Vous devriez lire la description suivante de nos résultats d'exploitation et
situation financière conjointement avec nos états financiers consolidés vérifiés
relevés pour les exercices terminés
HF Foods Group Inc.(" HF Group", or the "Company") markets and distributes fresh produces, frozen and dry food, and non- food products to primarily Asian restaurants and other foodservice customers throughout the Southeast, Pacific and Mountain West regions region of the United States.
La société a été initialement constituée en
société d'acquisition à but lucratif sous le nom
(«Atlantique»), afin d'acquérir, par le biais d'une fusion, un échange d'actions, des actifs
acquisition, achat d'actions, recapitalisation, réorganisation ou similaire
regroupement d'entreprises, une ou plusieurs entreprises ou entités.
27 -------------------------------------------------------------------------------- Effective
August 22, 2018, Atlanticconsummated the transactions contemplated by a merger agreement (the "Atlantic Merger Agreement"), dated as of March 28, 2018, by and among Atlantic, HF Group Merger Sub Inc., a Delawaresubsidiary formed by Atlantic, HF Group Holding Corporation, a North Carolinacorporation (" HF Holding"), the stockholders of HF Holding, and Zhou Min Ni, as representative of the stockholders of HF Holding. Pursuant to the AtlanticMerger Agreement, HF Holdingmerged with HF Merger Sub and HF Holdingbecame the surviving entity (the "Atlantic Merger") and a wholly-owned subsidiary of Atlantic(the "Atlantic Acquisition"). Additionally, upon the closing of the transactions contemplated by the Atlantic Merger Agreement (the " AtlanticClosing"), (i) the stockholders of HF Holdingbecame the holders of a majority of the shares of common stock of Atlantic, and (ii) Atlanticchanged its name to HF Foods Group Inc.(Collectively, these transactions are referred to as the "Atlantic Transactions"). At closing on August 22, 2018, Atlanticissued the HF Holdingstockholders an aggregate of 19,969,831 shares of its common stock, equal to approximately 88.5% of the aggregate issued and outstanding shares of Atlantic'scommon stock. The pre- Transaction stockholders of Atlanticowned the remaining 11.5% of the issued and outstanding shares of common stock of the combined entity. Following the consummation of the Atlantic Transactions on August 22, 2018, there were 22,167,486 shares of common stock issued and outstanding, consisting of (i) 19,969,831 shares issued to HF Holding'sstockholders pursuant to the Atlantic Merger Agreement, (ii) 400,000 shares redeemed by one of Atlantic'sshareholders in conjunction with the Atlantic Transactions, (iii) 10,000 restricted shares issued to one of Atlantic'sshareholders in conjunction with the Atlantic Transactions, and (iv) 2,587,655 shares originally issued to the pre-Transaction stockholders of Atlantic. Effective November 4, 2019, HF Group consummated the transactions contemplated by a merger agreement (the "B&R Global Merger Agreement"), dated as of June 21, 2019, by and among the Company, B&R Global Merger Sub Inc., a Delawarecorporation ("Merger Sub"), B&R Global, the stockholders of B&R Global (the "B&R Global Stockholders"), and Xiao Mou Zhang, as representative of the stockholders (the "Business Combination"). Upon the closing of the transactions contemplated by the B&R Global Merger Agreement (the "Closing"), Merger Sub merged with and into B&R Global, resulting in B&R Global becoming a wholly owned subsidiary of HF Group. HF Group acquired 100% of the controlling interest of B&R Global, in exchange for 30,700,000 shares of HF Group Common Stock. The aggregate fair value of the consideration paid by HF Group in the business combination is approximately $576,699,494and is based on the closing share price at the date of Closing. Due to the acquisition of B&R Global, the financial information of the Company for the year ended December 31, 2019is not comparable to the full year ended December 31, 2018. As such, the Company has presented our results of operations for the years ended December 31, 2019and 2018 as well as the unaudited pro forma combined results of operations for years ended December 31, 2019and 2018. For more information, see section titled "Supplemental Unaudited Pro Forma Combined Financial Information". Outlook The Company plans to continue to expand our business through acquisition of other distributors and wholesalers, which depends on access to sufficient capital. If the Company is unable to obtain equity or debt financing, or borrowings from bank loans, the Company may not be able to execute our plan to acquire other distributors and wholesalers. Even if the Company is able to make such acquisitions, the Company may not be able to successfully integrate any acquired businesses or improve their profitability, which could have a material adverse effect on our financial condition and future operating performance. Our net revenue for the year ended December 31, 2019was $388.2 million, an increase of $97.2 million, or 33.4%, from $291.0 millionfor the year ended December 31, 2018. Net income attributable to HF Group's stockholders for the year ended December 31, 2019was $5.39 million, a decrease of $0.9 million, or 14.3%, from $6.3 millionfor the year ended December 31, 2018. Adjusted EBITDA for the year ended December 31, 2019was $16.9 million, an increase of $2.7 million, or 19.0%, from $14.2 millionfor the year ended December 31, 2018. For additional information on Adjusted EBITDA, see the section entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS- Adjusted EBITDA" below. On a pro-forma basis, assuming that the Business Combination took place on January 1, 2018, our net revenue for the year ended December 31, 2019would have been $828.0 million, an increase of $10.0 million, or 1.2% from $818.0 millionfor the year ended December 31, 2018. Net income attributable to HF Group's stockholders for the year ended December 31, 2019would have been $5.7 million, a decrease of $10.1 million, or 64.1%, from net income attributable to HF Group's stockholder of $15.8 millionfor the year ended December 31, 2018. Adjusted EBITDA for the year ended December 31, 2019would have been $32.9 million, a decrease of $5.8 million, or 15.1%, from $38.7 millionfor the year ended December 31, 2018. For additional information on our pro-forma results, see the section entitled "SUPPLEMENTAL UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION" below. The COVID-19 epidemic may pose significant risks to our business. It is too early to quantify the impact this situation will have on company revenue and profits at this time, but the public health actions being undertaken to reduce spread of the virus are capable of creating uncertainties regarding consumer demand for meals away from home and regarding reliability of our supply chain. Accordingly, management is evaluating the Company's liquidity position, communicating with and monitoring customers and suppliers, and reviewing our analysis of our financial performance as we seek to position the Company to withstand the uncertainty related to the coronavirus.
