> ## Content Index > Fetch the complete content index at: https://www.hypebot.com/llms.txt > Use this file to discover other available public pages before exploring further. # Distributor Navarre Reports 2.1% Sales Drop - URL: https://www.hypebot.com/distributor_nav/ - Published: 2007-02-06T13:50:46.000Z - Updated: 2007-02-06T13:50:46.000Z - Description: Music and video distributor Navarre reported fiscal year 2007 third quarter results for the period ending December 31, 2006. The Company reported net sales of $210.2 million for the third. Continue reading [https://www.hypebot.com/hypebot/2007/02/distributor_nav.html] - Author: Bruce Houghton - Tags: Vinyl, Cassettes & Retail, #wp, #wp-post, #Import 2026-01-21 11:06 [![Cd_many_24](https://hypebot.typepad.com/hypebot/images/cd_many_24.jpg "Cd_many_24")](http://hypebot.typepad.com/.shared/image.html?/photos/uncategorized/cd%5Fmany%5F24.jpg&ref=hypebot.com) Music and video distributor [Navarre](http://www.navarre.com/?ref=hypebot.com) reported fiscal year 2007 third quarter results for the period ending December 31, 2006\. The Company reported net sales of $210.2 million for the third quarter as compared to net sales for the third quarter of fiscal year 2006 of $214.8 million, a decrease of 2.1%. Gross profit was a record for the third quarter increasing 24.9% to $35.3 million or 16.8% as a percent of net sales, as compared to $28.2 million or 13.1% as a percent of net sales in the third quarter of fiscal year 2006\. **(Detailed #’s after the jump.)** Navarre Corporation (NASDAQ:NAVR) a publisher and distributor of physical and digital home entertainment and multimedia products, today reported fiscal year 2007 third quarter results for the period ended December 31, 2006. Financial Results — The Company reported net sales of $210.2 million for the third quarter as compared to net sales for the third quarter of fiscal year 2006 of $214.8 million, a decrease of 2.1%. — Gross profit was a record for the third quarter increasing 24.9% to $35.3 million or 16.8% as a percent of net sales, as compared to $28.2 million or 13.1% as a percent of net sales in the third quarter of fiscal year 2006. — Operating income was a record for the third quarter at $8.7 million, as compared to an operating loss of $9.3 million for the third quarter of fiscal year 2006\. In the third quarter of fiscal year 2006 the operating loss was negatively impacted by pre-tax charges of $16.8 million related to the bankruptcy of Musicland Group and the write-off of an independent music label. Of these charges, $4.6 million was a reduction in gross profit and $12.2 million was an increase in operating expenses. — Net income for the third quarter was $4.1 million or $0.11 per diluted share, as compared to a net loss of $6.1 million or a loss of $0.20 per diluted share for the third quarter of fiscal year 2006. — Proforma net income for the third quarter was $5.2 million or $0.14 per diluted share as compared to the proforma net income for the third quarter of fiscal year 2006 of $3.7 million or $0.12 per diluted share.. See "Use of Non-GAAP Financial Information" below. — Earnings before interest, taxes, depreciation and amortization (EBITDA) was a record of $11.6 million for the third quarter. EBITDA for the fiscal year 2006 third quarter was a loss of $4.3 million. See "Use of Non-GAAP Financial Information" below. — On December 31, 2006 the Company had a cash balance of $10.7 million and no outstanding borrowings on its $25.0 million working capital revolving facility. Cary Deacon, the Company’s Chief Executive Officer commented, "In spite of our soft sales in the quarter, the Company’s management of its gross margin and expenses was very strong. We achieved record operating income and EBITDA and record gross margin contribution. As well, the Company’s focus on cash management continues to deliver solid results." Business Segment Highlights Publishing Segment Publishing segment net sales for the third quarter of fiscal year 2007, before inter-company eliminations, decreased 2.5% to $35.0 million, as compared to $35.9 million for the same period last year. During the fiscal year 2007 third quarter, publishing segment net sales benefited from several new FUNimation anime DVD releases including Black Cat, Basilisk, Fullmetal Panic, Trinity Blood and two Dragon Ball Z movie 3-packs. Television exposure and subsequent strong ratings further helped the DVD sales of several anime titles. Also, during the third quarter, the FUNimation Channel added three additional broadcast outlets and now is available in over 34 million households. Encore experienced softer than expected sales in the non-entertainment software categories. As well, one of