Market Overview

I think you’ll love what you hear,
what you’ll see and the opportunities
that will be set before you.
- Jon Najarian
GET TICKETS

TDH Holdings, Inc. Reports Full Year 2018 Audited Financial Results

Share:

QINGDAO, China, May 15, 2019 /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 in China, Asia and Europe, announced today its financial results for the twelve months ended December 31, 2018.

Full Year 2018 Financial Highlights:



 For the Twelve Months Ended December 31, 

 ($ millions, except per share data) 


2018


2017


 % Change 

 Revenues 


$23.67


$28.98


-18.3%

 Gross profit (loss) 


($4.05)


$8.30


-148.8%

 Gross profit (loss) margin 


-17.1%


28.6%


-45.7 pp*

 Operating income (loss) 


($14.04)


$0.27


-5353.8%

 Operating income (loss) margin 


-59.3%


0.9%


-60.2 pp*

 Net income (loss) attributable to common stockholders 


($14.22)


$0.12


-12452.6%

 Earnings (loss) per share - basic and diluted 


($1.49)


$0.01


-10831.2%








 * pp: percentage points 







  • Revenues decreased by 18.3% from $28.98 million to $23.67 million for the year of 2018, with decrease in sales from overseas markets and E-commerce platform was partially offset by increase in sales in domestic market. The decrease in total revenues in 2018 was mainly due to production reduction and delayed delivery resulting from (i) the government mandated production suspension during the second quarter of 2018 in connection with the Shanghai Cooperation Organization Summit that was held in Qingdao City where our facility located, (ii) production plant and equipment relocation, testing and delayed product delivery after relocation of the Company's production facilities during the first quarter of 2018, and (iii) the loss of customer orders due to significant competition in 2018.
  • Gross loss was $4.05 million for the year of 2018 as compared to gross profit of $8.30 million for 2017.  This loss was mainly due to (i) an increase in the costs of raw materials, such as chicken, beef and pork, (ii) write-down of obsolete inventories, and (iii) low productivity rates after the relocation of our main production facilities in 2018.
  • Operating loss was $14.04 million for the year of 2018 as compared to operating income of $0.27 million for 2017. The decrease in income from operations was the combined result of a decrease in revenues and increases in cost of goods sold and operating expenses.
  • Net loss attributable to common stockholders was $14.22 million, or loss per share of $1.49, for the year of 2018 as compared to net income of $0.12 million, or earnings per share of $0.01, for 2017.

Full Year 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 year of 2018, total revenues decreased by $5.31 million, or 18.3%, to $23.67 million from $28.98 million for 2017.  The decrease in total revenues in 2018 was mainly due to production reduction and delayed delivery resulting from (i) the government mandated production suspension during the second quarter of 2018 in connection with the Shanghai Cooperation Organization Summit that was held in Qingdao City where our facility located, (ii) production plant and equipment relocation, testing and delayed product delivery after relocation of the Company's production facilities during the first quarter of 2018, and (iii) the loss of customer orders due to significant competition in 2018.



 For the Twelve Months Ended December 31, 



2018



2017



 Y/Y Change 



Revenues ($'000)


% of Total



Revenues ($'000)


% of Total



Amount ($'000)


%

 Overseas 

$

15,832


66.9%


$

21,190


73.1%


$

(5,358)


-25.3%

 Domestic 


4,102


17.3%



2,086


7.2%



2,016


96.6%

 E-commerce 


3,801


16.1%



5,734


19.8%



(1,933)


-33.7%

 less: sales tax and additional surcharge 


(61)


-0.3%



(31)


-0.1%



(30)


97.4%

 Total 

$

23,674


100.0%


$

28,980


100.0%


$

(5,305)


-18.3%

Overseas sales decreased by $5.36 million, or 25.3%, to $15.83 million for the year of 2018 from $21.19 million for 2017. This decrease was due to the decline in production capacity, and loss of some key customers. Domestic sales increased by $2.02 million, or 96.6%, to $4.10 million for the year of 2018 from $2.09 million for 2017. This increase was mainly due to our effort to expand domestic market. Sales from the e-commerce channel decreased by $1.93 million, or 33.7%, to $3.80 million for the year of 2018 from $5.73 million for 2017, due to the rising raw material costs and our production costs. 


