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8-K - FORM 8-K - HASTINGS ENTERTAINMENT INC | c17333e8vk.htm |
NEWS RELEASE
Hastings
|
CONTACT: | Dan Crow PR11-200 | ||
Entertainment, Inc.
|
Vice President and | |||
Chief Financial Officer | ||||
(806) 677-1422 | ||||
www.gohastings.com |
Hastings Entertainment, Inc. Reports Results for the First Quarter of Fiscal 2011
AMARILLO, Texas, May 16, 2011Hastings Entertainment, Inc. (NASDAQ: HAST), a leading
multimedia entertainment retailer, today reported results for the three months ended April 30,
2011. Net earnings were approximately $0.4 million, or $0.05 per diluted share, for the first
quarter of fiscal 2011 compared to net earnings of approximately $1.0 million, or $0.11 per diluted
share, for the first quarter of fiscal 2010.
Operating income was approximately $1.0 million for the first quarter of fiscal 2011 compared to
approximately $1.5 million for the first quarter of fiscal 2010. Adjusted operating income, which
excludes gift card breakage revenue and stock compensation expense, was approximately $1.1 million
for the first quarter of fiscal 2011 compared to approximately $1.5 million in the first quarter of
fiscal 2010. Earnings before interest, taxes, property and equipment depreciation expense and
amortization (EBITDA) was approximately $5.1 for the first quarter of fiscal 2011 compared to
approximately $5.9 million for the first quarter of fiscal 2010. Adjusted EBITDA, which excludes
gift card breakage revenue and stock compensation expense, was approximately $5.3 for the first
quarter of fiscal 2011 compared to approximately $5.8 million for the first quarter of fiscal 2010.
Reconciliations of non-GAAP financial measures to comparable GAAP financial measures are included
in the tables following the financial statements in this release.
We faced a challenging quarter primarily due to a poor slate of new releases for movies and
books, said John H. Marmaduke, Chief Executive Officer and Chairman. Specifically, the box
office value of movies that came to Blu-ray and DVD during the quarter was down approximately 25%
compared to the first quarter of fiscal 2010, which directly impacted our sale and rental of
movies. The release of Avatar, The Twilight Saga: New Moon, and The Blind Side during the first
quarter of fiscal 2010, with no strong comparable releases in 2011, was a big driver of the decline
in box office value. Book sales were impacted by a 22% decrease in new release content, which we
define as those titles for which we purchase more than 1,000 copies, during the current quarter as
compared to the same period in the prior year. Additionally, increasing prices of gasoline and
groceries impacted consumer discretionary spending thereby reducing store traffic during the
quarter. We continued to focus on controlling our costs. We reduced selling, general and
administrative expenses by $1.7 million, or 3.7%, for the first quarter as compared to the first
quarter of fiscal 2010. Additionally, we continue to focus on maintaining a strong balance sheet.
We reduced debt by $5.3 million during the quarter, and merchandise inventories were approximately
$4.5 million less than a year ago.
I am excited to announce that we are currently working on an initiative that will allow us to
begin selling electronic books via our website, www.goHastings.com, which we estimate will
be available by the end of the third quarter of fiscal 2011. Consumers will be able to access
www.goHastings.com to shop for electronic books as well as any other entertainment needs
through an application preloaded onto an electronic book reader or downloaded to existing mobile
devices. The completion of this initiative will help us drive additional revenues, and, more
importantly, it will position www.goHastings.com for any future digital entertainment,
including movies and games, in addition to our existing digital music offerings. We expect that
selling electronic books on our website will compliment sales of physical books in our stores. Our
flexible multimedia store model and seamless selection of new and used products paired with the
offerings on www.goHastings.com, including digital delivery of entertainment, makes
Hastings a sustainable retailer, and we expect future market share growth as many of our
competitors continue to shut their doors.
