[NAVARRE CORPORATION LOGO]
FOR ADDITIONAL INFORMATION:
Cary Deacon, Corporation Relations Officer Jim Gilbertson, Vice President
and Chief Financial Officer
763-535-8333 763-535-8333
cdeacon@navarre.com jgilbert@navarre.com
Joyce Fleck, VP Marketing
763-535-8333
jfleck@navarre.com
NAVARRE CORPORATION REPORTS 31% SALES INCREASE AND RECORD NET INCOME
IN THE THIRD QUARTER OF FISCAL 2004
Company Reports Its Tenth Consecutive Quarter of Profitability
MINNEAPOLIS, MN --January 22, 2004 -- 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 net income for the
fiscal 2004 third quarter ended December 31, 2003.
HIGHLIGHTS FOR THE QUARTER INCLUDE:
o Consolidated net sales increased approximately 31% to $153.0 million from
$117.0 million last year.
o Consolidated net income increased by approximately 20% to $3.6 million or
$0.15 per share as compared to $3.0 million or $0.14 per share last year on
a fully diluted basis. The net income includes a non-recurring charge of
approximately $1.4 million in the third quarter (this charge represents
$0.06 per share). This charge was comprised of a non-recurring, non-cash
charge for stock based compensation of $536,000 and a special charge for
non-recurring debt retirement expense of $908,000 incurred in connection
with the complete discharge of the Hilco financing used for the BCI
acquisition.
o Income from operations grew by approximately 51% to $4.5 million as
compared to $3 million in the same period last year.
o The Company reported $14.1 million cash and no debt at the end of the
quarter.
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NAVARRE CORPORATION REPORTS 31% SALES INCREASE AND RECORD NET INCOME IN THE
THIRD QUARTER OF FISCAL 2004 (CONTINUED)
Eric Paulson, President and CEO stated, "The Company achieved the largest
quarterly sales and profit result in its 20 year history. Management
continues to aggressively execute our operating plan for organic and
acquisition growth. NDS continued its strong organic growth and the
quarter's sales represent record volume for the division. NDS continued to
grow its foothold in the productivity space and expand its customer roster
of major label music and DVD Video. The highlight of the quarter for NDS
was the volume generated by video games."
Paulson continued, "The slight decline in NEM sales in the quarter reflects
our move away from holiday driven titles. We anticipate our fourth fiscal
quarter results will reflect our improved roster of artists and labels.
Encore demonstrated strong growth with its commitment to increase its
licensing and content expansion in the PC category."
Paulson concluded, "As well, we are very encouraged by BCI's results for
November and December. We continue to be bullish about this acquisition and
its potential to add to Navarre's earnings."
FOR THE THIRD QUARTER ENDED DECEMBER 31, 2003
Navarre reported an increase in consolidated net sales of approximately 31%
to $153.0 million compared with $116.9 million in last year's third
quarter. On a divisional basis, NDS, which distributes non-proprietary
entertainment products including computer software, video games, major
label music and DVD video, reported a net sales increase of approximately
32% to $132.3 million compared to $100.1 million in the fiscal third
quarter last year. The division saw increased revenues during the quarter
from strong e-commerce sales from its e-commerce retail customers,
increased distribution of productivity titles to its chain customers, as
well as continued strong sales in internet security products.
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NAVARRE CORPORATION REPORTS 31% SALES INCREASE AND RECORD NET INCOME IN THE
THIRD QUARTER OF FISCAL 2004 (CONTINUED)
NDS also reported strong sales from the video game category driven by an
increased customer roster and continued growth in the publishers they
represent.
Encore Software, Navarre's PC and game publishing subsidiary, reported
increased sales of approximately 112% to $10.2 million before inter company
elimination of $5.6 million versus $4.8 million before inter company
elimination of $4.0 million during the same period last year.
BCI, Navarre's DVD video and music publishing subsidiary, which the company
acquired in November, 2003, reported sales of $2.1 million for the combined
months of November and December, 2003.
