QINGDAO, China, May 1, 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 audited financial results for the twelve months ended December 31, 2017.
Fiscal Year 2017 Financial Highlights:
| For the Twelve Months Ended December 31, |
||||||
| ($ millions, except per share data) |
2017 |
2016 |
% Change |
|||
| Revenues |
$28.98 |
$24.44 |
18.6% |
|||
| Gross profit |
$8.30 |
$7.08 |
17.3% |
|||
| Gross margin |
28.6% |
28.9% |
-0.3 pp* |
|||
| Operating income |
$0.27 |
$1.15 |
-76.8% |
|||
| Operating margin |
0.9% |
4.7% |
-3.8 pp* |
|||
| Net income |
$0.12 |
$1.01 |
-88.6% |
|||
| EPS - basic and diluted |
$0.01 |
$0.13 |
-89.1% |
|||
| * pp: percentage points |
||||||
Rongfeng Cui, Chairman and Chief Executive Officer of TDH, commented, "With revenues and gross profit increasing by 18.6% and 17.3%, respectively, our 2017 results highlighted steady growth momentum of our business. While the pet food industry in China remained highly fragmented and competitive in 2017, we benefited from a diversified portfolio of over 200 products and balanced sales and distribution channels that included both retail partners and wholesale distributor across overseas, domestic and E-commerce platforms. Innovation and new product launch also played a key role in our sales growth with new products introduced during the year accounted for 74% of sales in 2017."
Fiscal Year 2017 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. Revenue consists of the invoiced value for the sales, net of value-added tax ("VAT"), business tax, and applicable local government levies. For 2017, revenues increased by $4.54 million, or 18.6%, to $28.98 million from $24.44 million for 2016. The increase in revenues was across overseas, domestic and E-commerce sales. Our sales growth was mainly driven by the growth in sales volume as blended average selling prices for our products had been relatively stable for 2017 and 2016.
| For the Twelve Months Ended December 31, |
||||||||||||||
| 2017 |
2016 |
Y/Y Change |
||||||||||||
| Revenues ($'000) |
% of Total |
Revenues ($'000) |
% of Total |
Amount ($'000) |
% |
|||||||||
| Overseas |
$ |
21,190 |
73.1% |
$ |
18,883 |
77.2% |
$ |
2,307 |
12.2% |
|||||
| Domestic |
2,086 |
7.2% |
1,129 |
4.6% |
957 |
84.8% |
||||||||
| E-commerce |
5,734 |
19.8% |
4,462 |
18.3% |
1,273 |
28.5% |
||||||||
| less: sales tax and addition |
(31) |
-0.1% |
(29) |
-0.1% |
(2) |
5.6% |
||||||||
| Total |
$ |
28,980 |
100.0% |
$ |
24,444 |
100.0% |
$ |
4,536 |
18.6% |
|||||
Overseas sales increased by $2.31 million, or 12.2%, to $21.19 million for 2017 from $18.88 million for 2016. Domestic sales increased by $0.96 million, or 84.8%, to $2.09 million for 2017 from $1.13 million for 2016. Sales from the e-commerce channel increased by $1.27 million, or 28.5%, to $5.73 million for 2017 from $4.46 million for 2016.