Financial Results for the First Quarter of Fiscal Year 2011
Revenues. Total revenues for the first quarter decreased approximately $5.0 million, or 3.8%, to
$124.1 million compared to $129.1 million for the first quarter of fiscal 2010. As of April 30,
2011, we operated one less superstore, as compared to April 30, 2010, and operated one concept
store, Sun Adventure Sports, which opened during July 2010. The following is a summary of our
revenues results (dollars in thousands):
Three Months Ended April 30, | ||||||||||||||||||||||||
2011 | 2010 | Decrease | ||||||||||||||||||||||
Percent | Percent | |||||||||||||||||||||||
Revenues | Of Total | Revenues | Of Total | Dollar | Percent | |||||||||||||||||||
Merchandise Revenue |
$ | 104,463 | 84.2 | % | $ | 108,125 | 83.8 | % | $ | (3,662 | ) | -3.4 | % | |||||||||||
Rental Revenue |
19,528 | 15.7 | % | 20,779 | 16.1 | % | (1,251 | ) | -6.0 | % | ||||||||||||||
Gift Card Breakage
Revenue |
146 | 0.1 | % | 194 | 0.1 | % | (48 | ) | -24.7 | % | ||||||||||||||
Total Revenues |
$ | 124,137 | 100.0 | % | $ | 129,098 | 100.0 | % | $ | (4,961 | ) | -3.8 | % | |||||||||||
Comparable-store revenues (Comp)
Total |
-3.4 | % | ||
Merchandise |
-2.9 | % | ||
Rental |
-5.8 | % |
Below is a summary of the Comp results for our major merchandise categories:
Three Months Ended April 30, | ||||||||
2011 | 2010 | |||||||
Trends |
11.9 | % | 8.9 | % | ||||
Hardback Café |
5.2 | % | 15.6 | % | ||||
Video Games |
2.5 | % | 25.2 | % | ||||
Music |
1.3 | % | -4.8 | % | ||||
Electronics |
-1.9 | % | 4.1 | % | ||||
Consumables |
-6.0 | % | 9.4 | % | ||||
Movies |
-6.5 | % | 11.1 | % | ||||
Books |
-9.1 | % | -1.2 | % |
Trends Comps increased 11.9% for the quarter primarily driven by increased sales of new and used
comics, apparel, As Seen on TV products including Pillow Pets, and strong sales of shaped rubber
bands and collectible card games, such as Magic: The Gathering. The increase in new and used comic
sales is primarily due to an expanded comic footprint in 126 stores. Key drivers in the apparel
category included hats, jewelry, and bags. Hardback Café Comps increased 5.2% due to increased
sales of specialty café drinks. Video Game Comps increased 2.5% primarily due to increased sales
of video game consoles, used video games for the Microsoft XBOX 360, Nintendo Wii, and Sony
Playstation 3, new and used video gaming accessories and new Microsoft XBOX 360 video games. These
increases were partially offset by lower sales of new Sony Playstation 3 and Nintendo Wii video
games. Sales of new Nintendo Wii games were impacted by low allocations of Nintendo first party
titles. Music Comps increased 1.3% for the quarter due to increased sales of new CDs partially
offset by lower sales of used CDs. Sales of new music, which have been in decline for several
years, were up 4.6% for the first quarter. Electronics Comps decreased 1.9% for the quarter
resulting from lower sales of Blu-ray players and recordable media, partially offset by increased
sales of iPods and MP3 players and increased sales of PC Accessories. Sales of Blu-ray players
were negatively impacted by a lower average selling price during the current quarter as compared to
the same period in the prior year. Consumables Comps decreased 6.0% for the quarter primarily
driven by lower sales of fountain drinks and bottled drinks. Movies Comps decreased 6.5% for the
quarter primarily due to lower sales of new DVDs, partially offset by increased sales of new and
used DVD boxed set and used Blu-ray movies. Movie sales were negatively impacted by a 25% drop in
box office value of movies that came to Blu-ray and DVD during the first quarter as compared to the
same period in the prior year. Our top three selling movies during the current quarter generated
approximately 54% less revenue than the top three selling movies during the comparable period in
the prior year. Books Comps decreased 9.1% for the quarter primarily due to lower sales of new and
used mass market books, trade paperbacks and hardbacks. Sales of new books, which decreased 8.6%
for the quarter, were impacted by several books that were made into movies during the first quarter
of fiscal 2010. The movie tie-ins helped drive sales of related books. Some titles with movie
tie-ins during the first three months of fiscal 2010 included Rick Riordans Percy Jackson and the
Olympians series, and Dear John and The Last Song by Nicholas Sparks. There were no comparable
strong movie tie-ins during the current quarter. Sales of new books were also impacted by a weaker
slate of new book releases as compared to the same period in the prior year and the increasing
popularity of electronic book readers. Sales of used books, which decreased 19.6% for the quarter,
were also impacted by the weaker slate of new book release which in turn led to a less favorable
inventory of used titles. These decreases were partially offset by increased sales of value books,
which increased 8.7% for the period.
Rental Comps decreased 5.8% for the quarter, primarily due to fewer rentals of DVDs and books on CD
partially offset by increased rentals of games and Blu-ray movies. Rental Video Comps decreased
7.0% for the quarter and units rented decreased 9.0%. Rental Video Comps sales were negatively
impacted by fewer titles released in the $20 million to $80 million gross box office range, which
typically represent our best renters. Rental Video Game Comps increased 7.7% and units rented
increased 2.8%. We are currently exiting the Book on CD category of our rental business.
