Singing Machine Announces 3rd Consecutive Year of Profit in Fiscal 2014 Annual Report - NBC12.com - Richmond, VA News

Singing Machine Announces 3rd Consecutive Year of Profit in Fiscal 2014 Annual Report

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SOURCE The Singing Machine Company, Inc.

FORT LAUDERDALE, Fla., June 30, 2014 /PRNewswire/ -- The Singing Machine Company, Inc.  ("Singing Machine" or the "Company") (OTCBB: SMDM) today announced financial results for its fiscal year ended March 31, 2014.

For the full 2014 fiscal year, the Company reported approximate net sales of $31.4 million, gross profits of $7.1 million, and net income of $1.0 million dollars ($0.03 cents per share).  

Gary Atkinson, Singing Machine CEO commented, "Singing Machine has now recorded profits for three consecutive years and shown the ability to sustain and digest the sales growth that has been achieved over the last three years, while positioning the Company for renewed sales growth in the coming year.  Though our net sales for FYE March 2014 reflected a decline in reported net sales from the prior year, roughly $2.1 million of the FYE March 2013 reported net sales were for customer inventory, as one of our major retailers transitioned from carrying our products seasonally to year-around.  As such, we estimate that Singing Machine product sales at the consumer level actually increased in FYE March 2014 over the FYE March 2013."  

Atkinson continued, "FYE March 2014 was a highly productive year for the Company, perhaps more strategically than financially.  We are hopeful the financial impact will be more apparent in next year's results.  Singing Machine has consolidated its position as the market leader for consumer karaoke systems in North America.  New retail relationships are being added to our distribution channels, representing thousands of new stores carrying our products.  Retailers that previously did not stock karaoke products are now desiring to do so and carrying our products exclusively.  A number of our retailers that sold our products only seasonally are now transitioning to year-around sales due to the stable demand for karaoke entertainment.  Our Singing Machine Home™ product that was test marketed last holiday season is expected to be ready for roll-out marketing in the fall.  Also we are progressing in plans to expand our financial credit facilities with new relationships that provide for future flexibility for growth.  We intend to update shareholders once our plans result in reportable events.  We are committed to growing shareholder value."

Net sales for FYE March 2014 were $31.4 million compared to $34.4 million in the same period last year, a decrease of $3.0 million (8.7% decrease).  The decline in net sales reflects several factors, among these (i) a major retail customer transitioned to year-around sales in FYE 2013 had purchased $2.1 million of goods held in its inventory as of March 2013 that impacted the timing of purchases for FYE March 2014 and (ii) an estimated $0.7 million in sales were lost due to factory audit and delays in shipping from Chinese contract suppliers that impacted many consumer electronics companies last holiday season and (iii) the inability to respond to un-forecasted demand due to the length of the supply cycle. 

Gross profits of $7.1 million in FYE March 2014 declined compared to $8.1 million in FYE March 2013, reflecting principally the decline in reported net sales.

Total operating expenses increased by approximately $0.3 million, primarily due to a rise in general and administrative expenses.  G&A expenses increased due to (i) reductions in the use of our warehouse and logistics services by our strategic partner and major shareholder, Starlight Group, resulting in lowered fees from them to offset our costs, (ii) an increase in one-time expenses for the testing and development of the Singing Machine Home™ product and (iii) stock option expenses for key management.

As a result, the Company reported operating profits of approximately $0.3 million for FYE March 2014, compared to $1.6 million in FYE March 2013.  EBITDA for FYE March 2014 was $0.4 million compared to $1.7 million in the previous year.  The Company recorded an income tax benefit of approximately $0.8 million, resulting in net income of approximately $1.0 million dollars ($0.03 cents per share) in FYE March 2014, compared to an income tax benefit of $1.6 million and net income of $3.1 million in the previous year.

