Shineco, Inc. Reports Fourth Quarter and Full Year 2017 Financial Results


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PR Newswire 13-Oct-2017 4:30 PM
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BEIJING, Oct. 13, 2017 /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 fourth quarter and full year ended June 30, 2017.
Mr. Yuying Zhang, Chairman and Chief Executive Officer of Shineco, commented, "We are proud of all that we have accomplished in our first full year as an independent publicly traded company and pleased to report the fourth quarter of 2017 financial results with a 68.2% increase in net income and a 57.6% increase in EPS. As we reflect back on the year, we are pleased with the significant progress we have made as we begin to unlock the potential of our businesses by investing to establish the Institute of Chinese Apocynum Industrial Technology Research and Apocynum Industrial Park in Xinjiang. These investments presented headwinds to our sales and profit performance in the short term, we are confident that our strategy will best-position Shineco for continued success for the long term. We expect to sustain good momentum in our financial performance and we anticipate another year of good growth with stable margins and further progress in revenue and net income."
Fourth Quarter of 2017 Financial Highlights
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For the Three Months Ended June 30
($ millions, except per share data) 2017 2016 % Change
Revenue 8.06 8.13 -0.9%
Luobuma products 0.86 0.85 0.8%
Chinese medicinal herbal products 3.52 3.60 -2.3%
Other agricultural products 3.69 3.68 0.1%
Gross profit 2.27 2.18 4.0%
Gross margin 28.2% 26.8% 1.3%
Operating income 2.19 1.20 82.8%
Operating margin 27.2% 14.7% 12.4%
Net income attributable to Shineco 2.35 1.40 68.2%
EPS 0.114 0.072 57.6%
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Net income increased by 68.2% to $2.35 million, or $0.114 per basic and diluted share, for the three months ended June 30, 2017 from $1.40 million, or $0.072 per basic and diluted share, for the same period of last year. The increases in net income and earnings per share were primarily due to lower operating expenses in 2017 versus the same period of 2016.
Operating income increased by 82.8% to $2.19 million from $1.20 million, for the same period of last year.
Gross profit increased by 4.0% to $2.27 million for the three months ended June 30, 2017 from $2.18 million for the same period of last year. Gross margin increased by 1.3 percentage points to 28.2% from 26.8% for the same period of last year.
Revenues decreased by 0.9% to $8.06 million for the three months ended June 30, 2017 from $8.13 million for the same period of last year, mainly due to the price fluctuation of the Chinese Medicine Market.
Fourth Quarter of 2017 Financial Results
Revenues
Revenues for the three months ended June 30, 2017 decreased by $0.07 million, or 0.9%, to $8.06 million from $8.13 million for the same period of last year, mainly due to the decreased sales of products.
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For the Three Months Ended June 30
2017 2016
($ millions) Revenues COGS Gross Margin Revenues COGS Gross Margin
Luobuma products 0.86 0.31 63.3% 0.85 0.36 57.8%
Chinese medicinal herbal products 3.52 2.90 17.5% 3.60 3.04 15.6%
Other agricultural products 3.69 2.52 31.7% 3.68 2.61 29.0%
Business and sales related taxes - 0.02 - - 0.03 -
Total 8.06 5.76 28.6% 8.13 6.04 25.8%
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Revenues from Luobuma products increased by $0.01 million, or 0.8%, to $0.86 million for the three months ended June 30, 2017 from $0.85 million for the same period of last year, mainly due to the increased sales from online platform.
Revenues from Chinese medicinal herbal products decreased by $0.08 million, or 2.3%, to $3.52 million for the three months ended June 30, 2017 from $3.60 million for the same period of last year. The decrease was primarily due to the price fluctuation in the Chinese Medicine Market. The average currency exchange rates for the three months ended June 30, 2017 and 2016 were 1 RMB to $0.1457 USD and 1 RMB to $0.1531 USD, respectively, which represented a decrease of 4.8%.
Revenues from other agricultural products increased by $0.002 million, or 0.1%, to $3.69 million for the three months ended June 30, 2017 from $3.68 million for the same period of last year. The increase was mainly attributable to the added electronic warehousing.
Gross profit and Gross Margin
Total cost of goods sold decreased by $0.28 million, or 4.6%, to $5.76 million for the three months ended June 30, 2017 from $6.04 million for the same period of last year. Gross profit increased by $0.09 million, or 4.0%, to $2.27 million for the three months ended June 30, 2017 from $2.18 million for the same period of last year. Overall gross margin increased by 1.3 percentage points to 28.2% for the three months ended June 30, 2017, compared to 26.8% for the same period of last year.
Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 63.3%, 17.5%, and 31.7%, respectively, for the three months ended June 30, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 57.8%, 15.6%, and 29.0%, respectively, for the same period of last year.
Operating income
Selling expenses decreased by $0.1 million, or 24.8%, to $0.29 million for the three months ended June 30, 2017 from $0.39 million for the same period of last year, primarily due to decreased advertising expenses and promotion expenses. General and administrative expenses decreased by $0.81 million, or 136.6%, to negative $0.22 million for the three months ended June 30, 2017 from $0.59 million for the same period of last year. The decrease in general and administrative expenses was primarily attributable to account receivable collected and expenditure controlled. As a result, total operating expenses decreased by $0.90 million, or 92.1%, to $0.08 million for the three months ended June 30, 2017 from $0.98 million for the same period of last year.
Operating income increased by $0.99 million, or 82.8%, to $2.19 million for the three months ended June 30, 2017 from $1.20 million for the same period of last year. Operating margin was 27.2% for the three months ended June 30, 2017, compared to 14.7% for the same period of last year.
