Navarre Corporation Reports Second Quarter Results for Fiscal Year 2011 and Posts a 6% Net Sales Increase
Company to Host Conference Call on Tuesday, November 2, 2010 at 11:00 a.m. ET
MINNEAPOLIS, Nov 1, 2010 --
Navarre Corporation (Nasdaq:NAVR), a leading distributor, provider of complete logistics solutions and publisher of computer software today reported its financial results for the second quarter and year-to-date periods of its 2011 fiscal year.
Second Quarter Fiscal Year 2011
-- Net sales from continuing operations were $120.5 million, as compared to
net sales from continuing operations of $113.5 million for the same
period last year, an increase of $7.0 million or 6%. Continuing
operations does not include the results of FUNimation Entertainment,
which the Company is currently marketing for a potential sale and is
classified as discontinued operations pursuant to GAAP.
-- Operating income from continuing operations during the second quarter
was $3.2 million, as compared to operating income from continuing
operations of $3.0 million in the prior fiscal year, an increase of 5%.
-- Net income was $3.1 million, or $0.09 per diluted share, as compared to
net income of $2.3 million, or $0.06 per diluted share, in the prior
year's second quarter.
-- EBITDA before share-based compensation expense from continuing
operations was $4.2 million, as compared to EBITDA before share-based
compensation expense from continuing operations of $4.7 million in the
prior year's second quarter, a decrease of 10%. Second quarter EBITDA
before share-based compensation expense from continuing operations
includes the impact of a foreign exchange loss, as compared to foreign
exchange income in the prior year's second quarter, to create a $536,000
year-over-year impact. (See "Use of Non-GAAP Financial Information"
below)
-- Debt at September 30, 2010 was reduced to $14.4 million and includes the
use of $8.1 million in cash in connection with the May 2010 acquisition
of Punch! Software. This was a reduction of $5.5 million as compared to
debt of $19.9 million on September 30, 2009.
Year-to-Date Fiscal Year 2011
-- Net sales from continuing operations during the first two quarters of
the 2011 fiscal year were $219.3 million, as compared to net sales from
continuing operations of $236.9 million for the same period last year, a
decrease of $17.6 million or 7.4%.
-- Operating income from continuing operations on a year-to-date basis was
$4.3 million, as compared to operating income from continuing operations
of $4.1 million in the prior fiscal year, an increase of 4%.
-- Net income during the first two quarters of the 2011 fiscal year was
$4.2 million, or $0.11 per diluted share, as compared to net income of
$6.4 million, or $0.18 per diluted share, in the prior year.
-- EBITDA before share-based compensation expense from continuing
operations on a year-to-date basis was $6.2 million, as compared to
EBITDA before share-based compensation expense from continuing
operations of $7.7 million in the prior year, a decrease of $1.5 million
or 19%. Year-to-date EBITDA before share-based compensation expense from
continuing operations includes the impact of a foreign exchange loss, as
compared to foreign exchange income in the first six months of the prior
year, to create a more than $1.2 million year-over-year impact. (See
"Use of Non-GAAP Financial Information" below)
"I am pleased with our top line revenue increase and we look forward to more of the same for the remainder of the fiscal year. The improvement is in part a result of the initial stages of our strategies to pursue geographic expansion and to add distribution of new product categories," commented Cary L. Deacon, Chief Executive Officer. "Although our customers continue to take a cautious approach to inventory levels and buying patterns, we are also seeing a modest recovery in demand. Our expansion in Canada is continuing to meet expectations and we are successfully adding new consumer electronic accessory products to our distribution business. The performance of content acquired in the Punch! acquisition continues to be a bright spot in Encore's results.
"Our previously announced efforts in connection with the potential sale of FUNimation Entertainment are continuing and we anticipate making a strategic decision regarding that business in the coming months," continued Deacon.
