Shineco, Inc. Reports Second Quarter of 2018 Financial Results
BEIJING, Feb. 12, 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, today announced its financial results for the second quarter ended December 31, 2017.
Mr. Yuying Zhang, Chairman and Chief Executive Officer of Shineco, commented, "We are proud of all that we have accomplished in the first two quarters of our fiscal year and are pleased to report the second quarter of 2018 financial results with a 26.3% increase in net income as compared to the second quarter of 2017. We believe that our investment in our Apocynum Industrial Park and Institute of Chinese Apocynum Industrial Technology Research continues to strengthen the long-term outlook of Shineco as a positive long-term investment. In the short term we have seen tremendous growth in our Luobuma product line and are pleased that we have grown to become a high margin business, with revenues grown 327% compared to the second quarter ended December 31, 2016, and have achieved impressive results following our expansion over this past year. The past six months have been immensely positive for Shineco and we are excited to tackle the challenges and opportunities that the next six months will bring, as we anticipate continued future growth in our revenues and net income."
Second Quarter of 2018 Financial Highlights
For the Three Months Ended December 31
--------------------------------------
($ millions, except per share data) 2017 2016 % Change
---- ---- --------
Revenue 14.13 11.22 25.9%
Luobuma products 3.89 0.91 327.0%
Chinese medicinal herbal products 3.66 3.50 4.8%
Other agricultural products 6.58 6.82 -3.4%
Gross profit 4.82 3.95 21.9%
Gross margin 34.1% 35.2% -1.1%
Operating income 3.24 2.53 28.2%
Operating margin 22.9% 22.5% 0.4%
Net income attributable to Shineco 3.60 2.85 26.3%
EPS 0.17 0.14 26.3%
---- ---- ----
-- Revenues increased by 25.9% to $14.13 million for the three months ended
December 31, 2017 from $11.22 million for the same period of last year,
mainly due to increases in sales from Luobuma products and Chinese
medicinal herbal products and partially offset by decreased sales from
other agricultural products.
-- Gross profit increased by 21.9% to $4.82 million for the three months
ended December 31, 2017 from $3.95 million for the same period of last
year. Gross margin decreased by 1.1 percentage points to 34.1% from
35.2% for the same period of last year.
-- Net income attributable to Shineco increased by 26.3% to $3.60 million,
or $0.17 per basic and diluted share, for the three months ended
December 31, 2017 from $2.85 million, or $0.14 per basic and diluted
share, for the same period of last year. The increases in net income
earnings per share were primarily a result of the increase in gross
profit, partially offset by the increase in general and administrative
expenses.
Second Quarter of 2018 Financial Results
Revenues
Revenues for the three months ended December 31, 2017 increased by $2.91 million, or 25.9%, to $14.13 million from $11.22 million for the same period of last year, mainly due to increases in sales from Luobuma products and Chinese medicinal herbal products and partially offset by decreased sales from other agricultural products.
For the Three Months Ended December 31
--------------------------------------
2017 2016
---- ----
($ millions) Revenues COGS Gross Revenues COGS Gross
Margin Margin
------ ------
Luobuma products 3.89 1.87 51.7% 0.91 0.44 51.0%
Chinese medicinal herbal products 3.66 2.75 24.6% 3.50 2.48 29.1%
Other agricultural products 6.58 4.67 29.0% 6.82 4.33 36.4%
Business and sales related taxes - 0.03 - - 0.02 -
Total 14.13 9.31 34.1% 11.22 7.27 35.2%
----- ---- ---- ----- ---- ----
Revenues from Luobuma products increased by $2.98 million, or 327.0%, to $3.89 million for the three months ended December 31, 2017 from $0.91 million for the same period of last year, mainly due to establishment of new subsidiary, Xinjiang Taihe, which generated revenue of $2.93 million.
Revenues from Chinese medicinal herbal products increased by $0.17 million, or 4.8%, to $3.66 million for the three months ended December 31, 2017 from $3.50 million for the same period of last year. The increase was primarily due to more fulfilled sales orders from customers for the three months ended December 31, 2017 than the same period in 2016.
Revenues from other agricultural products decreased by $0.23 million, or 3.4%, to $6.58 million for the three months ended December 31, 2017 from $6.82 million for the same period of last year. The decrease was mainly due to the decrease in revenue of storage services, partially offset by the increased sales of yew trees.
Gross profit and Gross Margin
Total cost of goods sold increased by $2.04 million, or 28.1%, to $9.31 million for the three months ended December 31, 2017 from $7.27 million for the same period of last year. Gross profit increased by $0.86 million, or 21.9%, to $4.82 million for the three months ended December 31, 2017 from $3.95 million for the same period of last year. Overall gross margin decreased by 1.1 percentage points to 34.1% for the three months ended December 31, 2017, compared to 35.2% for the same period of last year.
Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 51.7%, 24.6%, and 29.0%, respectively, for the three months ended December 31, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 51.0%, 29.1%, and 36.4%, respectively, for the same period of last year.
Operating income
Selling expenses increased by $0.05 million, or 9.6%, to $0.55 million for the three months ended December 31, 2017 from $0.50 million for the same period of last year, primarily due to the acquisition of new subsidiary, Tajite, in October, and increased promotion expenses, partly offset by decreased rent expense of warehouses and service fees of e-commerce websites. General and administrative expenses increased by $0.10 million, or 11.2%, to $1.03 million for the three months ended December 31, 2017 from $0.92 million for the same period of last year. The increase in general and administrative expenses was due to the incorporation of new subsidiaries, Tiankunrunze, Xinjiang Taihe and Tajite in 2017. As a result, total operating expenses increased by $0.15 million, or 10.7%, to $1.58 million for the three months ended December 31, 2017 from $1.43 million for the same period of last year.
Operating income increased by $0.71 million, or 28.2%, to $3.24 million for the three months ended December 31, 2017 from $2.53 million for the same period of last year. Operating margin was 22.9% for the three months ended December 31, 2017, compared to 22.5% for the same period of last year.
Net income
Net income increased by $0.68 million, or 23.6%, to $3.58 million for the three months ended December 31, 2017 from $2.90 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the three months ended December 31, 2017 was $3.60 million, or $0.17 per basic and diluted share. This compared to net income attributable to common shareholders of $2.85 million, $0.14 per basic and diluted share, for the same period of last year.
Six Months Ended December 31, 2017 Financial Results
For the Six Months Ended December 31
------------------------------------
($ millions, except per share data) 2017 2016 % Change
---- ---- --------
Revenue 21.94 17.59 24.7%
Luobuma products 4.93 1.65 199.4%
Chinese medicinal herbal products 6.93 6.68 3.8%
Other agricultural products 10.08 9.27 8.8%
Gross profit 6.91 5.87 17.7%
Gross margin 31.5% 33.4% -1.9%
Operating income 4.20 3.59 17.0%
Operating margin 19.1% 20.4% -1.3%
Net income attributable to Shineco 4.85 4.20 15.7%
EPS 0.23 0.21 11.1%
---- ---- ----
Revenues
Revenues for the six months ended December 31, 2017 increased by $4.35 million, or 24.7%, to $21.94 million from $17.59 million for the same period of last year, mainly due to increases in sales across all the products.
For the Six Months Ended December 31
------------------------------------
2017 2016
---- ----
($ millions) Revenues COGS Gross Revenues COGS Gross
Margin Margin
------ ------
Luobuma products 4.93 2.45 50.1% 1.65 0.81 50.4%
Chinese medicinal herbal products 6.93 5.33 23.1% 6.68 4.92 26.0%
Other agricultural products 10.08 7.21 28.4% 9.27 5.96 35.6%
Business and sales related taxes - 0.04 - - 0.03 -
Total 21.94 15.04 31.5% 17.59 11.72 33.4%
----- ----- ---- ----- ----- ----
Revenues from Luobuma products increased by $3.29 million, or 199.4%, to $4.93 million for the six months ended December 31, 2017 from $1.65 million for the same period of last year, mainly due to revenue generated by a new subsidiary, Xinjiang Taihe, of $2.93 million and increased sales volume of our health awareness related products. The Company also enhanced online sales promotions during the six months ended December 31, 2017, which contributed to more sales.
Revenues from Chinese medicinal herbal products increased by $0.25 million, or 3.8%, to $6.93 million for the six months ended December 31, 2017 from $6.68 million for the same period of last year. The increase was primarily due to more fulfilled sales orders from customers.
Revenues from other agricultural products increased by $0.81 million, or 8.8%, to $10.08 million for the six months ended December 31, 2017 from $9.27 million for the same period of last year. The increase was mainly due to the increase in sales volume of yew trees since the public realized the air purification function of the yew trees.
Gross profit and Gross Margin
Total cost of goods sold increased by $3.31 million, or 28.3%, to $15.04 million for the six months ended December 31, 2017 from $11.72 million for the same period of last year. Gross profit increased by $1.04 million, or 17.7%, to $6.91 million for the six months ended December 31, 2017 from $5.87 million for the same period of last year. Overall gross margin decreased by 1.9 percentage points to 31.5% for the six months ended December 31, 2017, compared to 33.4% for the same period of last year.
Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 50.1%, 23.1%, and 28.4%, respectively, for the six months ended December 31, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 50.4%, 26.0%, and 35.6%, respectively, for the same period of last year.
Operating income
Selling expenses decreased by $0.04 million, or 4.2%, to $0.85 million for the six months ended December 31, 2017 from $0.88 million for the same period of last year, primarily due to decreased rent expense of warehouses, salary expenses, and service fees of e-commerce websites, partially offset by increased promotion expenses. General and administrative expenses increased by $0.47 million, or 33.3%, to $1.86 million for the six months ended December 31, 2017 from $1.40 million for the same period of last year. The increase in general and administrative expenses was primarily due to the incorporation of new subsidiaries, Tiankunrunze, Xinjiang Taihe and Tajite in 2017, as well as increased professional service fees, such as attorney's fees, consulting fees and auditing fees.
Operating income increased by $0.61 million, or 17.0%, to $4.20 million for the six months ended December 31, 2017 from $3.59 million for the same period of last year. Operating margin was 19.1% for the six months ended December 31, 2017, compared to 20.4% for the same period of last year.
Net income
Net income increased by $0.56 million, or 13.2%, to $4.84 million for the six months ended December 31, 2017 from $4.28 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the six months ended December 31, 2017 was $4.85 million, or $0.23 per basic and diluted share. This compared to net income attributable to common shareholders of $4.20 million, $0.21 per basic and diluted share, for the same period of last year.
Financial Condition
As of December 31, 2017, the Company had cash of $29.35 million, compared to $23.15 million as of June 30, 2017. Working capital as of December 31, 2017 was $44.27 million as compared to $39.69 million at June 30, 2017. Net cash provided by operating activities was $7.78 million for the six months ended December 31, 2017, compared to net cash used in operating activities of $0.15 million for the same period of last year. Net cash used in investing activities was $0.49 million for the six months ended December 31, 2017, compared to $2.78 million for the same period of last year. Net cash used in financing activities was $1.47 million for the six months ended December 31, 2017, compared to net cash provided by financing activities of $5.79 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
SHINECO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, June 30,
2017 2017
---- ----
(Unaudited)
CURRENT ASSETS:
Cash $29,351,613 $23,154,551
Accounts receivable, net 15,068,392 14,480,004
Due from related parties 529,816 448,833
Inventories 2,502,196 2,346,273
Advances to suppliers, net 3,230,843 2,396,123
Loans to third parties, net - 830,090
Other receivables, net 981,808 535,700
Short-term deposit 230,201 158,894
Prepaid expenses 138,967 375,459
TOTAL CURRENT ASSETS 52,033,836 44,725,927
Property and equipment at cost, net of accumulated depreciation and amortization 11,670,890 10,320,396
Land use right, net of accumulated amortization 1,385,421 1,346,631
Investments 6,280,999 5,695,080
Deposit for business acquisition 124,474 2,065,686
Distribution right 1,134,099 -
Long-term deposit and other noncurrent assets 116,633 112,883
Prepaid leases 3,698,929 3,784,533
Deferred tax assets 285,917 233,834
Goodwill 2,152,975 -
TOTAL ASSETS $78,884,173 $68,284,970
=========== ===========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term loans $1,203,764 $2,663,628
Accounts payable 1,740,791 158,068
Advances from customers 105,785 5,439
Due to related parties 343,655 257,880
Other payables and accrued expenses 2,057,436 337,107
Taxes payable 2,024,768 1,608,926
Deferred tax liability 283,525 -
TOTAL LIABILITIES 7,759,724 5,031,048
--------- ---------
Commitments and contingencies - -
EQUITY:
Common stock; par value $0.001, 100,000,000 shares authorized; 21,034,072 and 21,034,072 shares issued and outstanding at December
31, 2017 and June 30, 2017 21,034 21,034
Additional paid-in capital 22,737,302 22,737,302
Statutory reserve 3,727,672 3,484,449
Retained earnings 43,675,155 39,064,743
Accumulated other comprehensive loss (155,024) (3,140,982)
-------- ----------
Total Stockholders' equity of Shineco, Inc. 70,006,139 62,166,546
Non-controlling interest 1,118,310 1,087,376
--------- ---------
TOTAL EQUITY 71,124,449 63,253,922
---------- ----------
TOTAL LIABILITIES AND EQUITY $78,884,173 $68,284,970
=========== ===========
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
SHINECO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
