Singing Machine Announces Record Sales of $18.1 Million in 3rd Quarter Earnings Report, Over 1 Million Singing Machines Sold

News provided by

The Singing Machine Company, Inc.

Feb 17, 2015, 03:01 ET

FORT LAUDERDALE, Fla., Feb. 17, 2015 /PRNewswire/ -- The Singing Machine Company, Inc.  ("Singing Machine" or the "Company") (OTCBB: SMDM) today announced the results for its third fiscal quarter ended December 31, 2014.

The Company reported third-quarter net sales of approximately $18.1 million, as compared to net sales of approximately $16.8 million in the same quarter last year (increase of approximately 8%). The Company also posted an operating profit for the QE December 2014 of $1.7 million and net income of $1.0 million. Gross profit margins were 22.4% of sales compared to 24.4% in the same period last year. The increase in net sales reflected the addition of Wal-Mart Stores as a nationwide customer.  The reduction in gross profit margin is attributable in large part to greater participation of Singing Machine products in special promotions at lower margins as part of the Company's strategy to grow its market for its products. Operating expenses declined in the QE December 2014 from QE December 2013 by $0.4 million, due to reduced discretionary expenditures in marketing and G&A plus reduced banking fees, resulting in income from operations for the QE December 2014 of $1.7 million compared to $1.5 million in the QE December 2013.   Net income for the QE December 2014 was $1.0 million and $0.03 per share fully diluted compared to $0.8 million and $0.02 per share fully diluted in the QE December 2013, respectively.

For the nine months ended, Singing Machine reported net sales of approximately $36.6 million as compared with $29.1 million in the same period last year (an increase of 26%) and reported total operating expenses of $6.3 million compared to $5.7 million over the same period in the prior year. The increase in sales primarily reflects the addition of Wal-Mart Stores as a nationwide customer.  Income from operations for the nine-months ended December 2014 was $1.5 million compared to $1.1 million in the same period a year ago.  Net income for the nine-months ended December 2014 was $0.9 million or $0.02 per share fully diluted compared to $0.6 million and $0.02 per share fully diluted in the nine-months ended December 2013, respectively. 

The Company's sales of its karaoke-systems in the nine-months ended December 2014 exceeded one million units, the highest level of unit sales in over a decade.

Bernardo Melo, VP of Sales, commented, "The large increase in Singing Machine sales for the nine months reflects a number of key successes.  We have successfully absorbed the addition of Wal-Mart Stores with little effect to our longer-standing customers.  Our products were carried in over 10,000 stores in North America and our online business continues to grow. The market for our products in the U.S. has expanded and so has our share of the market. Further, in many outlets our products sold out in December reinforcing the idea that there is a strong demand for home karaoke music entertainment. It also signals to our customers that our category can continue to grow."  

Gary Atkinson, CEO, commented, "The continued expansion of our Company's sales in the December quarter is notable.  We enter calendar 2015 with the industry's best set of mass merchant retailers, most of whom carry our products exclusively, and proven products that work great and have highly favorable customer demand across a wide age of consumers.  Our investors should know we plan on continuing our strategy - to offer the industry's largest line of karaoke products; to innovate and improve our products to make them easier to use with today's technology; to make all formats of karaoke music widely available to our products; and to create a better experience for consumers with products that represent an excellent value while unlocking the educational and social benefits of singing for oneself and in sharing with others.   We look forward to implementing our strategy in the quarters that follow."

About The Singing Machine
Based in the US, Singing Machine® is the North American leader in consumer karaoke products.  We offer the industry's widest line of at-home karaoke entertainment products, which allow consumers to find a machine that suits their needs and skill level. As the most recognized brand in karaoke, Singing Machine products incorporate the latest technology for singing practice, music listening, entertainment and social sharing. The Singing Machine provides consumers the best warranties in the industry and access to over 10,000 songs for streaming download through the Singing Machine Music Channel (http://store.singingmachine.com/).  Singing Machine products are sold through major retailers in North America and also internationally. See www.singingmachine.com for more details.

