SMDM - Singing Machine Reports Fiscal 2019 Annual Earnings Report
Fort Lauderdale, FL, July 01, 2019 (GLOBE NEWSWIRE) -- The Singing Machine Company, Inc. (“Singing Machine” or the “Company”) (OTCQX: SMDM) – the North American leader in consumer karaoke products – today announced its financial results for its full fiscal year ended March 31, 2019.
Full Fiscal 2019 Highlights:
- Net sales for the fiscal year of $46.5 million.
- Gross profit of $11.8 million or 25.3% of total revenue compared to 25.8% in the prior year.
- Income from operations $1.0 million for the fiscal year.
- Net income improved by 315% to $0.63 million compared to $0.15 million in the prior year.
- Inventory reduced by 30% from $8.5 million in the prior year to $6.0 million.
Singing Machine reports net sales of approximately $46.5 million for the March 31, 2019 fiscal year-end period, compared to approximately $60.8 million in the prior year. The decrease in net sales is primarily due to the loss of Toys ‘R’ Us as a major customer.
Gross profit margin held steady to 25.3% compared to 25.8% in the prior year. Due to the decrease in net sales, gross profit was reported as $11.8 million compared to $15.7 million in the prior year.
Total operating expenses decreased by 27% from $14.7 million in the prior year to approximately $10.7 million for the full fiscal year. A majority of the decrease was due to a partial recovery of the Toys ‘R’ Us bankruptcy administrative claims of approximately $0.5 million compared to a writeoff of bad debt of $3.1 million in the prior year. General and administrative expenses were also reduced by approximately $0.6 million compared to the prior year due to general expense reductions and an increase in service revenue from the Company’s third-party logistics operation.
As a result of the above, income from operations held approximately the same as the prior year at $1.0 million. Net income for the full year was reported as $0.6 million compared to $0.1 million in the prior year.
Management Commentary:
Gary Atkinson, Singing Machine CEO commented, “Fiscal 2019 was a challenging year. We faced numerous market disruptions, most notably the loss of Toys ‘R’ Us. The ongoing trade war between China and the United States continues to cast uncertainty on the supply chain and retail landscapes. However, despite the challenging business environment, the Company accomplished a lot of positive things including maintaining gross margins from last year, reducing inventory by over $2.0 million to generate more cash, maintaining profitability, and signing some big licensing deals.” Atkinson added, “We’re extremely excited for our first big licensed product launch of Carpool Karaoke The Mic officially debuting this month.”
Bernardo Melo, Vice President of Sales, commented, “The overall popularity of music, singing, and karaoke could not be hotter right now. We continue to see the proliferation of singing and karaoke all throughout popular culture and media. Domestically, we had success opening up some new retailers and new departments within existing channels. While those additions did not replace the lost business from Toys ‘R’ Us, we saw them as meaningful new opportunities to grow market share. Fiscal 2019 also saw some positive developments internationally. We made great strides to expand our distribution abroad to new countries like Australia, Sweden, Finland, and Norway, Germany, and Spain.”
Earnings Call Information:
The Company will host a conference call today, Monday, July 1, 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 (877) 876-9173 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 13,000 songs for streaming and download. Singing Machine products are sold through most major retailers in North America and internationally. See www.singingmachine.com for more details.
Investor Relations Contact:
Brendan Hopkins
(407) 645-5295
investors@singingmachine.com
www.singingmachine.com
www.singingmachine.com/investors
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, 2019. 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, 2019 |
| March 31, 2018 |
| Assets |
| Current Assets |
| Cash |
| $ |
| 211,408 |
| $ |
| 813,908 |
| Accounts receivable, net of allowances of $51,096 and $82,102, respectively |
| 1,769,404 |
| 1,066,839 |
| Due from PNC Bank |
| 2,236,779 |
| 6,212 |
| Accounts receivable related party - Starlight Consumer Electronics USA, Inc. |
| - |
| 7,054 |
| Accounts receivable related party - Winglight Pacific, Ltd |
| 288,941 |
| 1,150,104 |
| Inventories, net |
| 6,024,311 |
| 8,536,934 |
| Prepaid expenses and other current assets |
| 274,278 |
| 137,970 |
| Deferred financing costs |
| 13,333 |
| 13,333 |
| Total Current Assets |
| 10,818,454 |
| 11,732,354 |
| Property and equipment, net |
| 522,910 |
| 450,305 |
| Deferred financing costs, net of current portion |
| 3,333 |
| 16,667 |
| Deferred tax assets |
| 758,366 |
| 937,137 |
| Other non-current assets |
| 90,082 |
| 11,523 |
| Total Assets |
| $ |
| 12,193,145 |
| $ |
| 13,147,986 |
| Liabilities and Shareholders’ Equity |
| Current Liabilities |
| Accounts payable |
| $ |
| 842,708 |
| $ |
| 1,614,748 |
| Accrued expenses |
| 950,773 |
| 701,932 |
| Current portion of bank term note payable |
| 125,000 |