Distribution Segment
For the second quarter ended September 30, 2010, the distribution segment's net sales, before inter-company eliminations, were $118.8 million, as compared to net sales of $111.3 million for the same period last year, an increase of $7.5 million or 7%. This increase in net sales resulted from improved sales of all product categories. Operating income in the distribution segment was $1.7 million in the second quarter, as compared to $1.3 in the second quarter of the prior fiscal year, an increase of 33%. (See "Use of Non-GAAP Financial Information" below)
During the first six months of the 2011 fiscal year, the distribution segment's net sales, before inter-company eliminations, were $214.7 million, as compared to net sales of $232.7 million for the same period last year, a decrease of $18.0 million or 7.7%. Operating income in the distribution segment was $1.7 million on a year-to-date basis, as compared to $1.6 million in the prior fiscal year, an increase of 4.3%. (See "Use of Non-GAAP Financial Information" below)
Publishing Segment
The publishing segment includes the results of Encore Software. The results of FUNimation Entertainment, which is being marketed for sale, is classified as discontinued operations pursuant to GAAP.
For the second quarter ended September 30, 2010, the publishing segment's net sales, before inter-company eliminations, were $8.7 million, as compared to net sales of $8.2 million for the same period last year, an increase of 6%. This increase in net sales arose primarily out of the addition of the Punch! line of home design software as print productivity and gaming products experienced top line difficulties in the quarter. Operating income in the publishing segment was $1.5 million in the second quarter, as compared to $1.7 million in the second quarter of the prior fiscal year a decrease of 16%. (See "Use of Non-GAAP Financial Information" below)
During the first six months of the 2011 fiscal year, the publishing segment's net sales, before inter-company eliminations, were $15.7 million, as compared to net sales of $15.0 million for the same period last year, an increase of 5%. Operating income for the publishing segment was $2.6 million on a year-to-date basis, as compared to $2.5 million in the prior fiscal year, an increase of 4%. (See "Use of Non-GAAP Financial Information" below)
Discontinued Operations
Discontinued operations includes the results of FUNimation Entertainment. Net income from discontinued operations during the second quarter was $1.7 million, as compared to $435,000 in the prior fiscal year. FUNimation had a small net sales increase in the second quarter compared to the prior year's second quarter.
Outlook
The Company's guidance from continuing operations for fiscal year 2011 remains unchanged as follows:
-- Net sales from continuing operations are anticipated to be between $480
million and $520 million;
-- EBITDA before share-based compensation expense from continuing
operations is expected to be between $18 million and $21 million; and
-- Cash flow from continuing operations is anticipated to be positive.
Conference Call
The Company will host a conference call at 11:00 a.m. ET (10:00 a.m. CT), Tuesday, November 2, 2010, to discuss its fiscal year 2011 second quarter and year to date financial results. The conference call can be accessed by dialing (866) 804-6923, and utilizing conference participant passcode "73954119", ten minutes prior to the scheduled start time. In addition, this discussion will be simultaneously webcast live and can be accessed in the "Investors" section of the Company's web site located at www.navarre.com. A replay of the conference call will be available at the Company's web site.
About Navarre Corporation
Navarre(R) Corporation provides distribution, third party logistics, supply chain management and other related services for North American retailers and their suppliers. For over 25 years, the Company has been a leading distributor for computer software, home entertainment media, consumer electronics and peripherals. The Company also publishes computer software in its Encore(R) subsidiary and produces anime video through its FUNimation Entertainment(R) subsidiary. Navarre was founded in 1983 and is headquartered in Minneapolis, Minnesota. Additional information can be found at www.navarre.com.
The Navarre Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6839
Use of Non-GAAP Financial Information
In evaluating our financial performance and operating trends, management considers information concerning our net sales before inter-company eliminations, and earnings before interest, taxes, depreciation, amortization, and share-based compensation expense, which are not calculated in accordance with generally accepted accounting principles ("GAAP") in the United States of America. The Company's management believes these non-GAAP measures are useful to investors because they provide supplemental information that facilitates comparisons to prior periods and for the evaluation of financial results. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. The method the Company uses to produce non-GAAP results is not computed according to GAAP, is likely to differ from the methods used by other companies and should not be regarded as a replacement for corresponding GAAP measures. Investors are encouraged to review the reconciliation of these preliminary non-GAAP financial measures to the comparable GAAP results, which is attached to this release and can also be found on the Company's web site at www.navarre.com.
