Exhibit 99.2
PRO FORMA FINANCIAL INFORMATION
NAVARRE CORPORATION AND
ENCORE SOFTWARE, INC.
The following unaudited pro forma combined statements of operations for the year
ended March 31, 2002, and the six months ended September 30, 2002, combine the
historical consolidated statements of operations information of Navarre
Corporation (Navarre) and Encore Software, Inc. (Encore) and present pro forma
financial results as if the acquisition of Encore by Navarre had been
consummated at the beginning of the periods presented. The transaction is being
accounted for under the purchase method of accounting after giving effect to the
pro forma adjustments described in the accompanying notes.
The Unaudited Pro Forma Combined Statement of Operations for the year ended
March 31, 2002 combines the audited consolidated results of Navarre Corporation
for the year ended March 31, 2002, with the audited consolidated results of
Encore Software, Inc. for the year ended December 31, 2001, along with a
description of the related pro forma adjustments.
The Unaudited Pro Forma Combined Statement of Operations for the six months
ended September 30, 2002 combines the unaudited consolidated results of Navarre
Corporation for the six months ended September 30, 2002, with the unaudited
consolidated results of Encore Software, Inc. for the four months ended April
30, 2002, along with a description of the related pro forma adjustments. The
unaudited consolidated results of Navarre Corporation for the six months ended
September 30, 2002 reflect the actual results of Encore for the two months
subsequent to its acquisition.
The approximately $10 million purchase price for Encore has been allocated on a
preliminary basis using information currently available. The allocation of the
purchase price to the assets acquired is expected to be finalized by the end of
fiscal 2003. Adjustments to the preliminary purchase price may occur as a result
of obtaining more information regarding asset valuations and revisions of
preliminary estimates of fair values made at the date of purchase. Navarre is
continuing to evaluate how the acquired operations will be integrated into its
overall business strategy.
The unaudited pro forma financial information has been prepared by management
and adjusts the historical statements of operations for the effect of costs,
expenses, and assets which might have been incurred or assumed had the
acquisition been effected on the dates indicated. The unaudited pro forma
financial information is provided for information purposes only and does not
purport to be indicative of the future results or financial position of the
combined companies. This information should be read in conjunction with the
consolidated financial statements and notes thereto included in Navarre's Form
10-K for the year ended March 31, 2002, and for Encore in the 8-K/A.
UNAUDITED PRO FORMA COMBINED SATEMENT OF OPERATIONS
NAVARRE CORPORATION AND ENCORE SOFTWARE, INC.
FOR THE YEAR ENDED MARCH 31, 2002
(in thousands, except per share amounts)
PRO FORMA
ADJUSTMENTS
INCREASE/ PRO FORMA
NAVARRE ENCORE (DECREASE) COMBINED
--------- --------- ---------------- ---------
Net sales $ 303,817 $ 32,047 $ (17,278) (a) $ 318,586
Cost of sales 270,924 22,390 (17,278) (a) 276,036
--------- --------- --------- ---------
Gross profit 32,893 9,657 -- 42,550
Operating expenses:
Selling and marketing 8,098 7,919 -- 16,017
Distribution and warehousing 5,202 -- -- 5,202
General and administrative 16,909 12,007 -- 28,986
Depreciation and amortization 1,491 1,185 (200) (c) 2,476
Restructuring 672 -- -- 672
--------- -------- --------- ---------
32,372 21,181 (200) 53,353
--------- -------- --------- ---------
Income(loss) from operations 521 (11,524) 200 (10,803)
Other income (expense):
Interest expense (173) (390) 213 (b) (350)
Other income 884 (46) -- 838
--------- --------- --------- ---------
Income(loss) before impact of investment in
NetRadio Corp 1,232 (11,960) 413 (10,315)
Impact of investment in NetRadio Corporation 1,480 -- -- 1,480
--------- --------- --------- ---------
Net income(loss) $ 2,712 $ (11,960) $ 413 $ (8,835)
========= ========= ========= =========
Basic income(loss) per share $ 0.12 $ (0.39)
========= ========= ========= =========
Diluted income(loss) per share $ 0.12 $ (0.39)
========= ========= ========= =========
Basic weighted average common shares outstanding 22,553 22,553
========= ========= ========= =========
Diluted weighted average common shares outstanding 22,575 22,575
========= ========= ========= =========
(a) To eliminate sales and related cost of goods related to sales from Encore
to Navarre.
(b) To eliminate interest expense associated with debt not assumed by Navarre.
(c) To adjust depreciation expense to reflect the allocated basis of the
acquired assets.
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UNAUDITED PRO FORMA COMBINED SATEMENT OF OPERATIONS
NAVARRE CORPORATION AND ENCORE SOFTWARE, INC.
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2002
(in thousands, except per share amounts)
PRO FORMA
ADJUSTMENTS
INCREASE/ PRO FORMA
NAVARRE ENCORE (DECREASE) COMBINED
-------- -------- ----------------- --------
Net sales $158,838 $7,627 $(3,041) (a) $163,424
Cost of sales 139,358 7,263 (3,041) (a) 143,580
-------- -------- ------- --------
Gross profit 19,480 364 -- 19,844
Operating expenses:
Selling and marketing 5,931 3,037 -- 8,968
Distribution and warehousing 2,430 -- -- 2,430
General and administrative 9,730 1,906 -- 11,636
Depreciation and amortization 675 160 (67) (c) 768
-------- -------- ------- --------
18,766 5,103 (67) 23,802
-------- -------- ------- --------
Income(loss) from operations 714 (4,739) 67 (3,958)
Other income (expense):
Interest expense (95) (1) (48) (b) (144)
Other income 255 4 259
-------- -------- ------- --------
Net income(loss) $874 $(4,736) $ 19 $(3,843)
======== ======== ======= ========
Basic income(loss) per share $0.04 $(0.18)
======== ======== ======= ========
Diluted income(loss) per share $0.04 $(0.18)
======== ======== ======= ========
Basic weighted average common shares outstanding 21,616 21,616
======== ======== ======= ========
Diluted weighted average common shares outstanding 21,736 21,736
======== ======== ======= ========
(a) To eliminate sales and related cost of goods related to sales from Encore
to Navarre.
(b) To eliminate interest expense associated with debt not assumed by Navarre
(c) To adjust depreciation expense to reflect the allocated basis of the
acquired assets.
3