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[NAVARRE CORPORATION LOGO]
For Additional Information:
Jim Gilbertson, VP/Chief Financial Officer Cary Deacon, COO, Publishing & Licensing
763-535-8333 763-535-8333
jgilbert@navarre.com cdeacon@navarre.com
Joyce Fleck, VP Marketing
763-535-8333
jfleck@navarre.com
NAVARRE CORPORATION REPORTS RECORD QUARTERLY AND
FISCAL YEAR 2004 PROFIT AND SALES
COMPANY PROVIDES GUIDANCE FOR FISCAL YEAR 2005
COMPANY REPORTS 11TH CONSECUTIVE PROFITABLE QUARTER
COMPANY WILL HOST A CONFERENCE CALL THURSDAY, MAY 27 AT 11:00 A.M. ET
MINNEAPOLIS, MN -- May 26, 2004 - Navarre Corporation (NASDAQ: NAVR) a leading
publisher and distributor of a broad range of home entertainment and multimedia
software products, today reported fiscal 2004 fourth quarter and year-end
results for the period ended
March 31, 2004.
o Net sales for the fiscal fourth quarter ended March 31, 2004,
increased 70% to $142.6 million as compared to $83.6 million for the
same quarter ended March 31, 2003.
o Net income for the fiscal fourth quarter increased 641% to $3.3
million or $0.12 fully diluted earnings per share as compared to
$442,000 or $0.02 fully diluted earnings per share for the same period
last year.
o Net sales for the fiscal year ended March 31, 2004, increased 32% to
$475.2 million as compared to $359.4 million for the fiscal year ended
March 31, 2003.
o Net income increased 106% to $8.9 million or $0.37 fully diluted
earnings per share compared to $4.3 million or $0.20 fully diluted
earnings per share over the same period last year.
Eric Paulson, Chairman and CEO of Navarre Corporation commented, "Fiscal Year
2004 was another record year for our company, both operationally and
financially. Our 4th quarter results were also a company record. The
restructuring of our company has allowed us to increase our focus on growing the
high margin publishing segment of our business while we continue to focus on
aggressive organic growth in our core distribution business. In the last twelve
months, the Company grew over $110 million."
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NAVARRE CORPORATION REPORTS RECORD PROFITABILITY AND SALES FOR FISCAL YEAR 2004
Paulson continued, "Our distribution segment provides a highly efficient
foundation for our current publishing business. This foundation assists in
making our acquisitions even more profitable as we drive sales and consolidate
back room operations. The company will also continue to seek out acquisitions
and co-publishing transactions, such as Riverdeep, in the publishing sector."
Paulson concluded, "Included in our results, is our management decision to shut
down the development of Encore's video game console projects which primarily
consisted of the Daredevil video game project. As a result, the Company wrote
off $4.3 million of development costs during the quarter and a total of $5.6
million for the fiscal year. These charges are reflected as a reduction in our
gross margin. We have refocused Encore on its core competencies of software
publishing."
BUSINESS SEGMENT HIGHLIGHTS
DISTRIBUTION SERVICES
The Distribution Services segment distributes software, video games,
accessories, major label music and DVD video, as well as independent music. For
the 4th quarter, ended March 31, 2004, the segment achieved a 55% increase in
net sales to $127.2 million, as compared to $82.3 million for the same period
last year. The segment achieved a 26% increase in net sales to $449.1 million,
for the fiscal year ended March 31, 2004, as compared to $355.9 million for the
same period last year.
The segment's growth during the 2004 fiscal year was achieved through increases
in all of its product groups. Software continues to expand its market share
presence across all categories. Internet security and anti-virus products
remained strong in light of continued virus outbreaks. Major label music, DVD
video and Video Games grew due to the combinations of increased publisher and
customer rosters and benefited from strong releases throughout the year.
Independent music also grew due to its increased label and artist roster and its
continued focus on catalog across all music genres.
PUBLISHING AND LICENSING
The publishing segment of Navarre includes Encore Software and BCI DVD video.
For the 4th quarter, ended March 31, 2004, the segment achieved sales of $20.0
million before inter-company sales elimination of $4.6 million as compared to
$6.2 million before inter-company sales elimination of $4.8 million for the same
period last year. For the year ended March 31, 2004, the segment achieved $46.2
million in sales before inter-company sales elimination of $20 million. This
compares to last year's sales of $14.7 million and before inter-company sales
elimination of $11.2 million. Navarre purchased BCI Eclipse, LLC. November 1,
2003.
Encore is positioned for growth and profitably. Our recent co-publishing
transaction with Riverdeep is expected to add approximately $35 million in
annual revenue for Fiscal Year 2005.
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NAVARRE CORPORATION REPORTS RECORD PROFITABILITY AND SALES FOR FISCAL YEAR 2004
BCI, since the acquisition in November 2003, has met and/or exceeded
expectations for 2004.
