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Friday May 8, 7:46 am Eastern Time
Company Press Release
Navarre Corporation Reports Annual and Fourth
Quarter Results
Computer Software Margins Up Substantially from Fiscal 1997;
Music Sales Increase by 18.7 Percent over Last Year
MINNEAPOLIS--(BUSINESS WIRE)--May 8, 1998-- Navarre's Net Radio Subsidiary,
'The Best RealAudio Net-Only
Radio Station', Is On Target With its Plans for Additional
Developments
Navarre Corporation (Nasdaq:NAVR - news), a leading national distributor of music,
computer software and interactive CD-ROM products, today reported a net loss for the
year ended March 31, 1998, of $974,000, or 14 cents per share, vs. a net loss of
$6,189,000, or 92 cents per share, for the year ended March 31, 1997. Net sales for
the year ended March 31, 1998, were $196,648,000, compared with net sales of
$200,697,000.
Eric Paulson, Navarre's chairman and chief executive officer, said, ''We significantly
narrowed our loss in fiscal 1998 compared with last year, and we are extremely
pleased with Navarre's progress in achieving our two primary objectives for the year.
Our first objective, to increase the gross profit margin in Navarre's computer software
business, was accomplished with an increase of nearly 300 basis points. Gross profit
on computer software rose from 9.0 percent of net sales in fiscal 1997 to 11.9 percent
of net sales in fiscal 1998. Our second objective was to build our music business and
we achieved that with an 18.7 percent increase in music sales over last year.''
EBITDA, an indicator of the company's cash flow, more than doubled, rising from $1.9
million in fiscal 1997 to $3.9 million in fiscal 1998.
''Fiscal 1998 began with Chapter 11 filings by four of Navarre's major customers,''
Paulson said. ''This negatively affected our results and Navarre's net worth was
diminished, causing some of our computer software suppliers to reduce our credit
lines. In response, we made strategic decisions with regard to our computer software
suppliers and assortments. The result was a more profitable business on net sales that
were 9 percent lower than a year ago. Our focus on reference and productivity software
has been beneficial to our improved profitability, and we have now completed the
restructuring of our credit lines with our valued computer software publishers,
positioning the computer software division for future growth.
''The significant improvement in net sales of the music division resulted from the
restructuring of our label base to fewer labels of higher quality, the addition of a few
new high quality labels, and the positive effect of new management added in this
division during the year. Although the restructuring of our label base had a negative
impact on fourth quarter profitability in the music division, our music division is
positioned to benefit from the growth opportunities that we see ahead.''
For the fourth quarter ended March 31, 1998, Navarre's net loss was $1,011,000, or
15 cents per share, vs. a net loss of $5,338,000, or 79 cents per share, for last year's
fourth quarter. Net sales for the fourth quarter were $38,834,000, compared with net
sales of $43,293,000 in the fourth quarter of last year.
''Despite the lower sales in the fourth quarter that resulted from repositioning
assortments, labels and publishers, we achieved a 21.8 percent increase in overall
gross profit dollars in the fourth quarter compared with the fourth quarter of last year,''
Paulson said. ''This illustrates the benefits of our earlier actions and gives us a
positive outlook for the future.
''Our core distribution business is sound and demonstrating substantially improved
performance. While our overall results were affected by the losses in our NetRadio
Network subsidiary, we view those losses as a high-potential investment in our future.''
Recent Developments
Following the end of its fiscal year, Navarre announced on May 4 the completion of a
private placement of $20 million of newly issued Convertible Preferred Stock Units.
''With the completion of this very important financing, we have meaningfully enhanced
Navarre's financial foundation,'' Paulson said. ''In combination with our significantly
strengthened core business and the exciting opportunities we see for NetRadio, we
are very optimistic about the future.
''NetRadio Network is the premier provider of real-time digital media on the Internet.
Their leadership role has been recognized by a panel of esteemed Internet industry
experts with NetRadio's recent receipt of 'The Best RealAudio(TM) Net-Only Radio'
Web Site awarded at RealNetworks' (http://www.real.com) 1998 Conference.
NetRadio was the first Internet-only ''radio'' network on the Web, with over 150
originally programmed, on-demand music and news channels encoded in RealAudio
format. NetRadio currently registers more than 3 million visits and 20 million
page-views per month, and delivers every 30 days more than 3 million on-demand
audio sessions to listeners around the world.
''NetRadio Network is right on target with its plans for capitalizing on its strong
presence on the Internet this summer, and we are very excited about NetRadio's
prospects and potential,'' Paulson said.
About Navarre Corporation
Navarre Corporation is a major publisher and distributor of quality consumer software
and entertainment products nationwide. Navarre also owns and operates NetRadio
Network, one of the world's largest on-demand Webcasters of originally programmed
audio content (www.netradio.net). For further information, please visit Navarre's
website at www.navarre.com
Navarre Corporation
(Amounts in thousands, except per share data)
Three months ended Year ended
March 31, March 31,
1998 1997 1998 1997
------------------------ ---------------------
(unaudited) Net sales $ 38,834 $ 43,293 $196,648 $200,697
Gross profit 6,192 5,082 24,994 23,282
Operating expenses 6,595 9,986 22,910 26,537
Operating income (loss) (403) (4,904) 2,084 (3,255)
Net loss $ (1,011) $ (5,338) $ (974) $ (6,189)
Loss per common share:
Basic and Diluted $ (.15) $ (.79) $ (.14) $ (.92)
Weighted average common
and common equivalent
shares outstanding:
Basic 6,976 6,792 6,921 6,692
Diluted 6,976 6,792 6,921 6,692
-0-
This news release, as it relates to expectations regarding future
sales and profitability, contains forward-looking statements regarding
future performance of the company and its products. The company's
actual results could differ materially from the estimates made in the
forward-looking statements as a result of a number of factors,
including the risks and uncertainties inherent in the company's
business, the retail market for prerecorded music and consumer
software products, customer buying patterns, new and different
competition in the company's traditional and new markets and the rate
of new product development and commercialization by the company.
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