 For the Twelve Months Ended December 31, 



2018



2017



 Y/Y Change 



Revenues ($'000)


% of Total



Revenues ($'000)


% of Total



Amount ($'000)


%

 Pet chews 

$

6,272


26.5%


$

9,614


33.2%


$

(3,343)


-34.8%

 Dried pet snacks 


13,611


57.5%



14,852


51.2%



(1,241)


-8.4%

 Wet canned pet food 


2,782


11.8%



3,035


10.5%



(253)


-8.3%

 Dental health snacks 


496


2.1%



857


3.0%



(361)


-42.2%

 Baked pet biscuits 


95


0.4%



8


0.0%



87


1056.9%

 Others 


480


2.0%



644


2.2%



(164)


-25.5%

 Less: sales tax and additional surcharge 


(61)


-0.3%



(31)


-0.1%



(30)


97.4%

 Total 

$

23,674


100.0%


$

28,980


100.0%


$

(5,305)


-18.3%

Sales of pet chews decreased by $3.34 million, or 34.8%, to $6.27 million for the year of 2018 from $9.61 million for 2017. Sales of dried pet snacks decreased by $1.24 million, or 8.4%, to $13.61 million for the year of 2018 from $14.85 million for 2017. Sales of wet canned pet food decreased by $0.25 million, or 8.3%, to $2.78 million for the year of 2018 from $3.04 million for 2017. Sales of dental health snacks decreased by $0.36 million, or 42.2%, to $0.50 million for the year of 2018 from $0.86 million for 2017. The foregoing decreases were mainly due to the fact that (i) we did not renew certain sale contracts as the selling prices offered were too low to make a profit, and (ii) our total daily production capacity decreased from 16 tons to 12 tons in 2018 due to the lease expiration for the Canning facility in 2018. Sales of pet chews, dried pet snacks, wet canned pet food, and dental health snacks accounted for 26.5%, 57.5%, 11.8%, and 2.1%, respectively, for the year of 2018, compared to 33.2%, 51.2%, 10.5%, and 3.0%, respectively, for 2017.

Cost of revenues

Cost of revenues consists primarily of raw materials, labor and factory overhead. Cost of revenues increased by $7.04 million, or 34.1%, to $27.73 million for the year of 2018 from $20.68 million for 2017. 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 117.1% for the year of 2018, compared to 71.4% for 2017.

Gross profit (loss) and gross profit (loss) margin

Gross loss was $4.05 million for the year of 2018, compared to gross profit of $8.30 million for 2017. Gross loss margin was 17.1% for the year of 2018, compared to gross profit margin of 28.6% for 2017.

Operating expense

Operating expense consists of selling expenses, general and administrative expenses and research and development expenses.

Selling expenses decreased by $0.35 million, or 7.1%, to $4.54 million for the year of 2018 from $4.88 million for 2017. The decrease in selling expenses was related to the decline of distribution costs as our overall sales decreased in 2018.

General and administrative expenses increased by $0.70 million, or 33.3%, to $2.79 million for the year of 2018 from $2.10 million for 2017. The increase in general and administrative expense was mainly attributable to increases in overall payroll and rental expenses.

Research and development expense increased by $0.01 million, or 1.0%, to $1.06 million for the year of 2018 from $1.05 million for 2017.

The Company also incurred impairment of goodwill charge of $1.60 million for the year of 2018, compared to $0 for 2017. The goodwill was a result of the acquisition of TDH Japan and TDH Group BVBA.

As a result, total operating expenses increased by $1.96 million, or 24.4%, to $9.99 million for the year of 2018 from $8.03 million for 2017. As a percentage of total revenues, total operating expenses was 42.2% for the year of 2018, compared to 27.7% for 2017.