Forward-Looking Statements
This press release contains forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward‑looking statements are based on current expectations, estimates and projections about the Company's business based, in part, on assumptions made by management and include, but are not limited to statements about our financial statements for the fiscal year ended March 31, 2014.  You should review our risk factors in our SEC filings which are incorporated herein by reference.  Such forward‑looking statements speak only as of the date on which they are made and the company does not undertake any obligation to update any forward‑looking statement to reflect events or circumstances after the date of this release.

(Financial statements attached)

 

The Singing Machine Company, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS






December 31, 2014

 March 31, 2014




 (Unaudited)


 (Audited)

Assets

Current Assets




Cash

$

473,401

$

1,354,099

Restricted cash

-

138,042

Accounts receivable, net of allowances of $253,988 and     






   $172,465, respectively

7,816,789

955,551

Due from Crestmark Bank

-

19,638

Due from related party - Starlight Consumer Electronics USA, Inc.

-

233,004

Due from related party - Starlight Electronics USA, Inc.

-

51,196

Due from related party - Starlight Electronics Co., Ltd

169,511

83,320

Due from related party - Cosmo Communications Canada, Ltd

184,038

-

Due from related party - Winglight Pacific, Ltd

582,133

-

Inventories, net

7,641,229

5,827,613

Prepaid expenses and other current assets

92,413

91,088

Deferred financing costs

74,077

-

Deferred tax asset, net

206,289

604,284

           Total Current Assets

17,239,880

9,357,835






Property and equipment, net

500,651

561,225

Other non-current assets

11,394

17,630

Deferred financing costs, net current portion

114,202

-

Deferred tax asset, net current portion

1,793,972

1,793,972

          Total Assets

$

19,660,099

$

11,730,662






Liabilities and Shareholders' Equity

Current Liabilities




Accounts payable

$

4,397,407

$

1,918,076

Due to related party - Starlight Marketing Development, Ltd.

-

1,107,678

Subordinated related party debt - Starlight Marketing Development, Ltd.

-

816,753

Note payable related party - Ram Light Management, Ltd.

673,825

-

Subordinated related party debt - Ram Light Management, Ltd.

-

1,683,247

Due to related party - Ram Light Management, Ltd

583,247

-

Due to related party - Starfair Electronics Company, Ltd.

-

17,738

Due to related party - Starlight R&D, Ltd.

1,997,389

194,678

Due to related party - Cosmo Communications Canada, Inc.

-

50,441

Due to related party - Starlight Consumer Electronics Co., Ltd.

257,436

1,051,913

Due to related parties - Other Starlight Group Companies

-

3,534

Accrued expenses

1,326,211

446,314

Revolving line of credit

2,425,424

-

Current portion of capital lease

12,488

12,076

Obligations to clients for returns and allowances

275,258

469,838

Warranty provisions

747,210

235,172

        Total Current Liabilities

12,695,895

8,007,458






Long-term capital lease, net of current portion

4,288

13,706

Note payable related party debt - Ram Light Management, Ltd.




net of current portion

426,175

-

Subordinated related party debt - Starlight Marketing Development, Ltd.

1,924,431

-

          Total Liabilities

15,050,789

8,021,164






Shareholders' Equity






Preferred stock, $1.00 par value; 1,000,000 shares authorized; no  






  shares issued and outstanding

-

-

Common stock, Class A, $0.01 par value;  100,000 shares






  authorized; no shares issued and outstanding

-

-

Common stock, Class B, $0.01 par value;  100,000,000 shares authorized;  






   38,117,517 and 38,070,642 shares issued and outstanding, respectively

381,175

380,706

Additional paid-in capital

19,305,965

19,262,127

Accumulated deficit

(15,077,830)

(15,933,335)

        Total Shareholders' Equity


4,609,310

3,709,498

        Total Liabilities and Shareholders' Equity

$

19,660,099

$

11,730,662






See notes to the condensed consolidated financial statements.