Safe Harbor
The statements in this press release that are not strictly historical are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbors provided therein. The forward-looking statements are subject to risks and uncertainties, and the actual results that the Company achieves may differ materially from these forward-looking statements due to such risks and uncertainties, including, but not limited to: the Company's revenues being derived from a small group of customers; the Company's dependence on significant vendors; the continued deterioration in the business of some of the Company's customers could harm its business; a pending investigation by the U.S. Securities and Exchange Commission (the "SEC") or litigation arising out of this investigation may subject the Company to significant costs; the seasonal nature of the Company's business; the Company's ability to meet significant working capital requirements; the Company may not be able to adequately adjust its cost structure in response to a decrease in net sales; technology developments could continue to adversely affect the Company's business; and the Company's ability to compete effectively in the highly competitive distribution and publishing industries. In addition to these, a detailed statement of risks and uncertainties is contained in the Company's SEC reports, including, in particular, the Company's Form 10-K filings, as well as its other SEC filings and public disclosures.
Investors and shareholders are urged to read this press release carefully. The Company can offer no assurances that any projections, assumptions or forecasts made or discussed in this press release will be met, and investors should understand the risks of investing solely due to such projections. The forward-looking statements included in this press release are made only as of the date of this report and the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.
Investors and shareholders may obtain free copies of the Company's public filings through the website maintained by the SEC at http://www.sec.gov/ or at one of the SEC's other public reference rooms in Washington D.C., New York, New York or Chicago, Illinois. Please contact the SEC at 1-800-SEC-0330 for further information with respect to the SEC's public reference rooms.
NAVARRE CORPORATION
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
--------------------- ---------------------
2010 2009 2010 2009
----------- -------- ----------- --------
Net sales $120,476 $113,491 $219,268 $236,907
Cost of sales (exclusive of
depreciation and
amortization) 103,216 96,748 187,531 205,201
----------- -------- ----------- --------
Gross profit 17,260 16,743 31,737 31,706
Operating expenses:
Selling and marketing 5,277 4,462 10,161 8,530
Distribution and
warehousing 2,686 2,435 5,158 4,511
General and administrative 5,149 5,818 10,223 12,271
Depreciation and
amortization 991 1,027 1,882 2,249
----------- -------- ----------- --------
Total operating expenses 14,103 13,742 27,424 27,561
----------- -------- ----------- --------
Income from operations 3,157 3,001 4,313 4,145
Other income (expense):
Interest expense (456) (482) (851) (1,050)
Interest income -- -- -- 7
Other income (expense) (172) 364 (431) 815
----------- -------- ----------- --------
Income from continuing
operations before income
tax 2,529 2,883 3,031 3,917
Income tax expense (1,072) (1,038) (1,371) (1,218)
----------- -------- ----------- --------
Net income from continuing
operations 1,457 1,845 1,660 2,699
Discontinued operations:
Income from discontinued
operations, net of tax 1,680 435 2,575 3,742
----------- -------- ----------- --------
Net income $3,137 $2,280 $4,235 $6,441
=========== ======== =========== ========
Basic earnings per common
share:
Continuing operations $0.04 $0.05 $0.05 $0.08
Discontinued operations 0.05 0.01 0.07 0.10
----------- -------- ----------- --------
Net income $0.09 $0.06 $0.12 $0.18
=========== ======== =========== ========
Diluted earnings per common
share:
Continuing operations $0.04 $0.05 $0.04 $0.08
Discontinued operations 0.05 0.01 0.07 0.10
----------- -------- ----------- --------
Net income $0.09 $0.06 $0.11 $0.18
=========== ======== =========== ========
Weighted average shares
outstanding:
Basic 36,376 36,237 36,371 36,237
