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Navarre Corp. Reports Operating Results (10-Q)

February 09, 2011 | About:
10qk

10qk

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Navarre Corp. (NAVR) filed Quarterly Report for the period ended 2010-12-31.

Navarre Corp. has a market cap of $78.1 million; its shares were traded at around $2.03 with a P/E ratio of 11.9 and P/S ratio of 0.1. Hedge Fund Gurus that owns NAVR: Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Total operating expenses from continuing operations for the nine months ended December 31, 2010 were $43.2 million or 11.8% of net sales, compared to $41.9 million or 11.6% of net sales in the same period for fiscal 2010. The $1.3 million increase was primarily due to resources to support the new Canadian distribution facility of $1.3 million, professional fees and additional personnel costs related to Punch! of $1.2 million, direct-to-consumer advertising and support expense of $703,000, and increased variable expenses driven by sales volume, partially offset by $3.2 million in performance-based compensation expense recorded during the first nine months of fiscal 2010 compared to zero in the first nine months of fiscal 2011.

At December 31, 2010 and March 31, 2010 we had $12.5 million and $6.6 million, respectively, outstanding on the Credit Facility and, based on the facilitys borrowing base and other requirements, we had excess availability of $42.7 million and $38.4 million, respectively. Amounts available under the Credit Facility are subject to a borrowing base formula. Changes in the assets within the borrowing base formula can impact the amount of availability. At December 31, 2010, we were in compliance with all covenants under the Credit Facility and currently believe we will be in compliance with all covenants over the next twelve months.

Net sales before inter-company eliminations for the distribution segment were $144.4 million for the third quarter of fiscal 2011 compared to $124.8 million for the third quarter of fiscal 2010, an increase of $19.6 million or 15.7%. Net sales increased $10.4 million in the software product group to $112.2 million during the third quarter of fiscal 2011 from $101.8 million for the same period last year due to additional sales in Canadian markets and increased utility software revenue. These sales increases were partially offset by the departure of two vendors. Home video net sales increased $2.8 million to $12.1 million in the third quarter of fiscal 2011 from $9.3 million in the third quarter of fiscal 2010, primarily due to new title releases in the third quarter of fiscal 2011. Video games net sales were relatively stable at $8.8 million in the third quarter of fiscal 2011 from $8.6 million for the same period last year. Consumer electronics and accessories net sales increased $6.2 million to $11.3 million during the third quarter of fiscal 2011 from $5.1 million for the same period last year due to the distribution of new products. 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.

General and administrative expenses for the distribution segment consist principally of executive, accounting and administrative personnel and related expenses, including professional fees. General and administrative expenses for the distribution segment were $4.7 million or 3.3% of net sales for the third quarter of fiscal 2011 compared to $5.0 million or 4.0% of net sales for the third quarter of fiscal 2010. The $318,000 decrease in the third quarter of fiscal 2011 was primarily a result of $932,000 in performance-based compensation expense recorded during the third quarter of fiscal 2010 compared to zero during the third quarter of fiscal 2011, partially offset by increased professional fees and a $176,000 increase in bad debt expense due to the increase in the allowance for doubtful accounts as a result of increased customer receivable collection risk.

Net sales before inter-company eliminations for the distribution segment were $359.1 million for the first nine months of fiscal 2011 compared to $357.5 million for the first nine months of fiscal 2010, an increase of $1.6 million or 0.4%. Net sales decreased $9.7 million in the software product group to $285.1 million for the first nine months of fiscal 2011 from $294.8 million for the same period last year primarily due to the departure of two vendors (which accounted for an additional $25.0 million of sales in the first nine months of fiscal 2010), partially offset by $15.0 million of additional sales in Canadian markets. Home video net sales increased $2.0 million to $31.1 million for the first nine months of fiscal 2011 from $29.1 million for the first nine months of fiscal 2010, primarily due to new title releases in the first nine months of fiscal 2011 compared to the first nine months of fiscal 2010. Video games net sales decreased $3.4 million to $20.3 million for the first nine months of fiscal 2011 from $23.7 million for the same period last year, due to the departure of a low margin vendor (which accounted for an additional $4.6 million of sales in first nine months of fiscal 2010), partially offset by a new title release during the first nine months of fiscal 2011. Consumer electronics and accessories net sales increased $12.7 million to $22.6 million during the second quarter of fiscal 2011 from $9.9 million for the same period last year due to the distribution of new products. 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.

Distribution and warehousing expenses for the distribution segment were $8.1 million or 2.2% of net sales for the first nine months of fiscal 2011 compared to $7.1 million or 2.0% of net sales for the same period of fiscal 2010. The $1.0 million increase was primarily due to rent and other warehouse costs incurred in connection with the opening of the new Canadian distribution facility and a $400,000 increase in personnel costs related to increased sales volume.

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