Encore’s major entertainment releases expected in the third quarter was delayed into the fourth quarter. BCI net sales continued to be affected by poor performance at a major customer and weak sales performance from its budget release schedule. Distribution Segment During the third quarter of fiscal year 2007, the distribution segment’s net sales, before inter-company eliminations, were $198.9 million, unchanged from the same period last year. During the fiscal year 2007 third quarter, distribution segment sales were negatively impacted by the $5.8 million shift of Symantec product releases into the prior quarter. Sales for the quarter in the video game category were negatively affected by the previously announced bankruptcy of Musicland Group and Tower Records. Third-party DVD distribution benefited from a vendor managed inventory system with a major consumer electronics retailer and the introduction of major studio new releases at an existing national department store customer. All product categories within the distribution segment demonstrated improved gross margin in the third quarter as compared to the same quarter last year. Outlook Based on the operating results of the first nine months and outlook for the remainder of fiscal year 2007, including the shift of the company’s Afro Samurai release into fiscal year 2008, the Company is updating its guidance as follows: — Consolidated net sales of between $690 million and $700 million. — Earnings before interest, taxes, depreciation and amortization (EBITDA), before share-based compensation expense as per FASB 123(R) of approximately $800,000, is expected to be between $31 million and $33 million. — Net income of between $7 million and $8 million. The Company maintains its previously announced anticipated depreciation expense of $3 million and anticipated amortization expense of $8 million for fiscal year 2007. 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, proforma net income, proforma net income per share 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 calculate 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/ . Conference Call The Company will host a conference call at 11:00 a.m. ET, Tuesday, February 6, 2007, to discuss the Company’s fiscal year 2007 third quarter results. The conference call can be accessed by dialing 800-659-1942, conference participant passcode "90116054", 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/ . 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 for a one-year period following the call’s completion by accessing 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, CD audio, DVD video, video games and accessories. Since its founding in 1983, the Company has established distribution relationships with customers across a wide spectrum of retail channels which includes mass merchants, discount, wholesale club, office and music superstores, military and e-tailers nationwide. The Company currently provides its products to over 19,000 retail and distribution center locations throughout the United States and Canada. Navarre has expanded its business to include the licensing and publishing of home entertainment and multimedia content, primarily through the acquisitions of Encore, BCI, and FUNimation. For more information, please visit the Company’s web site 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; the 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 for the year ended March 31, 2006 and Form 10-Q for the quarter ended September 30, 2006\. 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 Company’s 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 December 31, 2006 2005 Net sales $210,248 $214,841 Cost of sales (exclusive of depreciation and amortization) 174,982 186,614 Gross profit 35,266 28,227 Operating expenses: Selling and marketing 8,075 7,819 Distribution and warehousing 3,988 3,067 General and administrative 11,616 11,321 Bad debt expense 52 12,259 Depreciation and amortization 2,792 3,101 Total operating expenses 26,523 37,567 Income from operations 8,743 (9,340) Other income (expense): Interest expense (2,061) (2,983) Interest income 42 — Deconsolidation of variable interest entity — 1,896 Other income (expense), net (163) 4 Net income before tax 6,561 (10,423) Income tax (expense) benefit (2,510) 4,355 Net income (loss) $4,051 $(6,068) Earnings (loss) per common share: Basic $0.11 $(0.20) Diluted $0.11 $(0.20) Weighted average shares outstanding: Basic 35,890 29,893 Diluted 36,328 29,893 NAVARRE CORPORATION Consolidated Condensed Balance Sheets (In thousands) (Unaudited) December 31, December 31, March 31, 2006 2005 2006 Assets Current assets: Cash and cash equivalents $10,732 $14,401 $14,296 Receivables, net 