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Navarre Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 3, 2012 03:33PM

Navarre Corp. (NAVR) filed Quarterly Report for the period ended 2011-12-31. Navarre Corp. has a market cap of $54.3 million; its shares were traded at around $1.47 with and P/S ratio of 0.1.



Highlight of Business Operations:

Our gross profit from continuing operations was $34.0 million, or 9.3% of net sales, for the first nine months of fiscal 2012, compared with $49.6 million, or 13.5% of net sales, for the same period in fiscal 2011. Both the $15.5 million decrease in gross profit and 31.3% decrease in gross profit margin were due to $8.8 million, or 2.4% of net sales, of inventory, prepaid royalties and software development write-downs recognized as a result of the Restructuring Plan. In addition to the write-downs, the decrease in gross profit was due to a mix of lower gross profit margin security and utility software products within the distribution segment and lower gross profit margin value-priced software titles in the publishing segment.

Net sales before inter-company eliminations for the distribution segment increased $6.4 million, or 4.4%, to $150.8 million for the third quarter of fiscal 2012 compared to $144.4 million for the third quarter of fiscal 2011. Consumer electronics and accessories net sales increased $21.3 million to $32.6 million during the third quarter of fiscal 2012 from $11.3 million for the same period last year due to the distribution of new products to existing and new customers. The increase in consumer electronics and accessories net sales more than offset the net sales decline in software, video game and home video products. Net sales decreased $8.4 million in the software product group to $103.9 million during the third quarter of fiscal 2012 from $112.2 million for the same period last year due to reduced demand for our software products. Video games net sales increased $2.0 million to $10.8 million in the third quarter of fiscal 2012 from $8.8 million for the same period last year, due to new video game releases. Home video net sales decreased $8.5 million to $3.5 million in the third quarter of fiscal 2012 from $12.1 million in third quarter of fiscal 2011, primarily due to two large customers no longer selling our home video products and our transition out of home video exclusive content. We believe future net sales will be dependent upon our ability to continue to add new, appealing content and upon the strength of the retail environment and overall economic conditions.

Net sales before inter-company eliminations for the distribution segment decreased $2.5 million, or 0.7%, to $356.6 million for the first nine months of fiscal 2012 compared to $359.1 million for the first nine months of fiscal 2011. Net sales decreased $29.2 million in the software product group to $255.8 million for the first nine months of fiscal 2012 from $285.0 million for the same period last year primarily due to decreased demand for our software products. Consumer electronics and accessories net sales increased $37.1 million to $59.7 million during the first nine months of fiscal 2012 from $22.6 million for the same period last year due to the distribution of new products to existing customers and obtaining new customers. Video games net sales increased $792,000 to $21.1 million for the first nine months of fiscal 2012 from $20.3 million for the same period last year, due to new video game releases. Home video net sales decreased $11.2 million to $19.9 million for the first nine months of fiscal 2012 from $31.1 million for the first nine months of fiscal 2011, primarily due to two large customers no longer selling our home video products and our transition out of home video exclusive content. We believe future net sales will be dependent upon our ability to continue to add new, appealing content and upon the strength of the retail environment and overall economic conditions.

The net cash used in operating activities for the first nine 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 $2.8 million, amortization of debt acquisition costs of $448,000, amortization of software development costs of $1.9 million, share-based compensation of $933,000, goodwill and intangibles impairment of $6.0 million, a decrease in deferred income taxes of $13.4 million, offset by our working capital demands. The following are changes in the operating assets and liabilities during the first nine months of fiscal 2012: accounts receivable increased $34.4 million, resulting from the timing of sales, net of decreased sales during the quarter; inventories increased $8.0 million, primarily reflecting additional inventory related to our growing consumer electronics and accessories product line; prepaid expenses decreased $5.9 million, primarily resulting from the write-down of prepaid expenses and recoupments of prepaid royalties; income taxes receivable increased $20,000, primarily due to the timing of required tax payments and tax refunds; accounts payable increased $33.8 million, primarily as a result of timing of payments and purchases; income taxes payable decreased $37,000 primarily due to the timing of required tax payments and tax refunds; and accrued expenses decreased $661,000, net of various accrual payments and a decrease in accrued wages due to timing of pay periods.

The net cash used in operating activities for the first nine months of fiscal 2011 mainly reflected our net income, combined with various non-cash charges, including depreciation and amortization of $2.9 million, amortization of debt acquisition costs of $447,000, amortization of software development costs of $360,000, share-based compensation of $786,000, a decrease in deferred income taxes of $4.2 million, offset by our working capital demands. The following are changes in the operating assets and liabilities during the first nine months of fiscal 2011: accounts receivable increased $16.2 million, as a result of increased sales; inventories increased $6.4 million, primarily reflecting additional inventory related to the opening of our Canadian distribution facility and the timing of other inventory purchases; prepaid expenses increased $402,000, primarily resulting from prepaid royalty advances; income taxes receivable decreased $94,000 and income taxes payable increased $12,000, primarily due to the timing of required tax payments and tax refunds; accounts payable increased $12.2 million, primarily as a result of timing of payments and purchases; and accrued expenses decreased $4.6 million, primarily due to the payment of the fiscal 2010 performance-based cash compensation accrual.

Read the The complete Report



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