Press Release

Printer Friendly Version View printer-friendly version
<< Back
Navarre Corporation Reports Financial Results for Fourth Quarter and Fiscal Year 2008

Company will host conference call June 12, 2008 at 11:00a.m. ET

MINNEAPOLIS, June 11, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Navarre Corporation (Nasdaq: NAVR), a publisher and distributor of physical and digital home entertainment and multimedia products, today reported fiscal year 2008 fourth quarter and fiscal year-end results.

    Financial Results Fiscal Year 2008 Fourth Quarter

    -- Net sales were $160.2 million, as compared to net sales of $158.3
       million for the same period last year, an increase of $1.9 million or
       1.2%.
    -- Net income from continuing operations was $919,000, or $0.03 per
       diluted share, as compared to net loss from continuing operations in
       the fourth quarter of fiscal year 2007 of $2.2 million, or $(0.06) per
       diluted share.
    -- Net income, including discontinued operations, was $686,000 or $0.02
       per diluted share, as compared to a net loss in the fourth quarter of
       fiscal year 2007 of $2.2 million, or a loss of $(0.06) per diluted
       share.
    -- Earnings before interest, taxes, depreciation, amortization (EBITDA)
       from continuing operations was approximately $5.7 million, as compared
       to EBITDA from continuing operations of $4.1 million for the same
       quarter last year.  See "Use of Non-GAAP Financial Information" below.


    Financial Results Fiscal Year 2008

    -- Net sales were $658.5 million, as compared to net sales of $644.8
       million for the fiscal year ended March 31, 2007, an increase of $13.7
       million or 2.1%.
    -- Net income from continuing operations was $7.1 million, or $0.20 per
       diluted share, as compared to net income from continuing operations
       during fiscal year 2007 of approximately $3.6 million, or $0.10 per
       diluted share.
    -- Net income, including discontinued operations, was $9.7 million, or
       $0.27 per diluted share, as compared to net income in fiscal year 2007
       of $4.1 million, or $0.11 per diluted share.
    -- EBITDA from continuing operations of $28.9 million was a record for the
       Company, as compared to EBITDA from continuing operations of $27.9
       million for fiscal year 2007.  See "Use of Non-GAAP Financial
       Information" below.
    -- Debt, net of cash, on March 31, 2008 was $36.6 million, as compared to
       debt, net of cash, of $53.0 million on March 31, 2007.



Cary Deacon, Chief Executive Officer, commented, "The Company continues to manage its balance sheet very well. I am pleased with the Team's controls regarding debt, inventory and expenses. We have streamlined the organization and shed central expenses that were related to the divestiture of our music business during the year. We continue with the final phase of our enterprise wide software system. Our transportation and warehouse modules will be completed late this summer and this implementation will totally decouple us from our old legacy system."

Deacon continued, "FUNimation demonstrated double-digit net sales growth and more than doubled its operating profit during the 2008 fiscal year and we anticipate ongoing growth in the 2009 fiscal year. Encore maintained its solid profit performance. BCI was a major disappointment in the last half of the fiscal year. Its recovery was slower than anticipated; however, we are seeing early signs of improved performance in our first quarter. We have issued conservative guidance for FY2009 based on the current state of the economy and rising fuel costs."

Business Segment Highlights

Publishing Segment

The publishing segment includes the results of the wholly-owned subsidiaries FUNimation, Encore and BCI. For the fourth quarter ended March 31, 2008, the publishing segment achieved net sales, before inter-company eliminations, of $29.4 million, a decrease of 4.7%, as compared to net sales of $30.9 million for the same period of the prior fiscal year. For fiscal year 2008, net sales, before inter-company eliminations, in the publishing segment decreased by 7.3% to $117.4 million, as compared to net sales of $126.7 million for fiscal year 2007. See "Use of Non-GAAP Financial Information" below.

Distribution Segment

The distribution segment distributes first and third party PC software, DVD video and video games. It should be noted that the Company has presented historical information related to the distribution segment without including the results of the independent music distribution business which was sold May 31, 2007, and is now reflected as discontinued operations.

For the fourth quarter ended March 31, 2008, the distribution segment's net sales, before inter-company eliminations, increased by 4.2% to $148.5 million, as compared to net sales of $142.6 million for the same period last year. For fiscal year 2008, the distribution segment achieved net sales, before inter-company eliminations, of $611.0 million, as compared to net sales of $587.9 million for fiscal year 2007, an increase of 3.9%. See "Use of Non-GAAP Financial Information" below.

