Singing Machine Company Announces Record Sales, Record Profit in 2nd Quarter Ended September 30 Earnings Release
/EINPresswire.com/ -- FORT LAUDERDALE, FL -- (Marketwired) -- 11/12/15 -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTCQB: SMDM) announces the financial results for its second fiscal quarter ended September 30, 2015.
Singing Machine reports net sales of approximately $21.1 million in its second fiscal quarter ended September 30, 2015, up from approximately $16.0 million reported for the same period last year (an increase of 32%). The increase in net sales was attributable to increase in sales to its international distributors as well as an increase in sales to the Company's top three retailers. Gross margin increased to 23.5% compared to 19.8% in the same quarter in 2014 as a result of more favorable pricing and sales volume, reflected in gross profits of approximately 5.0 million up from $3.2 million in the prior year (a 56% increase in gross profits).
Operating expenses in the quarter ended September 30 were $3.1 million compared to $2.6 million in the same quarter of 2014. This increase was the result of an increase in selling expenses due to the increased sales volume. General and administrative expenses remained relatively flat at approximately $1.2 million, similar to the same quarter last year.
As a result the Company reports income from operations of approximately $1.9 million in the September 2015 quarter, compared to approximately $0.6 million in the prior year. The Company reports September 2015 quarter net income of approximately $1.1 million (or $0.03 cents per share), compared to approximately $0.3 million (or $0.01 per share) in the same quarter last year.
Through the first six months of its fiscal year, the Company also reports net sales of approximately $24.5 million and income from operations of approximately $1.1 million, compared to net sales and a loss from operations in the same six-month period last year of approximately $18.5 million and $0.2 million, respectively.
Gary Atkinson, CEO, commented, "Our results continue to reflect Singing Machine's dominance in the North American consumer karaoke machine market and the rising popularity of karaoke. We attribute several factors to our double digit sales growth rate -- the entertainment and educational value of karaoke; the breadth and quality of our product offering over a wide range of price points; the ease afforded by our machines for set up, use, recording and sharing of performances; and the ability and affordability of downloading and streaming music inexpensively using our karaoke store. We also have the industry's best roster of retailers carrying our products, now numbering over 25,000 brick and mortar storefronts as well as leading on-line venues for this holiday season. With the current order visibility we have for the quarter ending December, we anticipate continued sales growth compared to last year."
About The Singing Machine
Based in the US, 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 world-wide 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 10,000 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, 2015. 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
CONDENSED CONSOLIDATED BALANCE SHEETS
September March 31,
30, 2015 2015
------------ ------------
(Unaudited)
Assets
Current Assets
Cash $ 445,312 $ 116,286
Accounts receivable, net of allowances of
$125,390 and $174,131, respectively 16,972,702 1,466,168
Due from PNC Bank - 137,415
Due from related party - Cosmo
Communications Canada, Ltd 420,088 -
Due from related party - Winglight Pacific,
Ltd 1,171,169 -
Inventories, net 9,549,247 7,448,167
Prepaid expenses and other current assets 188,324 92,609
Deferred financing costs 74,077 74,077
Deferred tax asset, net 347,458 449,274
------------ ------------
Total Current Assets 29,168,377 9,783,996
Property and equipment, net 521,423 466,571
Other non-current assets 11,394 11,394
Deferred financing costs, net of current
portion 58,644 95,683
Deferred tax asset, net of current portion 1,583,403 1,856,281
------------ ------------
Total Assets $ 31,343,241 $ 12,213,925
============ ============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 9,262,726 $ 2,767,180
Note payable related party - Ram Light
Management, Ltd. 967,544 496,496
Due to related party - Ram Light Management,
Ltd 583,247 583,247
Due to related party - Starlight Electronics
Co., Ltd 2,721,293 -
Due to related party - Starlight R&D, Ltd. 393,886 554,031
Due to related party - Cosmo Communications
Canada, Inc. - 40,256
