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| 8-K - CURRENT REPORT - SHINECO, INC. | f8k101518_shinecoinc.htm |
Exhibit 99.1
Shineco, Inc. Reports Fiscal Year 2018 Financial Results
BEIJING, October 15, 2018 /PRNewswire/ -- Shineco, Inc. ("Shineco" or the "Company"; NASDAQ: TYHT), a producer and distributor of Chinese herbal medicines, organic agricultural produce, specialized textiles, and other health and well-being focused plant-based products in China, announced today its financial results for the fiscal year ended June 30, 2018.
Mr. Yuying Zhang, Chairman and Chief Executive Officer of Shineco, commented, "We are proud of our achievements for fiscal year 2018 with total revenue increased by 30.7% to $43.90 million. Our revenue from Luobuma products increased 200.3% to $10.88 million as our investment in our Apocynum Industrial Park in Xinjiang began to realize its potential. We expect to see more revenue momentum as we continue to invest in key projects to position ourselves for long term growth and success. We are pleased with the reception our Luobuma product line has received over the past fiscal year and we are excited to continue to optimize our operations and improve our gross margins as we enter the new fiscal year.”
Fiscal Year 2018 Financial Highlights
| For the Fiscal Years Ended June 30 | ||||||||||||
| ($ millions, except per share data) | 2018 | 2017 | % Change | |||||||||
| Revenue | 43.90 | 33.59 | 30.7 | % | ||||||||
| Luobuma products | 10.88 | 3.62 | 200.3 | % | ||||||||
| Chinese medicinal herbal products | 14.18 | 13.25 | 7.1 | % | ||||||||
| Other agricultural products | 18.83 | 16.72 | 12.6 | % | ||||||||
| Gross profit | 14.79 | 10.74 | 37.7 | % | ||||||||
| Gross margin | 33.7 | % | 32.0 | % | 1.7 pp | * | ||||||
| Operating income | 9.27 | 7.45 | 24.5 | % | ||||||||
| Operating margin | 21.1 | % | 22.2 | % | -1.0 pp | * | ||||||
| Net income attributable to Shineco | 7.59 | 8.47 | -10.4 | % | ||||||||
| EPS | 0.36 | 0.41 | -12.5 | % | ||||||||
| * | Notes: pp represents percentage points |
| ● | Revenue: $43.90 million (at 33.7% gross margin), up 30.7% from $33.59 million (at 32.0% gross margin) in fiscal year 2017, reflecting the increase in sales across all products. |
| ● | Luobuma Products Revenue: $10.88 million, growing 200.3% year-over-year from $3.62 million in fiscal year 2017. |
| ● | Gross Profit: $14.79 million, up from $10.74 million in fiscal year 2017. |
| ● | Operating Income: $9.27 million, growing 24.5% year-over-year from $7.45 million in fiscal year 2017. |
| ● | Net income attributable to Shineco: $7.59 million, compared to $8.47 million in fiscal year 2017. |
| ● | EPS: Net income per share of 0.36, compared to a net income per share of $0.41 in fiscal year 2017. |
Fiscal Year 2018 Financial Results
Revenue
Revenue for the year ended June 30, 2018 increased by $10.31 million, or 30.7%, to $43.90 million from $33.59 million for the same period of last year, mainly due to the increase in sales across all products.
| For the Fiscal Years Ended June 30 | ||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||
| ($ millions) | Revenue | COGS | Gross Margin | Revenue | COGS | Gross Margin | ||||||||||||||||||
| Luobuma products | 10.88 | 4.89 | 55.1 | % | 3.62 | 1.71 | 52.8 | % | ||||||||||||||||
| Chinese medicinal herbal products | 14.18 | 10.76 | 24.1 | % | 13.25 | 10.18 | 23.1 | % | ||||||||||||||||
| Other agricultural products | 18.83 | 13.46 | 28.5 | % | 16.72 | 10.96 | 34.5 | % | ||||||||||||||||
| Total | 43.90 | 29.11 | 33.7 | % | 33.59 | 22.85 | 32.0 | % | ||||||||||||||||
Revenue from Luobuma products increased by $7.26 million, or 200.3%, to $10.88 million for the year ended June 30, 2018 from $3.62 million for the same period of last year, mainly due to revenue generated by a new subsidiary, Xinjiang Taihe, of $8.21 million for the year ended June 30, 2018. Moreover, the increase of revenue from this segment was due to increased sales volume of health awareness related products. The Company also enhanced online sales promotions during the year ended June 30, 2018, which contributed to more sales revenue overall. The increase was partially offset by the decrease in revenue from Tenet-Jove Xuzhou branch of $1.59 million, as the business operation of this branch ceased in November 2017.