Net income
Net income increased by $0.95 million, or 68.2%, to $2.35 million for the three months ended June 30, 2017 from $1.40 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 June 30, 2017 was $2.35 million, or $0.114 per basic and diluted share. This compared to net income attributable to common shareholders of $1.40 million, $0.072 per basic and diluted share, for the same period of last year.
Full Year 2017 Financial Results
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For the Years Ended June 30
($ millions, except per share data) 2017 2016 % Change
Revenue 33.59 35.21 -4.6%
Luobuma products 3.62 4.39 -17.4%
Chinese medicinal herbal products 13.25 14.03 -5.6%
Other agricultural products 16.72 16.79 -0.4%
Gross profit 10.74 11.08 -3.1%
Gross margin 32.0% 31.5% 0.5%
Operating income 7.45 7.34 1.4%
Operating margin 22.2% 20.9% 1.3%
Net income attributable to Shineco 8.47 8.14 4.1%
EPS 0.41 0.42 -2.5%
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Revenues
Revenues for the twelve months ended June 30, 2017 decreased by $1.61 million, or 4.6%, to $33.59 million from $35.21 million for the same period of last year, mainly due to decrease in sales across all of our products.
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For the Years Ended June 30
2017 2016
($ millions) Revenues COGS Gross Margin Revenues COGS Gross Margin
Luobuma products 3.62 1.70 53.2% 4.39 1.97 55.0%
Chinese medicinal herbal products 13.25 10.12 23.6% 14.03 10.99 21.7%
Other agricultural products 16.72 10.96 34.5% 16.79 11.07 34.0%
Business and sales related taxes - 0.08 - - 0.09 -
Total 33.59 22.85 32.0% 35.21 24.12 31.5%
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Revenues from Luobuma products decreased by $0.76 million, or 17.4%, to $3.62 million for the twelve months ended June 30, 2017 from $4.39 million for the same period of last year, mainly due to both the decreased sales price and decreased sales volume of our products.
Revenues from Chinese medicinal herbal products decreased by $0.79 million, or 5.6%, to $13.25 million for the twelve months ended June 30, 2017 from $14.03 million for the same period of last year. The decrease was primarily due to the depreciation of RMB against USD. The average currency exchange rates for the twelve months ended June 30, 2017 and 2016 were 1 RMB to $0.1468 USD and 1 RMB to $0.1555 USD, respectively, which represented a decrease of 5.6%.
Revenues from other agricultural products decreased by $0.07 million, or 0.4%, to $16.72 million for the twelve months ended June 30, 2017 from $16.79 million for the same period of last year. The decrease was mainly attributable to the depreciation of RMB against USD as mentioned above.
Gross profit and Gross Margin
Total cost of goods sold decreased by $1.27 million, or 5.2%, to $22.85 million for the twelve months ended June 30, 2017 from $24.12 million for the same period of last year. Gross profit decreased by $0.34 million, or 3.1%, to $10.74 million for the twelve months ended June 30, 2017 from $11.08 million for the same period of last year. Overall gross margin increased by 0.5 percentage points to 32.0% for the twelve months ended June 30, 2017, compared to 31.5% for the same period of last year.
Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 53.2%, 23.6%, and 34.5%, respectively, for the twelve months ended June 30, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 55.0%, 21.7%, and 34.0%, respectively, for the same period of last year.
Operating income
Selling expenses decreased by $0.27 million, or 15.6%, to $1.48 million for the twelve months ended June 30, 2017 from $1.76 million for the same period of last year, primarily due to decreased advertising expenses, promotion expenses, and service fees of e-commerce websites, partially offset by increased rent expense of warehouses during the twelve months ended June 30, 2017 compared to the same period of 2016. General and administrative expenses decreased by $0.17 million, or 8.8%, to $1.81 million for the twelve months ended June 30, 2017 from $1.99 million for the same period of last year. The decrease in general and administrative expenses was primarily attributable to the recovery of allowance for doubtful accounts as a result of collection, partially offset by the increased general and administrative expenses of our Shineco holding company, which were $1.05 million and nil for the twelve months ended June 30, 2017 and 2016. As a result, total operating expenses decreased by $0.45 million, or 12.0%, to $3.29 million for the twelve months ended June 30, 2017 from $3.74 million for the same period of last year.
Operating income increased by $0.10 million, or 1.4%, to $7.45 million for the twelve months ended June 30, 2017 from $7.34 million for the same period of last year. Operating margin was 22.2% for the twelve months ended June 30, 2017, compared to 20.9% for the same period of last year.
Net income
Net income increased by $0.33 million, or 4.1%, to $8.47 million for the twelve months ended June 30, 2017 from $8.29 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the twelve months ended June 30, 2017 was $8.47 million, or $0.41 per basic and diluted share. This compared to net income attributable to common shareholders of $8.14 million, $0.42 per basic and diluted share, for the same period of last year.
Financial Condition
As of June 30, 2017, the Company had cash and cash equivalents of $23.15 million, compared to $22.01 million as of June 30, 2016. Net cash used in operating activities was $2.74 million for the twelve months ended June 30, 2017, compared to net cash provided by operating activities of $13.29 million for the same period of last year. Net cash used in investing activities was $0.73 million for the twelve months ended June 30, 2017, compared to net cash provided by investing activities of $3.95 million for the same period of last year. Net cash provided by financing activities was $5.38 million for the twelve months ended June 30, 2017, compared to net cash used in financing activities of $0.26 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 http://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 LLCPhone: +1-917-609-0333Email: tina.xiao@ascent-ir.com
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SHINECO, INC.
CONSOLIDATED BALANCE SHEETS