Navarre Entertainment Media (NEM) net sales decreased approximately 12% to
$14.0 million.
FOR THE NINE MONTHS ENDED DECEMBER 31, 2003
Navarre reported consolidated net sales increased 20.6% to $332.6 million
compared with $275.7 million in the first nine months of fiscal 2003. On a
divisional basis, NDS reported net sales of $278.6 million, an increase of
21.9% compared with $228.6 million in the comparable nine-month period. NEM
reported net sales of $43.3 million, a decrease of 3.8% compared with $45.0
million reported in the first nine months of fiscal 2003. Encore, before
inter company elimination of $15.4 million, reported net sales of $24.1
million versus $8.5 million before inter company elimination of $6.4
million for the same period last year. BCI Eclipse Company, Navarre's
wholly-owned subsidiary, which the company acquired in November, 2003, was
$2.1 million for the combined months of November and December, 2003.
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NAVARRE CORPORATION REPORTS 31% SALES INCREASE AND RECORD NET INCOME IN THE
THIRD QUARTER OF FISCAL 2004 (CONTINUED)
Consolidated net income for the nine months ended December 31, 2003
increased 43.6% to $5.6 million or $0.24 per share compared with $3.9
million or $0.18 per share in the same period last year. The consolidated
net income for the nine months includes a charge of approximately $1.6
million (this charge represents $0.07 per share). This charge was comprised
of a non-cash charge for stock based compensation of $705,000 and a
non-recurring debt retirement expense of $908,000 incurred in connection
with the complete discharge of the Hilco financing used for the BCI
acquisition.
CONFERENCE CALL
Navarre will host a conference call today at 11:00 ET to discuss fiscal
2004 third quarter results. Investors can access the conference call via a
live web cast on the Company's Web site, www.navarre.com, or by dialing
785-832-1508. A replay of the conference call will be archived on the
Company's Web site for one week. Additionally, the archived call can be
accessed by dialing 402-220-9180, which will be available through midnight
eastern time, Thursday, January 29, 2004.
ABOUT NAVARRE
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. BCI Eclipse, a
wholly-owned subsidiary of Navarre Corporation, is recognized as a
significant provider of niche DVD/Video products. BCI Eclipse's DVD/Video
and audio collection represents exclusively licensed titles and in-house
produced CD's and DVD's. Navarre's client-specific delivery systems allow
its product lines to be seamlessly distributed to over 11,000 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 www.navarre.com.
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NAVARRE CORPORATION REPORTS 31% SALES INCREASE AND RECORD NET INCOME IN THE
THIRD QUARTER OF FISCAL 2004 (CONTINUED)
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, 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, THE ABILITY OF
THE COMPANY TO INTEGRATE THE BUSINESS OF BCI ECLIPSE, AND THE ABILITY OF BCI
ECLIPSE TO DEVELOP AND DISTRIBUTE DVD/VIDEO 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 31% SALES INCREASE AND RECORD NET INCOME IN THE THIRD QUARTER OF FISCAL
2004", DATED JANUARY 21, 2004, 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.
(Financial Statements Follow)
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NAVARRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
------------------------------------------------------------
Net sales $153,039 $116,887 $332,629 $275,735
Gross profit 17,856 14,041 41,404 33,503
Operating expenses 13,335(1) 11,049 34,961(2) 29,825
Income from operations 4,521 2,992 6,443 3,678
Other income/(expense) (931)(3) 13 (822)(3) 201
Consolidated net income $3,590 $3,005 $5,621 $3,879
Earnings per common share:
Basic earnings per share $0.16 $0.14 $0.26 $0.18
Diluted earnings per share $0.15 $0.14 $0.24 $0.18
Weighted average common and common
equivalent shares outstanding
Basic shares 22,232 21,616 21,822 21,616
Diluted shares 24,094 22,009 23,003 21,814
(1) Includes a special non-cash charge for stock-based compensation of $536.
(2) Includes a special non-cash charge for stock-based compensation of $705.
(3) Includes a special charge for non-recurring debt retirement expense of $908.
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