50 Shades series, Nextbook tablets and used books. Book Comps,
excluding digital sales, decreased 2.3% for fiscal 2012. Music Comps
decreased 12.0% for fiscal 2012, primarily due to decreased sales in new and
used CDs which can be attributed to consumers increasingly using digital
delivery of their music purchases. Video Game Comps decreased 21.8% for
fiscal 2012, primarily due to decreased sales of new and used video games and
video game hardware and accessories, primarily resulting from the longevity of
the current console cycle, as well as the fact that overall industry sales of
Nintendo's Wii U system were weaker than expected.
Rental Comps decreased 12.9% for fiscal 2012, primarily due to fewer rentals
of DVDs and video games, partially offset by increased rentals of Blu-ray
movies. Rental Movie Comps decreased 10.6%, as sales were negatively impacted
by competitor rental kiosks and subscription-based rental services, while
Rental Video Game Comps, which were impacted by the longevity of the current
console cycle, decreased 28.4%.
Gross Profit – Merchandise. For fiscal 2012, total merchandise gross profit
dollars decreased approximately $2.1 million, or 1.6%, to $127.5 million from
$129.6 million for fiscal 2011, primarily due to lower revenues, partially
offset by higher merchandise margin rates. As a percentage of total
merchandise revenue, merchandise gross profit increased to 31.7% for fiscal
2012, compared to 30.5% for fiscal 2011, primarily due to a shift in mix of
revenues by category and lower merchandise shrinkage and merchandise markdown
expenses, partially offset by increased freight costs as a result of increased
internet sales.
Gross Profit – Rental. For fiscal 2012, total rental gross profit dollars
decreased approximately $4.2 million, or 9.7%, to $39.1 million from $43.3
million for fiscal 2011, primarily due to lower revenues, partially offset by
higher rental margin rates. As a percentage of total rental revenue, rental
gross profit increased to 65.3% for fiscal 2012 compared to 61.4% for fiscal
2011, primarily as a result of lower rental shrinkage expense and lower rental
asset depreciation expense.
Selling, General and Administrative Expenses ("SG&A"). As a percentage of
total revenue, SG&A increased to 37.7% for fiscal year 2012 compared to 37.3%
for fiscal year 2011, primarily due to deleveraging resulting from lower
revenues. SG&A decreased approximately $10.6 million, or 5.7%, to $174.5
million compared to $185.1 million for the same period last year. This is
primarily due to a $4.1 million decrease in store labor costs, a $2.1 million
reduction in abandoned lease expense, a $2.1 million decrease in depreciation,
a $1.7 million decrease in store occupancy costs and a $1.2 million decrease
in store advertising expense, partially offset by an increase of $1.4 million
in bonuses under our corporate officer and management bonus incentive
program. The reduction in depreciation and occupancy expenses are primarily
the result of operating fewer stores.
Interest Expense. For fiscal 2012, interest expense decreased approximately
$0.1 million, or 7.7%, to $1.2 million, compared to $1.3 million for fiscal
2011, primarily as a result of lower average debt levels during the current
fiscal year, along with lower interest rates. The average rate of interest
charged for fiscal 2012 decreased to 2.5% compared to 2.7% for fiscal 2011.
Income Taxes. As the Company has a net operating loss and a net deferred tax
asset, which has been offset by a full valuation allowance at the end of
fiscal 2011, there is no tax liability, with the exception of Texas state
income tax; therefore, the effective tax rate for fiscal year 2012 is (3.3%).
The valuation allowance is approximately $11.0 million as of January 31,
2013. We reassess the valuation quarterly, and if future evidence allows for
a partial or full release of the valuation allowance, a tax benefit will be
recorded accordingly.
Stock Repurchases
On September 18, 2001, we announced a stock repurchase program of up to $5.0
million of our common stock. As of January 31, 2013, the Board of Directors
had approved increases in the program totaling $32.5 million. During the
fourth quarter of fiscal 2012, we purchased a total of 78,100 shares of common
stock at a cost of $191,365, or $2.45 per share. As of January 31, 2013, a
total of 5,587,549 shares had been repurchased under the program at a cost of
approximately $31.8 million, for an average cost of approximately $5.68 per
share. As of January 31, 2013, a total of $5.7 million remained available
under the stock repurchase program.