Bernardo Melo, VP of Sales & Marketing commented, "The demand for karaoke entertainment from Singing Machine is growing.  Across the board, our major retailers showed dramatically improved sell-through rates during the October – December 2013 holiday season.  Our retailers actually sold more units while carrying less inventory, creating a situation where the Company couldn't keep up with product demand.  Ultimately we ended up missing out on sales due to the inability of our supply chain to fulfill the demand that exceeded our retailer forecasts." Melo added, "Following the Singing Machine Home™ market roll-out this year, we are evolving our products to incorporate music streaming and wireless features that enhance their use.  Importantly, the Home™ takes us into a product sector that opens our Company to the larger market of general music listening and everyday use, with karaoke as a feature rather that as the principal product use.  Consumers appear to be willing to pay more for these attributes.  In the future we hope that music subscriptions over time will become a significant component to SMC's business model. We are excited to continue leading the innovation in the karaoke market."

About The Singing Machine
Incorporated in 1982, The Singing Machine Company develops and distributes a full line of consumer-oriented karaoke machines and music under The Singing Machine™ and SoundX™ brand names.  The first to provide karaoke systems for home entertainment in the United States, the Company sells its products primarily in the United States and Canada through major mass merchandisers and on-line retailers.  Singing Machine offers digital karaoke music downloads and streaming services by subscription for play on its karaoke machines, inputted either directly to the karaoke machines or by personal computer and mobile devices. 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

CONSOLIDATED BALANCE SHEETS 






March 31, 2014


 March 31, 2013 

Assets

Current Assets






Cash 

$

1,354,099

$

1,652,996


Restricted cash


138,042


-


Accounts receivable, net of allowances of $172,465 and      






   $180,306, respectively


955,551


1,100,475


Due from Crestmark Bank


19,638


-


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


233,004


291,343


Due from related party - Starlight Electronics USA, Inc.


51,196


50,501


Due from related party - Starlight Electronics Co., Ltd


83,320


-


Due from related party - Cosmo Communications Canada, Ltd


-


61,310


Inventories, net


5,827,613


4,123,407


Prepaid expenses and other current assets


91,088


84,441


Deferred tax asset, net


604,284


421,340


           Total Current Assets


9,357,835


7,785,813







Property and Equipment, net


561,225


482,777

Other non-current assets


17,630


159,956

Deferred Tax Asset, net non-current portion


1,793,972


1,198,119


          Total Assets

$

11,730,662

$

9,626,665







Liabilities and Shareholders' Equity 

Current Liabilities






Accounts payable

$

1,918,076

$

1,135,125


Due to related party - Starlight Marketing Development, Ltd.


1,107,678


1,107,678


Subordinated related party debt - Starlight Marketing Development, Ltd.


816,753


-


Subordinated related party debt - Ram Light Management, Ltd.


1,683,247


-


Due to related party - Starfair Electronics Company, Ltd.


17,738


-


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


194,678


419,600


Due to related party - Cosmo Communications Canada, Inc.


50,441


-


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


1,051,913


585,125


Due to related parties - Other Starlight Group Companies


3,534


3,534


Accrued expenses


446,314


686,012


Current portion of capital lease


12,076


-


Obligations to clients for returns and allowances


469,838


376,289


Warranty provisions


235,172


215,471


        Total Current Liabilities


8,007,458


4,528,834







Long-term capital lease, net of current portion


13,706


-

Subordinated related party debt - Starlight Marketing Development, Ltd.,





net of current portion


-


816,753

Subordinated related party debt - Ram Light Management, Ltd.


-


1,683,247


          Total Liabilities


8,021,164


7,028,834







Shareholders' Equity 






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






  shares issued and outstanding


-


-


Common stock, Class A, $.01 par value;  100,000 shares 






  authorized; no shares issued and outstanding


-


-


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






38,070,642 and 38,028,975 shares issued and outstanding


380,706


380,289


Additional paid-in capital


19,262,127


19,155,193


Accumulated deficit


(15,933,335)


(16,937,651)


        Total Shareholders' Equity 


3,709,498


2,597,831


        Total Liabilities and Shareholders' Equity 

$

11,730,662

$

9,626,665







The accompanying notes are an integral part of these consolidated financial statements.

