TDH Holdings, Inc. Reports First Half 2018 Financial Results
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E-mailQINGDAO, China, Dec. 28, 2018 /PRNewswire/ – TDH Holdings, Inc. (NASDAQ: PETZ) ("TDH" or the "Company"), a PRC-based company that specializes in the development, manufacturing and sales of various pet food products under multiple established brands in China, Asia and Europe, today announced its unaudited financial results for the six months ended June 30, 2018.
First Half 2018 Unaudited Financial Highlights:
For the Six Months Ended June 30, | ||||||
($ millions, except per share data) | 2018 | 2017 | % Change | |||
Revenues | $11.55 | $14.08 | -18.0% | |||
Gross profit (loss) | ($0.89) | $4.16 | -121.4% | |||
Gross profit (loss) margin | -7.7% | 29.5% | -37.2 pp* | |||
Operating income (loss) | ($5.69) | $0.67 | -955.3% | |||
Operating income (loss) margin | -49.3% | 4.7% | -54.0 pp* | |||
Net income (loss) | ($4.83) | $0.54 | -989.2% | |||
Earnings (loss) per share - basic and diluted | ($0.51) | $0.07 | -845.4% | |||
* pp: percentage points | ||||||
- Revenues decreased by 18.0% to $11.55 million for the first half of 2018, with decreases in sales from overseas markets partially offset by increase in sales in domestic market and E-commerce platforms.
- Gross loss was $0.89 million for the first half of 2018, compared to gross profit of $4.16 million for the same period of the prior year.
- Operating loss was $5.69 million for the first half of 2018, compared to operating income of $0.67 million for the same period of the prior year. The operating loss was mainly due to the gross loss combined with the increased operating expenses.
- Net loss was $4.83 million, or loss per share of $0.51, for the first half of 2018, compared to net income of $0.54 million, or earning per share of $0.07, for the same period of the prior year.
First Half 2018 Financial Results
Revenues
The Company generates its revenues from product sales, mainly including sales for pet chews, dried pet snacks and wet canned pet foods in oversea markets, domestic markets and by e-commerce platform. Revenue consists of the invoiced value for the sales, net of value-added tax ("VAT"), business tax, and applicable local government levies. For the first half of 2018, total revenues decreased by $2.53 million, or 18.0%, to $11.55 million from $14.08 million as compared with the same period of the prior year. The decrease in total revenues was mainly due to production restriction and delayed delivery resulting from 1) government mandated production suspension for the most part of the second quarter of 2018 in preparation for the Shanghai Cooperation Organization Summit that was held in Qingdao City where our facility located; 2) equipment relocation, testing and delayed product delivery after relocation of one of our production facilities during the first quarter of 2018.
For the Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | Y/Y Change | ||||||||||||
Revenues ($'000) | % of Total | Revenues($'000) | % of Total | Amount($'000) | % | |||||||||
Overseas | $ | 7,576 | 65.6% | $ | 11,446 | 81.3% | $ | (3,869) | -33.8% | |||||
Domestic | 1,725 | 14.9% | 601 | 4.3% | 1,124 | 187.0% | ||||||||
E-commerce | 2,293 | 19.9% | 2,049 | 14.5% | 244 | 11.9% | ||||||||
less: sales tax and additional surcharge | (43) | -0.4% | (12) | -0.1% | (31) | 258.6% | ||||||||
Total | $ | 11,552 | 100.0% | $ | 14,084 | 100.0% | $ | (2,532) | -18.0% | |||||
Overseas sales decreased by $3.87 million, or 33.8%, to $7.58 million for the first half of 2018 from $11.45 million for the same period of the prior year. Domestic sales increased by $1.12 million, or 187%, to $1.73 million for the first half of 2018 from $0.60 million for the same period of the prior year. Sales from the e-commerce channel increased by $0.24 million, or 11.9%, to $2.29 million for the first half of 2018 from $2.05 million for the same period of the prior year.
Cost of revenues
Cost of revenues consists primarily of raw materials, labor and factory overhead expenses necessary to manufacture finished goods. Cost of revenues increased by $2.52 million, or 25.4%, to $12.44 million for the first half of 2018 from $9.93 million for the same period of the prior year. The increase in cost of revenues was mainly due to increased raw material costs, such as chicken, beef and pork, write-down of obsolete inventories and low productivity after the relocation of one of our main production facilities. As a percentage of revenues, cost of revenues was 107.7% for the first half of 2018, compared to 70.5% for the same period of the prior year.
