U.S. markets close in 4 hours 53 minutes

HF Foods Reports 2019 Financial Results and Pro Forma Figures Reflecting B&R Global Holdings Merger Transaction

GREENSBORO, N.C., March 16, 2020 (GLOBE NEWSWIRE) -- HF Foods Group Inc. (HFFG), a leading food distributor to Asian restaurants across the Southeast, Pacific and Mountain West regions of the United States, reported full year and pro forma financial results for the year ended December 31, 2019. The pro forma results reflect the combined results of HF Foods Group and B&R Global Holdings (“B&R”) as if the transaction had occurred on the first day of the period presented. The merger was previously completed and announced in a press release on November 4, 2019.

2019 Financial Summary (which includes two months (November and December 2019) of Consolidated Financial Results from B&R)

  • Net revenue increased 33% to $388.2 million, compared to $291.0 million in 2018.
  • Gross profit was $63.2 million, or 16.3% of total revenue, compared to $49.6 million, or 17.0% of total revenue in 2018.
  • Net income was $5.4 million, or $0.22 per diluted share, compared to $6.3 million, or $0.30 per diluted share in 2018.
  • Adjusted EBITDA increased 19% to $16.9 million, compared to $14.2 million in 2018.
  • As of December 31, 2019, cash and cash equivalents totaled $14.5 million compared to $5.5 million at December 31, 2018.

Pro Forma Financial Summary - 2019 vs 2018

  • On a pro forma basis, net revenue increased slightly to $828.1 million from $818.0 million.
  • On a pro forma basis, gross profit was $133.2 million, or 16.1% of total revenue, compared to $134.6 million, or 16.5% of total revenue in 2018.
  • On a pro forma basis, net income was $5.7 million, or $0.11 per diluted share, compared to $15.8 million, or $0.31 per diluted share.
  • On a pro forma basis, adjusted EBITDA was $31.2 million compared to $36.8 million in 2018.

Management Commentary
“Today marks a milestone for our business as we are reporting the pro forma results from our merger with B&R Global Holdings for the first time,” said Zhou Min Ni, chairman and Co-CEO of HF Foods. “Since inception, both B&R and HF Foods have been dedicated to servicing the growing demand for Chinese cuisine in their respective markets, and with the merger complete, we now believe that HF Foods is the largest food distributor to Asian restaurants in the United States. While it will take some time for us to completely integrate the two businesses, we are optimistic that we will soon be in a position to capitalize on the synergies of the merger. We are confident that HF Foods will benefit from greater economies of scale and enhanced buying and negotiating power, which will be of great value to both our customers and our shareholders.”

Peter Zhang, Co-CEO and CFO added, “In the coming months, we will continue to focus our attention on consolidating our operations to effectively grow the business and improve our bottom-line. Due to the synergies that existed between our respective organizations, we remain confident that this merger will be accretive in the first year and will provide the necessary scale to further grow our platform over the long-run.”

Pro Forma 2019 Results
On a pro forma basis, 2019 revenue increased slightly to $828.1 million compared to $818.0 million in 2018, due to an increase in sales to independent restaurants, which was nearly offset by a decline in sales to the wholesale segment. The decline in wholesale was primarily attributable to higher volatility in seafood prices as a result of slightly increased commodity prices year-over-year.

On a pro forma basis, gross profit was $133.2 million (16.1% of total revenue) compared to $134.6 million (16.5% of total revenue) in 2018. The slight decrease in gross profit margin for the year was primarily due to the impact of tariff increases.

On a pro forma basis, distribution, selling and administrative expenses in 2019 were $118.6 million compared to $115.0 million in 2018. The marginal increase reflected one-off professional expenses related to the recently completed merger transaction, increases in fuel prices, particularly in California, as well as increases in insurance premiums. Distribution, selling and administrative expenses also included a substantial straight-line amortization of $10.9 million on intangibles, such as tradenames and customer relationships associated with the B&R merger transaction based on US Accounting GAAP rules.

As a result, pro forma net income for 2019 was $5.7 million, or $0.11 per diluted share, compared to $15.8 million, or $0.31 per diluted share, in 2018.

Adjusted EBITDA on a pro forma basis in 2019 was $31.2 million compared to $36.8 million in 2018. The lower adjusted EBITDA in 2019 was due to a higher tax provision as well as higher non-recurring professional fees associated with the B&R merger transaction.

About HF Foods Group Inc.
HF Foods Group Inc., headquartered in Greensboro, North Carolina, is a leading marketer and distributor of fresh produce, frozen and dry food, and non-food products to primarily Asian/Chinese restaurants and other foodservice customers throughout the Southeast, Pacific and Mountain West regions of the United States. With 14 distribution centers along the U.S. eastern and western seaboards, HF Foods aims to supply the increasing demand for Asian American restaurant cuisine. With an in-house proprietary ordering and inventory control network, more than 10,000 established customers in 21 states, and strong relations with growers and suppliers of food products in the US and China, HF Foods Group is able to offer fresh, high-quality specialty restaurant foods and supplies at economical prices to its large and growing base of customers. For more information, please visit hffoodsgroup.com.