ERP Implementation

The implementation of the Company's new Enterprise Resource Planning (ERP) system continued to meet expectations. The final phase of this implementation process involves the installation of a warehouse and transportation management system that has been licensed from HighJump Software. This system will be integrated with the Company's financial reporting systems which operate on an SAP platform. Completion of this implementation process is anticipated to take place in the summer of fiscal year 2009.

    Outlook
    The Company reiterated its fiscal year 2009 guidance as follows:

    -- Expected net sales to range between $640 million and $670 million;
    -- Earnings before interest, taxes, depreciation and amortization (EBITDA)
       are anticipated to range between $28 million and $31 million;
    -- Net income (comparable to net income without discontinued operations
       for fiscal year 2008) is anticipated to range between $7 million and $9
       million; and
    -- Cash flow from operations is anticipated to again be positive for
       fiscal year 2009 results.


Use of Non-GAAP Financial Information

In evaluating our financial performances and operating trends, management considers information concerning our net sales before inter-company eliminations and earnings before interest, taxes, depreciation and amortization that 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 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 http://www.navarre.com.

About Navarre Corporation

Navarre Corporation (Nasdaq: NAVR) is a publisher and distributor of physical and digital home entertainment and multimedia products, including PC software, DVD video, video games and accessories. Navarre develops, licenses and publishes home entertainment and multimedia content through its Encore, BCI, and FUNimation subsidiaries and has established distribution relationships with customers across a wide spectrum of retail channels. Navarre was founded in 1983 and is headquartered in New Hope, Minnesota. Additional information regarding Navarre can be found at http://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; pending investigation by the U.S. Securities and Exchange Commission (the "SEC") could impact the reporting of future financial results or create uncertainty as to the reliability of previously-issued financial results; the seasonal nature of the Company's business; the potential for the Company to incur significant additional costs and to experience operational and logistical difficulties in connection with its implementation of a new ERP system; Company's dependence on significant vendors; uncertain growth in the publishing segment; the Company's ability to meet significant working capital requirements related to distributing products; 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 reports to the Securities and Exchange Commission, 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 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 call 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)
                            Three Months Ended       Twelve Months Ended
                                 March 31,                 March 31,
                             2008         2007        2008         2007

    Net sales             $160,188     $158,302     $658,472     $644,790
    Cost of sales
     (exclusive of
     depreciation
     and amortization)     136,307      134,708      556,913      537,433
    Gross profit            23,881       23,594      101,559      107,357
    Operating expenses:
      Selling and marketing  6,448        6,151       27,370       28,299
      Distribution and
       warehousing           3,041        2,855       11,976       12,330
      General and
       administrative        8,971       10,030       34,810       35,754
      Bad debt expense
       (recovery)             (100)         783          (15)       3,654
      Depreciation and
       amortization          2,540        2,859        9,587       10,958
    Total operating
     expenses               20,900       22,678       83,728       90,995
    Income from operations   2,981          916       17,831       16,362
    Other income (expense):
      Interest expense (1)  (1,270)      (4,232)      (6,127)     (10,220)
      Interest income           92          104          259          357
      Warrant expense            -            -            -         (251)
      Other income
       (expense), net          (65)         (72)         366          (50)
    Income (loss) from
     continuing operations   1,738       (3,284)      12,329        6,198
    Income tax (expense)
     benefit                  (819)       1,096       (5,273)      (2,594)
    Net income (loss)
     from continuing
     operations                919       (2,188)       7,056        3,604
    Discontinued operations,
     net of tax:
      Gain on sale of
       discontinued
       operations             178            -        4,892            -
      Income (loss) from
       discontinued
       operations             (411)         (50)      (2,290)         455
    Net income (loss)         $686      $(2,238)      $9,658       $4,059

    Basic earnings
     (loss) per common
     share:
      Continuing operations  $0.03       $(0.06)       $0.20        $0.10
      Discontinued
       operations           $(0.01)          $-        $0.07        $0.01
      Net income (loss)      $0.02       $(0.06)       $0.27        $0.11
    Diluted earnings
     (loss) per common
     share:
      Continuing operations  $0.03       $(0.06)       $0.20        $0.10
      Discontinued
       operations           $(0.01)          $-        $0.07        $0.01
      Net income (loss)      $0.02       $(0.06)       $0.27        $0.11
    Weighted average
     shares outstanding:
      Basic                 36,167       35,897       36,105       35,786
      Diluted               36,189       35,897       36,269       36,228

