Hastings Entertainment, Inc. Reports Results for the First Quarter of Fiscal 2013

 Hastings Entertainment, Inc. Reports Results for the First Quarter of Fiscal
                                     2013

- Positive Free Cash Flow of $5.9 million for the three months ending April
30, 2013.

- Debt reduced by $5.3 million from the beginning of fiscal 2013.

- Restructuring charge of $1.4 million recognized during first quarter of
fiscal 2013.

PR Newswire

AMARILLO, Texas, May 20, 2013

AMARILLO, Texas, May 20, 2013 /PRNewswire/ --Hastings Entertainment, Inc.
(NASDAQ: HAST), a leading multimedia entertainment retailer, today reported
results for the first quarter ended April 30, 2013. Net loss was approximately
$2.2 million, or $0.27 per diluted share, for the first quarter of fiscal
2013, compared to net earnings of $0.8 million, or $0.10 per diluted share,
for the first quarter of fiscal 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 popularity of digital
delivery, rental kiosks and subscription based services, as well as the
longevity of the current video game console life-cycle," said John H.
Marmaduke, Chief Executive Officer and Chairman. "As we have previously
disclosed, one of our strategic initiatives is the introduction of new product
categories which includes consumer electronics, music electronics and
accessories, hobby, recreation and lifestyle, vinyl and tablets. The majority
of these products are included in our Electronics category which had a
comparable sales increase of 18.4% for the first quarter of fiscal 2013 which
is on top of a 13.1% comparable sales increase for the first quarter of fiscal
2012. This was driven by the forty-four stores that were reset during fiscal
2012 and had an increase in sales of approximately 40% in the reset categories
when compared to the rest of our superstores that have not had a reset.
Additionally, the five stores which were reset by the first week of April
during the current quarter of fiscal 2013 had an increase of approximately 41%
when compared to our superstores that have not had a reset. We are encouraged
by the performance of these new products and plan to reset sixty stores during
fiscal 2013 which will give us a total of 104 stores by the end of fiscal
2013. Finally, we continue to see increases in our Trends and Hardback Cafe
categories.

"In order to reduce our SG&A expenses in light of our lower revenue base, we
underwent a restructuring of our corporate store support center which included
staff reduction, department consolidation and the termination of four of our
eight corporate officers. The total cost of this restructuring was
approximately $1.4 million which we recognized during the first quarter of
fiscal 2013.

"With the current and expected future success of our new product categories,
along with the expected launch of new game consoles in the latter half of our
current fiscal year, we anticipate a reduction in our pre-tax losses during
fiscal 2013 when compared to fiscal 2012 and a return to profitability in the
not too distant future."

Financial Results for the First Quarter of Fiscal Year 2013

Revenues. Total revenues for the first quarter decreased approximately $6.4
million, or 5.5%, to $109.1 million compared to $115.5 million for the first
quarter of fiscal 2012. As of April 30, 2013, we operated 4 fewer
superstores, as compared to April 30, 2012. The following is a summary of our
revenues results (dollars in thousands):

                    Three Months Ended April 30,
                    2013                 2012                 Decrease
                              Percent              Percent
                    Revenues  Of Total   Revenues  Of Total   Dollar   Percent
Merchandise       $ 94,800    86.9%    $ 99,519    86.2%    $ (4,719)  -4.7%
Revenue
Rental Revenue      14,213    13.0%      15,826    13.7%      (1,613)  -10.2%
Gift Card
Breakage                                                          

 Revenue          114       0.1%       142       0.1%       (28)     -19.7%
 Total        $ 109,127   100.0%   $ 115,487   100.0%   $ (6,360)  -5.5%
Revenues


Comparable-store revenues ("Comp")


 Total          -4.7%
 Merchandise    -4.0%
 Rental         -9.0%

Below is a summary of the Comp results for our major merchandise categories:

