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Navarre Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 9, 2011 03:12PM

Navarre Corp. (NAVR) filed Quarterly Report for the period ended 2011-06-30. Navarre Corp. has a market cap of $63 million; its shares were traded at around $1.77 with a P/E ratio of 43.1 and P/S ratio of 0.1.



Highlight of Business Operations:

Total operating expenses from continuing operations for the first quarter of fiscal 2012 were $14.4 million, or 13.8% of net sales, compared to $13.3 million, or 13.5% of net sales, in the same period for fiscal 2011. The $1.1 million increase was primarily a result of a $1.4 million severance charge related to the departure of our former CEO recorded during the first quarter of fiscal 2012, increased costs of investments in technology and business development offset by personnel costs savings and reversal of the first anniversary Punch! contingent payment accrual due to the unmet sales target in the first quarter of fiscal 2012.

Net sales before inter-company eliminations for the distribution segment increased $5.7 million, or 6%, to $101.7 million for the first quarter of fiscal 2012 compared to $96.0 million for the first quarter of fiscal 2011. Net sales decreased $4.0 million in the software product group to $74.4 million during the first quarter of fiscal 2012 from $78.4 million for the same period last year due to reduced demand for our software products. Consumer electronics and accessories net sales increased $7.4 million to $12.2 million during the first quarter of fiscal 2012 from $4.8 million for the first quarter of fiscal 2011, due to the addition of new product lines. Video games net sales increased $1.1 million to $4.8 million in the first quarter of fiscal 2012 from $3.7 million for the same period last year, due to a stronger release schedule in the first quarter of fiscal 2012. Home video net sales increased $1.2 million to $10.3 million in the first quarter of fiscal 2012 from $9.1 million in first quarter of fiscal 2010, due primarily to a stronger release schedule in first quarter of fiscal 2012. We believe future net sales will be dependent upon the ability to continue to add new, appealing content and upon the strength of the retail environment and overall economic conditions.

Selling and marketing expenses for the distribution segment increased $484,000 to $3.8 million, or 3.7% of net sales, for the first quarter of fiscal 2012, compared to $3.3 million, or 3.4% of net sales, for the first quarter of fiscal 2011. This increase was primarily due to $167,000 of additional freight expense due to fuel surcharges and $110,000 additional personnel costs related to new business development. Additionally, we recognized a $200,000 favorable vendor advertising credit in the first quarter of fiscal 2011 that we did not receive in the first quarter of fiscal 2012.

We recognize interest accrued related to unrecognized income tax benefits (“UTB’s”) in the provision for income taxes. At March 31, 2011, interest accrued was approximately $168,000, which was net of federal and state tax benefits, and total UTB’s, net of federal and state income tax benefits that would impact the effective tax rate if recognized, were $612,000. During the three months ended June 30, 2011, an additional $54,000 of UTB’s were accrued, which was net of $11,000 of deferred federal and state income tax benefits. At June 30, 2011, interest accrued was $183,000 and total UTB’s, net of deferred federal and state income tax benefits that would impact the effective tax rate if recognized, were $667,000.

The net cash used in operating activities for the first three months of fiscal 2012 mainly reflected our net loss, combined with various non-cash charges, including the reversal of the first anniversary Punch! contingent payment accrual of $526,000 which was unearned, depreciation and amortization of $972,000, amortization of debt acquisition costs of $149,000, amortization of software development costs of $191,000, share-based compensation of $63,000, an increase in deferred income taxes of $366,000, offset by our working capital demands. The following are changes in the operating assets and liabilities during the first three months of fiscal 2012: accounts receivable decreased $6.0 million, resulting from decreased sales during the quarter; inventories increased $2.8 million, primarily reflecting additional inventory related to our growing consumer electronics and accessories product line; prepaid expenses decreased $328,000, primarily resulting from prepaid royalty recoupments; income taxes receivable increased $63,000, primarily due to the timing of required tax payments and tax refunds; accounts payable decreased $7.9 million, primarily due to reduced purchases resulting from decreased sales; and accrued expenses increased $1.4 million, primarily as a result of a $1.4 million severance accrual related to the departure of our former CEO.

The net cash used in operating activities in the first three months of fiscal 2011 of $1.5 million was primarily the result of net income, combined with various non-cash charges, including depreciation and amortization of $891,000, amortization of debt acquisition costs of $149,000, amortization of software development costs of $101,000, share-based compensation of $226,000, a decrease in deferred income taxes of $708,000, offset by our working capital demands. The following are changes in the operating assets and liabilities during the first three months of fiscal 2011: accounts receivable decreased $18.5 million, resulting from decreased sales in the quarter; inventories increased $2.9 million, primarily reflecting $722,000 worth of inventory acquired with Punch! and additional inventory related to the opening of our Canadian warehouse facility; prepaid expenses increased $1.0 million, primarily resulting from prepaid royalty advances; income taxes receivable decreased $170,000, primarily due to the timing of required tax

Read the The complete Report



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