| For the Twelve Months Ended December 31, |
||||||||||||||
| 2017 |
2016 |
Y/Y Change |
||||||||||||
| Revenues ($'000) |
% of Total |
Revenues ($'000) |
% of Total |
Amount ($'000) |
% |
|||||||||
| Pet chews |
$ |
9,614 |
33.2% |
$ |
10,317 |
42.2% |
$ |
(702) |
-6.8% |
|||||
| Dried pet snacks |
14,852 |
51.2% |
11,205 |
45.8% |
3,647 |
32.6% |
||||||||
| Wet canned pet food |
3,035 |
10.5% |
1,926 |
7.9% |
1,109 |
57.6% |
||||||||
| Dental health snacks |
857 |
3.0% |
607 |
2.5% |
250 |
41.2% |
||||||||
| Baked pet biscuits |
8 |
0.0% |
124 |
0.5% |
(116) |
-93.4% |
||||||||
| Others |
644 |
2.2% |
295 |
1.2% |
349 |
118.4% |
||||||||
| Less: sales tax and addition |
(31) |
-0.1% |
(29) |
-0.1% |
(2) |
5.6% |
||||||||
| Total |
$ |
28,980 |
100.0% |
$ |
24,444 |
100.0% |
$ |
4,536 |
18.6% |
|||||
Sales of dried pet snacks increased by $3.65 million, or 32.6%, to $14.85 million for 2017 from $11.20 million for 2016. Sales of wet canned pet food grew by $1.11 million, or 57.6%, to $3.04 million for 2017 from $1.93 million for 2016. Sales of pet chews, dried pet snacks, wet canned pet food, and dental health snacks accounted for 33.2%, 51.2%, 10.5%, and 3.0%, respectively, for 2017, compared to 42.2%, 45.8%, 7.9%, and 2.5%, respectively, for 2016.
Cost of revenue
Cost of revenues consists primarily of raw materials, labor and factory overhead expenses necessary to manufacture finished goods. Cost of revenues increased by $3.31 million, or 19.1%, to $20.68 million for 2017 from $17.37 million for 2016. The increase in cost of revenues was roughly in line with the increase in revenues. As a percentage of revenues, cost of revenues was 71.4% for 2017, compared to 71.1% for 2016.
Gross profit and gross margin
Gross profit increased by $1.22 million, or 17.3%, to $8.30 million for 2017 from $7.08 million for 2016. Gross margin decreased by 0.3 percentage point to 28.6% for 2017 from 28.9% for 2016.
Operating expense
Operating expense consists of selling expense, general and administrative expense and research and development expense.
Selling expense increased by $1.44 million, or 41.9%, to $4.88 million for 2017 from $3.44 million for 2016. The increase in selling expense was mainly due to the increase in e-commerce promotion expenses, e-commerce platform commission, shipping and handling expenses and payroll expenses for marketing personnel, as it was the Company's strategy to expand E-commerce business in the past two years.
General and administrative expense increased by $0.69 million, or 48.9%, to $2.10 million for 2017 from $1.41 million for 2016. The increase in general and administrative expense was mainly attributable to the increased professional fees related to the IPO and the increase in management compensation.
Research and development expense was $1.05 million for 2017, compared to $1.08 million for 2016.
As a result, total operating expenses increased by $2.11 million, or 35.5%, to $8.03 million for 2017 from $5.92 million for 2016.
Operating income and operating margin
Income from operations decreased by $0.88 million, or 76.8%, to $0.27 million for 2017 from $1.15 million for 2016. The decrease in income from operations was mainly driven by increase in selling, general and administrative expenses that more than offset the increase in gross profit. Operating margin was 0.9% for 2017, compared to 4.7% for 2016.
Net Income and earnings per share
Net income was $0.12 million, or $0.01 per basic and diluted share, for 2017, compared to $1.01 million, or $0.13 per basic and diluted share, for 2016. The significant decrease in net income and earnings per share were resulted from the increase in selling, general and administrative expenses that more than offset the increase in gross profit.
Financial Condition
As of December 31, 2017, the Company had cash and cash equivalents of $2.35 million, compared to $1.15 million at December 31, 2016. Accounts receivable and inventories were $1.93 million and $9.14 million, respectively, as of December 31, 2017, compared to $0.87 million and $5.97 million, respectively, at the end of 2016. Total working capital was $6.92 million as of December 31, 2017, compared to $0.85 million at the end of 2016.
Net cash used in operating activities was $2.67 million for 2017, compared to $1.49 million for 2016. Net cash used in investing activities was $1.39 million for 2017, compared to net cash provided by investing activities of $0.94 million for 2016. Net cash provided by financing activities was $5.26 million for 2017, compared to $1.07 million for 2016.
