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Navarre Reports Strong Fiscal Third Quarter 2013 Results

Investors and shareholders are urged to read this press release carefully. The company can offer no assurances that any projections, assumptions or forecasts made or discussed in this press release will be met, and investors should understand the risks of investing solely due to such projections. The forward-looking statements included in this press release are made only as of the date of this report and the company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

Investors and shareholders may obtain free copies of the public filings through the website maintained by the SEC at www.sec.gov or at one of the SEC's other public reference rooms in Washington, D.C., New York, New York or Chicago, Illinois. Please contact the SEC at 1-800-SEC-0330 for further information with respect to the SEC's public reference rooms.

NAVARRE CORPORATION
Consolidated Condensed Balance Sheets
(In thousands)
       
  (Unaudited) (Unaudited)  
  Preliminary    
  December 31, December 31, March 31,
  2012 2011 2012
Assets:      
Current assets:      
Cash  $ 62  $ 1,882  $ 5,600
Accounts receivable, net  123,251  92,144  47,935
Inventories  39,018  32,784  28,850
Deferred tax assets — current, net  1,441  3,462  1,580
Other  2,621  2,603  2,211
Total current assets  166,393  132,875  86,176
Property and equipment, net  11,441  7,534  6,868
Goodwill and intangible assets, net  55,475  1,675  1,547
Deferred tax assets — non-current, net  9,028  13,874  18,450
Other assets  7,687  8,936  8,335
Total assets  $ 250,024  $ 164,894  $ 121,376
Liabilities and shareholders' equity:      
Current liabilities:      
Accounts payable  $ 141,423  $ 112,855  $ 73,421
Revolving line of credit  17,432  --   -- 
Other  24,726  7,447  6,642
Total current liabilities  183,581  120,302  80,063
Long-term liabilities:      
Other liabilities  4,473  1,629  1,497
Total liabilities  188,054  121,931  81,560
       
Shareholders' equity  61,970  42,963  39,816
Total liabilities and shareholders' equity  $ 250,024  $ 164,894  $ 121,376
 
 
 
NAVARRE CORPORATION
Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except per share amounts)
(Unaudited)
         
  Three months ended December 31, Nine months ended December 31,
  2012 2011 2012 2011
Net sales        
Distribution  $ 156,856  $ 151,298  $ 340,476  $ 359,167
E-commerce and fulfillment services  21,428  2,199  33,212  4,914
Total net sales  178,284  153,497  373,688  364,081
Cost of sales        
Distribution  143,045  144,137  306,280  325,900
E-commerce and fulfillment services  18,238  1,832  28,384  4,658
Total cost of sales  161,283  145,969  334,664  330,558
Gross profit        
Distribution  13,811  7,161  34,196  33,267
E-commerce and fulfillment services  3,190  367  4,828  256
Total gross profit  17,001  7,528  39,024  33,523
Operating expenses:        
Selling and marketing  5,312  5,701  13,805  15,749
Distribution and warehousing  2,394  2,685  5,907  7,623
General and administrative  4,544  5,016  10,653  14,162
Information technology  1,533  1,516  3,661  4,047
Depreciation and amortization  760  771  2,248  2,283
Goodwill and intangible impairment  --   5,996  --   5,996
Total operating expenses  14,543  21,685  36,274  49,860
Income (loss) from operations  2,458  (14,157)  2,750  (16,337)
Other income (expense):        
Interest income (expense), net  (325)  (292)  (586)  (873)
Other income (expense), net  (503)  (171)  (602)  (501)
Income (loss) from operations, before income tax  1,630  (14,620)  1,562  (17,711)
Income tax benefit (expense)  (1,620)  (14,457)  (1,635)  (13,242)
Net income (loss)  $ 10  $ (29,077)  $ (73)  $ (30,953)
Earnings (loss) per common share:        
Basic  $ --  $ (0.79)  $ --  $ (0.84)
Diluted  $ --  $ (0.79)  $ --  $ (0.84)
Weighted average shares outstanding:        
Basic  44,883  36,977  39,749  36,805
Diluted  45,026  36,977  39,749  36,805
         
Other comprehensive income (loss):        
Net unrealized gain (loss) on foreign exchange rate translation, net of tax  76  145  159  (122)
Comprehensive income (loss)  $ 86  $ (28,932)  $ 86  $ (31,075)
 
 
 
NAVARRE CORPORATION
Supplemental Information
(In thousands)
(Unaudited)
                 
