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"While the events of last fall lead to uncertainty with retail channels in general, we are pleased with the quarter's results."
—Eric Paulson. Navarre President/CEO
NAVARRE HOLDING STEADY THROUGH THREE QUARTERS
Minneapolis Distributor Slightly Up for Q3, Nine-Month Totals

Not bad, not bad at all.

Minneapolis-based Navarre Corporation a leading distributor of PC software, video games, music, DVD and VHS video, announced its results through the third quarter which ended Dec. 31, 2001, with a slight increase for the three-month period and a slight decrease for the nine months overall.

For the third quarter ended December 31, 2001, the Company reported a 57.4% net income increase to $3,278,000 or $0.15 per share vs. net income of $2,082,000 or $0.08 per share for the same period last year. The net income for the quarter includes a one-time gain of $1,500,000 for the repayment of a NetRadio note and the Company's continuing focus to its core businesses and expense control measures.

Net sales for the third fiscal quarter ended December 31, 2001, were $116,040,000 versus $119,465,000, a 2.9% decrease for the same period last year. Gross profit for the quarter was $11,557,000 versus $14,004,000 for the same quarter last year. Operating expenses decreased 14.9% for the quarter from $11,530,000 last year to $9,811,000 this year.

President/CEO Eric Paulson wasn't unhappy: "While the events of last fall lead to uncertainty with retail channels in general, we are pleased with the quarter's results. Our continued improvements in the Company's operational productivity contributed to our overall profitability.''

Meanwhile, net income for the nine-month period ended December 31, 2001 was $2,372,000 or $0.10 per share versus a loss of $8,486,000 or a loss of $0.34 per share for the same period last year. Operating expenses for the nine-month period decreased 13.2% from $28,405,000 last year to $24,655,000 this year.

Net sales for the nine-month period ended December 31, 2001 were $238,201,000 versus $253,009,000 for the same period last year or a decrease of 5.9%. Gross profit for the nine-month period was $24,889,000 versus $30,785,000 for the same period last year. The sales and gross profit decrease for the nine-month period are a result of the continued softness of major label music sales.

Added Paulson: "This year, our management team has positioned the Company on the many opportunities at hand in the home entertainment industry. We have made a dramatic shift throughout the year signing labels that will drive our sales and enhance our profitability. While major label music sales in Navarre Distribution Services (NDS) have suffered, PC software, our largest product line, continues to be a solid performer, and NDS is well positioned to launch into the video game business. Our focus on the core business positions us for growth in Fiscal Year 2003.''

The Company reported that it continued to be debt free and that cash on hand at the end of the quarter increased over 9% to $15,581,000 from $14,257,000 at the end of the quarter last year.

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