Revenue from Chinese medicinal herbal products increased by $0.93 million, or 7.1%, to $14.18 million for the year ended June 30, 2018 from $13.25 million for the same period of last year. The increase was primarily due to the increased unit sales price in the herbal market during the period from October to December 2017, as well as more fulfilled sales orders from customers for the year ended June 30, 2018 than the same period in 2017.
Revenue from other agricultural products increased by $2.11 million, or 12.6%, to $18.83 million for the year ended June 30, 2018 from $16.72 million for the same period of last year. The increase was mainly attributable to the increase in sales volume of yew trees since the public realized the air purification function of the yew trees for year ended June 30, 2018 as compared to the same period in 2017.
Gross profit and Gross Margin
Total cost of revenue increased by $6.26 million, or 27.4%, to $29.11 million for the year ended June 30, 2018 from $22.85 million for the same period of last year. Gross profit increased by $4.05 million, or 37.7%, to $14.79 million for the year ended June 30, 2018 from $10.74 million for the same period of last year. Overall gross margin increased by 1.7 percentage points to 33.7% for the year ended June 30, 2018, compared to 32.0% for the same period of last year.
Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 55.1%, 24.1%, and 28.5%, respectively, for the year ended June 30, 2018. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 52.8%, 23.1%, and 34.5%, respectively, for the same period of last year.
Operating income
Selling expenses increased by $0.05 million, or 3.3%, to $1.53 million for the year ended June 30, 2018 from $1.48 million for the same period of last year, primarily due to the acquisition of a new subsidiary, Tianjin Tajite, in October 2017. The increase in selling and distribution expenses was also a result of increased promotion expenses as the Company enhanced its online sales promotions, partially offset by decreased rent expense of warehouse and salary expenses due to more effective cost control during the years ended June 30, 2018 compared to the same period of 2017.
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General and administrative expenses increased by $2.17 million, or 119.8%, to $3.99 million for the year ended June 30, 2018 from $1.81 million for the same period of last year. The increase in general and administrative expenses was primarily attributable to the incorporation and acquisition of new subsidiaries, Tiankunrunze in second quarter of fiscal year 2017, and Xinjiang Taihe, Runze and Tianjin Tajite in fiscal year 2018. The increase in general and administrative expenses was also a result of increased bad debt expense, salary expenses as well as entertainment expense.
Operating income increased by $1.83 million, or 24.5%, to $9.27 million for the year ended June 30, 2018 from $7.45 million for the same period of last year. Operating margin was 21.1% for the year ended June 30, 2018, compared to 22.2% for the same period of last year.
Impairment loss on goodwill
Impairment loss on goodwill was $2.15 million for the year ended June 30, 2018, representing an increase of 100.00%, as compared to the same period of last year. In conjunction with the preparation of consolidated financial statement for year ended June 30, 2018, the management performed evaluation on the impairment of goodwill. Due to the lower than expected revenue and profit, and unfavorable business environment, the management fully recorded impairment loss on goodwill of Tianjin Tajite.
Net income
Net income decreased by $1.09 million, or 12.7%, to $7.53 million for the year ended June 30, 2018 from $8.62 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the year ended June 30, 2018 was $7.59 million, or $0.36 per basic and diluted share. This compared to net income attributable to common shareholders of $8.47 million, $0.41 per basic and diluted share, for the same period of last year.
Financial Condition
As of June 30, 2018, the Company had cash and cash equivalents of $31.49 million, compared to $23.15 million as of June 30, 2017. Net cash provided by operating activities was $9.85 million for the year ended June 30, 2018, compared to net cash used in operating activities of $2.74 million for the same period of last year. Net cash used in investing activities was $0.75 million for the year ended June 30, 2018, compared to $0.73 million for the same period of last year. Net cash used in financing activities was $0.49 million for the year ended June 30, 2018, compared to net cash provided by financing activities of $5.38 million for the same period of last year.
About Shineco, Inc.
Incorporated in August 1997 and headquartered in Beijing, China, Shineco, Inc. ("Shineco" or the "Company") is a Delaware holding company that uses its subsidiaries' and variable interest entities' vertically- and horizontally-integrated production, distribution and sales channels to provide health and well-being focused plant-based products in China. Utilizing modern engineering technologies and biotechnologies, Shineco produces, among other products, Chinese herbal medicines, organic agricultural produce and specialized textiles. For more information about the Company, please visit www.tianyiluobuma.com.
Forward-Looking Statements
This press release contains information about Shineco's view of its future expectations, plans and prospects that constitute forward-looking statements. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors including, but not limited to, risks and uncertainties associated with its ability to raise additional funding, its ability to maintain and grow its business, variability of operating results, its ability to maintain and enhance its brand, its development and introduction of new products and services, the successful integration of acquired companies, technologies and assets into its portfolio of products and services, marketing and other business development initiatives, competition in the industry, general government regulation, economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the requirements of its clients, and its ability to protect its intellectual property. Shineco encourages you to review other factors that may affect its future results in Shineco's registration statement and in its other filings with the Securities and Exchange Commission.