Store Activity
Since December 10, 2012, which was the last date we reported store activity,
we have the following activity to report.
o Store closed in Flagstaff, Arizona on March 15, 2013
o Store closing in McMinnville, Tennessee on March 31, 2013
Safe Harbor Statement
This press release contains "forward-looking statements." Hastings
Entertainment, Inc. is including this statement for the express purpose of
availing itself of the protections of the safe harbor provided by the Private
Securities Litigation Reform Act of 1995 with respect to all such
forward-looking statements. These forward-looking statements are based on
currently available information and represent the beliefs of the management of
the Company. These statements are subject to risks and uncertainties that
could cause actual results to differ materially. These risks include, but are
not limited to, consumer appeal of our existing and planned product offerings,
and the related impact of competitor pricing and product offerings; overall
industry performance and the accuracy of our estimates and judgments regarding
trends; our ability to obtain favorable terms from suppliers; our ability to
respond to changing consumer preferences, including with respect to new
technologies and alternative methods of content delivery, and to effectively
adjust our offerings if and as necessary; the application and impact of future
accounting policies or interpretations of existing accounting policies;
unanticipated adverse litigation results or effects; the effects of a
continued deterioration in economic conditions in the U.S. or the markets in
which we operate our stores; the effect of inclement weather on the ability of
consumers to reach our stores; and other factors which may be outside of the
company's control. 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. Please refer to the company's annual, quarterly,
and periodic reports on file with the Securities and Exchange Commission for a
more detailed discussion of these and other risks that could cause results to
differ materially.
About Hastings
Founded in 1968, Hastings Entertainment, Inc. is a leading multimedia
entertainment retailer that combines the sale of new and used books, videos,
video games and CDs, and trends and consumer electronics merchandise, with the
rental of videos and video games in a superstore format. We currently operate
136 superstores, averaging approximately 24,000 square feet, primarily in
medium-sized markets throughout the United States. We also operate three
concept stores, Sun Adventure Sports, located in Amarillo, Texas and Lubbock,
Texas, and TRADESMART, located in Littleton, Colorado.
We operate www.goHastings.com, 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. The Investor Relations section of our web site contains press
releases, a link to request financial and other literature and access to our
filings with the Securities and Exchange Commission.
Consolidated Balance Sheets
(Dollars in thousands)
January 31, January 31,
2013 2012
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 3,730 $ 4,172
Merchandise inventories, net 145,337 151,366
Prepaid expenses and other current assets 10,427 15,229
Total current assets 159,494 170,767
Rental assets, net 11,353 12,634
Property and equipment, net 32,099 39,449
Intangible assets, net 244 244
Other assets 2,792 2,380
Total assets $ 205,982 $ 225,474
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable $ 54,928 $ 51,268
Accrued expenses and other current liabilities 27,396 26,150
Total current liabilities 82,324 77,418
Long-term debt, excluding current maturities 41,805 53,279
Deferred income taxes 50 42
Other liabilities 7,828 8,677
Shareholders' equity
Preferred stock — —
Common stock 119 119
Additional paid-in capital 36,375 36,231
Retained earnings 58,642 71,010
Accumulated other comprehensive income 247 118
Treasury stock, at cost (21,408) (21,420)