Recent Developments
On September 21, 2017, the Company announced the pricing of its initial public offering (the "IPO") of 1,325,000 common shares at a public offering price of $4.25 per share, for total gross proceeds of approximately $5.63 million. The shares began trading on the NASDAQ Capital Market on September 21, 2017 under the ticker symbol "PETZ." On September 25, 2017, the Company announced the closing of the IPO.
On September 28, 2017, the Company announced that ViewTrade Securities, Inc., who acted as the managing underwriter and sole book-runner of the IPO, had exercised the full over-allotment option to purchase an additional 198,750 shares at the IPO price per share. As a result of the exercise of this over-allotment option, the Company had raised additional gross proceeds of approximately $0.84 million.
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. The Company has four production facilities and offers in excess of 200 products, including pet chews, dried pet snacks, dental health snacks, and baked pet biscuits, as well as non-food items like dog leashes, pet toys, etc. 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 registration statement on Form F-1 that was filed with the SEC. 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 LLC
Email: tony.tian@weitian-ir.com
Phone: +1-732-910-9692
|
TDH HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS |
||||||
| December 31, |
December 31, |
|||||
| 2017 |
2016 |
|||||
| ASSETS |
||||||
| CURRENT ASSETS: |
||||||
| Cash and cash equivalents |
$ |
2,346,109 |
$ |
1,145,103 |
||
| Restricted cash, current |
797,668 |
707,120 |
||||
| Accounts receivable |
1,932,924 |
865,491 |
||||
| Advances to suppliers |
633,554 |
711,751 |
||||
| Inventories |
9,135,332 |
5,973,124 |
||||
| Due from related parties |
361,961 |
35,842 |
||||
| Prepayments and other current assets |
371,796 |
383,932 |
||||
| Total current assets |
15,579,344 |
9,822,363 |
||||
| NON-CURRENT ASSETS: |
||||||
| Restricted cash, non-current |
500,000 |
- |
||||
| Property, plant and equipment, net |
3,520,373 |
3,306,735 |
||||
| Land use rights, net |
211,023 |
110,821 |
||||
| Total non-current assets |
4,231,396 |
3,417,556 |
||||
| Total assets |
$ |
19,810,740 |
$ |
13,239,919 |
||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||
| CURRENT LIABILITIES: |
||||||
| Accounts payable |
$ |
4,734,110 |
$ |
3,262,375 |
||
| Account payable - related parties |
152,298 |
111,139 |
||||
| Notes payable |
1,377,106 |
1,414,232 |
||||
| Advances from customers |
231,230 |
802,339 |
||||
| Advances from customers - related party |
7,520 |
- |
||||
| Short term loans |
1,402,514 |
1,728,185 |
||||
| Taxes payable |
13,562 |
124,829 |
||||
| Due to related parties |
345,873 |
1,120,702 |
||||
| Other current liabilities |
392,435 |
409,571 |
||||
| Total current liabilities |
8,656,648 |
8,973,372 |
||||
| NON-CURRENT LIABILITIES: |
||||||
| Deferred tax liabilities |
5,810 |
13,795 |
||||
| Total liabilities |
8,662,458 |
8,987,167 |
||||
| STOCKHOLDERS' EQUITY |
||||||
| Common stock ($0.001 par value; 200,000,000 shares authorized; 9,423,750 and 7,900,000 shares issued and outstanding at December 31, 2017 and 2016) |
9,424 |
7,900 |
||||
| Additional paid-in capital |
9,947,084 |
4,406,561 |
||||
| Stock subscription receivable |
(100,000) |
(927,730) |
||||
| Statutory reserves |
160,014 |
140,570 |
||||