Operating income (loss) and operating income (loss) margin

Loss from operations was $14.04 million for the year of 2018, compared to operating income of $0.27 million for 2017. The decrease in income from operations was the combined result of decrease in revenues and increases in cost of goods sold and operating expenses.

Net Income (loss) and earnings (loss) per share

Net loss was $14.22 million for the year of 2018, compared to net income of $0.12 million for 2017. After deducting for noncontrolling interest, net loss attributable to common stockholders was $14.22 million, or loss per share of $1.49, for the year of 2018. This is compared to net income attributable to common stockholders of $0.12 million, or earnings per share of $0.01, for 2017.

Financial Conditions

As of December 31, 2018, the Company had cash, cash equivalents and restricted cash of $2.70 million, compared to $3.64 million at December 31, 2017. Accounts receivable and inventories were $0.85 million and $3.02 million, respectively, as of December 31, 2018, compared to $1.93 million and $9.14 million, respectively, at the end of 2017. Total working capital deficit was $11.34 million as of December 31, 2018, as compared to working capital of $6.92 million at the end of 2017.

Net cash used in operating activities was $2.17 million for the year of 2018, compared to $2.67 million for 2017. Net cash used in investing activities was $6.59 million for the year of 2018, compared to $0.85 million for 2017. Net cash provided by financing activities was $7.73 million for the year of 2018, compared to $5.26 million for 2017.

Going Concern

The report of the Company's independent registered public accounting firm expresses substantial doubt about the Company's ability to continue as a going concern. The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, for the year ended December 31, 2018, the Company has incurred a net loss of approximately $14.2 million and working capital deficit of approximately $11.3 million and its cash balance and revenues generated are not currently sufficient and cannot be projected to cover operating expenses and meet the Company's obligations as they become due for the next twelve months after the date that our financial statements are issued. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plan to alleviate the substantial doubt about the Company's ability to continue as a going concern include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to meet its operating needs on a timely basis, obtain additional working capital funds through debt and equity financings to eliminate inefficiencies in order to meet its anticipated cash requirements. However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company's ongoing capital expenditures, working capital, and other requirements. If the Company is unable to achieve these goals, its business plan implementation would be in jeopardy and the Company may have to substantially reduce or even cease its operations.

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, among others, its continued growth and business outlook, the Company's ability to execute on its business plan, secure necessary capital to sustain and maintain its operations, 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 LLC
Email: ttian@weitianco.com
Phone: +1-732-910-9692

 

TDH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



December 31,


December 31,


2018


2017





ASSETS


CURRENT ASSETS:




Cash and cash equivalents

$

893,020


$

2,346,109

Restricted cash, current


1,807,485



797,668

Accounts receivable


845,800



1,932,924

Accounts receivable - related party


435,513



-

Advances to suppliers


77,280



633,554

Inventories, net


3,019,804



9,135,332

Due from related parties


43,554



361,961

Prepayments and other current assets


680,606



371,796

Total current assets


7,803,062



15,579,344

NON-CURRENT ASSETS:






Restricted cash, non-current


-



500,000

Property, plant and equipment, net


8,410,525



3,520,373

Land use rights, net


1,014,538



211,023

Long-term investments


201,281



-

Total non-current assets


9,626,344



4,231,396

Total assets

$

17,429,406


$

19,810,740







LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)






CURRENT LIABILITIES:






Accounts payable

$

6,220,375


$

4,734,110

Accounts payable - related parties


125,126



152,298

Notes payable


2,462,044



1,377,106

Advances from customers


160,828



231,230

Advances from customers - related party


-



7,520

Short term loans


8,263,038



1,402,514

Short term loans - related parties


1,061,360



-

Current portion of long term loans - related party


68,673



-

Taxes payable


44,319



13,562

Due to related parties


45,146



345,873

Other current liabilities


692,669



392,435

Total current liabilities


19,143,578



8,656,648

NON-CURRENT LIABILITIES:






Deferred tax liabilities


4,929



5,810

Long term loans - related party, non-current


217,466



-

Total liabilities


19,365,973



8,662,458

STOCKHOLDERS' EQUITY (DEFICIT):






Common stock ($0.001 par value; 200,000,000 shares authorized; 10,516,662 and 9,423,750 shares issued and outstanding at December 31, 2018 and 2017, respectively)


10,517



9,424

Additional paid-in capital


10,999,011



9,947,084

Stock subscription receivable


-



(100,000)

Statutory reserves


160,014



160,014

Retained earnings (Accumulated deficit)


(13,349,232)



823,474

Accumulated other comprehensive income


243,470



308,286

Total TDH Holdings, Inc. stockholders' equity (deficit)


(1,936,220)



11,148,282

Noncontrolling interest


(347)



-

Total stockholders' equity (deficit)


(1,936,567)



11,148,282

Total liabilities and stockholders' equity (deficit)

$

17,429,406


$

19,810,740

 

 

 

TDH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)



For The Years Ended December 31,


2018


2017


2016







Net revenue

$

22,154,506


$

28,473,016


$

24,443,736

Net revenue - related parties


1,519,531



506,495



-

Total revenue


23,674,037



28,979,511



24,443,736

Cost of revenue


26,278,300



20,283,321



17,368,249

Cost of revenue - related parties


1,448,533



399,177



-

Total cost of revenue


27,726,833



20,682,498



17,368,249

Gross profit


(4,052,796)



8,297,013



7,075,487

Operating expenses:









Selling expense


4,535,945



4,882,367



3,439,843

General and administrative expense


2,792,858



2,095,676



1,407,787

Research and development expense


1,062,582



1,051,665



1,076,568

Impairment of goodwill


1,599,591



-



-

Total operating expenses


9,990,976



8,029,708



5,924,198

Income (loss) from operations


(14,043,772)



267,305



1,151,289

Interest expense


(233,101)



(82,946)



(102,274)

Government subsidies


81,882



414



21,912

Other income


20,242



19,305



51,535

Other expense


(26,992)



(144,069)



(23,490)

Loss from equity method investment


(17,524)



-



-

Total other expenses


(175,493)



(207,296)



(52,317)

Income (loss) before income taxes provision (benefit)


(14,219,265)



60,009



1,098,972

Income tax provision (benefit)


-



(55,102)



89,801

Net income (loss)


(14,219,265)



115,111



1,009,171

Less: Net loss attributable to noncontrolling interest


(40)



-



-

Net income (loss) attributable to TDH Holdings, Inc.

$

(14,219,225)


$

115,111


$

1,009,171

Comprehensive income (loss)









Net income (loss)

$

(14,219,265)


$

115,111


$

1,009,171

Other comprehensive income (loss)









Foreign currency translation adjustment


(65,123)



410,642



(221,418)

Total comprehensive income (loss)

$

(14,284,388)


$

525,753


$

787,753

Less: Comprehensive loss attributable to noncontrolling interest


(347)



-



-

Comprehensive income (loss) attributable to TDH Holdings, Inc.

$

(14,284,041)


$

525,753


$

787,753










Earnings (loss) per common share attributable to TDH Holdings Inc.









Basic

$

(1.49)


$

0.01


$

0.13

Diluted

$

(1.49)


$

0.01


$

0.13

Weighted average common shares outstanding









Basic


9,558,493



8,303,853



7,900,000

Diluted


9,558,493



8,303,853



7,900,000

 

 

TDH HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 



For The Years Ended December 31,


2018


2017


2016

Cash flows from operating activities






Net income (loss)

$

(14,219,265)


$

115,111


$

1,009,171

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









Depreciation and amortization expense


395,355



364,170



256,104

Loss from equity method investment


17,524



-



-

Impairment of goodwill


1,599,591



-



-

Inventory write-down


1,668,508



-



-

Bad debt provision


-



18,201



-

Deferred income tax liability


(591)