Total shareholders' equity 73,975 86,058
Total liabilities and shareholders' equity $ 205,982 $ 225,474
Consolidated Statements of Operations
(In thousands, except per share data)
Three months ended Fiscal year ended
January 31, January 31,
2013 2012 2013 2012
(unaudited) (unaudited) (unaudited)
Merchandise revenue $ 125,992 $ 135,213 $ 402,735 $ 425,142
Rental revenue 15,608 17,634 59,846 70,426
Gift card breakage 40 244 (80) 819
revenue
Total revenues 141,640 153,091 462,501 496,387
Merchandise cost of 88,100 94,320 275,251 295,506
revenue
Rental cost of revenue 5,744 6,696 20,779 27,166
Total cost of revenues 93,844 101,016 296,030 322,672
Gross profit 47,796 52,075 166,471 173,715
Selling, general and 46,178 50,500 174,461 185,107
administrative expenses
Pre-opening expenses — 2 — 244
Operating income 1,618 1,573 (7,990) (11,636)
(loss)
Other income (expense):
Interest expense, net (302) (440) (1,173) (1,334)
Other, net 17 45 147 275
Income (loss) before 1,333 1,178 (9,016) (12,695)
income taxes
Income tax expense 123 9,592 297 4,884
Net income (loss) $ 1,210 $ (8,414) $ (9,313) $ (17,579)
Basic income (loss) per $ 0.15 $ (1.00) $ (1.14) $ (2.05)
share
Diluted income (loss) per $ 0.15 $ (1.00) $ (1.14) $ (2.05)
share
Weighted-average common
shares
outstanding:
Basic 8,168 8,410 8,202 8,556
Dilutive effect of 48 — — —
stock awards
Diluted 8,216 8,410 8,202 8,556
Consolidated Statements of Cash Flows
(Dollars in thousands)
Fiscal year ended January 31,
2013 2012
(unaudited)
Cash flows from operating activities:
Net loss $ (9,313) $ (17,579)
Adjustments to reconcile net loss to net
cash provided by (used in) operations:
Rental asset depreciation expense 6,187 11,042
Purchases of rental assets (11,072) (22,126)
Property and equipment depreciation 14,948 17,026
expense
Impairment of goodwill — 147
Deferred income taxes 8 7,725
Loss on rental assets lost, stolen and 985 1,293
defective
Loss on disposal or impairment of
property and equipment, 1,411 1,055
excluding rental assets
Non-cash stock-based compensation 704 1,058
Changes in operating assets and liabilities:
Merchandise inventories, net 11,209 5,558
Prepaid expenses and other current assets 4,802 (3,487)
Trade accounts payable 1,895 (8,284)
Accrued expenses and other current 1,246 (177)
liabilities
Other assets and liabilities, net (806) 2,229
Net cash provided by (used in) 22,204 (4,520)
operating activities
Cash flows from investing activities:
Purchases of property and equipment (9,008) (15,944)
Net cash used in investing activities (9,008) (15,944)
Cash flows from financing activities:
Net borrowings (repayments) under (11,474) 21,513
revolving credit facility
Purchase of treasury stock (542) (1,992)
Cash dividends paid (3,062) —
Change in cash overdraft 1,765 (1,003)
Deferred financing costs paid (325) (68)
Proceeds from exercise of stock options — 37
Net cash provided by (used in) (13,638) 18,487
financing activities
Net decrease in cash (442) (1,977)
Cash at beginning of period 4,172 6,149
Cash at end of period $ 3,730 $ 4,172
Balance Sheet and Other Ratios ( A )
(Dollars in thousands, except per share amounts)
January 31, January 31,
2013 2012
Merchandise inventories, net $ 145,337 $ 151,366
Inventory turns, trailing 12 months ( B ) 1.85 1.87
Long-term debt $ 41,805 $ 53,279
Long-term debt to total capitalization ( C ) 36.1% 38.2%
Book value ( D ) $ 73,975 $ 86,058
Book value per share ( E ) $ 9.02 $ 10.06
Three Months Ended Fiscal Year Ended January
January 31, 31,
2013 2012 2013 2012
Comparable-store
revenues ( F ):
Total -5.7% -5.5% -5.1% -5.3%
Merchandise -5.1% -3.7% -3.7% -4.0%
Rental -10.1% -16.7% -12.9% -12.4%
( 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 period's trailing
) twelve months divided by average merchandise inventory over the same
period.
( 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 for the fiscal year ended January 31, 2013 and 2012,
respectively.