135,769 116,468 87,653 Inventories 49,024 53,351 43,624 Other 26,513 24,302 24,711 Total current assets 222,038 208,522 170,284 Property and equipment, net 12,259 9,547 10,298 Other assets 126,175 137,798 129,032 Total assets $360,472 $355,867 $309,614 Liabilities and shareholders’ equity Current liabilities: Note payable – short-term $5,000 $5,000 $5,000 Accounts payable 146,225 126,249 97,923 Other 15,449 18,660 18,997 Total current liabilities 166,674 149,909 121,920 Long-term liabilities: Note payable – long-term 71,380 112,500 75,130 Other 7,152 5,981 7,024 Total liabilities 245,206 268,390 204,074 Temporary equity — — 16,634 Shareholders’ equity 115,266 87,477 88,906 Total liabilities and shareholders’ equity $360,472 $355,867 $309,614 NAVARRE CORPORATION Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended December 31, 2006 2005 Net cash provided by (used in) operating activities $5,735 $(16,919) Net cash used in investing activities (5,679) (100,323) Net cash (used in) provided by financing activities (3,620) 116,072 Net decrease in cash (3,564) (1,170) Cash at beginning of period 14,296 15,571 Cash at end of period $10,732 $14,401 NAVARRE CORPORATION Supplemental Information (In thousands) (Unaudited) Business Segments Three months ended December 31, 2006 Distribution Publishing Other Eliminations Consolidated Net sales $198,914 $35,045 — $(23,711) $210,248 Income from operations $3,800 $4,943 — — $8,743 Three months ended December 31, 2005 Distribution Publishing Other Eliminations Consolidated Net sales $198,940 $35,940 $169 $(20,208) $214,841 Income (loss) from operations $(9,652) $799 $(487) — $(9,340) Reconciliation of GAAP Net Sales to Non-GAAP Net Sales Three Months Ended December 31, 2006 % 2005 % Net sales: Distribution $198,914 85.0% $198,940 84.6% Publishing 35,045 15.0% 35,940 15.3% Other — — 169 0.1% Net sales before inter-company eliminations 233,959 235,049 Inter-company eliminations (23,711) (20,208) Net sales as reported $210,248 $214,841 Reconciliation of GAAP Net Income (Loss) to EBITDA Three Months Ended December 31, 2006 2005 Net income (loss), as reported $4,051 $(6,068) Interest expense, net 2,019 2,983 Tax expense (benefit) 2,510 (4,355) Depreciation and amortization 2,792 3,101 Share-based compensation 220 0 EBITDA $11,592 $(4,339) Reconciliation of GAAP Net Income (Loss) to Non-GAAP Proforma Net Income (Loss) Three Months Ended December 31, 2006 2005 Non-GAAP Non-GAAP As Adjustments As Adjustments Reported (a) Non-GAAP Reported (a) Non-GAAP Net sales $210,248 $– $210,248 $214,841 $(169)(f) $214,672 Cost of sales (exclusive of depreciation and amorti- zation) 174,982 — 174,982 186,614 (4,687)(f)(g) 181,927 Gross profit 35,266 — 35,266 28,227 4,518 32,745 Operating expenses: Selling and market- ing 8,075 — 8,075 7,819 — 7,819 Distribution and ware- housing 3,988 — 3,988 3,067 — 3,067 General and administr- ative 11,616 (220)(b) 11,396 11,321 (523)(f) 10,798 Bad debt expense 52 — 52 12,259 (12,243)(e) 16 Deprecia- tion and amorti- zation 2,792 (1,719)(c) 1,073 3,101 (2,280)(c) 821 Total operating expenses 26,523 (1,939) 24,584 37,567 (15,046) 22,521 Income from operations 8,743 1,939 10,682 (9,340) 19,564 10,224 Other income (expense): Interest expense (2,061) — (2,061) (2,983) 52 (f) (2,931) Interest income 42 — 42 — — — Deconsolid- ation of variable interest entity — — — 1,896 (1,896)(f) — Other income, net (163) (163) 4 — 4 Net income (loss) before tax 6,561 1,939 8,500 (10,423) 17,720 7,297 Income tax (expense) benefit (2,510) (742)(d) (3,252) 4,355 (7,971)(d) (3,616) Net income (loss) $4,051 $1,197 $5,248 $(6,068) $9,749 $3,681 Earnings (loss) per common share: Basic $0.11 $0.15 $(0.20) $0.12 Diluted $0.11 $0.14 $(0.20) $0.12 Weighted average shares outstanding: Basic 35,890 35,890 29,893 29,893 Diluted 36,328 36,328 29,893 30,592 Notes: (a) See explanation above regarding the Company’s use of non-GAAP financial information. (b) Share-based compensation expense recorded under FAS 123R in fiscal 2007. (c) Amortization expense related to the intangible assets acquired in acquisitions. (d) Income tax associated with non-GAAP adjustments, not taking into consideration the amounts for item (f). (e) Bad debt expense related to the bankruptcy of Musicland Group. (f) Amounts related to the deconsolidation of a variable interest entity, Mix & Burn, Inc. (g) Expense related to the bankruptcy of Musicland Group and the loss of an independent music label of $4.6 million. First Call Analyst: FCMN Contact: hscharnowski@navarre.com Source: Navarre Corporation CONTACT: Haug Scharnowski, Vice President Corporate Relations, of Navarre Corporation, +1-763-535-8333, hscharnowski@navarre.com Web site: http://www.navarre.com/