MINNEAPOLIS, June 11 /PRNewswire-FirstCall/ -- Navarre Corporation , a publisher and distributor of physical and digital home entertainment and multimedia products, today reported fiscal year 2008 fourth quarter and fiscal year-end results.
Financial Results Fiscal Year 2008 Fourth Quarter -- Net sales were $160.2 million, as compared to net sales of $158.3 million for the same period last year, an increase of $1.9 million or 1.2%. -- Net income from continuing operations was $919,000, or $0.03 per diluted share, as compared to net loss from continuing operations in the fourth quarter of fiscal year 2007 of $2.2 million, or $(0.06) per diluted share. -- Net income, including discontinued operations, was $686,000 or $0.02 per diluted share, as compared to a net loss in the fourth quarter of fiscal year 2007 of $2.2 million, or a loss of $(0.06) per diluted share. -- Earnings before interest, taxes, depreciation, amortization (EBITDA) from continuing operations was approximately $5.7 million, as compared to EBITDA from continuing operations of $4.1 million for the same quarter last year. See "Use of Non-GAAP Financial Information" below. Financial Results Fiscal Year 2008 -- Net sales were $658.5 million, as compared to net sales of $644.8 million for the fiscal year ended March 31, 2007, an increase of $13.7 million or 2.1%. -- Net income from continuing operations was $7.1 million, or $0.20 per diluted share, as compared to net income from continuing operations during fiscal year 2007 of approximately $3.6 million, or $0.10 per diluted share. -- Net income, including discontinued operations, was $9.7 million, or $0.27 per diluted share, as compared to net income in fiscal year 2007 of $4.1 million, or $0.11 per diluted share. -- EBITDA from continuing operations of $28.9 million was a record for the Company, as compared to EBITDA from continuing operations of $27.9 million for fiscal year 2007. See "Use of Non-GAAP Financial Information" below. -- Debt, net of cash, on March 31, 2008 was $36.6 million, as compared to debt, net of cash, of $53.0 million on March 31, 2007.
Cary Deacon, Chief Executive Officer, commented, "The Company continues to manage its balance sheet very well. I am pleased with the Team's controls regarding debt, inventory and expenses. We have streamlined the organization and shed central expenses that were related to the divestiture of our music business during the year. We continue with the final phase of our enterprise wide software system. Our transportation and warehouse modules will be completed late this summer and this implementation will totally decouple us from our old legacy system."
Deacon continued, "FUNimation demonstrated double-digit net sales growth and more than doubled its operating profit during the 2008 fiscal year and we anticipate ongoing growth in the 2009 fiscal year. Encore maintained its solid profit performance. BCI was a major disappointment in the last half of the fiscal year. Its recovery was slower than anticipated; however, we are seeing early signs of improved performance in our first quarter. We have issued conservative guidance for FY2009 based on the current state of the economy and rising fuel costs."
Business Segment Highlights Publishing Segment
The publishing segment includes the results of the wholly-owned subsidiaries FUNimation, Encore and BCI. For the fourth quarter ended March 31, 2008, the publishing segment achieved net sales, before inter-company eliminations, of $29.4 million, a decrease of 4.7%, as compared to net sales of $30.9 million for the same period of the prior fiscal year. For fiscal year 2008, net sales, before inter-company eliminations, in the publishing segment decreased by 7.3% to $117.4 million, as compared to net sales of $126.7 million for fiscal year 2007. See "Use of Non-GAAP Financial Information" below.
Distribution Segment
The distribution segment distributes first and third party PC software, DVD video and video games. It should be noted that the Company has presented historical information related to the distribution segment without including the results of the independent music distribution business which was sold May 31, 2007, and is now reflected as discontinued operations.
For the fourth quarter ended March 31, 2008, the distribution segment's net sales, before inter-company eliminations, increased by 4.2% to $148.5 million, as compared to net sales of $142.6 million for the same period last year. For fiscal year 2008, the distribution segment achieved net sales, before inter-company eliminations, of $611.0 million, as compared to net sales of $587.9 million for fiscal year 2007, an increase of 3.9%. See "Use of Non-GAAP Financial Information" below.
ERP Implementation
The implementation of the Company's new Enterprise Resource Planning (ERP) system continued to meet expectations. The final phase of this implementation process involves the installation of a warehouse and transportation management system that has been licensed from HighJump Software. This system will be integrated with the Company's financial reporting systems which operate on an SAP platform. Completion of this implementation process is anticipated to take place in the summer of fiscal year 2009.
Outlook The Company reiterated its fiscal year 2009 guidance as follows: -- Expected net sales to range between $640 million and $670 million; -- Earnings before interest, taxes, depreciation and amortization (EBITDA) are anticipated to range between $28 million and $31 million; -- Net income (comparable to net income without discontinued operations for fiscal year 2008) is anticipated to range between $7 million and $9 million; and -- Cash flow from operations is anticipated to again be positive for fiscal year 2009 results. 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 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 produce 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/.
About Navarre Corporation
Navarre Corporation is a publisher and distributor of physical and digital home entertainment and multimedia products, including PC software, DVD video, video games and accessories. Navarre develops, licenses and publishes home entertainment and multimedia content through its Encore, BCI, and FUNimation subsidiaries and has established distribution relationships with customers across a wide spectrum of retail channels. Navarre was founded in 1983 and is headquartered in New Hope, Minnesota. Additional information regarding Navarre can be found 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; pending investigation by the U.S. Securities and Exchange Commission (the "SEC") could impact the reporting of future financial results or create uncertainty as to the reliability of previously-issued financial results; the seasonal nature of the Company's business; the potential for the Company to incur significant additional costs and to experience operational and logistical difficulties in connection with its implementation of a new ERP system; 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 filings, as well as its other SEC filings and public disclosures.