    (1) Fiscal year 2007 and fiscal year 2007 fourth quarter interest expense
        includes approximately $2.4 million of non-cash costs



                             NAVARRE CORPORATION
                     Consolidated Condensed Balance Sheet
                                (In thousands)

                                                     March 31,      March 31,
                                                       2008           2007

    Assets
    Current assets:
      Cash and cash equivalents                       $4,445           $966
      Receivables, net                                76,806         70,609
      Inventories                                     32,654         36,791
      Other                                           24,361         20,889
      Assets from discontinued operations - current        -         21,889

    Total current assets                             138,266        151,144
    Property and equipment, net                       17,181         12,551
    Other assets                                     128,015        124,187
    Assets from discontinued operations -
     non current                                           -            343

    Total assets                                    $283,462       $288,225

    Liabilities and shareholders' equity
    Current liabilities:
      Note payable - line of credit                  $31,314        $38,956
      Note payable - short-term                          150            150
      Accounts payable                                92,199         87,145
      Other                                           18,257         13,680
      Liabilities from discontinued operations -
       current                                             -         12,748
    Total current liabilities                        141,920        152,679
    Long-term liabilities:
      Note payable - long-term                         9,594         14,850
      Other                                            7,537          7,245
    Total liabilities                                159,051        174,774
      Shareholders' equity                           124,411        113,451
    Total liabilities and shareholders' equity      $283,462       $288,225




                             NAVARRE CORPORATION
               Consolidated Condensed Statements of Cash Flows
                                (In thousands)

                                 (Unaudited)
    `                        Three Months Ended       Twelve Months Ended
                                  March 31,                 March 31,
                             2008         2007         2008         2007


    Net cash provided by
     operating activities  $21,405      $13,483      $18,385      $21,353
    Net cash used in
     investing activities   (2,689)      (3,116)     (13,941)      (8,880)
    Net cash used in
     financing activities  (17,650)     (23,324)     (13,051)     (26,944)
    Net cash provided
     by (used in)
     continuing operations   1,066      (12,957)      (8,607)     (14,471)
    Net cash provided
     by discontinued
     operations               (869)       3,191       12,086        1,141

    Net increase
     (decrease) in cash        197       (9,766)       3,479      (13,330)
    Cash at beginning
     of period               4,248       10,732          966       14,296
    Cash at end of period   $4,445         $966       $4,445         $966



                             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 March 31,
                             2008            %         2007            %
    Net sales:
      Distribution        $148,505        83.5%     $142,570        82.2%
      Publishing            29,403        16.5%       30,863        17.8%
    Net sales before
     inter-company
     eliminations          177,908                   173,433
      Inter-company
       eliminations        (17,720)                  (15,131)
    Net sales as
     reported             $160,188                  $158,302

    Income (loss) from
     continuing
     operations:
      Distribution            $295                    $2,140
      Publishing             2,686                    (1,224)
    Consolidated income
     from continuing
     operations             $2,981                      $916



                                  Twelve Months Ended March 31,
                             2008            %         2007            %

    Net sales:
      Distribution        $611,007        83.9%     $587,881        82.3%
      Publishing           117,423        16.1%      126,651        17.7%
    Net sales before
     inter-company
     eliminations          728,430                   714,532
      Inter-company
       eliminations        (69,958)                  (69,742)
    Net sales as
     reported             $658,472                  $644,790

    Income from
     continuing
     operations:
      Distribution          $5,138                    $6,273
      Publishing            12,693                    10,089
    Consolidated
     income from
     continuing
     operations            $17,831                   $16,362



    Reconciliation of Net Income (Loss) from Continuing Operations to EBITDA

                             Three Months Ended       Twelve Months Ended
                                  March 31,                 March 31,
                              2008         2007         2008         2007

    Net income (loss)
     from continuing
     operations, as
     reported                 $919      $(2,188)      $7,056       $3,604
      Interest expense
     (income), net           1,178        4,128        5,868        9,863
      Tax expense (benefit)    819       (1,096)       5,273        2,594
      Depreciation and
       amortization          2,540        2,859        9,587       10,958
      Share-based
       compensation            246          390        1,072          910
    EBITDA                  $5,702       $4,093      $28,856      $27,929

SOURCE
Navarre Corporation

Print Page Print Page | RSS Feeds RSS Feeds | E-mail Alerts E-mail Alerts | Financial Tear Sheet Financial Tear Sheet