Edward,
Here's the earnings report. Everyone's waiting for the CC in hope of getting good news about NetRadio.
Navarre Corporation Reports Fiscal Third Quarter Results
BusinessWire, Tuesday, January 26, 1999 at 07:26
MINNEAPOLIS--(BUSINESS WIRE)--Jan. 26, 1999--Navarre Corporation
(NASDAQ:"NAVR") today reported net sales of $74,592,000 for the fiscal
third quarter ended December 31, 1998, a 7.4% increase over the
$69,437,000 reported for the same period last year. For the nine month
period ended December 31, 1998, sales were $182,682,000, a 15.8%
increase over $157,814,000 reported for the same period last year.
The Company reported a net loss for the quarter of $3,997,000
compared to net income of $579,000 for the same quarter last year.
This loss is primarily attributable to the operation of Net Radio.
Also included in the loss is $1,427,000 of tax adjustments for both
Navarre and Net Radio and the cost of upgrading the Company's computer
systems, which in part, is to make the Company Y2K compliant. For the
nine month period ending December 31, 1998, the Company reported a
loss of $5,389,000 compared to a profit of $38,000 for the previous
year. Gross margin as a percent of sales for the quarter ended
December 31, 1998 was 11.6%, in line with expectations, and comparable
to the 11.9% reported in the previous year.
Gross sales for the quarter, which are actual sales to customers
before returns processing, increased to $103,562,000, a 29.7% increase
over $79,825,000 of gross sales for the same quarter last year. Gross
sales for music were $35,760,000, an increase of 49.3% over the same
period last year, while gross sales in software for the quarter were
$67,802,000, an increase of 21.3% over last year.
During the quarter, the Company instituted significant upgrades
in its operations including the doubling of its returns processing
capabilities. Eric Paulson, Navarre's Chairman and Chief Executive
Officer, stated, "The goal is to process incoming returns within three
days of receipt. This fully implemented upgrade will be completed by
March 31, 1999."
Charles Cheney, the Company's Executive Vice President and Chief
Financial Officer, stated, "By accomplishing this objective, we expect
to eliminate for the first time in the Company's history, all bank
debt by March 31, 1999. Although the new process will have a negative
effect on net sales and profits during the Company's fiscal fourth
quarter, we expect it to significantly improve inventory and cash
utilization as well as future earnings."
Paulson added, "During the quarter ended December 31, 1998,
Navarre's Computer Products division continued to strengthen its
customer base with the addition of Office Max, Circuit City,
Chumbo.com, Fred Meyer, GrowBiz and Datavision, as well as becoming a
major fullfillment source for retail e-commerce sites such as
barnesandnoble.com. In addition to strong sales and margins, the
Company's "business to business" e-commerce interactive wholesale Web
site www.navarre.com became fully operational in December and
contributed to both new customers and increased revenues. DVD sales to
both music and software customers were ahead of expectations and we
look forward to strong growth in this product category in subsequent
months."
Paulson continued, "For the third fiscal quarter ended December
31, 1998, Navarre's e-commerce sales, which consisted of Navarre's
fulfillment of orders for third parties including Net Radio, although
small in total, grew by over 1,000% from the fiscal second quarter
ended September 30, 1998. Also, Net Radio strengthened its management
team and board of directors with the addition of Messrs. Jim Caparro
and Marc Kalman and the appointment of Ed Tomechko as President,
Chief Executive Officer and Director of the Company."
As previously disclosed, on May 1, 1998 the Company issued
1,523,810 shares of convertible preferred stock with warrants
attached. As of December 31, 1998, the holders converted 1,516,191
shares into 7,580,955 shares of common stock, leaving 7,619 preferred
shares remaining. In addition, by that date, holders of warrants had
exercised their rights to purchase an additional 6,030,158 common
shares which provided the Company with $20,827,033 of additional cash
and equity. As of December 31, 1998, the total shareholders' equity in
the Company is $39,984,401.