| 500,000 |
| Due to related party - Starlight Electronics Co., Ltd |
| - |
| 210,756 |
| Due to related party - Starlight R&D, Ltd. |
| - |
| 113,116 |
| Due to related party - Merrygain Holding Co., Ltd. |
| - |
| 89,803 |
| Refunds due to customers |
| 31,075 |
| 445,484 |
| Reserve for sales returns |
| 896,154 |
| 726,000 |
| Current portion of capital leases |
| 14,414 |
| - |
| Current portion of subordinated related party debt - Starlight Marketing Development, Ltd. |
| 815,367 |
| 689,792 |
| Total Current Liabilities |
| 3,675,491 |
| 5,091,631 |
| Bank term note payable, net of current portion |
| - |
| 125,000 |
| Capital leases, net of current portion |
| 17,499 |
| - |
| Subordinated related party debt - Starlight Marketing Development, Ltd., net of current portion |
| - |
| 125,575 |
| Total Liabilities |
| 3,692,990 |
| 5,342,206 |
| Commitments and Contingencies |
| 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; 38,464,753 and 38,282,028 shares issued and outstanding, respectively |
| 384,648 |
| 382,820 |
| Additional paid-in capital |
| 19,687,263 |
| 19,624,063 |
| Subscriptions receivable - related party |
| (2,200 |
| ) |
| - |
| Accumulated deficit |
| (11,569,556 |
| ) |
| (12,201,103 |
| ) |
| Total Shareholders’ Equity |
| 8,500,155 |
| 7,805,780 |
| Total Liabilities and Shareholders’ Equity |
| $ |
| 12,193,145 |
| $ |
| 13,147,986 |
See notes to the consolidated financial statements
The Singing Machine Company, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
| For the Years Ended |
| March 31, 2019 |
| March 31, 2018 |
| Net Sales |
| $ |
| 46,482,998 |
| $ |
| 60,808,050 |
| Cost of Goods Sold |
| 34,709,799 |
| 45,135,272 |
| Gross Profit |
| 11,773,199 |
| 15,672,778 |
| Operating Expenses |
| Selling expenses |
| 5,117,235 |
| 4,875,238 |
| General and administrative expenses |
| 5,790,019 |
| 6,371,541 |
| Bad debt (recovery) expense |
| (442,671 |
| ) |
| 3,203,677 |
| Depreciation |
| 259,662 |
| 219,968 |
| Total Operating Expenses |
| 10,724,245 |
| 14,670,424 |
| Income from Operations |
| 1,048,954 |
| 1,002,354 |
| Other Expenses |
| - |
| Interest expense |
| (244,593 |
| ) |
| (273,385 |
| ) |
| Finance costs |
| (13,334 |
| ) |
| (31,606 |
| ) |
| Total Other Expenses |
| (257,927 |
| ) |
| (304,991 |
| ) |
| Income Before Income Tax Provision |
| 791,027 |
| 697,363 |
| Income Tax Provision |
| (159,480 |
| ) |
| (544,877 |
| ) |
| Net Income |
| $ |
| 631,547 |
| $ |
| 152,486 |
| Net Income per Common Share |
| Basic |
| $ |
| 0.02 |
| $ |
| 0.00 |
| Diluted |
| $ |
| 0.02 |
| $ |
| 0.00 |
| Weighted Average Common and Common Equivalent Shares: |
| Basic |
| 38,360,883 |
| 38,274,432 |
| Diluted |
| 39,244,250 |
| 39,553,649 |
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, 2019 |
| March 31, 2018 |
| Cash flows from operating activities |
| Net Income |
| $ |
| 631,547 |
| $ |
| 152,486 |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
| Depreciation |
| 259,662 |
| 219,968 |
| Amortization of deferred financing costs |
| 13,334 |
| 31,606 |
| Change in inventory reserve |
| (26,000 |
| ) |
| (420,000 |
| ) |
| Change in allowance for bad debts |
| (31,006 |
| ) |
| (50,481 |
| ) |
| Stock based compensation |
| 52,428 |
| 211,503 |
| Change in net deferred tax assets |
| 178,771 |
| 542,072 |
| Changes in operating assets and liabilities: |
| Accounts receivable |
| (671,559 |
| ) |
| 639,160 |
| Due from PNC Bank |
| (2,230,567 |
| ) |
| 236,647 |
| Accounts receivable - related parties |
| 868,217 |
| (1,157,158 |
| ) |
| Inventories |
| 2,538,623 |
| (2,314,288 |
| ) |
| Prepaid expenses and other current assets |
| (136,308 |
| ) |
| (56,692 |
| ) |
| Other non-current assets |
| (78,559 |
| ) |
| - |
| Accounts payable |
| (772,040 |
| ) |
| 232,878 |
| Accrued expenses |
| 248,841 |
| 75,601 |
| Due to related parties |
| (413,675 |
| ) |
| 413,675 |
| Refunds due to customers |
| (414,409 |
| ) |
| 407,024 |
| Reserve for sales returns |
| 170,154 |
| 126,000 |
| Net cash provided by (used in) operating activities |
| 187,454 |
| (709,999 |
| ) |
| Cash flows from investing activities |
| Purchase of property and equipment |
| (288,741 |
| ) |
| (257,468 |
| ) |
| Net cash used in investing activities |
| (288,741 |
| ) |
| (257,468 |
| ) |
| Cash flows from financing activities |
| Proceeds from bank term note |
| - |
| 1,000,000 |
| Payment of bank term note |
| (500,000 |
| ) |
| (375,000 |
| ) |
| Proceeds from exercise of stock options |
| 10,400 |
| - |
| Payment of deferred financing costs |
| - |
| (40,000 |
| ) |
| Payment on subordinated debt - related party |
| - |
| (1,109,064 |
| ) |
| Payments on capital leases |
| (11,613 |
| ) |
| - |
| Net cash used in financing activities |
| (501,213 |
| ) |
| (524,064 |
| ) |
| Net change in cash |
| (602,500 |
| ) |
| (1,491,531 |
| ) |
| Cash at beginning of year |
| 813,908 |
| 2,305,439 |
| Cash at end of year |
| $ |
| 211,408 |
| $ |
| 813,908 |
| Supplemental disclosures of cash flow information: |
| Cash paid for interest |
| $ |
| 230,342 |
| $ |
| 301,748 |
| Cash paid for income taxes |
| $ |
| - |
| $ |
| 30,000 |
| Equipment purchased under capital lease |
| $ |
| 43,526 |
| $ |
| - |
See notes to the consolidated financial statements