[NAVARRE CORPORATION LOGO]
FOR ADDITIONAL INFORMATION:
Cary Deacon, Corporate Relations Jim Gilbertson, Vice President and
Officer Chief Financial Officer
763-535-8333 763-535-8333
cdeacon@navarre.com jgilbert@navarre.com
Joyce Fleck, Vice President Marketing
763-535-8333
jfleck@navarre.com
NAVARRE CORPORATION REPORTS RECORD SALES AND
NET INCOME FOR ITS SECOND QUARTER FISCAL 2004
COMPANY REPORTS NINTH CONSECUTIVE QUARTER OF PROFITABILITY
MINNEAPOLIS, MN -- October 20, 2003 -- Navarre Corporation (Nasdaq: NAVR),
a leading distributor and publisher of a broad range of home entertainment
and multimedia software products, today reported record sales and operating
income for the fiscal 2004 second quarter ended September 30, 2003.
HIGHLIGHTS FOR THE QUARTER INCLUDE:
o Consolidated net sales, for the quarter, increased approximately 19.5%
to $106.2 million from $88.9 million last year.
o Consolidated income from operations, for the quarter, increased
approximately 179% to $1.7 million from $609,000 in the comparable
time period last year.
o Consolidated net income for the quarter increased approximately 155%
to $1.7 million or $0.08 per share compared with $676,000 or $0.03 per
share in the same period last year, on a fully diluted basis.
o The Company's ninth consecutive quarter of profitability.
Eric Paulson, Navarre's Chairman and CEO, stated, "While I'm extremely pleased
with the company's 2nd quarter results, I believe that the best is yet to come.
Each of our business units continues to gain momentum. I believe that we have
yet to reach our optimal performance as we continue to drive improved margin
dollar enhancement through content acquisition combined with our new and more
productive material handling capabilities.
Our entrance into the mass merchant channel this past quarter, by the combined
efforts of NDS and Encore, should provide increased momentum in future months.
As well, Encore continues to provide quality releases in both console and
PC products.
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NAVARRE CORPORATION REPORTS RECORD SALES AND Page 2
NET INCOME FOR ITS SECOND QUARTER FISCAL 2004
As previously announced, our new addition to our corporate headquarters, is part
of a three year program to improve efficiency and flexibility for ourselves and
trading partners. This facility will replace two remote leased locations and is
expected to be operational next year."
Paulson continued, "Maximizing capital to assist improving shareholder value is
a major focus for our business units. We will balance the use of debt and equity
to fund growth, seeking the very best use of our capital. We will continue to
fund growth opportunities that have strategic value.
To achieve our financial goals, we continue to pursue strategic acquisitions
that build on our foundation while providing accretive earnings per share. The
organization is energized as we move into our largest quarter. Management
anticipates it will achieve its plan for the balance of the fiscal year."
SECOND QUARTER ENDED SEPTEMBER 30, 2003
For the second quarter ended September 30, 2003, Navarre reported a 19.5%
increase in consolidated net sales to $106.2 million, compared with $88.9
million in last year's second quarter. The Company reported gross margin of
$13.5 million or 12.7%, compared with $11.4 million or 12.8% in the comparable
period last year. Total operating expenses for the quarter were $11.8 million or
11.1% as compared with $10.8 million or 12.2% in the last year's second quarter.
Income from operations for the second quarter ended September 30, 2003,
increased 178.8% to $1.7 million, compared with $609,000 last year. Net income
for the period increased 154.7% to $1.7 million, compared with $676,000 in the
comparable period last year. Fully diluted earnings per share for the quarter
were $.08 per share, compared with $.03 per share in the comparable period last
year.
Jim Gilbertson, Navarre's CFO, stated, "We are extremely pleased with our sales
and net income results for the quarter. The organization continues to manage its
expenses aggressively, with a full 1.1% decrease in rate as a percent of net
sales. Our cash management remains strong and we are looking forward to a solid
finish to the fiscal year."
SIX MONTHS ENDED SEPTEMBER 30, 2003
For the six months ended September 30, 2003, Navarre reported an increase in
consolidated net sales to $179.6 million, as compared with $158.8 million for
the first six months of fiscal 2003, an increase of 13.1%. The Company reported
gross margin of $23.5 million or 13.1%, as compared with $19.5 million or 12.3%
in the comparable period last year. Total operating expenses, for the six month
period, were $21.6 million or 12.0% as compared with $18.8 million or 11.8% in
the last year's six month period. Income from operations for the six months
ended September 30, 2003, increased 180.3% to $1.9 million, as compared with
$686,000 last year. Net income for the period increased 132.3% to $2.0 million,
compared with $874,000 in the comparable period last year. Fully diluted
earnings per share for the six months ended September 30, 2003 were $.09 per
share, compared with $.04 per share in the comparable period last year.
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NAVARRE CORPORATION REPORTS RECORD SALES AND Page 3
NET INCOME FOR ITS SECOND QUARTER FISCAL 2004
BUSINESS UNIT HIGHLIGHTS
NAVARRE DISTRIBUTION SERVICES
Navarre Distribution Services, which distributes non-proprietary
entertainment products including computer software, video games, major
label music and DVD video, reported a net sales increase of 20.5% to $83.3
million, compared with $69.1 million in the second quarter of fiscal
quarter of fiscal 2003.