ASSETS
June 30, June 30,
2017 2016

CURRENT ASSETS:
Cash $ 23,154,551 $ 22,009,374
Accounts receivable, net 14,480,004 6,372,970
Due from related parties 448,833 850,707
Inventories 2,346,273 4,608,179
Advances to suppliers, net 2,396,123 53,024
Loans to third parties, net 830,090 560,234
Other receivables, net 535,700 463,361
Short-term deposit 158,894 100,270
Prepaid expenses 375,459 33,117
TOTAL CURRENT ASSETS 44,725,927 35,051,236

Property and equipment at cost, net of accumulated depreciation and amortization 10,320,396 11,035,199
Land use right, net of accumulated amortization 1,346,631 1,408,765
Investments 5,695,080 4,766,847
Deposit for business acquisition 2,065,686 -
Long-term deposit and other noncurrent assets 112,883 120,357
Prepaid leases 3,784,533 4,338,892
Deferred tax assets 233,834 327,492
TOTALASSETS $ 68,284,970 $ 57,048,788

LIABILITIES AND EQUITY

CURRENT LIABILITIES:
Short-term loans $ 2,663,628 $ 2,745,945
Accounts payable 158,068 259,803
Advances from customers 5,439 9,597
Due to related parties 257,880 244,915
Other payables and accrued expenses 337,107 1,999,622
Taxes payable 1,608,926 1,278,142
TOTAL LIABILITIES 5,031,048 6,538,024

Commitments and contingencies - -

EQUITY:
Common stock; par value $0.001, 100,000,000 shares authorized; 21,034,072 and 19,320,882 shares issued and outstanding at June 30, 2017 and 2016 21,034 19,321
Additional paid-in capital 22,737,302 17,344,466
Statutory reserve 3,484,449 3,242,139
Retained earnings 39,064,743 30,837,399
Accumulated other comprehensive loss (3,140,982) (1,887,929)
Total Stockholders' equity of Shineco, Inc. 62,166,546 49,555,396
Non-controlling interest 1,087,376 955,368
TOTAL EQUITY 63,253,922 50,510,764