Reconciliation of Net Sales Before Inter-Company Eliminations to GAAP Net Sales and Business Segment Information
                 
  Three Months Ended December 31, Nine Months December 31,
  2012 % 2011 % 2012 % 2011 %
Net sales:                
Distribution                
Software  $ 107,638 60.4%  $ 104,359 68.0%  $ 249,838 66.9%  $ 258,413 71.0%
Consumer electronics and accessories  47,363 26.6% 32,640 21.3%  83,863 22.4% 59,682 16.4%
Video games  1,855 1.0% 10,785 7.0%  6,775 1.8% 21,137 5.8%
Home video  --  0.0% 3,514 2.3%  --  0.0% 19,935 5.5%
   156,856 88.0%  151,298 98.6%  340,476 91.1%  359,167 98.7%
E-commerce and fulfillment services  21,428 12.0%  2,199 1.4%  33,212 8.9%  4,914 1.3%
Net sales as reported  $ 178,284    $ 153,497    $ 373,688    $ 364,081  
                 
Operating income (loss)                
Distribution  $ 499    $ (13,980)    $ 21    $ (15,045)  
E-commerce and fulfillment services  1,959    (177)    2,729    (1,292)  
Consolidated operating income (loss)  $ 2,458    $ (14,157)    $ 2,750    $ (16,337)  
                 
                 
Net Sales by Geographic Region                
United States  $ 144,666    $ 127,904    $ 311,268    $ 319,407  
International  33,618    25,593    62,420    44,674  
Net Sales as reported  $ 178,284    $ 153,497    $ 373,688    $ 364,081  
                 
                 
Net Sales by Sales Channel                
Retail  $ 129,943    $ 125,329    $ 289,665    $ 307,460  
E-commerce  48,341    28,168    84,023    56,621  
Net Sales as reported  $ 178,284    $ 153,497    $ 373,688    $ 364,081  
 
 
 
Navarre Corporation
Supplemental Information
(In thousands)
(Unaudited)
                 
Adjusted Pro Forma Income from Continuing Operations Before Income Tax
             
  GAAP Information Adjusted Pro Forma Information 
  Three Months Ended December 31,  Three Months Ended December 31, 
  2012 % of sales 2011 % of sales 2012 % of sales 2011 % of sales
Net sales $ 178,284   $ 153,497   $ 178,284   $ 153,497  
Gross profit (1) 17,001 9.5% 7,528 4.9% 17,001 9.5% 16,322 10.6%
Operating expenses (2) 14,543 8.2% 21,685 14.1% 13,017 7.3% 13,428 8.7%
Income (loss) from operations  2,458    (14,157)    3,984    2,894  
Other (expense), net  (828)    (463)    (828)    (463)  
Income (loss) before income tax  $ 1,630    $ (14,620)    $ 3,156    $ 2,431  
                 
  Three Months Ended December 31,       
  2012   2011          
                 
(1) Pro forma adjustments to gross profit consist of the following:                
Inventory write-downs  $ --     $ 1,728          
Software development impairment  --     1,238          
Prepaid royalties impairment  --     5,826          
Restructuring and transaction costs  --     2          
Total adjustments  $ --     $ 8,794          
                 
(2) Pro forma adjustments to operating expenses consist of the following:                
Restructuring and transaction costs  $ (1,526)    $ (2,261)          
Goodwill and intangible impairment  --     (5,996)          
Total adjustments  $ (1,526)    $ (8,257)          
 
 
 
NAVARRE CORPORATION
Supplemental Information
(In thousands)
(Unaudited)
         
Reconciliation of Net Income (Loss) to Adjusted EBITDA 
         
  Three Months Nine Months
  Ended December 31, Ended December 31,
  2012 2011 2012 2011
Net income (loss), as reported  $ 10  $ (29,077)  $ (73)  $ (30,953)
Interest expense, net  325  292  586  873
Income tax expense  1,620  14,457  1,635  13,242
Depreciation and amortization  1,257  883  2,884  2,782
Foreign translation loss (gain)  388  172  493  501
Share-based compensation  245  278  705  702
Restructure expenses  --   17,051  --   18,908
Transaction and transition costs  1,526  --   1,926  -- 
Adjusted EBITDA  $ 5,371  $ 4,056  $ 8,156  $ 6,055
CONTACT: Investor Relations
         Liolios Group, Inc.
         Cody Slach
         1-949-574-3860
         NAVR@liolios.com

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