 

The Singing Machine Company, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME





























For the Years Ended






March 31, 2014


March 31, 2013


March 30, 2012





















Net Sales



$      31,379,629


$      34,437,774


$    25,943,832











Cost of Goods Sold


24,273,038


26,368,945


20,292,738











Gross Profit


7,106,591


8,068,829


5,651,094











Operating Expenses








Selling expenses


2,402,153


3,078,340


2,470,985


General and administrative expenses


4,257,335


3,310,325


2,537,379


Depreciation expense


168,138


110,267


171,818

Total Operating Expenses


6,827,626


6,498,932


5,180,182











Income from Operations


278,965


1,569,897


470,912











Other Expenses








Interest expense


(53,446)


(48,421)


(7,796)











Income before income tax benefit


225,519


1,521,476


463,116











Income tax benefit


778,797


1,619,459


-











Net Income 


$        1,004,316


$        3,140,935


$         463,116











Net Income per Common Share








Basic 



$               0.026


$               0.083


$             0.012


Diluted


$               0.026


$               0.082


$             0.012











Weighted Average Common and Common 








Equivalent Shares:








Basic 



38,057,628


37,973,309


37,877,460


Diluted


38,647,290


38,360,324


37,877,460











The accompanying notes are an integral part of these consolidated financial statements.

 

The Singing Machine Company, Inc. and Subsidiaries


CONSOLIDATED STATEMENTS OF CASH FLOWS










For the Years Ended






March 31, 2014


March 31, 2013


March 30, 2012





















Cash flows from operating activities








Net Income 

$

1,004,316

$

3,140,935

$

463,116


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









Depreciation 


168,138


110,267


171,818



Change in inventory reserve 


135,000


(160,000)


211,999



Change in allowance for bad debts


(7,841)


11,752


(7,250)



Loss from disposal of property and equipment


4,479


-


31,027



Stock based compensation


107,351


14,777


26,030



Warranty provisions


19,701


(4,289)


75,738



Change in net deferred tax assets


(778,796)


(1,619,459)


-


Changes in operating assets and liabilities:








  (Increase) Decrease in:









Accounts receivable


152,765


(326,737)


426,969



Due from Crestmark Bank


(19,638)


-


-



Inventories


(1,839,206)


44,985


(1,203,446)



Prepaid expenses and other current assets


(6,647)


(31,208)


6,077



Other non-current assets


142,326


(282)


5,004


  Increase (Decrease) in:









Accounts payable 


782,951


(168,270)


184,721



Accounts payable - net due to related party


345,679


18,116


(347,946)



Accrued expenses


(239,699)


517,856


(88,379)



Obligations to clients for returns and allowances


93,549


133,910


(192,962)




Net cash provided by (used in) operating activities


64,428


1,682,353


(237,484)

Cash flows from investing activities








Purchase of property and equipment


(214,677)


(296,822)


(165,216)


Deposit of restricted cash


(138,042)


-


-




Net cash used in investing activities


(352,719)


(296,822)


(165,216)

Cash flows from financing activities








Payments on long-term capital lease


(10,606)


-


(4,547)




Net cash used in financing activities


(10,606)


-


(4,547)

Change in cash 


(298,897)


1,385,531


(407,247)











Cash beginning of period


1,652,996


267,465


674,712

Cash at end of period

$

1,354,099

$

1,652,996

$

267,465











Supplemental Disclosures of Cash Flow Information:








Cash paid for Interest

$

53,446

$

48,421

$

7,796


Cash paid for Income Taxes

$

13,348

$

3,988

$

4,332

 Supplemental Disclosures of Non-cash Investing Activities: 








 Property and equipment purchased under capital lease 

$

36,388

$

-

$

-











The accompanying notes are an integral part of these consolidated financial statements.

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