              Three Months Ended April 30,
              2013          2012
Electronics   18.4%         13.1%
Hardback Cafe 9.1%          6.8%
Trends        7.9%          12.7%
Movies        3.9%          -3.7%
Consumables   -5.5%         -0.5%
Books         -8.4%         -0.8%
Music         -13.1%        -9.4%
Games         -21.6%        -21.3%

Electronics Comps increased 18.4% for the quarter, resulting primarily from
our new product categories which were introduced in forty-four stores during
fiscal year 2012 and five additional stores by the first week of April 2013.
Continued sales growth in headphones, home electronics, refurbished
televisions, tablets and tablet and phone accessories contributed to the
positive electronics comps. Hardback Cafe Comps increased 9.1% for the
quarter, primarily due to increased sales in hot beverages and blended coffee
drinks, which can be attributed to the success of the Mocha Madness
promotional campaign during the quarter. Trends Comps increased 7.9% for the
quarter, primarily due to increased sales of boutique gift items and action
figures and recreation and lifestyles and hobby products, such as exercise
accessories, airsoft and paintball guns and model rockets. Movie Comps
increased 3.9% for the quarter, primarily due to strong sales in new DVDs,
Blu-rays and boxed sets and an overall stronger slate of new releases as
compared to the first quarter of fiscal 2012. Consumable Comps decreased 5.5%
for the quarter, primarily due to lower sales of bottled drinks and assorted
snacks. The decrease in sales of bottled drinks resulted from having fewer
promotional pricing events. Books Comps decreased 8.4% for the quarter,
primarily due to a weaker new release schedule for new books as compared to
the first quarter of fiscal 2012 which included strong sales from the Hunger
Games trilogy. Music Comps decreased 13.1% during the quarter, primarily
resulting from lower sales of new and used CDs and the increasing popularity
of digital delivery. Video Game Comps decreased 21.6% for the quarter,
primarily resulting from lower sales of new and used video games and video
game hardware and accessories. The longevity of the current console cycle
continues to contribute to weak overall sales in the video game industry.

Rental Comps decreased 9.0% 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 Video Comps decreased 7.4% for the quarter and continue to be
impacted by competitor rental kiosks and subscription-based rental services.
Rental Video Game Comps, which continue to be affected by the longevity of the
current console cycle, decreased 22.0%.

Gross Profit – Merchandise. For the first quarter, total merchandise gross
profit dollars decreased approximately $1.6 million, or 5.0%, to $30.4 million
from $32.0 million for the same period in the prior year, primarily due to a
decrease in revenue and a slight decrease in margin rates. As a percentage of
total merchandise revenue, merchandise gross profit decreased to 32.0% for the
quarter compared to 32.1% for the same period in the prior year. The decrease
in gross profit rate resulted primarily from a shift in mix of revenues by
category as compared to the same quarter in the prior year, partially offset
by lower shrinkage and freight costs.

Gross Profit – Rental. For the first quarter, total rental gross profit
dollars decreased approximately $1.0 million, or 9.7%, to $9.3 million from
$10.3 million for the same period in the prior year, primarily due to a
decrease in revenue. As a percentage of total rental revenue, rental gross
profit increased to 65.5% for the quarter compared to 65.2% for the same
period in the prior year, resulting primarily from lower depreciation and
shrinkage expense. Depreciation is a function of rental asset purchases which
were lower for the first quarter of fiscal 2013 than the same quarter in the
last year due to lower anticipated rental revenues.

Selling, General and Administrative Expenses ("SG&A"). As a percentage of
total revenue, SG&A increased for the first quarter to 38.3% from 35.8% for
the same quarter in the prior year, primarily due to deleveraging resulting
from lower revenues. SG&A increased approximately $0.4 million during the
quarter, or 1.0%, to $41.7 million compared to $41.3 million for the same
quarter last year. The increase results from $1.4 million in severance
charges from a corporate restructuring that was initiated in February 2013 and
recognized during the first quarter of fiscal 2013, partially offset by a $0.4
million reduction in depreciation expense, a $0.3 million reduction in store
advertising costs and a $0.2 million reduction in store supplies costs.