Due to related party - Starlight Consumer
Electronics Co., Ltd. 23,951 208,672
Accrued expenses 1,679,010 452,651
Revolving line of credit 8,540,889 -
Current portion of capital lease 7,462 12,628
Customer deposits 91,157 -
Obligations to customers for returns and
allowances 5,410 399,419
Warranty provisions 627,531 197,873
------------ ------------
Total Current Liabilities 24,904,106 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 26,828,537 8,287,961
------------ ------------
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; 38,161,635
and 38,117,517 shares issued and
outstanding, respectively 381,616 381,175
The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For Three Months Ended For Six Months Ended
------------------------- -------------------------
September September September September
30, 2015 30, 2014 30, 2015 30, 2014
------------ ------------ ------------ ------------
Net Sales $ 21,060,584 $ 15,952,059 $ 24,527,458 $ 18,497,018
Cost of Goods Sold 16,109,943 12,790,291 18,718,396 14,819,359
------------ ------------ ------------ ------------
Gross Profit 4,950,641 3,161,768 5,809,062 3,677,659
Operating Expenses
Selling expenses 1,831,235 1,266,767 2,288,962 1,612,034
General and
administrative
expenses 1,202,256 1,267,246 2,304,237 2,196,118
Depreciation 37,332 32,873 74,665 62,204
------------ ------------ ------------ ------------
Total Operating Expenses 3,070,823 2,566,886 4,667,864 3,870,356
------------ ------------ ------------ ------------
Income (Loss) from
Operations 1,879,818 594,882 1,141,198 (192,697)
Other Expenses
Interest expense (102,806) (79,644) (152,918) (81,485)
Financing costs (18,520) (15,433) (37,039) (15,433)
------------ ------------
Total Other Expenses (121,326) (95,077) (189,957) (96,918)
------------ ------------ ------------ ------------
Income (Loss) Before
Income Tax (Provision)
Benefit 1,758,492 499,805 951,241 (289,615)
Income Tax (Provision)
Benefit (687,019) (178,634) (374,694) 111,257
------------ ------------ ------------ ------------
Net Income (Loss) $ 1,071,473 $ 321,171 $ 576,547 $ (178,358)
============ ============ ============ ============
Income (Loss) per Common
Share
Basic $ 0.03 $ 0.01 0.02 $ 0.00
Diluted $ 0.03 $ 0.01 0.01 $ 0.00
Weighted Average Common
and Common
Equivalent Shares:
Basic 38,141,974 38,083,663 38,129,812 38,077,116
Diluted 38,629,328 38,538,510 38,613,732 38,077,116
See notes to the condensed consolidated financial statements.
The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For Six Months Ended
----------------------------
September September
30, 2015 30, 2014
------------ ------------
Cash flows from operating activities:
Net Income (Loss) $ 576,547 $ (178,358)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 74,665 62,204
Amortization of deferred financing
costs 37,039 15,433
Change in inventory reserve 112,440 50,000
Change in allowance for bad debts (48,741) 63,156
Stock based compensation 12,193 42,103
Warranty provisions 429,658 292,859
Change in net deferred tax assets 374,694 (111,257)
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable (15,457,793) (8,059,910)
Inventories (2,213,520) (9,280,282)
Prepaid expenses and other current
assets (95,715) (67,778)
Other non-current assets - 6,236
Increase (decrease) in:
Accounts payable 6,495,546 9,439,129
Net due to related parties 744,914 726,052
Accrued expenses 1,179,864 712,285
Customer deposits 91,157 -
Obligations to customers for returns
and allowances (394,009) (960)
------------ ------------
Net cash used in operating
activities (8,081,061) (6,289,088)
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (129,517) (33,013)
------------ ------------
Net cash used in investing
activities (129,517) (33,013)
------------ ------------
Cash flows from financing activities:
Net proceeds from revolving line of credit 8,678,304 5,370,519
Payment on note payable related party - Ram
Light Management, Ltd. (132,456) -
Payment of deferred financing costs - (222,232)
Payments on long-term capital lease (6,244) (5,971)
------------ ------------
Net cash provided by financing
activities 8,539,604 5,142,316
------------ ------------
Net change in cash 329,026 (1,179,785)
Cash at beginning of period 116,286 1,354,099
------------ ------------
Cash at end of period $ 445,312 $ 174,314
============ ============
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 58,808 $ 63,205
============ ============
See notes to the condensed 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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