Gross Profit Merchandise. For the first quarter, total merchandise gross profit dollars
decreased approximately $1.4 million, or 4.2%, to $32.3 million from $33.7 million for the same
period in the prior year, primarily due to lower revenues. As a percentage of total merchandise
revenue, merchandise gross profit decreased to 31.0% for the quarter compared to 31.2% for the same
period in the prior year, resulting primarily from increased costs to return products partially
offset by lower shrinkage expense. The decrease in shrinkage expense is a direct result of our
comprehensive store audit program that assesses store level execution and controls designed to
reduce shrink, with a strong focus on our high-shrinkage stores.
Gross Profit Rental. For the first quarter, total rental gross profit dollars decreased
approximately $0.9 million, or 6.9%, to $12.2 million from $13.1 million for the same period in the
prior year, primarily due to lower revenues. As a percentage of total rental revenue, rental gross
profit decreased to 62.7% for the quarter compared to 62.9% for the same period in the prior year.
Selling, General and Administrative Expenses (SG&A). As a percentage of total revenue, SG&A
remained consistent for the first quarter at 35.2%. SG&A decreased approximately $1.7 million
during the quarter, or 3.7%, to $43.7 million compared to $45.4 million for the same quarter last
year. The primary drivers of the decrease in total SG&A included a decrease of approximately $0.8
million in store advertising expense, a decrease of approximately $0.3 million in store labor
costs, and a decrease of approximately $0.2 million in depreciation expense.
Interest Expense. For the first quarter, interest expense increased approximately $0.1 million, or
100%, to $0.2 million, compared to $0.1 million for the same period in the prior year, primarily as
a result of higher interest rates incurred under our Amended and Restated Loan and Security
Agreement partially offset by lower average debt levels outstanding during the quarter. The
average rate of interest charged for the quarter increased to 2.6% compared to 1.9% for the same
period in the prior year.
Income Tax Expense. During the three months ended April 30, 2010, the Company recorded a discrete
tax benefit of approximately $0.2 million related to amended state returns resulting from an
Internal Revenue Service audit of the Companys previously filed Federal tax returns. No discrete
tax items were recorded during the three months ended April 30, 2011. Primarily as a result of
this discrete tax benefit, the effective tax rate for the first quarter of fiscal 2011 increased to
47.1% compared to 28.3% for the first quarter of fiscal 2010.
Stock Repurchase
On September 18, 2001, we announced a stock repurchase program of up to $5.0 million of our common
stock. As of April 30, 2011, the Board of Directors had approved increases in the program totaling
$32.5 million. During the first quarter of fiscal 2011, we purchased a total of 129,400 shares of
common stock at a cost of $653,598, or $5.05 per share. As of April 30, 2011, a total of 4,808,040
shares had been repurchased under the program at a cost of approximately $29.9 million, for an
average cost of approximately $6.22 per share. As of April 30, 2011 a total of $7.6 million
remained available under the stock repurchase program.
Store Activity
Since March 21, 2011, which was the last date we reported store activity, we have the following
activity to report.
| Store opened in Nampa, Idaho on April 18, 2011. This store is our fifth in the
Boise area and contains 20,201 selling square footage. |
Fiscal Year 2011 Guidance
Results for the quarter fell short of our internal forecast, which is the basis for our guidance,
said Dan Crow, Vice President and Chief Financial Officer. Based on certain promotional
initiatives we are taking to drive revenues and our continued focus on costs, which were less than
our internal forecast, we expect to make up the shortfall during the remaining three quarters.
Consequently, we are reaffirming our guidance of net earnings per share ranging from $0.22 to $0.37
for the full fiscal year ending January 31, 2012.
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 companys 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 companys 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 146 superstores, averaging approximately 24,000 square feet, primarily in
medium-sized markets throughout the United States. We also operate a concept store, Sun Adventure
Sports, in Amarillo, Texas.