Gross profit (loss) and gross profit (loss) margin
Gross loss was $0.89 million for the first half of 2018, compared to gross profit of $4.16 million for the same period of the prior year. Gross loss margin was 7.7% for the first half of 2018, compared to gross profit margin of 29.5% for the same period of the prior year.
Operating expense
Operating expense consists of selling expense, general and administrative expense and research and development expense.
Selling expense increased by $0.27 million, or 12.8%, to $2.40 million for the first half of 2018 from $2.13 million for the same period of the prior year. The increase in selling expense was mainly due to the increased payroll expenses of new marketing personnel recruited during the first half of 2018 and the increased advertising and promotion expenditures.
General and administrative expense increased by $0.57 million, or 63.0%, to $1.48 million for the first half of 2018 from $0.91 million for the same period of the prior year. The increase in general and administrative expense was mainly attributable to the increased payroll expenses for newly engaged senior management executives and professionals, and increased expenses on application of production certifications during the first half of 2018.
Research and development expense increased by $0.46 million, or 102.0%, to $0.92 million for the first half of 2018 from $0.46 million for the same period of the prior year. The increase in research and development expense was due to new R&D projects during the first half of 2018.
As a result, total operating expenses increased by $1.31 million, or 37.5%, to $4.80 million for the first half of 2018 from $3.49 million for the same period of the prior year.
Operating income (loss) and operating income (loss) margin
Loss from operations was $5.69 million for the first half of 2018, compared to operating income of $0.67 million for the same period of the prior year. The decrease in income from operations was the combined result of decrease in net revenues and increases in cost of goods sold and operating expenses.
Net Income (loss) and earnings (loss) per share
Net loss was $4.83 million, or loss per share of $0.51, for the first half of 2018, compared to net income of $0.54 million, or earnings per share of $0.07, for the same period of the prior year.
Financial Conditions
As of June 30, 2018, the Company had cash, cash equivalents and restricted cash of $3.02 million, compared to $3.64 million at December 31, 2017. Accounts receivable and inventories were $1.82 million and $7.70 million, respectively, as of June 30, 2018, compared to $1.93 million and $9.14 million, respectively, at the end of 2017. Total working capital was $1.30 million as of June 30 2018, compared to $6.92 million at the end of 2017.
Net cash used in operating activities was $2.04 million for the first half of 2018, compared to $1.13 million for the same period of the prior year. Net cash used in investing activities was $0.28 million for the first half of 2018, compared to $1.25 million for the same period of the prior year. Net cash provided by financing activities was $1.74 million for the first half of 2018, compared to $1.54 million for the same period of the prior year.
Notice
Rounding amounts and percentages: Certain amounts and percentages included in this press release have been rounded for ease of presentation. Percentage figures included in this press release have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, certain percentage amounts in this press release may vary from those obtained by performing the same calculations using the figures in the financial statements. In addition, certain other amounts that appear in this press release may not sum due to rounding.
About TDH Holdings, Inc.
Founded in April 2002, TDH Holdings, Inc. (the "Company") (NASDAQ: PETZ), is a developer, manufacturer and distributer of a variety of pet food products under multiple brands that are sold in the China, Asia and Europe. More information about the Company can be found at www.tiandihui.com.
Safe Harbor Statement
This news release contains forward-looking statements. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate" or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements are only predictions, uncertainties and other factors may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Specifically, the Company's statements regarding its continued growth and business outlook, are forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict and many of which are beyond the control of the Company. Actual results may differ from those projected in the forward-looking statements due to risks and uncertainties that are described more fully in the Company's public reports filed with the U.S. Securities and Exchange Commission. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking statements will be realized. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by TDH or any other person that their objectives or plans will be achieved. The Company does not undertake any obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
