FORT LAUDERDALE, Fla., June 28, 2018 (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, 2018.
Full Fiscal 2018 Highlights:
- Net sales for the fiscal year increased by 15% to $60.8 million.
- The Company wrote off $3.1 million bad debt expense due to the Toys ‘R’ Us bankruptcy and liquidation.
- Gross profit of $15.7 million.
- Income from operations $1.0 million for the fiscal year.
- Positive net income of $0.15 million.
- Reduced $1.2 million of related-party debt during the fiscal year.
Singing Machine reports net sales of approximately $60.8 million for the March 31, 2018 fiscal year-end period, compared to approximately $52.9 million in the prior year. The increase in net sales is primarily due to an increase in hardware sales to the Company’s top North American retailers, new distribution into a brand new national mass market electronics retailer, strong demand online for karaoke products, and expanded international growth in the United Kingdom.
Gross profit margin decreased slightly by 0.3% from 26.1% to 25.8%. Due to the increase in net sales, gross profit increased to $15.7 million compared to $13.8 million in the prior year.
Total operating expenses increased from $10.9 million in the prior year to approximately $14.7 million for Fiscal 2018. A majority of the increase was due to the bankruptcy of Toys ‘R’ Us who announced Chapter 7 liquidation in April 2018. The Company wrote off $3.1 million, which represents its total exposure to the Toys ‘R’ Us bankruptcy.
As a result of the above, income from operations decreased to $1.0 million from $3.0 million in the prior year. The Company reported an income tax provision of $0.54 million which included a one-time valuation adjustment to its deferred tax assets of approximately $0.33 million due to the newly signed Tax Cuts and Jobs Act. The Company still retains approximately $0.9 million in deferred tax assets going forward.
Despite writing off $3.1 million from the Toys ‘R’ Us bankruptcy, the Company still reported positive net income for the year of $0.15 million.
Management Commentary:
Gary Atkinson, Singing Machine CEO commented, “We’re pleased with the 15% top line sales growth we posted for Fiscal 2018. It marks five consecutive years of annual growth. Unfortunately, due to the Toys ‘R’ Us bankruptcy and liquidation, we took a $3.1 million bad debt charge which represents the full exposure related to the bankruptcy. We do not anticipate taking any future bad debt write-downs associated with Toys ‘R’ Us in coming quarters. Despite the bad debt write off, we still remained profitable for the year which reflects tremendously on our position in the market and the popularity of karaoke.”
Bernardo Melo, Vice President of Sales, commented, “Given the liquidation of Toys ‘R’ Us, we are taking aggressive steps to increase our presence at other major retail channels. The demand for in-home karaoke remains strong and we expect other retailers to soak up the demand. Outside North America, we’re well positioned to become the global leader in home karaoke as we expand our efforts to grow internationally. During this year, we’ve signed aboard numerous new distributors around the world in territories like Australia, Central America, South America, Japan, and Mexico and are actively looking to add more.”
Earnings Call Information:
The Company will host a conference call today, Thursday, June 28, 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) 876-9177 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, 2018. 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, 2018 | March 31, 2017 | ||||
| Assets | |||||
| Current Assets | |||||
| Cash | $ | 813,908 | $ | 2,305,439 | |
| Accounts receivable, net of allowances of $82,102 and | |||||
| $132,583 respectively | 1,066,839 | 1,655,518 | |||
| Due from PNC Bank | 6,212 | 242,859 | |||
| Accounts receivable related party - Starlight Consumer Electronics USA, Inc. | 7,054 | - | |||
| Accounts receivable related party - Winglight Pacific, Ltd | 1,150,104 | - | |||
| Inventories, net | 8,057,774 | 5,426,346 | |||
| Prepaid expenses and other current assets | 137,970 | 81,278 | |||
| Deferred financing costs | 13,333 | 21,606 | |||
| Total Current Assets | 11,253,194 | 9,733,046 | |||
| Property and equipment, net | 450,305 | 412,805 | |||
| Other non-current assets | 11,523 | 11,523 | |||
| Deferred financing costs, net of current portion | 16,667 | - | |||
| Deferred tax assets | 937,137 | 1,479,209 | |||
| Total Assets | $ | 12,668,826 | $ | 11,636,583 | |
| Liabilities and Shareholders' Equity | |||||
| Current Liabilities | |||||
| Accounts payable | $ | 1,614,748 | $ | 1,381,870 | |
| Current portion of bank term note payable | 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 | - | |||
| Accrued expenses | 701,932 | 626,331 | |||
| Obligations to customers for returns and allowances | 445,484 | 38,460 | |||