Diluted 36,995 36,650 36,886 36,530
NAVARRE CORPORATION
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited) (Unaudited)
September September March
30, 30, 31,
2010 2009 2010
----------- ----------- --------
Assets
Current assets:
Accounts receivables,
net $57,739 $61,828 $61,880
Inventories 27,694 24,786 21,164
Other 20,424 15,650 21,210
Current assets of
discontinued operations 8,748 6,666 6,071
----------- ----------- --------
Total current assets 114,605 108,930 110,325
Property and equipment,
net 10,548 12,724 11,790
Other assets 26,897 15,260 20,054
Non-current assets of
discontinued operations 29,907 29,218 29,434
----------- ----------- --------
Total assets $181,957 $166,132 $171,603
=========== =========== ========
Liabilities and
shareholders' equity
Current liabilities:
Revolving line of credit $14,428 $19,916 $6,634
Accounts payable 74,512 77,418 79,968
Other 16,640 16,472 17,177
Current liabilities of
discontinued operations 8,914 6,939 5,760
----------- ----------- --------
Total current liabilities 114,494 120,745 109,539
Long-term liabilities:
Other 1,850 1,407 1,303
Non-current liabilities
of discontinued
operations -- 1 --
----------- ----------- --------
Total liabilities 116,344 122,153 110,842
Shareholders' equity 65,613 43,979 60,761
----------- ----------- --------
Total liabilities and
shareholders' equity $181,957 $166,132 $171,603
=========== =========== ========
NAVARRE CORPORATION
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
September 30,
--------------------
2010 2009
----------- -------
Net cash (used in) provided by operating
activities $(4,041) $123
Net cash used in investing activities (8,985) (1,299)
Net cash provided by (used in) financing
activities 10,447 (111)
----------- -------
Net cash used in continuing operations (2,579) (1,287)
Discontinued operations
Net cash provided by operating activities 2,776 1,377
Net cash used in investing activities (191) (85)
Net cash used in financing activities (6) (5)
----------- -------
Net cash provided by discontinued
operations 2,579 1,287
Net increase (decrease) in cash -- --
Cash at beginning of period -- --
----------- -------
Cash at end of period $ -- $ --
=========== =======
NAVARRE CORPORATION
Supplemental Information
(In thousands)
(Unaudited)
Reconciliation of Net Sales Before Inter-Company Eliminations to GAAP Net Sales and Business
Segment Information
Three Months Ended September 30, Six Months Ended September 30,
2010 % 2009 % 2010 % 2009 %
--------- ----- -------- ----- --------- ----- -------- -----
Net sales:
Distribution $118,761 93.2% $111,336 93.2% $214,714 93.2% $232,732 94.0%
Publishing 8,656 8,156 15,710 14,953
--------- 6.8% -------- 6.8% --------- 6.8% -------- 6.0%
Net sales before
inter-company
eliminations 127,417 119,492 230,424 247,685
Inter-company
eliminations (6,941) (6,001) (11,156) (10,778)
--------- -------- --------- --------
Net sales as reported $120,476 $113,491 $219,268 $236,907
========= ======== ========= ========
Income from continuing
operations:
Distribution $1,699 $1,274 $1,708 $1,638
Publishing 1,458 1,727 2,605 2,507
--------- -------- --------- --------
Consolidated income from
continuing operations $3,157 $3,001 $4,313 $4,145
========= ======== ========= ========
NAVARRE CORPORATION
Supplemental Information
(In thousands)
(Unaudited)
Reconciliation of Net Income from Continuing Operations to EBITDA
from Continuing Operations Before Share-Based Compensation Expense
Three Months
Ended Six Months Ended
September 30, September 30,
2010 2009 2010 2009
--------- ------ --------- ------
Net income from continuing
operations, as reported $1,457 $1,845 $1,660 $2,699
Interest expense, net 456 482 851 1,043
Income tax expense 1,072 1,038 1,371 1,218
Depreciation and
amortization 991 1,027 1,882 2,249
Share-based compensation 242 272 468 529
--------- ------ --------- ------
EBITDA from continuing
operations before
share-based compensation
expense $4,218 $4,664 $6,232 $7,738
========= ====== ========= ======
MINNEAPOLIS, Nov 1, 2010 --
Navarre Corporation (Nasdaq:NAVR), a leading distributor, provider of complete logistics solutions and publisher of computer software today reported its financial results for the second quarter and year-to-date periods of its 2011 fiscal year.