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)
(Dollars in thousands)
April 30, | April 30, | January 31, | ||||||||||
2011 | 2010 | 2011 | ||||||||||
(unaudited) | (unaudited) | |||||||||||
Assets |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ | 6,040 | $ | 4,620 | $ | 6,149 | ||||||
Merchandise inventories, net |
148,340 | 152,804 | 146,636 | |||||||||
Deferred income taxes |
6,433 | 6,777 | 6,022 | |||||||||
Prepaid expenses and other current assets |
11,121 | 9,364 | 11,742 | |||||||||
Total current assets |
171,934 | 173,565 | 170,549 | |||||||||
Rental assets, net |
13,392 | 13,432 | 13,129 | |||||||||
Property and equipment, net |
40,774 | 45,616 | 41,588 | |||||||||
Deferred income taxes |
1,713 | 2,974 | 1,668 | |||||||||
Intangible assets, net |
391 | 391 | 391 | |||||||||
Other assets |
2,318 | 1,366 | 2,358 | |||||||||
Total assets |
$ | 230,522 | $ | 237,344 | $ | 229,683 | ||||||
Liabilities and shareholders equity |
||||||||||||
Current liabilities |
||||||||||||
Trade accounts payable |
$ | 66,470 | $ | 69,973 | $ | 60,555 | ||||||
Accrued expenses and other current liabilities |
26,093 | 26,177 | 26,124 | |||||||||
Total current liabilities |
92,563 | 96,150 | 86,679 | |||||||||
Long-term debt, excluding current maturities |
26,431 | 26,435 | 31,766 | |||||||||
Other liabilities |
6,703 | 6,262 | 6,512 | |||||||||
Shareholders equity |
||||||||||||
Preferred stock |
| | | |||||||||
Common stock |
119 | 119 | 119 | |||||||||
Additional paid-in capital |
36,975 | 36,978 | 36,673 | |||||||||
Retained earnings |
89,002 | 87,902 | 88,589 | |||||||||
Accumulated other comprehensive income |
147 | 68 | 107 | |||||||||
Treasury stock, at cost |
(21,418 | ) | (16,570 | ) | (20,762 | ) | ||||||
Total shareholders equity |
104,825 | 108,497 | 104,726 | |||||||||
Total liabilities and shareholders equity |
$ | 230,522 | $ | 237,344 | $ | 229,683 | ||||||
Consolidated Statements of Operations
(In thousands, except per share data)
(In thousands, except per share data)
Three months ended | ||||||||
April 30, | ||||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Merchandise revenue |
$ | 104,463 | $ | 108,125 | ||||
Rental revenue |
19,528 | 20,779 | ||||||
Gift card breakage revenue |
146 | 194 | ||||||
Total revenues |
124,137 | 129,098 | ||||||
Merchandise cost of revenue |
72,120 | 74,426 | ||||||
Rental cost of revenue |
7,285 | 7,705 | ||||||
Total cost of revenues |
79,405 | 82,131 | ||||||
Gross profit |
44,732 | 46,967 | ||||||
Selling, general and administrative expenses |
43,710 | 45,436 | ||||||
Pre-opening expenses |
58 | | ||||||
Operating income |
964 | 1,531 | ||||||
Other income (expense): |
||||||||
Interest expense, net |
(202 | ) | (132 | ) | ||||
Other, net |
19 | 20 | ||||||
Income before income taxes |
781 | 1,419 | ||||||
Income tax expense |
368 | 401 | ||||||
Net income |
$ | 413 | $ | 1,018 | ||||
Basic income per share |
$ | 0.05 | $ | 0.11 | ||||
Diluted income per share |
$ | 0.05 | $ | 0.11 | ||||
Weighted-average common shares
outstanding: |
||||||||
Basic |
8,711 | 9,432 | ||||||
Dilutive effect of stock awards |
211 | 236 | ||||||
Diluted |
8,922 | 9,668 | ||||||
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Dollars in thousands)
For the Three Months Ended April 30, | ||||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 413 | $ | 1,018 | ||||
Adjustments to reconcile net income to net
cash provided by operations: |
||||||||
Rental asset depreciation expense |
2,889 | 2,654 | ||||||
Purchases of rental assets |
(5,869 | ) | (5,980 | ) | ||||
Property and equipment depreciation expense |
4,155 | 4,321 | ||||||
Deferred income taxes |
(456 | ) | (637 | ) | ||||
Loss on rental assets lost, stolen and defective |
495 | 470 | ||||||
Loss on disposal or impairment of property and
equipment,
excluding rental assets |
34 | 19 | ||||||
Non-cash stock-based compensation |
302 | 143 | ||||||
Changes in operating assets and liabilities: |
||||||||
Merchandise inventories |
519 | (2,105 | ) | |||||
Other current assets |
621 | 756 | ||||||
Trade accounts payable |
4,034 | 12,092 | ||||||
Accrued expenses and other current liabilities |
(31 | ) | (1,951 | ) | ||||
Other assets and liabilities, net |
271 | (4 | ) | |||||
Net cash provided by operating activities |
7,377 | 10,796 | ||||||
Cash flows from investing activities: |