Interest Expense. For both the first quarter of fiscal 2013 and fiscal 2012,
interest expense was approximately $0.3 million, as interest rates for both
periods averaged 2.5%.

Income Tax Expense. 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 the first quarter of
fiscal 2013 is (2.7%). The valuation allowance is approximately $11.8 million
as of April 30, 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 Repurchase

During the first quarter of fiscal 2013, we purchased a total of 11,700 shares
of common stock at a cost of $27,552 or $2.35 per share. We purchased these
shares as part of a stock repurchase program originally announced in September
2001 and subsequently extended and expanded. As of April 30, 2013 a total of
$5.7 million remained available under the stock repurchase program.

Store Activity

Since March 18, 2013, which was the last date we reported store activity, we
have the following activity to report.

  oStore closed in Huntsville, Texas during April 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; the "sequester" and related governmental
spending and budget matters; 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
134 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 also 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)
                                       April 30,     April 30,     January 31,
                                       2013          2012          2013
                                       (unaudited)   (unaudited)
Assets
Current assets
 Cash and cash equivalents         $ 3,532       $ 5,590       $ 3,730
 Merchandise inventories, net        146,364       144,936       145,337
 Prepaid expenses and other          11,230        12,746        10,427
current assets
 Total current assets          161,126       163,272       159,494
Rental assets, net                     10,677        11,207        11,353
Property and equipment, net            30,035        37,201        32,099
Intangible assets, net                 244           244           244
Other assets                           668           2,347         2,792
Total assets                         $ 202,750     $ 214,271     $ 205,982
Liabilities and shareholders' equity
Current liabilities
 Trade accounts payable            $ 58,084      $ 56,522      $ 54,928
 Accrued expenses and other          30,471        26,534        27,396
current liabilities
 Total current liabilities     88,555        83,056        82,324
Long-term debt, excluding current      36,476        35,930        41,805
maturities
                                       53            45            50
Deferred income taxes
Other liabilities                      5,842         8,310         7,828
Shareholders' equity
 Preferred stock                     —             —             —
 Common stock                        119           119           119
 Additional paid-in capital          36,396        36,395        36,375
 Retained earnings                   56,436        71,843        58,642
 Accumulated other comprehensive     309           188           247
income
 Treasury stock, at cost             (21,436)      (21,615)      (21,408)
 Total shareholders' equity    71,824        86,930        73,975
Total liabilities and shareholders'  $ 202,750     $ 214,271     $ 205,982
equity



Consolidated Statements of Operations

(In thousands, except per share data)
                                               Three months ended
                                               April 30,
                                               2013          2012
                                               (unaudited)   (unaudited)
Merchandise revenue                          $ 94,800      $ 99,519
Rental revenue                                 14,213        15,826
Gift card breakage revenue                     114           142
 Total revenues                              109,127       115,487

                                               64,433        67,529
Merchandise cost of revenue
Rental cost of revenue                         4,903         5,515
 Total cost of revenues                      69,336        73,044

                                               39,791        42,443
 Gross profit

                                               41,745        41,290
Selling, general and administrative expenses

                                               (1,954)       1,153
 Operating income (loss)


Other income (expense):
 Interest expense, net                       (263)         (278)
 Other, net                                  70            24

                                               (2,147)       899
 Income (loss) before income taxes

                                               59            66
Income tax expense

                                             $ (2,206)     $ 833
 Net income (loss)

                                             $ (0.27)      $ 0.10
Basic income (loss) per share

                                             $ (0.27)      $ 0.10
Diluted income (loss) per share




Weighted-average common shares

 outstanding:
 Basic                                     8,143         8,263
 Dilutive effect of stock awards           —             10