FISCAL YEAR 2005 GUIDANCE
The company anticipates consolidated net sales for fiscal 2005, based on current
share equivalents, to be in the $550 to $580 million range.
The company anticipates pre-tax earnings per share, based on current share
equivalents, in fiscal 2005 to be in the $.69 to $.77 range.
The Publishing segment is expected to contribute approximately 15% of total
company sales before inter-company sales elimination with gross margins expected
in the 35--40% range.
The Distribution segment is expected to contribute approximately 85% of total
company sales with gross margins expected to be in the 10-12% range.
Our new warehouse and material handling systems are proceeding on schedule and
are expected to come online this summer and are expected to lead to increased
efficiencies in all business units.
TAX MATTERS
We utilized existing net operating loss carryforwards in Fiscal 2004, resulting
in no federal income tax expense on the majority of our earnings. We also
reversed an additional $1 million of our deferred tax asset valuation reserve in
the 4th quarter of Fiscal 2004, resulting in a further tax benefit, due to our
expectation that we will be profitable in Fiscal 2005. We continue to maintain a
valuation allowance on the majority of our remaining net operating loss
carryforwards, and it is possible that our Fiscal 2005 results could include the
reversal of additional amounts of tax valuation reserves, which will be recorded
as a reduction of income tax expense to the extent that our taxable income
exceeds certain levels.
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NAVARRE CORPORATION REPORTS RECORD PROFITABILITY AND SALES FOR FISCAL YEAR 2004
CONFERENCE CALL
The Company will host a conference call Thursday, May 27 at 11:00 a.m. ET to
discuss the Company's results. Messrs. Eric Paulson, Chairman and Chief
Executive Officer, Jim Gilbertson, Chief Financial Officer, Cary Deacon, COO,
Publishing & Licensing and Brian Burke, COO Distribution Services, will host the
call. The conference call can be accessed by dialing (800-683-1525), 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 (877-519-4471) and
utilizing the pin number 4701879 through midnight eastern time, Thursday, June
3, 2004 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. The company
operates under two business divisions; Distribution Services which includes PC
software, video games, CD audio and DVD video; Publishing which includes Encore.
Based in Los Angeles, CA, Encore is a majority-owned subsidiary of Navarre
Corporation (NASDAQ: NAVR), and a leading interactive publisher in the PC CD-ROM
and videogame markets. As a result of strategic relationships, the company
publishes PC titles or compilations in major software categories from
productivity to education. BCI Eclipse, a wholly-owned subsidiary of Navarre
Corporation, provides niche DVD video and audio products. 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 sites 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 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, 2004. 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 QUARTERLY AND FISCAL YEAR PROFIT AND SALES FOR FISCAL YEAR 2004,
dated May 26, 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
(Amounts in thousands, except per share data)
THREE MONTHS - MARCH 31, YEAR ENDED -- MARCH 31,
------------------------------- --------------------------------
2004 2003 2004 2003
------------- ------------- ------------ --------------
Net sales $142,615 $83,649 $475,244 $359,384
Gross profit 15,936 * 11,509 57,340 ** 45,013
Operating expenses 13,232 11,182 48,193 41,008
-------- ------- -------- --------
Income from operations 2,704 327 9,147 4,005
Other income(expense) (12) 52 (834) 253
Impact of investment in NetRadio -- 63 -- 63
-------- ------- -------- --------
Net income before tax 2,692 442 8,313 4,321
Tax benefit(expense) 583 --- 583 --
-------- ------- -------- --------
Consolidated net income $3,275 $442 $8,896 $4,321
======== ======= ======== ========
Earnings per common share:
Basic $0.13 $0.02 $0.39 $0.20
Diluted $0.12 $0.02 $0.37 $0.20
======== ======= ======== ========
Weighted average common and
Common equivalent shares outstanding
Basic 25,673 21,616 22,780 21,616
Diluted 27,469 21,907 24,112 21,841
======== ======= ======== ========
* The Company reduced gross margin by $4.3 million for development costs
during the quarter.
** The Company reduced gross margin by $5.6 million for development costs for
the fiscal year.
NAVARRE CORPORATION
Consolidated Balance Sheets
(Amounts in thousands)
AS OF MARCH 31, 2004 AS OF MARCH 31, 2003
-------------------- --------------------
Assets
Current assets
Cash $14,495 $10,485
Receivables, net 72,316 54,787
Inventories 30,151 22,828
Other 5,175 4,845
-------- --------
Total current assets 122,137 92,945
Property and equipment, net 6,914 3,585
Other assets 17,876 4,599
-------- --------
Total assets $146,927 $101,129
======== ========
Liabilities and stockholders' equity
Payables and accrued expenses $91,359 $72,190
Long-term note payable -- 268
Stockholders' equity 55,568 28,671
-------- --------
Total liabilities and stockholders' equity $146,927 $101,129
======== ========
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