||||||||
Purchases of property, equipment and improvements |
(3,376 | ) | (2,260 | ) | ||||
Net cash used in investing activities |
(3,376 | ) | (2,260 | ) | ||||
Cash flows from financing activities: |
||||||||
Net repayments under revolving credit facility |
(5,335 | ) | (11,739 | ) | ||||
Purchase of treasury stock |
(656 | ) | (959 | ) | ||||
Change in cash overdraft |
1,881 | (187 | ) | |||||
Proceeds from exercise of stock options |
| 106 | ||||||
Net cash used in financing activities |
(4,110 | ) | (12,779 | ) | ||||
Net decrease in cash and cash equivalents |
(109 | ) | (4,243 | ) | ||||
Cash and cash equivalents at beginning of period |
6,149 | 8,863 | ||||||
Cash and cash equivalents at end of period |
$ | 6,040 | $ | 4,620 | ||||
Balance Sheet and Other Ratios ( A )
(Dollars in thousands, except per share amounts)
(Dollars in thousands, except per share amounts)
April 30, | April 30, | |||||||
2011 | 2010 | |||||||
Merchandise inventories, net |
$ | 148,340 | $ | 152,804 | ||||
Inventory turns, trailing 12 months (B) |
1.94 | 1.89 | ||||||
Long-term debt |
$ | 26,431 | $ | 26,435 | ||||
Long-term debt to total capitalization (C) |
20.1 | % | 19.6 | % | ||||
Book value (D) |
$ | 104,825 | $ | 108,497 | ||||
Book value per share (E) |
$ | 11.75 | $ | 11.22 |
Three Months Ended April 30, | ||||||||
2011 | 2010 | |||||||
Comparable-store revenues ( F ): |
||||||||
Total |
-3.4 | % | 4.9 | % | ||||
Merchandise |
-2.9 | % | 6.3 | % | ||||
Rental |
-5.8 | % | -1.7 | % |
(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 periods 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 three months ended April 30, 2011 and 2010, respectively. |
|
(F) | 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 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 free cash flow, EBITDA, adjusted EBITDA, and adjusted operating income
(loss) as supplemental non-GAAP financial measures regarding the Companys 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 Companys core operating performance,
which management believes represents the Companys 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 Companys financial results
through the eyes of management. The Company further believes that providing this information
allows investors to both better understand the Companys 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, | ||||||||
2011 | 2010 | |||||||
Net cash provided by operating activities |
$ | 7,377 | $ | 10,796 | ||||
Purchase of property, equipment and improvements, net |
(3,376 | ) | (2,260 | ) | ||||
Free cash flow |
$ | 4,001 | $ | 8,536 | ||||
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 and store
asset impairments. 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, | ||||||||
2011 | 2010 | |||||||
Net income |
$ | 413 | $ | 1,018 | ||||
Adjusted for |
||||||||
Interest expense, net |
202 | 132 | ||||||
Income tax expense |
368 | 401 | ||||||
Property and equipment depreciation expense |
4,155 | 4,321 | ||||||
EBITDA |
5,138 | 5,872 | ||||||
Gift card breakage revenue |
(146 | ) | (194 | ) | ||||
Non-cash stock-based compensation |
302 | 143 | ||||||
Adjusted EBITDA |
$ | 5,294 | $ | 5,821 | ||||
Adjusted Operating Income (Loss)
Adjusted operating income (loss) is defined as operating income (loss) excluding gift card breakage
revenue, stock based compensation expense and store asset impairments. The following table
reconciles operating income (loss), a GAAP financial measure, to adjusted operating income (loss),
a non-GAAP financial measure (in thousands):
Three months ended April 30, | ||||||||
2011 | 2010 | |||||||
Operating income |
$ | 964 | $ | 1,531 | ||||
Adjusted for |
||||||||
Gift card breakage revenue |
(146 | ) | (194 | ) | ||||
Non-cash stock-based compensation |
302 | 143 | ||||||
Adjusted operating income |
$ | 1,120 | $ | 1,480 | ||||
Free cash flow, EBITDA, adjusted EBITDA, and adjusted operating income (loss) are considered
non-GAAP financial measures under the SECs 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 non-GAAP free cash flow, EBITDA, adjusted EBITDA,
and adjusted operating income (loss) may vary among other companies. Therefore, our free cash
flow, EBITDA, adjusted EBITDA, and adjusted operating income (loss) may not be comparable to
similarly titled measures used by other companies.