For more information, please contact:
Tina
Xiao
Ascent Investor Relations LLC
Phone: +1-917-609-0333
Email: tina.xiao@ascent-ir.com
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SHINECO, INC.
CONSOLIDATED BALANCE SHEETS
| June 30, | June 30, | |||||||
| 2018 | 2017 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 31,487,053 | $ | 23,154,551 | ||||
| Accounts receivable, net | 15,478,336 | 14,480,004 | ||||||
| Due from related parties | 388,261 | 448,833 | ||||||
| Inventories | 2,364,558 | 2,346,273 | ||||||
| Advances to suppliers, net | 4,977,407 | 2,396,123 | ||||||
| Deferred issuance cost | 434,000 | - | ||||||
| Other current assets | 1,034,780 | 1,900,143 | ||||||
| TOTAL CURRENT ASSETS | 56,164,395 | 44,725,927 | ||||||
| Property and equipment, net | 11,697,304 | 10,320,396 | ||||||
| Land use right, net of accumulated amortization | 1,345,088 | 1,346,631 | ||||||
| Investments | 6,567,090 | 5,695,080 | ||||||
| Deposit for business acquisition | - | 2,065,686 | ||||||
| Distribution rights | 1,114,837 | - | ||||||
| Long-term deposit and other noncurrent assets | 113,764 | 112,883 | ||||||
| Long-term accounts receivable, net | 2,700,367 | - | ||||||
| Prepaid leases | 3,397,572 | 3,784,533 | ||||||
| Deferred tax assets | - | 233,834 | ||||||
| TOTAL ASSETS | $ | 83,100,417 | $ | 68,284,970 | ||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Short-term loans | $ | 2,316,283 | $ | 2,663,628 | ||||
| Accounts payable | 2,270,140 | 158,068 | ||||||
| Advances from customers | 17,500 | 5,439 | ||||||
| Due to related parties | 197,617 | 257,880 | ||||||
| Other payables and accrued expenses | 1,736,735 | 337,107 | ||||||
| Taxes payable | 2,991,624 | 1,608,926 | ||||||
| TOTAL CURRENT LIABILITIES | 9,529,899 | 5,031,048 | ||||||
| Income tax payable - noncurrent portion | 685,185 | - | ||||||
| Deferred tax liability | 11,652 | - | ||||||
| TOTAL LIABILITIES | 10,226,736 | 5,031,048 | ||||||
| Commitments and contingencies | - | - | ||||||
| EQUITY: | ||||||||
| Common stock; par value $0.001, 100,000,000 shares authorized; 21,234,072 and 21,034,072 shares issued and outstanding at June 30, 2018 and June 30, 2017 | 21,234 | 21,034 | ||||||
| Additional paid-in capital | 23,171,102 | 22,737,302 | ||||||
| Statutory reserve | 4,085,819 | 3,484,449 | ||||||
| Retained earnings | 46,051,289 | 39,064,743 | ||||||
| Accumulated other comprehensive loss | (1,509,212 | ) | (3,140,982 | ) | ||||
| Total Stockholders' equity of Shineco, Inc. | 71,820,232 | 62,166,546 | ||||||
| Non-controlling interest | 1,053,449 | 1,087,376 | ||||||
| TOTAL EQUITY | 72,873,681 | 63,253,922 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 83,100,417 | $ | 68,284,970 | ||||
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SHINECO, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
| For the Years Ended June 30, | ||||||||
| 2018 | 2017 | |||||||
| REVENUE | $ | 43,897,618 | $ | 33,592,337 | ||||
| COST OF REVENUE | ||||||||
| Cost of product and services | 29,005,659 | 22,776,035 | ||||||
| Business and sales related tax | 104,667 | 75,974 | ||||||
| Total cost of revenue | 29,110,326 | 22,852,009 | ||||||
| GROSS PROFIT | 14,787,292 | 10,740,328 | ||||||
| OPERATING EXPENSES | ||||||||
| General and administrative expenses | 3,985,604 | 1,813,402 | ||||||
| Selling expenses | 1,530,005 | 1,480,855 | ||||||
| Total operating expenses | 5,515,609 | 3,294,257 | ||||||
| INCOME FROM OPERATIONS | 9,271,683 | 7,446,071 | ||||||
| OTHER INCOME | ||||||||
| Impairment loss on goodwill | (2,153,298 | ) | - | |||||
| Income from equity method investments | 907,794 | 927,697 | ||||||
| Purchase rebate income | 1,377,108 | 1,136,162 | ||||||
| Other income | 307,637 | 348,181 | ||||||
| Interest income (expense), net | (58,775 | ) | 14,171 | |||||
| Total other income | 380,466 | 2,426,211 | ||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 9,652,149 | 9,872,282 | ||||||
| PROVISION FOR INCOME TAXES | 2,123,587 | 1,252,637 | ||||||
| NET INCOME | 7,528,562 | 8,619,645 | ||||||
| Net (loss) income attributable to non-controlling interest | (59,354 | ) | 149,991 | |||||
