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TDH Holdings, Inc. Reports Fiscal Year 2017 Financial Results

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TDH Holdings, Inc. Reports Fiscal Year 2017 Financial Results

PR Newswire

QINGDAO, China, April 30, 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







  • Revenues increased by 18.6% to $28.98 million for 2017, with growth in sales across overseas, domestic and E-commerce.
  • Gross profit increased by 17.3% to $8.30 million for 2017 from $7.08 million for 2016.
  • Operating income was $0.27 million for 2017, compared to $1.15 million for 2016. The decrease in operating income was mainly due to the increase in selling, general and administrative expenses that more than offset the increase in gross profit. Selling expense increased due to the increase in e-commerce promotion expenses, e-commerce platform commission, shipping and handling expenses and payroll expenses for marketing personnel, all part of the Company's strategy to expand E-commerce business in the past two years; and general and administrative expense increased primarily due to the increased professional fees related to the IPO and an increase in management compensation.
  • 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.

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

 

Cision View original content:http://www.prnewswire.com/news-releases/tdh-holdings-inc-reports-fiscal-year-2017-financial-results-300639454.html

SOURCE TDH Holdings, Inc.

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