Second Quarter Fiscal Year 2011
-- Net sales from continuing operations were $120.5 million, as compared to
net sales from continuing operations of $113.5 million for the same
period last year, an increase of $7.0 million or 6%. Continuing
operations does not include the results of FUNimation Entertainment,
which the Company is currently marketing for a potential sale and is
classified as discontinued operations pursuant to GAAP.
-- Operating income from continuing operations during the second quarter
was $3.2 million, as compared to operating income from continuing
operations of $3.0 million in the prior fiscal year, an increase of 5%.
-- Net income was $3.1 million, or $0.09 per diluted share, as compared to
net income of $2.3 million, or $0.06 per diluted share, in the prior
year's second quarter.
-- EBITDA before share-based compensation expense from continuing
operations was $4.2 million, as compared to EBITDA before share-based
compensation expense from continuing operations of $4.7 million in the
prior year's second quarter, a decrease of 10%. Second quarter EBITDA
before share-based compensation expense from continuing operations
includes the impact of a foreign exchange loss, as compared to foreign
exchange income in the prior year's second quarter, to create a $536,000
year-over-year impact. (See "Use of Non-GAAP Financial Information"
below)
-- Debt at September 30, 2010 was reduced to $14.4 million and includes the
use of $8.1 million in cash in connection with the May 2010 acquisition
of Punch! Software. This was a reduction of $5.5 million as compared to
debt of $19.9 million on September 30, 2009.
Year-to-Date Fiscal Year 2011
-- Net sales from continuing operations during the first two quarters of
the 2011 fiscal year were $219.3 million, as compared to net sales from
continuing operations of $236.9 million for the same period last year, a
decrease of $17.6 million or 7.4%.
-- Operating income from continuing operations on a year-to-date basis was
$4.3 million, as compared to operating income from continuing operations
of $4.1 million in the prior fiscal year, an increase of 4%.
-- Net income during the first two quarters of the 2011 fiscal year was
$4.2 million, or $0.11 per diluted share, as compared to net income of
$6.4 million, or $0.18 per diluted share, in the prior year.
-- EBITDA before share-based compensation expense from continuing
operations on a year-to-date basis was $6.2 million, as compared to
EBITDA before share-based compensation expense from continuing
operations of $7.7 million in the prior year, a decrease of $1.5 million
or 19%. Year-to-date EBITDA before share-based compensation expense from
continuing operations includes the impact of a foreign exchange loss, as
compared to foreign exchange income in the first six months of the prior
year, to create a more than $1.2 million year-over-year impact. (See
"Use of Non-GAAP Financial Information" below)
"I am pleased with our top line revenue increase and we look forward to more of the same for the remainder of the fiscal year. The improvement is in part a result of the initial stages of our strategies to pursue geographic expansion and to add distribution of new product categories," commented Cary L. Deacon, Chief Executive Officer. "Although our customers continue to take a cautious approach to inventory levels and buying patterns, we are also seeing a modest recovery in demand. Our expansion in Canada is continuing to meet expectations and we are successfully adding new consumer electronic accessory products to our distribution business. The performance of content acquired in the Punch! acquisition continues to be a bright spot in Encore's results.
"Our previously announced efforts in connection with the potential sale of FUNimation Entertainment are continuing and we anticipate making a strategic decision regarding that business in the coming months," continued Deacon.