TOTAL LIABILITIES AND EQUITY $ 68,284,970 $ 57,048,788



SHINECO, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

For the Years Ended June 30,
2017 2016

REVENUE $ 33,592,337 $ 35,206,852

COST OF REVENUE
Cost of product and services 22,776,035 24,037,241
Business and sales related tax 75,974 85,038
Total cost of revenue 22,852,009 24,122,279

GROSS PROFIT 10,740,328 11,084,573

OPERATING EXPENSES
General and administrative expenses 1,813,402 1,988,101
Selling expenses 1,480,855 1,755,264
Total operating expenses 3,294,257 3,743,365

INCOME FROM OPERATIONS 7,446,071 7,341,208

OTHER INCOME
Income from equity method investments 927,697 672,269
Purchase rebate income 1,136,162 1,124,258
Other income 348,181 197,390
Interest income, net 14,171 135,404
Total other income 2,426,211 2,129,321

INCOME BEFORE PROVISION FOR INCOME TAXES 9,872,282 9,470,529

PROVISION FOR INCOME TAXES 1,252,637 1,177,707

NET INCOME 8,619,645 8,292,822

Less: net income attributable to non-controlling interest 149,991 155,926

NET INCOME ATTRIBUTABLE TO SHINECO, INC. $ 8,469,654 $ 8,136,896

COMPREHENSIVE INCOME
Net income $ 8,619,645 $ 8,292,822
Other comprehensive loss: foreign currency translation loss (1,271,036) (3,991,356)
Total comprehensive income 7,348,609 4,301,466
Less: comprehensive income attributable to non-controlling interest 132,008 107,219

COMPREHENSIVE INCOME ATTRIBUTABLE TO SHINECO, INC. $ 7,216,601 $ 4,194,247

Weighted average number of shares basic and diluted 20,616,335 19,320,882

Basic and diluted earnings per common share $ 0.41 $ 0.42



SHINECO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended June 30,
2017 2016

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,619,645 $ 8,292,822
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 575,196 871,099
Gain from disposal of property and equipment (8,063) -
(Recovery of) provision for doubtful accounts (342,041) 324,515
Increase in inventory reserve 37,292 290,515
Deferred tax provision (benefit) 86,780 (120,765)
Income from equity method investments (927,697) (672,269)
Interest income from loans to related parties (86,355) -
Gain on disposal of investment - (233,249)

Changes in operating assets and liabilities:
Accounts receivable (8,136,668) (1,980,619)
Advances to suppliers (2,339,757) 1,249,897
Inventories 2,122,982 2,834,739
Other receivables (72,891) 172,176
Prepaid expense and other assets (401,755) 135,528
Due from related parties (976,937) 246,026
Prepaid leases 466,759 495,122
Accounts payable (96,137) 105,382
Advances from customers (3,950) (21,266)
Other payables (1,614,992) 1,008,132
Taxes payable 354,453 292,580
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (2,744,136) 13,290,365

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (49,863) (498,772)
Proceeds from disposal of property and equipment 17,688 -
Proceeds from withdrawal of investments - 466,497
Repayments of loans from third parties 4,839 189,275
Repayments of loans from related parties 565,739 1,366,787
Income received from investments in unconsolidated entities 990,839 2,428,894
Deposit for business acquisition (2,055,074) -
Deposit for potential investment (200,000) -
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (725,832) 3,952,681

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans 2,673,064 3,148,077
Repayment of short-term loans (2,701,321) (3,526,423)
Proceeds from initial public offering, net of offering costs 5,394,549 -
Proceeds from advances from related parties 17,683 122,424
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 5,383,975 (255,922)

EFFECT OF EXCHANGE RATE CHANGE ON CASH (768,830) (1,033,855)

NET INCREASE IN CASH 1,145,177 15,953,269

CASH - Beginning of the Year 22,009,374 6,056,105

CASH - End of the Year $ 23,154,551 $ 22,009,374

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income tax $ 845,792 $ 991,599
Cash paid for interest $ 150,175 $ 366,844

SUPPLEMENTAL NON-CASH INVESTING ACTIVITY:
Long-term investment converted to fixed assets $ - $ 6,219,960
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SOURCE Shineco, Inc

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