| Warranty provisions | 246,840 | 223,700 | |||
| Current portion of subordinated related party debt - Starlight Marketing Development, Ltd. | 689,792 | 1,924,431 | |||
| Total Current Liabilities | 4,612,471 | 4,194,792 | |||
| Bank term note payable, net of current portion | 125,000 | - | |||
| Subordinated related party debt - Starlight Marketing Development, Ltd., | |||||
| net of current portion | 125,575 | - | |||
| Total Liabilities | 4,863,046 | 4,194,792 | |||
| 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; | |||||
| 38,282,028 and 38,259,303 shares issued and outstanding, respectively | 382,820 | 382,593 | |||
| Additional paid-in capital | 19,624,063 | 19,412,787 | |||
| Accumulated deficit | (12,201,103) | (12,353,589) | |||
| Total Shareholders' Equity | 7,805,780 | 7,441,791 | |||
| Total Liabilities and Shareholders' Equity | $ | 12,668,826 | $ | 11,636,583 | |
| The Singing Machine Company, Inc. and Subsidiaries | |||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||
| For the Years Ended | |||||||||
| March 31, 2018 | March 31, 2017 | ||||||||
| Net Sales | $ | 60,808,050 | $ | 52,919,228 | |||||
| Cost of Goods Sold | 45,135,272 | 39,082,802 | |||||||
| Gross Profit | 15,672,778 | 13,836,426 | |||||||
| Operating Expenses | |||||||||
| Selling expenses | 4,875,238 | 5,035,787 | |||||||
| General and administrative expenses | 6,371,541 | 5,564,453 | |||||||
| Bad debt expense | 3,203,677 | 83,583 | |||||||
| Depreciation | 219,968 | 166,025 | |||||||
| Total Operating Expenses | 14,670,424 | 10,766,265 | |||||||
| Income from Operations | 1,002,354 | 3,070,161 | |||||||
| Other Expenses | |||||||||
| Interest expense | (273,385) | (189,230) | |||||||
| Finance costs | (31,606) | (74,077) | |||||||
| Total Other Expenses | (304,991) | (263,307) | |||||||
| Income Before Income Tax Provision | 697,363 | 2,806,854 | |||||||
| Income Tax Provision | (544,877) | (1,017,073) | |||||||
| Net Income | $ | 152,486 | $ | 1,789,781 | |||||
| Income per Common Share | |||||||||
| Basic and Diluted | $ | 0.00 | $ | 0.05 | |||||
| Diluted | $ | 0.00 | $ | 0.05 | |||||
| Weighted Average Common and Common | |||||||||
| Equivalent Shares: | |||||||||
| Basic and Diluted | 38,274,432 | 38,242,535 | |||||||
| Diluted | 39,553,649 | 39,422,608 | |||||||
| The Singing Machine Company, Inc. and Subsidiaries | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| For the Years Ended | ||||||||
| March 31, 2018 | March 31, 2017 | |||||||
| Cash flows from operating activities | ||||||||
| Net Income | $ | 152,486 | $ | 1,706,198 | ||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation | 219,968 | 166,025 | ||||||
| Amortization of deferred financing costs | 31,606 | 74,077 | ||||||
| Change in inventory reserve | (420,000) | (60,000) | ||||||
| Change in allowance for bad debts | (50,481) | 81,404 | ||||||
| Stock based compensation | 211,503 | 63,745 | ||||||
| Change in net deferred tax assets | 542,072 | 929,322 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 639,160 | (355,133) | ||||||
| Due from PNC Bank | 236,647 | (58,467) | ||||||
| Accounts receivable - related parties | (1,157,158) | (1,675,371) | ||||||
| Inventories | (2,211,428) | 26,152 | ||||||
| Prepaid expenses and other current assets | (56,692) | 34,323 | ||||||
| Other non-current assets | - | (129) | ||||||
| Accounts payable | 232,878 | 659,657 | ||||||
| Due to related parties | 413,675 | (400,000) | ||||||
| Accrued expenses | 75,601 | (23,784) | ||||||
| Obligations to clients for returns and allowances | 407,024 | (82,632) | ||||||
| Warranty provisions | 23,140 | (68,800) | ||||||
| Net cash (used in) provided by operating activities | (709,999) | 1,016,587 | ||||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | (257,468) | (148,228) | ||||||
| Net cash used in by investing activities | (257,468) | (148,228) | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds from bank term note | 1,000,000 | - | ||||||
| Payment of bank term note | (375,000) | - | ||||||
| Proceeds from subscriptions receivable | - | 6,400 | ||||||
| Proceeds from exercise of stock options | - | 11,880 | ||||||
| Payment of deferred financing costs | (40,000) | - | ||||||
| Payment on note payable related party - Ram Light Management, Ltd. | - | (696,612) | ||||||
| Payment on subordinated debt - related party | (1,109,064) | - | ||||||
| Payments on capital lease | - | (1,078) | ||||||
| Net cash used in financing activities | (524,064) | (679,410) | ||||||
| Net change in cash | (1,491,531) | 188,949 | ||||||
| Cash at beginning of year | 2,305,439 | 2,116,490 | ||||||
| Cash at end of year | $ | 813,908 | $ | 2,305,439 | ||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid for interest | $ | 301,748 | $ | 253,008 | ||||
| Cash paid for income taxes | $ | 30,000 | $ | 58,955 | ||||