Distribution Segment
For the second quarter ended September 30, 2010, the distribution segment's net sales, before inter-company eliminations, were $118.8 million, as compared to net sales of $111.3 million for the same period last year, an increase of $7.5 million or 7%. This increase in net sales resulted from improved sales of all product categories. Operating income in the distribution segment was $1.7 million in the second quarter, as compared to $1.3 in the second quarter of the prior fiscal year, an increase of 33%. (See "Use of Non-GAAP Financial Information" below)
During the first six months of the 2011 fiscal year, the distribution segment's net sales, before inter-company eliminations, were $214.7 million, as compared to net sales of $232.7 million for the same period last year, a decrease of $18.0 million or 7.7%. Operating income in the distribution segment was $1.7 million on a year-to-date basis, as compared to $1.6 million in the prior fiscal year, an increase of 4.3%. (See "Use of Non-GAAP Financial Information" below)
Publishing Segment
The publishing segment includes the results of Encore Software. The results of FUNimation Entertainment, which is being marketed for sale, is classified as discontinued operations pursuant to GAAP.
For the second quarter ended September 30, 2010, the publishing segment's net sales, before inter-company eliminations, were $8.7 million, as compared to net sales of $8.2 million for the same period last year, an increase of 6%. This increase in net sales arose primarily out of the addition of the Punch! line of home design software as print productivity and gaming products experienced top line difficulties in the quarter. Operating income in the publishing segment was $1.5 million in the second quarter, as compared to $1.7 million in the second quarter of the prior fiscal year a decrease of 16%. (See "Use of Non-GAAP Financial Information" below)
During the first six months of the 2011 fiscal year, the publishing segment's net sales, before inter-company eliminations, were $15.7 million, as compared to net sales of $15.0 million for the same period last year, an increase of 5%. Operating income for the publishing segment was $2.6 million on a year-to-date basis, as compared to $2.5 million in the prior fiscal year, an increase of 4%. (See "Use of Non-GAAP Financial Information" below)
Discontinued Operations
Discontinued operations includes the results of FUNimation Entertainment. Net income from discontinued operations during the second quarter was $1.7 million, as compared to $435,000 in the prior fiscal year. FUNimation had a small net sales increase in the second quarter compared to the prior year's second quarter.
Outlook
The Company's guidance from continuing operations for fiscal year 2011 remains unchanged as follows:
-- Net sales from continuing operations are anticipated to be between $480
million and $520 million;
-- EBITDA before share-based compensation expense from continuing
operations is expected to be between $18 million and $21 million; and
-- Cash flow from continuing operations is anticipated to be positive.
Conference Call
The Company will host a conference call at 11:00 a.m. ET (10:00 a.m. CT), Tuesday, November 2, 2010, to discuss its fiscal year 2011 second quarter and year to date financial results. The conference call can be accessed by dialing (866) 804-6923, and utilizing conference participant passcode "73954119", ten minutes prior to the scheduled start time. In addition, this discussion will be simultaneously webcast live and can be accessed in the "Investors" section of the Company's web site located at www.navarre.com. A replay of the conference call will be available at the Company's web site.
About Navarre Corporation
Navarre(R) Corporation provides distribution, third party logistics, supply chain management and other related services for North American retailers and their suppliers. For over 25 years, the Company has been a leading distributor for computer software, home entertainment media, consumer electronics and peripherals. The Company also publishes computer software in its Encore(R) subsidiary and produces anime video through its FUNimation Entertainment(R) subsidiary. Navarre was founded in 1983 and is headquartered in Minneapolis, Minnesota. Additional information can be found at www.navarre.com.
The Navarre Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6839
Use of Non-GAAP Financial Information
In evaluating our financial performance and operating trends, management considers information concerning our net sales before inter-company eliminations, and earnings before interest, taxes, depreciation, amortization, and share-based compensation expense, which are not calculated in accordance with generally accepted accounting principles ("GAAP") in the United States of America. The Company's management believes these non-GAAP measures are useful to investors because they provide supplemental information that facilitates comparisons to prior periods and for the evaluation of financial results. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. The method the Company uses to produce non-GAAP results is not computed according to GAAP, is likely to differ from the methods used by other companies and should not be regarded as a replacement for corresponding GAAP measures. Investors are encouraged to review the reconciliation of these preliminary non-GAAP financial measures to the comparable GAAP results, which is attached to this release and can also be found on the Company's web site at www.navarre.com.