NAVARRE ENTERTAINMENT MEDIA
Navarre Entertainment Media, which distributes and licenses proprietary
music and DVD video, reported a net sales increase of 2.3% to $18.8
million, compared with $18.4 million for the same period last year.
ENCORE SOFTWARE
Encore, a leading interactive publisher in the videogame and PC CD-ROM
markets, reported net sales of $9.2 million for the quarter before
inter-company elimination of $5.2 million, compared to net sales of $3.8
million, before inter-company elimination of $2.4 million in the second
quarter of fiscal 2003. Fiscal second quarter 2003 net sales for Encore
included August and September. The company purchased Encore in August of
2002.
CONFERENCE CALL
In conjunction with the press release, management of Navarre will host a
conference call at 11:00 a.m. ET Tuesday, October 21, 2003, to discuss the
Company's results. Messrs. Eric Paulson, Chairman and Chief Executive Officer,
Jim Gilbertson, Chief Financial Officer will host the call.
CALL ACCESS
The conference call can be accessed by dialing (785-832-0326), conference ID
"NAV" ten minutes prior to the scheduled start time. In addition, this call will
be simultaneously broadcast live over the Internet and can be accessed at
http://www.navarre.com under the "About Navarre" subheading. Investors should go
to the Web site 15 minutes prior to the start time to register and download any
necessary software needed to listen to the call. A replay of the conference call
will be available following the call's completion by dialing (402-220-2332),
through midnight eastern time, Tuesday October 28, 2003 or by accessing
http://www.navarre.com where a replay will be available for a one-week period.
ABOUT NAVARRE CORPORATION
Navarre Corporation (Nasdaq: NAVR) provides distribution and related services to
leading developers and retailers of home entertainment content, including PC
software, audio and video titles, and interactive games. Encore, Navarre's
majority-owned subsidiary, is a leading interactive publisher in the videogame
and PC CD-ROM markets. Navarre's client-specific delivery systems allow its
product lines to be seamlessly distributed to over 18,000 retail locations
throughout North America. The Company provides such value-added services as
inventory management, Web-based ordering, fulfillment and marketing and EDI
customer and vendor interface. Since its founding in 1983, Navarre has built a
base of distribution partnerships with a broad base of leading retailers across
the mass merchant, music, computer and office specialty, wholesale club and
military PX channels, as well as software content developers from all categories
of the industry and independent record labels encompassing all musical genres.
For more information, please visit the Company's Web site at
http://www.navarre.com.
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NAVARRE CORPORATION REPORTS RECORD SALES AND Page 4
NET INCOME FOR ITS SECOND QUARTER FISCAL 2004
SAFE HARBOR
"The statements in this press release that are not strictly historical are
"forward looking" statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are
intended to be covered by the safe harbors created by these sections. 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 dependence upon a limited number of large
customers that account for a significant part of its business, developments in
the retail and consumer markets for prerecorded music products and computer
software products, the Company's ability to successfully increase its sales of
video and DVD products, retail consumer buying patterns, the ability of the
Company and the music industry generally to maintain or increase sales in light
of the wide-spread internet-based music swapping and file sharing by consumers,
new and different competition in the Company's traditional and new markets,
seasonality in its business and the fact that a large portion of the Company's
revenues have traditionally been related to the holiday selling season, the
Company's ability to successfully act as distributor to on-line retailers, the
Company's ability to manage its inventory, the Company's dependence upon
recording labels and artists, the Company's dependence upon obtaining and
maintaining license agreements with software publishers, the Company's ability
to react to changes in the distribution of software and prerecorded music, the
Company's dependence upon a key employee, namely, Eric H. Paulson, Chairman of
the Board, President and Chief Executive Officer who has been with the Company
since its inception in 1983, and the ability of the Company's majority-owned
subsidiary Encore Software, Inc, a videogame and CD-ROM publisher, to
successfully develop and distribute new and existing products. 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 for the year ended March 31, 2003. Investors and shareholders are
urged to read this document carefully. The Company can offer no assurances that
any projections, assumptions or forecasts made or discussed in this release
"Navarre Corporation Reports Record Sales and Net Income for its Second Quarter
of Fiscal 2004", dated October 20, 2003, will be met, and investors should
understand the risks of investing solely due to such projections. The Company
undertakes no obligation to revise any forward- looking statements in order to
reflect events or circumstances that may arise after the date of this press
release."
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 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. Free copies of these documents may be obtained by
contacting Kathy Conlin at 763-535-8333.
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(Financial Statements Follow)
NAVARRE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002 2003 2002
--------------------------------------------------
Net sales $106,166 $88,870 $179,590 $158,849
Gross profit 13,499 11,410 23,548 19,462
Operating expenses 11,801 10,801 21,626 18,776
Income from operations 1,698 609 1,922 686
Other income/(expense) 25 67 109 188
Consolidated net income $1,723 $676 $2,031 $874
Earnings (loss) per common share:
Basic earnings (loss) per share $0.08 $0.03 $0.09 $0.04
Diluted earnings (loss) per share $0.08 $0.03 $0.09 $0.04
Weighted average common and common
equivalent shares outstanding
Basic shares 21,616 21,616 21,616 21,616
Diluted shares 22,340 21,692 22,250 21,736
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