For more information, please contact:
Tony Tian, CFA Weitian Group LLCEmail: [email protected] Phone: +1-732-910-9692
TDH HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
June 30, | December 31, | |||||||
2018 | 2017 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 1,486,464 | $ | 2,346,109 | ||||
Restricted cash, current | 1,037,824 | 797,668 | ||||||
Accounts receivable | 1,726,107 | 1,932,924 | ||||||
Accounts receivable - related party | 97,787 | - | ||||||
Advances to suppliers | 384,610 | 633,554 | ||||||
Inventories | 7,696,593 | 9,135,332 | ||||||
Due from related parties | 283,334 | 361,961 | ||||||
Prepayments and other current assets | 957,391 | 371,796 | ||||||
Total current assets | 13,670,110 | 15,579,344 | ||||||
NON-CURRENT ASSETS: | ||||||||
Restricted cash, non-current | 500,000 | 500,000 | ||||||
Property, plant and equipment, net | 3,358,909 | 3,520,373 | ||||||
Land use rights, net | 204,899 | 211,023 | ||||||
Equity Investments | 226,617 | - | ||||||
Deferred tax assets | 872,510 | - | ||||||
Total non-current assets | 5,162,935 | 4,231,396 | ||||||
Total assets | $ | 18,833,045 | $ | 19,810,740 | ||||
LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 6,260,891 | $ | 4,734,110 | ||||
Accounts payable - related parties | 134,175 | 152,298 | ||||||
Notes payable | 1,807,950 | 1,377,106 | ||||||
Advances from customers | 490,096 | 231,230 | ||||||
Advances from customers - related party | - | 7,520 | ||||||
Short term loans | 3,127,313 | 1,402,514 | ||||||
Taxes payable | 13,331 | 13,562 | ||||||
Due to related parties | 204,786 | 345,873 | ||||||
Other current liabilities | 335,524 | 392,435 | ||||||
Total current liabilities | 12,374,066 | 8,656,648 | ||||||
NON-CURRENT LIABILITIES: | ||||||||
Deferred tax liabilities | - | 5,810 | ||||||
Total liabilities | 12,374,066 | 8,662,458 | ||||||
Equity | ||||||||
Common stock ($0.001 par value; 200,000,000 shares authorized; 9,423,750 sharesissued and outstanding at June 30, 2018 and December 31, 2017) | 9,424 | 9,424 | ||||||
Additional paid-in capital | 9,947,084 | 9,947,084 | ||||||
Stock subscription receivable | - | (100,000) | ||||||
Statutory reserves | 160,014 | 160,014 | ||||||
Retained earnings (deficit)(1) | (3,957,057) | 823,474 | ||||||
Accumulated other comprehensive income | 299,723 | 308,286 | ||||||
Total TDH Holdings, Inc. stockholders' equity | 6,459,188 | 11,148,282 | ||||||
Noncontrolling interest | (209) | - | ||||||
Total equity | 6,458,979 | 11,148,282 | ||||||
Total liabilities and equity | $ | 18,833,045 | $ | 19,810,740 | ||||
(1) | On January 1, 2018, the Company adopted ASC 606 Revenue from Contracts with Customers using the modified retrospective method, which means that prior periods amount will be reported on a historical basis and amounts for 2018 are reported on the new basis. Under the new accounting standard, the main impact to the Company is that revenue generated from products sold to certain E-commerce platforms is recognized at the time products are delivered rather than when the price is determined and mutually agreed upon between the Company and the E-commerce platforms, usually at a later time after products delivery. The cumulative impact arising from the adoption was an increase to retained earnings as of January 1, 2018 of approximately $0.05 million. |
TDH HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) | ||||||||
(Unaudited) | ||||||||
For The Six MonthsEnded June 30, 2018 | For The Six MonthsEnded June 30, 2017 | |||||||
Net revenues | $ | 11,034,840 | $ | 14,074,615 | ||||
Net revenues - related parties | 517,038 | 9,087 | ||||||
Total revenues | 11,551,878 | 14,083,702 | ||||||
Cost of revenues | 12,007,697 | 9,918,642 | ||||||
Cost of revenues - related parties | 435,449 | 7,161 | ||||||
Gross profit | (891,268) | 4,157,899 | ||||||
Operating expenses: | ||||||||
Selling expense | 2,404,158 | 2,130,758 | ||||||
General and administrative expense | 1,476,634 | 905,693 | ||||||
Research and development expense | 920,745 | 455,878 | ||||||
Total operating expenses | 4,801,537 | 3,492,329 | ||||||
Income (loss) from operations | (5,692,805) | 665,570 | ||||||
Interest expense | (46,142) | (46,814) | ||||||
Government subsidies | 21,676 | 407 | ||||||
Other income | 9,944 | 40,985 | ||||||
Other expenses | (34,629) | (61,591) | ||||||
Total other expenses | (49,151) | (67,013) | ||||||
Income (loss) before income taxes provision (benefit) | (5,741,956) | 598,557 | ||||||
Income tax provision (benefit) | (913,052) | 55,489 | ||||||
Net income (loss) | (4,828,904) | 543,068 | ||||||
Less: Net loss attributable to noncontrolling interest | (42) | - | ||||||