Forward-Looking Statements
All statements in this news release other than statements of historical facts are forward-looking statements which contain our current expectations about our future results. We have attempted to identify any forward-looking statements by using words such as “anticipates,” “believes,” “could,” “expects,” “intends,” “may,” “should” and other similar expressions. Although we believe that the expectations reflected in all of our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause the Company’s actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements. Such factors include, but are not limited to, unfavorable macroeconomic conditions in the United States, competition in the food service distribution industry, particularly the entry of new competitors into the Chinese/Asian restaurant market niche, increases in fuel costs or commodity prices, disruption of relationships with vendors and increases in product prices, U.S. government tariffs on products imported into the United States, particularly from China, changes in consumer eating and dining out habits, disruption of relationships with or loss of customers, our ability to execute our acquisition strategy, availability of financing to execute our acquisition strategy, control of the Company by our Chief Executive Officer and principal stockholder, failure to retain our senior management and other key personnel, our ability to attract, train and retain employees, changes in and enforcement of immigration laws, failure to comply with various federal, state and local rules and regulations regarding food safety, sanitation, transportation, minimum wage, overtime and other health and safety laws, product recalls, voluntary recalls or withdrawals if any of the products we distribute are alleged to have caused illness, been mislabeled, misbranded or adulterated or to otherwise have violated applicable government regulations, failure to protect our intellectual property rights, any cyber security incident, other technology disruption, or delay in implementing our information technology systems, statements of assumption underlying any of the foregoing, and other factors disclosed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as required by law, we undertake no obligation to disclose any revision to these forward-looking statements.

Investor Relations Contact:
Gateway Investor Relations
Cody Slach
Tel 1-949-574-3860
HFFG@gatewayir.com


HF Foods Group Inc.
Consolidated Balance Sheets

    As of  
    December 31     December 31  
    2019     2018  
ASSETS                
CURRENT ASSETS:                
Cash   $ 14,538,286     $ 5,489,404  
Accounts receivable, net     50,027,134       14,406,476  
Accounts receivable - related parties, net     4,202,870       2,292,151  
Inventories, net     77,531,854       22,175,769  
Advances to suppliers - related parties, net     745,135       1,526,482  
Notes receivable     -       3,803,826  
Notes receivable - related parties, current     -       8,117,686  
Other current assets     4,374,338       1,230,970  
TOTAL CURRENT ASSETS     151,419,617       59,042,764  
Property and equipment, net     37,538,147       22,650,021  
Security deposits-related parties     591,380       -  
Long-term notes receivable - related parties     -       423,263  
Operating lease right-of-use assets     17,155,584       -  
Long-term investments     2,296,276       -  
Intangible assets, net     186,687,950       -  
Goodwill     406,703,348       -  
Deferred tax assets     78,993       117,933  
Other long-term assets     372,499       242,426  
TOTAL ASSETS   $ 802,843,794     $ 82,476,407  
                 
CURRENT LIABILITIES:                
Bank overdraft   $ 14,952,510       -  
Lines of credit     41,268,554       8,194,146  
Accounts payable     39,689,911       17,474,206  
Accounts payable - related parties     4,521,356       3,923,120  
Accrued expenses and other payables     2,683,696       2,376,498  
Current portion of long-term debt, net     2,726,981       1,455,441  
Current portion of obligations under finance leases     280,243       164,894  
Current portion of obligations under operating leases     4,322,503       -  
TOTAL CURRENT LIABILITIES     110,445,754       33,588,305  
Long-term debt, net     18,535,016       13,109,854  
Obligations under finance leases, non-current     1,053,166       120,705  
Obligations under operating leases, non-current     12,833,081       -  
Deferred tax liabilities     52,320,045       1,196,061  
TOTAL LIABILITIES   $ 195,187,062     $ 48,014,925  
SHAREHOLDERS’ EQUITY:                
Preferred Stock, $0.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively     -       -  
Common Stock, $0.0001 par value, 100,000,000 shares authorized, 53,050,211 shares issued, and 52,145,096 shares outstanding as of December 31, 2019, and 30,000,000 shares authorized, 22,167,486 shares issued and outstanding as of December 31, 2018     5,305       2,217  
Treasury Stock, at cost, 905,115 shares as of December 31, 2019, and - 0 - shares at December 31, 2018     (12,038,030 )     -  
Additional paid-in capital     599,617,009       22,920,603  
Retained earnings     15,823,661       10,433,984  
Total shareholders’ equity attributable to HF Foods Group, Inc.     603,407,945       33,356,804  
Noncontrolling interest     4,248,787       1,104,678  
TOTAL SHAREHOLDERS’ EQUITY     607,656,732       34,461,482  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY     802,843,794     $ 82,476,407  


HF Foods Group Inc.
Consolidated Statements of Income

    For the years ended December 31  
    2019     2018  
                 
Net revenue - third parties   $ 368,809,865     $ 272,859,695  
Net revenue - related parties     19,352,416       18,147,003  
TOTAL NET REVENUE     388,162,281       291,006,698  
Cost of revenue - third parties     306,370,972       223,694,206  
Cost of revenue - related parties     18,582,786       17,746,943  
TOTAL COST OF REVENUE     324,953,758       241,441,149  
GROSS PROFIT     63,208,523       49,565,549  
                 
DISTRIBUTION, SELLING AND ADMINISTRATIVE EXPENSES     54,931,157       41,039,438  
                 
INCOME FROM OPERATIONS     8,277,366       8,526,111  
                 
Other Income (Expenses)                
Interest income     418,530       493,358  
Interest expense and bank charges     (1,661,454 )     (1,372,508 )
Rental income – related parties     525,600       525,600  
Other income     532,336       671,389  
Total Other Income (Expenses), net     (184,988 )     317,839  
INCOME BEFORE INCOME TAX PROVISION     8,092,378       8,843,950  
                 
PROVISION FOR INCOME TAXES     2,197,092       2,490,255  
NET INCOME     5,895,286       6,353,695  
Less: net income attributable to noncontrolling interest     505,609       67,240  
NET INCOME ATTRIBUTABLE TO HF FOODS GROUP INC.   $ 5,389,677     $ 6,286,455  
                 
Earnings per common share – basic and diluted   $ 0.22     $ 0.30  
Weighted average shares – basic and diluted     27,113,288       20,991,004