Based on the Company's stock price on May 1, 1998, the date of
issuance of the convertible preferred stock, these securities are
deemed to have contained beneficial conversion features that must be
recognized as a dividend paid to preferred stockholders. After the end
of the quarter ended December 31, 1998 the Company determined its
financial statements for the quarters ended June 30 and September 30,
1998 should be restated to reflect the allocation of proceeds to the
beneficial conversion features of the Company's convertible preferred
stock and accompanying warrants. Revenues, expenses, net loss, total
assets and total shareholders' equity are not affected by this
restatement. The Company is conforming its financial statements with
the Financial Accounting Standards Board's Emerging Issues Task Force
- Topic D60 ("Accounting for the Issuance of Convertible Preferred
Stock and Debt Securities with a Nondetachable Conversion Feature")
issued March 13, 1997, and considering the Task Force's Working Group
discussions and tentative conclusions reported on Issue 98-5,
November, 1998, which provide that any discounts resulting from an
allocation of proceeds to the beneficial conversion feature is
analogous to a dividend, and should be recognized as a return to the
preferred stockholders over the minimum conversion period (from date
securities are issued to date they are first convertible). As a result
of this restatement, basic and diluted loss applicable to common
shareholders for the three months ended June 30, 1998 increased by
$4.89 per share and for the six months ended September 30, 1998 by
$3.79 per share. The Company intends to amend its Forms 10-Q for the
quarters ended June 30 and September 30, 1998 to reflect this
restatement.
Navarre will hold a conference call Tuesday, January 26, 1999 at
2 p.m.EST for investment professionals to discuss the 3rd Quarter
results (800.818.5264 confirmation 612538). An Internet simulcast will
be offered through VCall at www.vcall.com for interested investors. A
replay for the conference call will available on Tuesday by calling
719.457.0820.
Navarre Corporation operates one of the first "business to
business" Internet E-Commerce web sites and provides fulfillment for
both traditional and E-Commerce retail sites. Navarre Corporation's
major business groups are: Computer Products Division which publishes
and distributes quality consumer software to retailers nationwide;
Independent Music Distribution which is the major distributor of
independent music labels in the United States and now Canada; ARM
which distributes major label music to non-traditional retail outlets;
DVD Home Video distribution; and the majority-owned subsidiary
NetRadio Network is the premier Internet radio network featuring 120
channels of originally programmed audio content at:
netradio.net(TM), and its online stores, CDPoint
(http://CDPoint.com(TM)) and SoftwarePoint
(http://SoftwarePoint.com(TM)).
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which
are intended to be covered by the safe harbors created hereby.
Statements in this release that are not strictly historical are
"forward looking" statements which are subject to risk and
uncertainty. investors are cautioned that all "forward-looking"
statements contained herein may not be reasonable and assumptions
could be inaccurate, and should not be construed, considered or
assumed as guarantees. The inclusion of such information should not be
regarded as a representation or guarantee by the Company, or any other
person, that the objections and plans stated herein will be achieved.
Unknown factors could cause actual results to differ as well as other
risks detailed in the Company's reports filed with the Securities and
Exchange Commission, including its prospectuses, and Forms 10-K and
10-Q filings.
(Financial Statements to Follow)
*T
Navarre Corporation
(Amounts in thousands, except per share data)
Three months ended Nine months ended
December 31 December 31
1998 1997 1998 1997
--------------------- ------------------
(unaudited) (unaudited)
Sales $ 74,592 $ 69,437 $ 182,682 $ 157,814
Gross profit 8,670 8,289 21,670 18,802
Operating expense 10,770 6,286 24,489 16,836
Operating income
(loss) (2,100) 2,004 (2,819) 1,967
Net income (loss)$ (3,997) $ 579 $ (5,389) $ 38
Earnings (loss) per
common share:
Basic $ (.26) $ .08 $ (3.55) $ .01
Diluted $ (.26) $ .08 $ (3.55) $ .01
Weighted average
common and
common equivalent
shares
outstanding
Basic 15,914 6,906 11,335 6,904
Diluted 15,914 7,223 11,335 7,187
*T
CONTACT: Navarre Corporation
Terri Bonoff, 612/535-8333
tbonoff@navarre.com
www.navarre.com
or
Dresner Corporate Services, Inc.
Spencer Maus, 312/726-3200
smaus@dresnerco.com
Allison Gabrys, 312/726-3200
KEYWORD: MINNESOTA
INDUSTRY KEYWORD: ENTERTAINMENT EARNINGS
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Copyright 1999, Business Wire
Companies or Securities discussed in this article:
Symbol Name
NASDAQ:NAVR Navarre Corp
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