Safe Harbor
The statements in this press release that are not strictly historical are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbors provided therein. The forward-looking statements are subject to risks and uncertainties, and the actual results that the Company achieves may differ materially from these forward-looking statements due to such risks and uncertainties, including, but not limited to: the Company's revenues being derived from a small group of customers; the Company's dependence on significant vendors; the continued deterioration in the business of some of the Company's customers could harm its business; a pending investigation by the U.S. Securities and Exchange Commission (the "SEC") or litigation arising out of this investigation may subject the Company to significant costs; the seasonal nature of the Company's business; the Company's ability to meet significant working capital requirements; the Company may not be able to adequately adjust its cost structure in response to a decrease in net sales; technology developments could continue to adversely affect the Company's business; and the Company's ability to compete effectively in the highly competitive distribution and publishing industries. In addition to these, a detailed statement of risks and uncertainties is contained in the Company's SEC reports, including, in particular, the Company's Form 10-K filings, as well as its other SEC filings and public disclosures.
Investors and shareholders are urged to read this press release carefully. The Company can offer no assurances that any projections, assumptions or forecasts made or discussed in this press release will be met, and investors should understand the risks of investing solely due to such projections. The forward-looking statements included in this press release are made only as of the date of this report and the Company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.
Investors and shareholders may obtain free copies of the Company's public filings through the website maintained by the SEC at http://www.sec.gov/ or at one of the SEC's other public reference rooms in Washington D.C., New York, New York or Chicago, Illinois. Please contact the SEC at 1-800-SEC-0330 for further information with respect to the SEC's public reference rooms.
NAVARRE CORPORATION
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
--------------------- ---------------------
2010 2009 2010 2009
----------- -------- ----------- --------
Net sales $120,476 $113,491 $219,268 $236,907
Cost of sales (exclusive of
depreciation and
amortization) 103,216 96,748 187,531 205,201
----------- -------- ----------- --------
Gross profit 17,260 16,743 31,737 31,706
Operating expenses:
Selling and marketing 5,277 4,462 10,161 8,530
Distribution and
warehousing 2,686 2,435 5,158 4,511
General and administrative 5,149 5,818 10,223 12,271
Depreciation and
amortization 991 1,027 1,882 2,249
----------- -------- ----------- --------
Total operating expenses 14,103 13,742 27,424 27,561
----------- -------- ----------- --------
Income from operations 3,157 3,001 4,313 4,145
Other income (expense):
Interest expense (456) (482) (851) (1,050)
Interest income -- -- -- 7
Other income (expense) (172) 364 (431) 815
----------- -------- ----------- --------
Income from continuing
operations before income
tax 2,529 2,883 3,031 3,917
Income tax expense (1,072) (1,038) (1,371) (1,218)
----------- -------- ----------- --------
Net income from continuing
operations 1,457 1,845 1,660 2,699
Discontinued operations:
Income from discontinued
operations, net of tax 1,680 435 2,575 3,742
----------- -------- ----------- --------
Net income $3,137 $2,280 $4,235 $6,441
=========== ======== =========== ========
Basic earnings per common
share:
Continuing operations $0.04 $0.05 $0.05 $0.08
Discontinued operations 0.05 0.01 0.07 0.10
----------- -------- ----------- --------
Net income $0.09 $0.06 $0.12 $0.18
=========== ======== =========== ========
Diluted earnings per common
share:
Continuing operations $0.04 $0.05 $0.04 $0.08
Discontinued operations 0.05 0.01 0.07 0.10
----------- -------- ----------- --------
Net income $0.09 $0.06 $0.11 $0.18
