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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): MARCH 7, 2000
HASTINGS ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 000-24381 75-1386375
(State or Other
Jurisdiction of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
3601 PLAINS BOULEVARD, SUITE 1, AMARILLO, TEXAS 79102
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (806) 351-2300
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ITEM 5. OTHER EVENTS
On March 7, 2000, Hastings Entertainment, Inc. issued a press release
announcing a non-cash accounting adjustment and fourth quarter charges to
earnings. A copy of the press release is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits:
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Exhibit
Number Description
99.1 Press Release, dated March 7, 2000 (filed herewith)
2
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SIGNATURE
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.
HASTINGS ENTERTAINMENT, INC.
By: /s/ THOMAS D. NUGENT
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Thomas D. Nugent
Vice President and Chief Financial Officer
Date: March 8, 2000
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
99.1 Press Release, dated March 7, 2000 (filed herewith)
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EXHIBIT 99.1
NEWS RELEASE
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HASTINGS
ENTERTAINMENT, INC. CONTACT: THOMAS D NUGENT
Vice President and
Chief Financial Officer
(806) 351-2300, ext. 6000
www.gohastings.com
Hastings Entertainment Announces Non-Cash Accounting Adjustment and Fourth
Quarter Charges
AMARILLO, Texas, March 7, 2000--Hastings Entertainment, Inc. (NASDAQ:HAST),
today announced that its fourth quarter and fiscal 1999 results (and previous
four years' results) will be negatively impacted by an accounting adjustment
that will result in a non-cash charge to earnings. The company has determined
that merchandise receipts were not properly entered into the inventory control
system for a small portion of vendor deliveries. As a result, merchandise cost
of revenue was understated. The adjustment will require Hastings to restate its
earnings in the first three quarters of fiscal 1999 and probably for the prior
four fiscal years. The company presently believes the aggregate amount of the
pre-tax effect of the restatement, after certain off-setting adjustments, could
total $23-$27 million for all of the periods. The pre-tax effect by year is
currently being determined. The company believes that these charges can be
utilized to amend its tax returns for the tax years 1996-1998 which would result
in a tax refund to the company of approximately $6.8 million. It is not possible
at this time to predict the precise amount or timing of such tax refund.
"This adjustment does not affect the company's current cash flow from
operations," said Thomas D. Nugent, chief financial officer. "We are working
diligently with our outside auditors to more precisely determine the magnitude
of this accounting adjustment and the proper allocation to the 1999 and prior
fiscal year periods. Until that process is completed, the company cannot provide
information on our fiscal 1999 performance. We have made appropriate changes to
our internal accounting system to ensure that this problem does not recur. Those
changes are expected to have some impact on future operating margins."
John H. Marmaduke, chairman and chief executive officer, said "We have directed
our finance team, headed by our new CFO, Tom Nugent, to devote whatever
resources are required to resolve this issue as promptly as possible. This
accounting adjustment in no way reduces our confidence in the Hastings concept
and its future prospects."
Unrelated to the accounting adjustment referred to above, the company also will
record an approximate $6 million pre-tax charge in the fourth quarter related to
the closing of five of its stores and will record fourth quarter inventory
write-downs of approximately $3.5 million. These two fourth quarter charges, of
which approximately $5.8 million is a non-cash charge, will negatively affect
earnings for fiscal 1999 by approximately $0.51 loss per share.
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The company presently believes the adjustment and charges referred to above will
not cause the company to be out of compliance with financial covenants in its
$60 million unsecured revolving credit facility, under which the company
presently has outstanding borrowings of approximately $23 million. The company
believes that, once fourth quarter results are final, it would not, however, be
in compliance with the fixed charge coverage ratio financial covenant under its
unsecured 7.75% Series A Senior Notes due June 13, 2003, of which there is
outstanding an aggregate principal amount of $20 million. The holders of the
Senior Notes have granted a waiver of the company's compliance with that
covenant for the quarter ending January 31, 2000. The company is also engaged in
discussions with the holders of the Senior Notes to amend certain provisions of
the Senior Notes, including the covenant relating to the fixed charge coverage
ratio.
Founded in 1968, Hastings Entertainment, Inc. is the leading multimedia
entertainment retailer that combines the sale of books, music, software,
periodicals, DVDs, videos and video games with the rental of videos, DVDs and
video games in a superstore format. The company currently operates 147
superstores, averaging 21,500 square feet, primarily in small to medium-sized
markets throughout United States. The company plans to slow new store growth in
fiscal 2000 to four or five new units.
Hastings also operates 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, including best-selling books at up to 50% off list price. In addition,
investors and customers can review general and financial information about
Hastings at this site.
Certain statements set forth above are forward-looking statements within the
meaning of the Securities Exchange Act of 1934. Such statements are based upon
Hastings Entertainment management's current estimates, assumptions and
expectations and are subject to a number of factors and uncertainties, which
could cause actual results to differ materially from those described herein.
Significant uncertainties at this time include a determination of the precise
magnitude of the accounting adjustment referred to above, the fiscal periods to
which the adjustment should be allocated and the amount of the adjustment in
each period. The forward-looking statements set forth above are also subject to
the factors and uncertainties set forth under the heading "Risk Factors" in the
company's Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission and declared effective on June 11, 1998, and the company's
annual and quarterly reports on file with the SEC.
