Singing Machine Announces Record Earnings in Fiscal 2016 Annual Report
/EINPresswire.com/ -- FORT LAUDERDALE, FL -- (Marketwired) -- 06/29/16 -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTCQB: SMDM) -- the North American leader in consumer karaoke products -- today announced record-breaking financial results for its fiscal year ended March 31, 2016.
Fiscal Year End Highlights:
- Earnings per share of $0.04 for the March 31, 2016 fiscal year end.
- Net sales for the fiscal year increased by 24% to $48.9 million.
- Gross profit margins increased by 3.3% to 24.4%.
- Gross profits increased by $3.6 million to $11.9 million.
- Product returns reduced to historical low of 5.5% of gross sales.
- Inventory decreased by 50% to $3.7 million.
- Net income for the fiscal year end increased to $1.7 million.
Singing Machine reports net sales of approximately $48.9 million for the March 31, 2016 fiscal year end period, an increase of 24% from the prior year ($39.3 million). The increase in net sales is attributable to an increase in sales to the Company's major retailers caused by successful marketing campaigns and increased consumer demand. The increase is also attributable to an expansion in international sales to the United Kingdom and other new territories. E-commerce sales through the Company's online platforms continue to grow, accounting for 18% of the increase.
Gross profit increased by $3.6 million to $11.9 million, or 24.4% of net sales compared to $8.3 million or 21.1% of net sales reported in the prior year. The increase in gross profit margin is primarily attributable to the Company successfully negotiating price reductions on select high volume products and the Company's ability to command a higher margin on its digital download line of products.
Total operating expenses for FYE March 2016 were $10.0 million compared to $7.7 million in the prior year. The increase is primarily attributable to the rise in selling expenses due to the 24% increase in overall net sales.
As a result, the Company reported income from operations of $1.9 million for the fiscal year ended March 31, 2016, compared to $0.6 million reported in the prior year. The Company reversed its remaining deferred tax asset valuation allowance of approximately $0.8 million based upon the Company's history of profitability and Management's assessment of the current business climate and expected future profits. As a result, the Company recognized a net income tax benefit of $0.1 million. Consequently, net income for the year was $1.7 million, compared to $0.2 million for the 2015 fiscal year end and earnings per share for the fiscal year end was $0.04 cents.
Management Commentary:
Gary Atkinson, Singing Machine CEO commented, "Fiscal 2016 was a banner year for Singing Machine. The Company has now recorded profits in five consecutive years and demonstrated continued growth. We drove improvements in all financial areas including sales growth, margin improvement, inventory reduction, and significant improvement in bottom line earnings. In addition, we realized a historically low rate of product returns (5.5% of gross sales compared to historical average of 8.0% of gross sales), signaling that our customers are thrilled with the new digital line of products."
Atkinson added, "In Fiscal 2016 we generated heavy promotion and distribution on our Classic line of karaoke products which was carried by almost every single major big box retailer. We also successfully launched a new digital download line of products that generated an average revenue stream of over $27 per paying user, not including recurring mobile App revenue that has increased 75% from the prior year. In addition, we have confirmed a backlog of orders on our digital download products for this coming year that represents a 400% increase on last year's numbers."
"As we move into Fiscal 2017, we enter the fiscal year with the best retailers carrying Singing Machine products year-round, increasing international demand and establishing a strong cash position, a significantly improved balance sheet, and a product development strategy that will focus on driving more music sales to our various music revenue platforms."
Earnings Call Information:
The Company will host a conference call tomorrow, Thursday, June 30, beginning at 10:00 am Eastern time to discuss these results and answer questions. If you would like to participate on the call, please dial 800-894-5910 and use conference ID: SMDM.
An audio rebroadcast of the call will be available later in the day after the earnings call and can be heard at: www.singingmachine.com/investors.
About The Singing Machine
Based in the U.S., Singing Machine® is the North American leader in consumer karaoke products. The first to provide karaoke systems for home entertainment in the United States, the Company sells its products worldwide through major mass merchandisers and on-line retailers. 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 12,000 songs for streaming and download. Singing Machine products are sold through most 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, 2016. 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.
The Singing Machine Company, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 31, March 31,
2016 2015
------------ ------------
Assets
Current Assets
Cash $ 2,116,490 $ 116,286
Accounts receivable, net of allowances of
$51,179 and $174,131, respectively 1,381,789 1,466,168
Due from PNC Bank 184,392 137,415
Accounts receivable related party -
Starlight Consumer Electronics USA, Inc. 2,820 -
Accounts receivable related party -
Starlight R&D, Ltd. 4,255 -
Accounts receivable related party - Cosmo
Communications Canada, Ltd 19,077 -
Inventories, net 3,690,975 7,448,167
Prepaid expenses and other current assets 115,601 92,609
Deferred financing costs 74,077 74,077
------------ ------------
Total Current Assets 7,589,476 9,334,722
Property and equipment, net 430,602 466,571
Other non-current assets 11,394 11,394
Deferred financing costs, net of current
portion 21,606 95,683
Deferred tax asset 2,408,531 2,305,555
------------ ------------
Total Assets $ 10,461,609 $ 12,213,925
============ ============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 722,213 $ 2,767,180
Note payable related party - Ram Light
Management, Ltd. 696,612 496,496
Due to related party - Ram Light Management,
Ltd 400,000 583,247
Due to related party - Starlight R&D, Ltd. - 554,031
Due to related party - Cosmo Communications
Canada, Inc. - 40,256
Due to related party - Starlight Consumer
Electronics Co., Ltd. - 208,672
Accrued expenses 650,115 452,651
Current portion of capital lease 1,078 12,628
Obligations to customers for returns and
allowances 121,092 399,419
Warranty provisions 292,500 197,873
------------ ------------
Total Current Liabilities 2,883,610 5,712,453
Long-term capital lease, net of current
portion - 1,078
Note payable related party debt - Ram Light
Management, Ltd. net of current portion - 603,504
Accrued expenses, net of current portion - 46,495
Subordinated related party debt - Starlight
Marketing Development, Ltd. 1,924,431 1,924,431
------------ ------------
Total Liabilities 4,808,041 8,287,961
------------ ------------
Commitments and Contengencies
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; 38,181,635
and 38,117,517 shares issued and
outstanding, respectively 381,816 381,175
Additional paid-in capital 19,337,939 19,307,966
Subscriptions receivable (6,400)
Accumulated deficit (14,059,787) (15,763,177)
------------ ------------
Total Shareholders' Equity 5,653,568 3,925,964
------------ ------------
Total Liabilities and Shareholders' Equity $ 10,461,609 $ 12,213,925
============ ============
See notes to the consolidated financial statements.