| Retained earnings |
823,474 |
727,807 |
||||
| Accumulated other comprehensive income (loss) |
308,286 |
(102,356) |
||||
| Total stockholders' equity |
11,148,282 |
4,252,752 |
||||
| Total liabilities and stockholders' equity |
$ |
19,810,740 |
$ |
13,239,919 |
||
|
TDH HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME |
||||||||||
| For The Years Ended December 31, |
||||||||||
| 2017 |
2016 |
2015 |
||||||||
| Net revenues |
$ |
28,473,016 |
$ |
24,443,736 |
$ |
16,312,274 |
||||
| Net revenues - related party |
506,495 |
- |
- |
|||||||
| Total revenues |
28,979,511 |
24,443,736 |
16,312,274 |
|||||||
| Cost of revenues |
20,283,321 |
17,368,249 |
12,289,773 |
|||||||
| Cost of revenues - related party |
399,177 |
- |
- |
|||||||
| Total cost of revenues |
20,682,498 |
17,368,249 |
12,289,773 |
|||||||
| Gross profit |
8,297,013 |
7,075,487 |
4,022,501 |
|||||||
| Operating expenses: |
||||||||||
| Selling expense |
4,882,367 |
3,439,843 |
1,820,700 |
|||||||
| General and administrative expense |
2,095,676 |
1,407,787 |
931,107 |
|||||||
| Research and development expense |
1,051,665 |
1,076,568 |
593,962 |
|||||||
| Total operating expenses |
8,029,708 |
5,924,198 |
3,345,769 |
|||||||
| Income from operations |
267,305 |
1,151,289 |
676,732 |
|||||||
| Interest expense |
(82,946) |
(102,274) |
(117,366) |
|||||||
| Government subsidies |
414 |
21,912 |
22,116 |
|||||||
| Other income |
19,305 |
51,535 |
156,908 |
|||||||
| Other expense |
(144,069) |
(23,490) |
(2,056) |
|||||||
| Total other income (expenses) |
(207,296) |
(52,317) |
59,602 |
|||||||
| Income before income taxes provision (benefit) |
60,009 |
1,098,972 |
736,334 |
|||||||
| Income tax provision (benefit) |
(55,102) |
89,801 |
269,581 |
|||||||
| Net income |
$ |
115,111 |
$ |
1,009,171 |
$ |
466,753 |
||||
| Comprehensive income |
||||||||||
| Net income |
$ |
115,111 |
$ |
1,009,171 |
$ |
466,753 |
||||
| Other comprehensive income (loss) |
||||||||||
| Foreign currency translation adjustment |
410,642 |
(221,418) |
(143,434) |
|||||||
| Total comprehensive income |
$ |
525,753 |
$ |
787,753 |
$ |
323,319 |
||||
| Earnings per common share |
||||||||||
| Basic |
$ |
0.01 |
$ |
0.13 |
$ |
0.06 |
||||
| Diluted |
$ |
0.01 |
$ |
0.13 |
$ |
0.06 |
||||
| Weighted average common shares outstanding |
||||||||||
| Basic |
8,303,853 |
7,900,000 |
7,900,000 |
|||||||
| Diluted |
8,303,853 |
7,900,000 |
7,900,000 |
|||||||
|
TDH HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||
| For The Years Ended December 31, |
||||||||||
| 2017 |
2016 |
2015 |
||||||||
| Cash flows from operating activities |
||||||||||
| Net income |
$ |
115,111 |
$ |
1,009,171 |
$ |
466,753 |
||||
| Adjustments to reconcile net income to net cash used in operating activities: |
||||||||||
| Depreciation and amortization expense |
364,170 |
256,104 |
266,534 |
|||||||
| Bad debt provision |
18,201 |
- |
- |
|||||||
| Deferred income tax liability |
(8,581) |
(127) |
15,513 |
|||||||
| Loss on disposal of property, plant and equipment |
1,783 |
- |
7,410 |
|||||||
| Changes in operating assets and liabilities: |
||||||||||
| Accounts receivable |
(971,831) |
(609,099) |
336,193 |
|||||||
| Accounts receivable - related party |
(10,817) |
- |
- |
|||||||
| Inventories |
(2,658,359) |
(3,316,762) |
(2,136,489) |
|||||||
| Due to related parties |
5,920 |
|||||||||
| Advances to suppliers |
121,360 |