| NET INCOME ATTRIBUTABLE TO SHINECO, INC. | $ | 7,587,916 | $ | 8,469,654 | ||||
| COMPREHENSIVE INCOME | ||||||||
| Net income | $ | 7,528,562 | $ | 8,619,645 | ||||
| Other comprehensive income (loss): foreign currency translation gain (loss) | 1,658,658 | (1,271,036 | ) | |||||
| Total comprehensive income | 9,187,220 | 7,348,609 | ||||||
| Less: comprehensive (loss) income attributable to non-controlling interest | (32,466 | ) | 132,008 | |||||
| COMPREHENSIVE INCOME ATTRIBUTABLE TO SHINECO, INC. | $ | 9,219,686 | $ | 7,216,601 | ||||
| Weighted average number of shares basic and diluted | 21,119,004 | 20,616,335 | ||||||
| Earnings per common share | $ | 0.36 | $ | 0.41 | ||||
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SHINECO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For
the Years Ended June 30, | ||||||||
| 2018 | 2017 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 7,528,562 | $ | 8,619,645 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 698,232 | 575,196 | ||||||
| Loss (gain) from disposal of property and equipment | 5,557 | (8,063 | ) | |||||
| Provision (recovery of) for doubtful accounts | 262,013 | (342,041 | ) | |||||
| Increase in inventory reserve | 124,601 | 37,292 | ||||||
| Deferred tax (benefit) provision | (28,138 | ) | 86,780 | |||||
| Income from equity method investments | (907,794 | ) | (927,697 | ) | ||||
| Interest income from loans to related parties | - | (86,355 | ) | |||||
| Impairment loss on goodwill | 2,153,298 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (3,569,821 | ) | (8,136,668 | ) | ||||
| Advances to suppliers | (2,563,943 | ) | (2,339,757 | ) | ||||
| Inventories | (25,031 | ) | 2,122,982 | |||||
| Other receivables | 170,125 | (72,891 | ) | |||||
| Prepaid expense and other assets | 4,442 | (401,755 | ) | |||||
| Due from related parties | 126,293 | (976,937 | ) | |||||
| Prepaid leases | 485,382 | 466,759 | ||||||
| Accounts payable | 2,145,058 | (96,137 | ) | |||||
| Advances from customers | (70,459 | ) | (3,950 | ) | ||||
| Other payables | 1,272,263 | (1,614,992 | ) | |||||
| Taxes payable | 2,036,079 | 354,453 | ||||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 9,846,719 | (2,744,136 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Acquisitions of property and equipment | (1,763,160 | ) | (49,863 | ) | ||||
| Proceeds from disposal of property and equipment | 607 | 17,688 | ||||||
| Payment for construction in progress | 58,671 | - | ||||||
| Repayments of loans from third parties | 831,716 | 4,839 | ||||||
| Loan advances to related party | (53,793 | ) | - | |||||
| Repayments of loans from related parties | - | 565,739 | ||||||
| Income received from investments in unconsolidated entities | 153,695 | 990,839 | ||||||
| Deposit for business acquisition | - | (2,055,074 | ) | |||||
| Deposit for potential investment | - | (200,000 | ) | |||||
| Cash of subsidiary acquired | 23,304 | - | ||||||
| NET CASH USED IN INVESTING ACTIVITIES | (748,960 | ) | (725,832 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from short-term loans | 2,459,122 | 2,673,064 | ||||||
| Repayment of short-term loans | (2,877,044 | ) | (2,701,321 | ) | ||||
| Proceeds from initial public offering, net of offering costs | - | 5,394,549 | ||||||
| Repayments of advances from related parties | (67,561 | ) | 17,683 | |||||
| NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (485,483 | ) | 5,383,975 | |||||
| EFFECT OF EXCHANGE RATE CHANGE ON CASH | (279,774 | ) | (768,830 | ) | ||||
| NET INCREASE IN CASH | 8,332,502 | 1,145,177 | ||||||
| CASH - Beginning of the Period | 23,154,551 | 22,009,374 | ||||||
| CASH - End of the Period | $ | 31,487,053 | $ | 23,154,551 | ||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES: | ||||||||
| Cash paid for income taxes | $ | 857,201 | $ | 845,792 | ||||
| Cash paid for interest | $ | 133,930 | $ | 150,175 | ||||
| SUPPLEMENTAL NON-CASH INVESTING ACTIVITY: | ||||||||
| Issued 200,000 shares of deferred issuance cost | $ | 434,000 | $ | - | ||||
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