The Singing Machine Company, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Years Ended
-------------------------------------
March 31, March 31, March 31,
2016 2015 2014
----------- ----------- -----------
Net Sales $48,856,544 $39,308,281 $31,379,629
Cost of Goods Sold 36,937,654 30,997,211 24,273,038
----------- ----------- -----------
Gross Profit 11,918,890 8,311,070 7,106,591
Operating Expenses
Selling expenses 4,656,003 3,104,598 2,402,153
General and administrative expenses 5,153,950 4,507,606 4,257,335
Depreciation 171,785 130,254 168,138
----------- ----------- -----------
Total Operating Expenses 9,981,738 7,742,458 6,827,626
----------- ----------- -----------
Income from Operations 1,937,152 568,612 278,965
Other Expenses
Interest expense (261,061) (253,282) (53,446)
Financing costs (74,077) (52,471) -
----------- ----------- -----------
Net Other Expenses (335,138) (305,753) (53,446)
----------- ----------- -----------
Income before income tax (provision)
benefit 1,602,014 262,859 225,519
Income tax benefit (provision) 101,376 (92,701) 778,797
----------- ----------- -----------
Net Income $ 1,703,390 $ 170,158 $ 1,004,316
=========== =========== ===========
Income per Common Share
Basic $ 0.04 $ 0.00 $ 0.03
Diluted $ 0.04 $ 0.00 $ 0.03
Weighted Average Common and Common
Equivalent Shares:
Basic 38,146,391 38,097,226 38,057,628
Diluted 38,597,862 38,602,577 38,647,290
See Notes to the consolidated financial statements.
The Singing Machine Company, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
-------------------------------------
March 31, March 31, March 31,
2016 2015 2014
----------- ----------- -----------
Cash flows from operating activities:
Net Income $ 1,703,390 $ 170,158 $ 1,004,316
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation 171,785 130,254 168,138
Amortization of deferred
financing costs 74,077 52,471 -
Change in inventory reserve 339,000 (217,000) 135,000
Change in allowance for bad debts (122,952) 1,666 (7,841)
Loss from disposal of property
and equipment - - 4,479
Stock-based compensation 24,214 46,308 107,351
Change in net deferred tax assets (102,976) 92,701 (778,797)
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable 207,331 (512,283) 152,765
Due from Crestmark Bank - 19,638 (19,638)
Due from PNC Bank (46,977) (137,415) -
Accounts receivable related
parties (26,152)
Inventories 3,418,192 (1,403,554) (1,839,206)
Prepaid expenses and other
current assets (22,992) (1,521) (6,647)
Other non-current assets - 6,236 142,326
Increase (decrease) in:
Accounts payable (2,044,967) 849,104 782,951
Due to related parties (986,206) (147,825) 345,679
Accrued expenses 150,969 52,832 (239,698)
Warranty provisions 94,627 (37,299) 19,701
Obligations to customers for
returns and allowances (278,327) (70,419) 93,549
----------- ----------- -----------
Net cash provided by (used in)
operating activities 2,552,036 (1,105,948) 64,428
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (135,816) (35,600) (214,677)
Refund (deposit) of restricted cash - 138,042 (138,042)
----------- ----------- -----------
Net cash (used in) provided by
investing activities (135,816) 102,442 (352,719)
----------- ----------- -----------
Cash flows from financing activities:
Payment on note payable related
party - Ram Light Management, Ltd. (403,388) - -
Payment of deferred financing costs - (222,231) -
Payments on long-term capital lease (12,628) (12,076) (10,606)
----------- ----------- -----------
Net cash used in financing
activities (416,016) (234,307) (10,606)
----------- ----------- -----------
Net change in cash 2,000,204 (1,237,813) (298,897)
Cash at beginning of year 116,286 1,354,099 1,652,996
----------- ----------- -----------
Cash at end of year $ 2,116,490 $ 116,286 $ 1,354,099
=========== =========== ===========
Supplemental Disclosures of Cash Flow
Information:
----------- ----------- -----------
Cash paid for interest $ 270,193 $ 180,371 $ 53,446
=========== =========== ===========
Cash paid for income taxes $ - $ - $ 13,348
=========== =========== ===========
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 consolidated financial statements.
Investor Relations Contact:
Brendan Hopkins
(407) 645-5295
investors@singingmachine.com
www.singingmachine.com
www.singingmachine.com/investors
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