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Navarre Corp. Reports Operating Results (10-Q)

February 09, 2009 | About:

Navarre Corp. (NAVR) filed Quarterly Report for the period ended 2008-12-31.

Navarre Corporation is a major distributor of music software interactive CD-ROM products and DVD videos. They sell to major music and software retailers wholesalers and rackjobbers. In addition through their majority-owned subsidiary NetRadio Corporation they own and operate NetRadio Network a leading audio content broadcaster on the Internet. Navarre Corp. has a market cap of $17.39 million; its shares were traded at around $0.39 with a P/E ratio of 2.29 and P/S ratio of 0.03. Navarre Corp. had an annual average earning growth of 15.2% over the past 5 years.

Highlight of Business Operations:

Total operating expenses for the third quarter of fiscal 2009 were $30.8 million or 18.0% of net sales, compared with $23.0 million or 10.6% of net sales in the same period for fiscal 2008. The increase in expenses of $7.8 million is primarily a result of non-cash goodwill and trademark impairment charges of $6.2 million, $2.0 million of impairment related to masters and severance costs of $1.1 million related to the reduction in force which was offset by a decrease in ERP expenses of $1.0 million.

Net income (loss) from continuing operations for the third quarter fiscal 2009 was a loss of $47.7 million or $1.32 per diluted share compared to income of $4.0 million or $0.11 per diluted share from continuing operations for the same period last year.

Total operating expenses for the nine months ended December 31, 2008 were $144.6 million or 29.9% of net sales, compared with $62.8 million or 12.6% of net sales in the same period for fiscal 2008. This $81.8 million increase was primarily due to non-cash goodwill and trademark impairment charges of $79.6 million, $2.0 million of impairment related to masters and severance costs of $1.1 million related to the reduction in force which was offset by a decrease in ERP expenses of $1.4 million.

As part of this transaction, we recorded a gain in the first quarter of fiscal 2008 of $6.1 million ($4.6 million net of tax), which included severance and legal costs of $339,000 and other direct costs to sell of $842,000. The gain is included in Gain on sale of discontinued operations in the Consolidated Statements of Operations.

At March 31, 2008, we were also a party to a credit agreement with Monroe Capital Advisors, LLC (Monroe), which provided for a four-year $15.0 million Term Loan facility which was to expire on March 22, 2011. The Term Loan facility called for monthly installments of $12,500, annual excess cash flow payments and final payment of $9.4 million on March 22, 2011. The facility was secured by a second priority security interest in all of our assets. At March 31, 2008 we had $9.7 million outstanding on the Term Loan facility. This facility was paid in full on June 12, 2008 in connection with the Third Amendment to the GE revolving facility.

At December 31, 2008 and March 31, 2008 we had $48.7 million and $31.3 million, respectively, outstanding on the revolving facility and, based on the facilitys borrowing base and other requirements, approximately $8.1 million and $12.0 million, respectively, was available. At March 31, 2008 we had $9.7 million outstanding related to our Term Loan facility, which was paid in full on June 12, 2008 in connection with the Third Amendment to the GE revolving facility.

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