(8,581)



(127)

Loss on disposal of property, plant and equipment


-



1,783



-

Changes in operating assets and liabilities:









Accounts receivable


1,302,573



(971,831)



(609,099)

Accounts receivable - related party


(778,516)



(10,817)



-

Inventories, net


4,203,927



(2,658,359)



(3,316,762)

Due to related parties


18,142



5,920



-

Advances to suppliers


569,723



121,360



(610,215)

Prepayments and other current assets


(291,336)



18,197



(223,632)

Accounts payable


1,870,157



1,174,363



1,321,954

Accounts payable - related parties


19,848



32,440



-

Interest payable


119,712



-



-

Notes payable


1,204,910



(127,275)



284,510

Taxes payable


32,733



(115,219)



(85,139)

Advances from customers


(60,254)



(601,855)



513,456

Advances from customer - related party


(7,397)



7,241



-

Other current liabilities


160,914



(39,785)



(29,339)

Net cash used in operating activities


(2,173,742)



(2,674,936)



(1,489,118)

Cash flows from investing activities









Payments to acquire property, plant and equipment


(5,627,422)



(227,900)



(9,002)

Proceeds from disposal of property, plant and equipment


-



2,012



-

Payments to acquire land use rights


(854,221)



(103,596)



-

Acquisition of businesses, net of cash acquired


19,888



-



-

Loans to related parties


(132,147)



(533,242)



(2,543,946)

Repayments from related parties


235,049



15,443



3,400,799

Payments for long-term investments


(235,605)



-



-

Net cash provided by (used in) investing activities


(6,594,458)



(847,283)



847,851

Cash flows from financing activities









Proceeds from issuance of common shares


-



5,542,047



3,759,423

Collection of stock subscription receivable


100,000



827,730



-

Capital distribution in connection with acquisition of a subsidiary


-



-



(2,880,000)

Proceeds from related parties


5,306



1,073,961



3,503,190

Repayments to related parties


(385,420)



(1,767,391)



(3,310,849)

Proceeds from short term loans


8,400,090



2,077,219



1,806,411

Repayments of short term loans


(1,508,056)



(2,494,793)



(1,806,411)

Proceeds from short term loans - related parties


1,176,690



-



-

Repayments of short term loans - related party


(60,490)



-



-

Net cash provided by financing activities


7,728,120



5,258,773



1,071,764

Effect of exchange rate changes on cash, cash equivalents and restricted cash


96,808



55,000



(84,892)

Net change in cash, cash equivalents and restricted cash


(943,272)



1,791,554



345,605

Cash, cash equivalents and restricted cash, beginning of the year


3,643,777



1,852,223



1,506,618

Cash, cash equivalents and restricted cash, end of the year

$

2,700,505


$

3,643,777


$

1,852,223










Supplemental cash flow information









Interest paid

$

113,389


$

82,234


$

102,274

Income taxes paid

$

-


$

59,927


$

102,036










Non-cash investing and financial activities









Operating expenses paid by related parties

$

157,094


$

85,837


$

68,679

Property, plant and equipment transferred from construction in progress

$

-


$

-


$

34,721

Liabilities assumed in connection with purchase of property, plant and equipment

$

38,636


$

133,229


$

295,280

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

$

114,707


$

169,906


$

92,402

Shares issuance in connection with acquisition of subsidiaries

$

1,053,020


$

-


$

-

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets









Cash and cash equivalents

$

893,020


$

2,346,109


$

1,145,103

Restricted cash, current

$

1,807,485


$

797,668


$

707,120

Restricted cash, non-current

$

-


$

500,000


$

-

Total cash, cash equivalents, and restricted cash at end of year

$

2,700,505


$

3,643,777


$

1,852,223

 

Cision View original content:http://www.prnewswire.com/news-releases/tdh-holdings-inc-reports-full-year-2018-audited-financial-results-300851031.html

SOURCE TDH Holdings, Inc.

View Comments and Join the Discussion!