Stores included in the comparable-store revenues calculation are those
stores that have been open for a minimum of 60 weeks. Also included are
( F stores that are remodeled or relocated during the comparable period. Gift
) card breakage revenues are not included, and closed stores are removed
from each comparable period for the purpose of calculating
comparable-store revenues.
Use of Non-GAAP Financial Measures
The Company is providing EBITDA and adjusted EBITDA as supplemental non-GAAP
financial measures regarding the Company's operational performance. The
Company evaluates its historical and prospective financial performance, and
its performance relative to its competitors, by using such non-GAAP financial
measures. Specifically, management uses these items to further its own
understanding of the Company's core operating performance, which management
believes represents the Company's performance in the ordinary, ongoing and
customary course of its operations. Therefore, management excludes from core
operating performance those items, such as those relating to restructuring,
investing, stock-based compensation expense and non-cash activities that
management does not believe are reflective of such ordinary, ongoing and
customary activities.
The Company believes that providing this information to its investors, in
addition to the presentation of GAAP financial measures, allows investors to
see the Company's financial results "through the eyes" of management. The
Company further believes that providing this information allows investors to
both better understand the Company's financial performance and to evaluate the
efficacy of the methodology and information used by management to evaluate and
measure such performance.
Free Cash Flow
Management defines free cash flow as net cash provided by operating activities
for the period less purchases of property, equipment and improvements during
the period. Purchases of property, equipment and improvements during the
period are netted with any proceeds received from insurance on casualty loss
that are directly related to the reinvestment of new capital expenditures. The
following table reconciles net cash provided by operating activities, a GAAP
financial measure, to free cash flow, a non-GAAP financial measure (in
thousands):
Fiscal Year Ended January 31,
2013 2012
Net cash provided by (used in) operating $ 22,204 $ (4,520)
activities
Purchase of property, equipment and (9,008) (15,944)
improvements, net
Free cash flow $ 13,196 $ (20,464)
EBITDA and Adjusted EBITDA
EBITDA is defined as net income (loss) before interest expense (net), income
tax expense (benefit), property and equipment depreciation expense, and
amortization. Adjusted EBITDA, as presented herein, is EBITDA excluding gift
card breakage revenue, stock-based compensation expense, store asset
impairment expense, abandoned lease expense and impairment of goodwill. The
following table reconciles net income (loss), a GAAP financial measure, to
EBITDA and adjusted EBITDA, non-GAAP financial measures (in thousands):
Three months ended January Fiscal year ended January
31, 31,
2013 2012 2013 2012
Net income (loss) $ 1,210 $ (8,414) $ (9,313) $ (17,579)
Adjusted for
Interest expense, net 302 440 1,173 1,334
Income tax expense 123 9,592 297 4,884
Property and equipment 3,574 4,223 14,948 17,026
depreciation expense
EBITDA 5,209 5,841 7,105 5,665
Gift card breakage (40) (244) 80 (819)
revenue
Non-cash stock-based 165 299 704 1,058
compensation
Store asset impairment 1,313 722 1,362 808
expense
Abandoned lease 166 2,436 329 2,436
expense
Impairment of goodwill — 147 — 147
Adjusted EBITDA $ 6,813 $ 9,201 $ 9,580 $ 9,295
EBITDA and adjusted EBITDA are considered non-GAAP financial measures under
the SEC's Regulation G and therefore should not be considered in isolation of,
or as a substitute for, net income (loss), operating income (loss), cash flow
from operating activities, or any other measure of financial performance or
liquidity presented in accordance with GAAP. The financial measures of EBITDA
and adjusted EBITDA may vary among other companies. Therefore, our EBITDA and
adjusted EBITDA may not be comparable to similarly titled measures used by
other companies.
SOURCE Hastings Entertainment, Inc.
Website: http://www.gohastings.com
Contact: Dan Crow, Vice President and Chief Financial Officer,
+1-806-677-1422, www.goHastings.com
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement
Rate this Page