=========== ======== =========== ========
Weighted average shares
outstanding:
Basic 36,376 36,237 36,371 36,237
Diluted 36,995 36,650 36,886 36,530
NAVARRE CORPORATION
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited) (Unaudited)
September September March
30, 30, 31,
2010 2009 2010
----------- ----------- --------
Assets
Current assets:
Accounts receivables,
net $57,739 $61,828 $61,880
Inventories 27,694 24,786 21,164
Other 20,424 15,650 21,210
Current assets of
discontinued operations 8,748 6,666 6,071
----------- ----------- --------
Total current assets 114,605 108,930 110,325
Property and equipment,
net 10,548 12,724 11,790
Other assets 26,897 15,260 20,054
Non-current assets of
discontinued operations 29,907 29,218 29,434
----------- ----------- --------
Total assets $181,957 $166,132 $171,603
=========== =========== ========
Liabilities and
shareholders' equity
Current liabilities:
Revolving line of credit $14,428 $19,916 $6,634
Accounts payable 74,512 77,418 79,968
Other 16,640 16,472 17,177
Current liabilities of
discontinued operations 8,914 6,939 5,760
----------- ----------- --------
Total current liabilities 114,494 120,745 109,539
Long-term liabilities:
Other 1,850 1,407 1,303
Non-current liabilities
of discontinued
operations -- 1 --
----------- ----------- --------
Total liabilities 116,344 122,153 110,842
Shareholders' equity 65,613 43,979 60,761
----------- ----------- --------
Total liabilities and
shareholders' equity $181,957 $166,132 $171,603
=========== =========== ========
NAVARRE CORPORATION
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
September 30,
--------------------
2010 2009
----------- -------
Net cash (used in) provided by operating
activities $(4,041) $123
Net cash used in investing activities (8,985) (1,299)
Net cash provided by (used in) financing
activities 10,447 (111)
----------- -------
Net cash used in continuing operations (2,579) (1,287)
Discontinued operations
Net cash provided by operating activities 2,776 1,377
Net cash used in investing activities (191) (85)
Net cash used in financing activities (6) (5)
----------- -------
Net cash provided by discontinued
operations 2,579 1,287
Net increase (decrease) in cash -- --
Cash at beginning of period -- --
----------- -------
Cash at end of period $ -- $ --
=========== =======
NAVARRE CORPORATION
Supplemental Information
(In thousands)
(Unaudited)
Reconciliation of Net Sales Before Inter-Company Eliminations to GAAP Net Sales and Business
Segment Information
Three Months Ended September 30, Six Months Ended September 30,
2010 % 2009 % 2010 % 2009 %
--------- ----- -------- ----- --------- ----- -------- -----
Net sales:
Distribution $118,761 93.2% $111,336 93.2% $214,714 93.2% $232,732 94.0%
Publishing 8,656 8,156 15,710 14,953
--------- 6.8% -------- 6.8% --------- 6.8% -------- 6.0%
Net sales before
inter-company
eliminations 127,417 119,492 230,424 247,685
Inter-company
eliminations (6,941) (6,001) (11,156) (10,778)
--------- -------- --------- --------
Net sales as reported $120,476 $113,491 $219,268 $236,907
========= ======== ========= ========
Income from continuing
operations:
Distribution $1,699 $1,274 $1,708 $1,638
Publishing 1,458 1,727 2,605 2,507
--------- -------- --------- --------
Consolidated income from
continuing operations $3,157 $3,001 $4,313 $4,145
========= ======== ========= ========
NAVARRE CORPORATION
Supplemental Information
(In thousands)
(Unaudited)
Reconciliation of Net Income from Continuing Operations to EBITDA
from Continuing Operations Before Share-Based Compensation Expense
Three Months
Ended Six Months Ended
September 30, September 30,
2010 2009 2010 2009
--------- ------ --------- ------
Net income from continuing
operations, as reported $1,457 $1,845 $1,660 $2,699
Interest expense, net 456 482 851 1,043
Income tax expense 1,072 1,038 1,371 1,218
Depreciation and
amortization 991 1,027 1,882 2,249
Share-based compensation 242 272 468 529
--------- ------ --------- ------
EBITDA from continuing
operations before
share-based compensation
expense $4,218 $4,664 $6,232 $7,738
========= ====== ========= ======
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