(610,215) |
492,800 |
|||||||
| Prepayments and other current assets |
18,197 |
(223,632) |
167,519 |
|||||||
| Accounts payable |
1,174,363 |
1,321,954 |
(482,510) |
|||||||
| Accounts payable - related parties |
32,440 |
- |
||||||||
| Notes payable |
(127,275) |
284,510 |
32,109 |
|||||||
| Taxes payable |
(115,219) |
(85,139) |
139,153 |
|||||||
| Advances from customers |
(601,855) |
513,456 |
(92,736) |
|||||||
| Advances from customers - related party |
7,241 |
- |
||||||||
| Other current liabilities |
(39,785) |
(29,339) |
87,013 |
|||||||
| Net cash used in operating activities |
(2,674,936) |
(1,489,118) |
(700,738) |
|||||||
| Cash flows from investing activities |
||||||||||
| Payments to acquire property, plant and equipment |
(227,900) |
(9,002) |
(231,939) |
|||||||
| Proceeds from disposal of property, plant and equipment |
2,012 |
- |
- |
|||||||
| Payments to acquire land use rights |
(103,596) |
- |
- |
|||||||
| Loans to related parties |
(533,242) |
(2,543,946) |
(5,941,665) |
|||||||
| Repayments from related parties |
15,443 |
3,400,799 |
5,790,092 |
|||||||
| Change in restricted cash |
(541,426) |
96,337 |
73,851 |
|||||||
| Net cash provided by (used in) investing activities |
(1,388,709) |
944,188 |
(309,661) |
|||||||
| Cash flows from financing activities |
||||||||||
| Proceeds from issuance of common shares |
5,542,047 |
3,759,423 |
10 |
|||||||
| Collection of stock subscription receivable |
827,730 |
- |
- |
|||||||
| Capital distribution in connection with acquisition of a subsidiary |
- |
(2,880,000) |
- |
|||||||
| Proceeds from related parties |
1,073,961 |
3,503,190 |
971,575 |
|||||||
| Repayments to related parties |
(1,767,391) |
(3,310,849) |
(56) |
|||||||
| Proceeds from short term loans |
2,077,219 |
1,806,411 |
3,243,000 |
|||||||
| Repayments of short term loans |
(2,494,793) |
(1,806,411) |
(2,713,203) |
|||||||
| Net cash provided by financing activities |
5,258,773 |
1,071,764 |
1,501,326 |
|||||||
| Effect of exchange rate changes on cash and cash equivalents |
5,878 |
(33,411) |
(29,581) |
|||||||
| Net change in cash and cash equivalents |
1,201,006 |
493,423 |
461,346 |
|||||||
| Cash and cash equivalents, beginning of the year |
1,145,103 |
651,680 |
190,334 |
|||||||
| Cash and cash equivalents, end of the year |
$ |
2,346,109 |
$ |
1,145,103 |
$ |
651,680 |
||||
| Supplemental cash flow information |
||||||||||
| Interest paid |
$ |
82,234 |
$ |
102,274 |
$ |
117,366 |
||||
| Income taxes paid |
$ |
59,927 |
$ |
102,036 |
$ |
103,436 |
||||
| Non-cash investing and financial activities |
||||||||||
| Operating expenses paid by related parties |
$ |
85,837 |
$ |
68,679 |
$ |
84,842 |
||||
| Property, plant and equipment transferred from construction in progress |
$ |
- |
$ |
34,721 |
$ |
44,819 |
||||
| Liabilities assumed in connection with purchase of property, plant and equipment |
$ |
133,229 |
$ |
295,280 |
$ |
46,786 |
||||
| Liabilities assumed in connection with acquisition of a subsidiary |
$ |
- |
$ |
91,826 |
$ |
- |
||||
| Accounts payable settled with loans to related parties |
$ |
- |
$ |
490,388 |
$ |
- |
||||
| Receivables from related parties settled with payables to related parties |
$ |
169,906 |
$ |
92,402 |
$ |
- |
||||
| Debt paid by the related party in lieu of repayment to the Company |
$ |
- |
$ |
- |
$ |
125,225 |
||||
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