Net income (loss) attributable to TDH Holdings, Inc. | $ | (4,828,862) | $ | 543,068 | ||||
Comprehensive income (loss) | ||||||||
Net income (loss) | $ | (4,828,904) | $ | 543,068 | ||||
Other comprehensive income (loss) | ||||||||
Foreign currency translation adjustment | (8,730) | 122,832 | ||||||
Total comprehensive income (loss) | (4,837,634) | 665,900 | ||||||
Less: Comprehensive loss attributable to noncontrolling interest | (209) | - | ||||||
Comprehensive income (loss) attributable to TDH Holdings, Inc. | $ | (4,837,425) | $ | 665,900 | ||||
Earnings (loss) per common share attributable to TDH Holdings, Inc. | ||||||||
Basic | $ | (0.51) | $ | 0.07 | ||||
Diluted | $ | (0.51) | $ | 0.07 | ||||
Weighted average common shares outstanding | ||||||||
Basic | 9,423,750 | 7,900,000 | ||||||
Diluted | 9,423,750 | 7,900,000 | ||||||
TDH HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
For the six monthsended | For the six monthsended | |||||||
June 30, 2018 | June 30, 2017 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | (4,828,904) | $ | 543,068 | ||||
Adjustments to reconcile net income to net cash used in operating activities | ||||||||
Depreciation and amortization expense | 189,571 | 174,663 | ||||||
Deferred income tax asset | (913,052) | - | ||||||
Deferred income tax liability | - | (1,174) | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 436,165 | (629,097) | ||||||
Accounts receivable - related party | (101,665) | - | ||||||
Inventories | 1,152,362 | (3,109,155) | ||||||
Due to related party | 9,424 | - | ||||||
Advances to suppliers | 247,602 | 127,546 | ||||||
Prepayments and other current assets | (640,101) | (201,707) | ||||||
Accounts payable | 1,740,043 | 2,929,702 | ||||||
Accounts payable - related parties | (16,146) | - | ||||||
Notes payable | 472,309 | (568,785) | ||||||
Taxes payable | (782) | 39,846 | ||||||
Advances from customers | 273,226 | (469,522) | ||||||
Advances from customer - related party | (7,685) | - | ||||||
Other current liabilities | (52,402) | 37,928 | ||||||
NET CASH USED IN OPERATING ACTIVITIES | $ | (2,040,035) | $ | (1,126,687) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Payments to acquire property, plant and equipment | (59,603) | (28,730) | ||||||
Loans to related parties | (236,388) | (1,225,765) | ||||||
Repayment from related parties | 254,902 | - | ||||||
Payments for equity investments | (235,605) | - | ||||||
NET CASH USD IN INVESTING ACTIVITIES(2) | $ | (276,694) | $ | (1,254,495) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Collection of stock subscription receivable | 100,000 | 644,970 | ||||||
Proceeds from related parties | 4,665 | 1,736,158 | ||||||
Repayments to related parties | (188,484) | (676,957) | ||||||
Proceeds from short term loans | 2,133,269 | 1,008,076 | ||||||
Repayments of short term loans | (314,139) | (1,169,430) | ||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | $ | 1,735,311 | $ | 1,542,817 | ||||
Effects on changes in foreign exchange rate | (38,071) | 34,820 | ||||||
Net change in cash, cash equivalents, and restricted cash | (619,489) | (803,545) | ||||||
Cash, cash equivalents, and restricted cash - beginning of the period | 3,643,777 | 1,852,223 | ||||||
Cash, cash equivalents, and restricted cash - end of the period | $ | 3,024,288 | $ | 1,048,678 | ||||
Supplemental cash flow information | ||||||||
Interest paid | $ | 46,142 | $ | 46,814 | ||||
Income taxes paid | $ | - | $ | 7,390 | ||||
Non-cash Investing and Financing Transactions | ||||||||
Operating expenses paid by related parties | $ | 58,650 | $ | 43,059 | ||||
Liabilities assumed in connection with purchase of property, plant and equipment | $ | 21,785 | $ | 2,639 | ||||
Accounts payable settled with loans to related parties | $ | - | $ | 10,632 | ||||
Receivables from related parties settled with payables to related parties | $ | 56,875 | $ | 1,060,574 | ||||
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets | ||||||||
Cash and cash equivalents | $ | 1,486,464 | $ | 528,118 | ||||
Restricted cash | $ | 1,537,824 | $ | 520,560 | ||||
Total cash, cash equivalents, and restricted cash | $ | 3,024,288 | $ | 1,048,678 | ||||
(2) | The Company adopted ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash", beginning in the first quarter of fiscal year 2018. As a result of adopting this new accounting update, the consolidated statements of cash flows were retrospectively adjusted to include restricted cash in cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the consolidated statements of cash flows. The impact of the retrospective reclassification on cash flows used in investing activities and effect of exchange rate changes for the six months ended June 30, 2017 was an increase of $201,075 and an increase of $14,515, respectively. |
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SOURCE TDH Holdings, Inc.
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