For the Six Months Ended For the Three Months Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
REVENUE $21,941,696 $17,589,730 $14,132,202 $11,223,066
----------- ----------- ----------- -----------
COST OF REVENUE
Cost of product and services 14,994,212 11,687,306 9,288,701 7,251,134
Business and sales related tax 41,337 33,964 25,724 18,419
------ ------ ------ ------
Total cost of revenue 15,035,549 11,721,270 9,314,425 7,269,553
GROSS PROFIT 6,906,147 5,868,460 4,817,777 3,953,513
--------- --------- --------- ---------
OPERATING EXPENSES
General and administrative expenses 1,863,924 1,398,341 1,028,373 924,577
Selling expenses 845,219 882,354 550,283 502,036
Total operating expenses 2,709,143 2,280,695 1,578,656 1,426,613
--------- --------- --------- ---------
INCOME FROM OPERATIONS 4,197,004 3,587,765 3,239,121 2,526,900
--------- --------- --------- ---------
OTHER INCOME
Income from equity method investments 350,652 401,768 202,194 240,586
Purchase rebate income 779,935 592,628 411,132 352,638
Other income 139,975 159,308 54,356 73,407
Interest income (expense), net (31,324) 40,538 (12,139) 7,785
Total other income 1,239,238 1,194,242 655,543 674,416
--------- --------- ------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,436,242 4,782,007 3,894,664 3,201,316
PROVISION FOR INCOME TAXES 595,035 505,387 312,178 303,751
------- ------- ------- -------
NET INCOME 4,841,207 4,276,620 3,582,486 2,897,565
Less: net income (loss) attributable to non-controlling interest (12,428) 80,177 (15,259) 49,829
------- ------ ------- ------
NET INCOME ATTRIBUTABLE TO SHINECO, INC. $4,853,635 $4,196,443 $3,597,745 $2,847,736
COMPREHENSIVE INCOME
Net income $4,841,207 $4,276,620 $3,582,486 $2,897,565
Other comprehensive income (loss): foreign currency translation gain (loss) 3,030,781 (2,514,175) 1,561,371 (2,317,494)
--------- ---------- --------- ----------
Total comprehensive income 7,871,988 1,762,445 5,143,857 580,071
Less: comprehensive income attributable to non-controlling interest 32,395 36,441 9,542 9,815
------ ------ ----- -----
COMPREHENSIVE INCOME ATTRIBUTABLE TO SHINECO, INC. $7,839,593 $1,726,004 $5,134,315 $570,256
Weighted average number of shares basic and diluted 21,034,072 20,205,409 21,034,072 21,034,072
========== ========== ========== ==========
Basic and diluted earnings per common share $0.23 $0.21 $0.17 $0.14
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
SHINECO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended December
31,
2017 2016
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $4,841,207 $4,276,620
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 295,832 299,553
(Recovery of) provision for doubtful accounts (18,931) 298,297
Increase in inventory reserve 148,043 35,930
Deferred tax benefit (41,523) (43,424)
Income from equity method investments (350,652) (401,768)
Interest income from loans to related parties - (87,220)
Changes in operating assets and liabilities:
Accounts receivable 35,996 (6,148,928)
Advances to suppliers (733,215) (282,288)
Inventories (145,327) 2,530,386
Other receivables (195,516) (399,914)
Prepaid expense and other assets 189,270 (152,508)
Due from related parties (8,399) 240,601
Prepaid leases 237,751 235,872
Accounts payable 1,544,313 5,444
Advances from customers 17,181 79,921
Other payables 1,640,458 (785,057)
Taxes payable 323,744 151,820
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 7,780,232 (146,663)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (564,937) (31,952)
Payment for construction in progress (602,267) -
Loan advances to third parties - (979,465)
Repayments of loans from third parties 830,889 -
Loan advances to related party (52,698) -
Repayments of loans from related parties - 501,119
Deposit for business acquisition (121,959) (2,074,198)
Deposit for potential investment - (200,000)
Cash of subsidiary acquired 22,830 -
NET CASH (USED IN) INVESTING ACTIVITIES (488,142) (2,784,496)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans 1,204,533 2,697,939
Repayment of short-term loans (2,743,199) (2,414,589)
Stock issuance cost payable - 843,844
Proceeds from initial public offering, net of offering costs - 4,550,705
Proceeds from advances from related parties 73,556 109,882
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,465,110) 5,787,781
---------- ---------
EFFECT OF EXCHANGE RATE CHANGE ON CASH 370,082 (1,122,302)
------- ----------
NET INCREASE IN CASH 6,197,062 1,734,320
CASH - Beginning of the Period 23,154,551 22,009,374
---------- ----------
CASH - End of the Period $29,351,613 $23,743,694
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income tax $492,206 $219,682
Cash paid for interest $69,498 $71,586
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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SOURCE Shineco, Inc