                                               8,143         8,273
 Diluted



Consolidated Statements of Cash Flows

(Dollars in thousands)
                                          For the Three Months Ended April 30,
                                          2013                  2012
                                          (unaudited)           (unaudited)
Cash flows from operating activities:
Net income (loss)                      $ (2,206)         $     833
Adjustments to reconcile net income
(loss) to net

 cash provided by operations:
 Rental asset depreciation expense    1,160                 1,668
 Purchases of rental assets           (2,281)               (2,930)
 Property and equipment               3,372                 3,781
depreciation expense
 Deferred income taxes                3                     3
 Loss on rental assets lost, stolen   24                    224
and defective
 Loss on disposal or impairment of
property and equipment,                   16                    77

 excluding rental assets
 Non-cash stock-based compensation    22                    164


 Changes in operating assets and
liabilities:
 Merchandise inventories              746                   8,894
 Other current assets                 (804)                 2,483
 Trade accounts payable               3,917                 2,309
 Accrued expenses and other current   3,076                 384
liabilities
 Other assets and liabilities, net    198                   (265)
 Net cash provided by operating    7,243                 17,625
activities


Cash flows from investing activities:
 Purchases of property, equipment      (1,324)               (1,609)
and improvements
 Net cash used in investing        (1,324)               (1,609)
activities


Cash flows from financing activities:
 Net repayments under revolving        (5,328)               (17,349)
credit facility
 Purchase of treasury stock            (28)                  (194)
 Change in cash overdraft              (761)                 2,945
 Net cash used in financing        (6,117)               (14,598)
activities

                                          (198)                 1,418
Net increase/(decrease) in cash and
cash equivalents

                                          3,730                 4,172
Cash and cash equivalents at beginning
of period

                                        $ 3,532           $     5,590
Cash and cash equivalents at end of
period



Balance Sheet and Other Ratios ( A )

(Dollars in thousands, except per share amounts)
                                               April 30,   April 30,

                                               2013        2012
Merchandise inventories, net                 $ 146,364   $ 144,936
Inventory turns, trailing 12 months ( B )      1.62        1.84

                                             $ 36,476    $ 35,930
Long-term debt
Long-term debt to total capitalization ( C )   33.7%       29.2%

                                             $ 71,824    $ 86,930
Book value ( D )

                                             $ 8.82      $ 10.51
Book value per share ( E )



                                 Three Months Ended April 30,
                                 2013       2012
Comparable-store revenues ( F ):
 Total                         -4.7%      -6.3%
 Merchandise                   -4.0%      -4.3%
 Rental                        -9.0%      -16.5%



( A ) Calculations may differ in the method employed from similarly titled
      measures used by other companies.
      Calculated as merchandise cost of goods sold for the period's trailing
( B ) 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.
      Defined as total shareholders' equity divided by weighted average
( E ) diluted shares outstanding for the three months ended April 30, 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):

                                           Three months ended April 30,
                                           2013              2012
Net cash provided by operating activities  $         $        
                                           7,243            17,625
Purchase of property, equipment and        (1,324)           (1,609)
improvements, net
                                                           

Free cash flow                             $         $        
                                           5,919            16,016

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 and stock-based compensation expense. 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 April 30,
                                       2013                2012
Net income                             $      (2,206) $         
                                                           833
Adjusted for
 Interest expense, net               263                 278
 Income tax expense                  59                  66
 Property and equipment depreciation 3,372               3,781
expense
EBITDA                                 1,488               4,958
                                                         

 Gift card breakage revenue          (114)               (142)
 Non-cash stock-based compensation   22                  164
                                                         

Adjusted EBITDA                        $       1,396 $        
                                                           4,980

SOURCE Hastings Entertainment, Inc.

Website: http://www.gohastings.com
Contact: Dan Crow, Vice President and Chief Financial Officer, (806) 677-1422,
www.gohastings.com
 
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