The Singing Machine Company, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


























For Three Months Ended

For Nine Months Ended




December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013






















Net Sales

$       18,086,370

$       16,814,794

$       36,583,388

$       29,062,931











Cost of Goods Sold

14,034,505

12,707,912

28,853,864

22,251,890











Gross Profit

4,051,865

4,106,882

7,729,524

6,811,041











Operating Expenses







Selling expenses

1,078,905

1,218,688

2,690,939

2,401,528

General and administrative expenses

1,258,643

1,344,634

3,454,761

3,154,577

Depreciation and amortization

33,969

54,506

96,173

112,483

Total Operating Expenses

2,371,517

2,617,828

6,241,873

5,668,588











Income from Operations

1,680,348

1,489,054

1,487,651

1,142,453











Other Expenses







Interest expense

(118,713)

(41,102)

(200,198)

(50,810)

Financing costs

(18,519)

-

(33,952)

-

Net Other Expenses

(137,232)

(41,102)

(234,150)

(50,810)











Income before income tax provision

1,543,116

1,447,952

1,253,501

1,091,643











Income tax provision

(509,252)

(627,278)

(397,995)

(488,084)











Net Income

$         1,033,864

$            820,674

$            855,506

$            603,559











Income per Common Share







Basic


$                 0.03

$                 0.02

$                 0.02

$                 0.02

Diluted

$                 0.03

$                 0.02

$                 0.02

$                 0.02











Weighted Average Common and Common









Equivalent Shares:







Basic

38,117,517

38,070,642

38,090,756

38,053,458

Diluted

38,645,514

38,650,355

38,589,350

38,633,171











See  notes to the condensed consolidated financial statements.

The Singing Machine Company, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)





For Nine Months Ended





December 31, 2014

December 31, 2013
















Cash flows from operating activities:




Net Income

$

855,506

$

603,559

Adjustments to reconcile net income to net cash (used in) provided by operating activities:





Depreciation


96,173

112,483


Amortization of deferred financing costs

33,952

-


Change in inventory reserve


(103,000)

25,000


Change in allowance for bad debts

81,523

116,426


Loss from disposal of property and equipment

-

4,479


Stock based compensation

44,307

74,953


Warranty provisions

512,038

558,495


Change in net deferred tax assets

397,995

488,084

Changes in operating assets and liabilities:




     (Increase) Decrease in:





Accounts receivable

(6,942,761)

(5,085,599)


Due from Crestmark Bank

-

(212,505)


Inventories

(1,710,616)

(1,625,394)


Prepaid expenses and other current assets

(1,325)

(1,877)


Other non-current assets

6,236

142,326

      Increase (Decrease) in:





Accounts payable


2,479,331

3,078,953


Net due to related parties

368,359

2,172,814


Accrued expenses

879,896

624,222


Obligations to clients for returns and allowances

(194,580)

(20,572)



Net cash (used in) provided by operating activities

(3,196,966)

1,055,847

Cash flows from investing activities:




Purchase of property and equipment

(35,599)

(207,178)

Refund (deposit) of restricted cash

138,042

(137,967)



Net cash provided by (used by) investing activities

102,443

(345,145)

Cash flows from financing activities:




Net proceeds from revolving line of credit

2,425,424

-

Net proceeds from Crestmark Bank credit facility

19,638

-

Payment of deferred financing costs

(222,231)

-

Payments on long-term capital lease

(9,006)

(7,670)



Net cash provided by (used in) financing activities

2,213,825

(7,670)

Net change in cash


(880,698)

703,032








Cash at beginning of year

1,354,099

1,652,996

Cash at end of period

$

473,401

$

2,356,028








Supplemental Disclosures of Cash Flow Information:




Cash paid for interest

$

170,729

$

50,810

 Supplemental Disclosures of Non-cash Investing and Financing Activities:






 Conversion of related party payables to note payable

$

1,100,000

$

-

 Property and equipment purchased under capital lease

$

-

$

36,388








See notes to the condensed consolidated financial statements.

SOURCE The Singing Machine Company, Inc.

Related Links

http://www.singingmachine.com

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