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 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 Twelve Months Ended March 31, March 31, 2008 2007 2008 2007 Net sales $160,188 $158,302 $658,472 $644,790 Cost of sales (exclusive of depreciation and amortization) 136,307 134,708 556,913 537,433 Gross profit 23,881 23,594 101,559 107,357 Operating expenses: Selling and marketing 6,448 6,151 27,370 28,299 Distribution and warehousing 3,041 2,855 11,976 12,330 General and administrative 8,971 10,030 34,810 35,754 Bad debt expense (recovery) (100) 783 (15) 3,654 Depreciation and amortization 2,540 2,859 9,587 10,958 Total operating expenses 20,900 22,678 83,728 90,995 Income from operations 2,981 916 17,831 16,362 Other income (expense): Interest expense (1) (1,270) (4,232) (6,127) (10,220) Interest income 92 104 259 357 Warrant expense - - - (251) Other income (expense), net (65) (72) 366 (50) Income (loss) from continuing operations 1,738 (3,284) 12,329 6,198 Income tax (expense) benefit (819) 1,096 (5,273) (2,594) Net income (loss) from continuing operations 919 (2,188) 7,056 3,604 Discontinued operations, net of tax: Gain on sale of discontinued operations 178 - 4,892 - Income (loss) from discontinued operations (411) (50) (2,290) 455 Net income (loss) $686 $(2,238) $9,658 $4,059 Basic earnings (loss) per common share: Continuing operations $0.03 $(0.06) $0.20 $0.10 Discontinued operations $(0.01) $- $0.07 $0.01 Net income (loss) $0.02 $(0.06) $0.27 $0.11 Diluted earnings (loss) per common share: Continuing operations $0.03 $(0.06) $0.20 $0.10 Discontinued operations $(0.01) $- $0.07 $0.01 Net income (loss) $0.02 $(0.06) $0.27 $0.11 Weighted average shares outstanding: Basic 36,167 35,897 36,105 35,786 Diluted 36,189 35,897 36,269 36,228 (1) Fiscal year 2007 and fiscal year 2007 fourth quarter interest expense includes approximately $2.4 million of non-cash costs NAVARRE CORPORATION Consolidated Condensed Balance Sheet (In thousands) March 31, March 31, 2008 2007 Assets Current assets: Cash and cash equivalents $4,445 $966 Receivables, net 76,806 70,609 Inventories 32,654 36,791 Other 24,361 20,889 Assets from discontinued operations - current - 21,889 Total current assets 138,266 151,144 Property and equipment, net 17,181 12,551 Other assets 128,015 124,187 Assets from discontinued operations - non current - 343 Total assets $283,462 $288,225 Liabilities and shareholders' equity Current liabilities: Note payable - line of credit $31,314 $38,956 Note payable - short-term 150 150 Accounts payable 92,199 87,145 Other 18,257 13,680 Liabilities from discontinued operations - current - 12,748 Total current liabilities 141,920 152,679 Long-term liabilities: Note payable - long-term 9,594 14,850 Other 7,537 7,245 Total liabilities 159,051 174,774 Shareholders' equity 124,411 113,451 Total liabilities and shareholders' equity $283,462 $288,225 NAVARRE CORPORATION Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) Three Months Ended Twelve Months Ended March 31, March 31, 2008 2007 2008 2007 Net cash provided by operating activities $21,405 $13,483 $18,385 $21,353 Net cash used in investing activities (2,689) (3,116) (13,941) (8,880) Net cash used in financing activities (17,650) (23,324) (13,051) (26,944) Net cash provided by (used in) continuing operations 1,066 (12,957) (8,607) (14,471) Net cash provided by discontinued operations (869) 3,191 12,086 1,141 Net increase (decrease) in cash 197 (9,766) 3,479 (13,330) Cash at beginning of period 4,248 10,732 966 14,296 Cash at end of period $4,445 $966 $4,445 $966 NAVARRE CORPORATION Supplemental Information (In thousands) (Unaudited)
Reconciliation of Net Sales Before Inter-Company Eliminations to GAAP Net Sales and Business Segment Information
Three Months Ended March 31, 2008 % 2007 % Net sales: Distribution $148,505 83.5% $142,570 82.2% Publishing 29,403 16.5% 30,863 17.8% Net sales before inter-company eliminations 177,908 173,433 Inter-company eliminations (17,720) (15,131) Net sales as reported $160,188 $158,302 Income (loss) from continuing operations: Distribution $295 $2,140 Publishing 2,686 (1,224) Consolidated income from continuing operations $2,981 $916 Twelve Months Ended March 31, 2008 % 2007 % Net sales: Distribution $611,007 83.9% $587,881 82.3% Publishing 117,423 16.1% 126,651 17.7% Net sales before inter-company eliminations 728,430 714,532 Inter-company eliminations (69,958) (69,742) Net sales as reported $658,472 $644,790 Income from continuing operations: Distribution $5,138 $6,273 Publishing 12,693 10,089 Consolidated income from continuing operations $17,831 $16,362 Reconciliation of Net Income (Loss) from Continuing Operations to EBITDA Three Months Ended Twelve Months Ended March 31, March 31, 2008 2007 2008 2007 Net income (loss) from continuing operations, as reported $919 $(2,188) $7,056 $3,604 Interest expense (income), net 1,178 4,128 5,868 9,863 Tax expense (benefit) 819 (1,096) 5,273 2,594 Depreciation and amortization 2,540 2,859 9,587 10,958 Share-based compensation 246 390 1,072 910 EBITDA $5,702 $4,093 $28,856 $27,929