In assessing our performance, the Company considers a variety of performance and financial measures, including principal growth in net revenue, gross profit, distribution, general and administrative expenses, and adjusted EBITDA. The key measures that the Company uses to evaluate the performance of our business are set forth below: 28
Net Revenue Net revenue is equal to gross sales minus sales returns, sales incentives that the Company offers to our customers, such as rebates and discounts that are offsets to gross sales; and certain other adjustments. Our net sales are driven by changes in number of customers and average customer order amount, product inflation that is reflected in the pricing of its products and mix of products sold. Gross Profit Gross profit is equal to net sales minus cost of revenue. Cost of revenue primarily includes inventory costs (net of supplier consideration), inbound freight, custom clearance fees and other miscellaneous expenses. Cost of revenue generally changes as the Company incurs higher or lower costs from suppliers and as the customer and product mix changes.
Frais de distribution, de vente et d'administration
Distribution, selling and administrative expenses primarily consist of salaries and benefits for employees and contract laborers, trucking and fuel expenses, utilities, maintenance and repair expenses, insurance expenses, depreciation and amortization expenses, selling and marketing expenses, professional fees and other operating expenses. Adjusted EBITDA The Company believes that Adjusted EBITDA is a useful performance measure and can be used to facilitate a comparison of the Company's operating performance on a consistent basis from period to period and to provide for a more complete understanding of factors and trends affecting our business than GAAP measures alone can provide. Our management believes that Adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect our operating performance. Our management believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial performance with other companies in the same industry, many of which present similar non-GAAP financial measures to investors. The Company presents Adjusted EBITDA in order to provide supplemental information that the Company considers relevant for the readers of our consolidated financial statements included elsewhere in this report, and such information is not meant to replace or supersede
U.S.GAAP measures. The Company defines Adjusted EBITDA as net income (loss) before interest expense, income taxes, and depreciation and amortization, further adjusted to exclude certain unusual, non-cash, non-recurring, cost reduction, and other adjustment items. The definition of Adjusted EBITDA may not be the same as similarly titled measures used by other companies in the industry. Adjusted EBITDA is not defined under U.S.GAAP and is subject to important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of HF Group's results as reported under U.S.GAAP. For example, Adjusted EBITDA:
? exclut certains paiements d'impôts qui peuvent représenter une réduction des liquidités disponibles
à la Société;
? ne reflète aucune exigence de dépenses en capital pour les actifs
étant déprécié et amorti qui pourrait devoir être remplacé à l'avenir;
? ne reflète pas les changements ni les besoins de trésorerie de notre fonds de roulement
? ne reflète pas les intérêts débiteurs importants ou les besoins de trésorerie,
necessary to service our debt.
Pour plus d'informations sur le BAIIA ajusté, voir la section intitulée
"RAPPORT DE GESTION ET ANALYSE DE LA SITUATION FINANCIÈRE ET DES RÉSULTATS DE
OPÉRATIONS – EBITDA ajusté "ci-dessous.
Résultats d'exploitation pour les exercices terminés
Le tableau suivant présente un résumé de nos résultats consolidés de
opérations pour les exercices terminés
les résultats présentés ci-dessous ne sont pas nécessairement représentatifs des résultats
être attendue pour toute période future.
For the years ended December 31 Changes 2019 2018 Amount % Net revenue
$ 388,162,281 $ 291,006,698 $ 97,155,58333.4 % Cost of revenue 324,953,758 241,441,149 83,512,609 34.6 % Gross profit 63,208,523 49,565,549 13,642,974 27.5 % Distribution, selling and administrative expenses 54,931,157 41,039,438 13,891,719 33.8 % Income from operations 8,277,366 8,526,111 (248,745 ) (2.9 )% Interest income 418,530 493,358 (74,828 ) (15.2 )% Interest expenses and bank charges (1,661,454 ) (1,372,508 ) (288,946 ) 21.1 % Other income 1,057,936 1,196,989 (139,053 ) (11.6 )% Income before income tax provision 8,092,378 8,843,950 (751,572 ) (8.5 )% Provision for income taxes 2,197,092 2,490,255 293,163 (11.8 )% Net income 5,895,286 6,353,695 (458,409 ) (7.2 )% Less: net income attributable to noncontrolling interest 505,609 67,240 438,369 651.9 % Net income attributable to HF Foods Group Inc. $ 5,389,677 $ 6,286,455 $ (896,778 )(14.3 )% Net Revenue Our net revenue was $388.2 millionfor the year ended December 31, 2019, which consisted of $366.4 million, or 94.4% of net revenue, of sales to independent restaurants and $21.7 million, or 5.6% of net revenue, of sales to wholesale distributors. Net revenue was $291.0 millionfor the year ended December 31, 2018, which consisted of $272.2 million, or 93.5% of net revenue, of sales to independent restaurants and $18.8 million, or 6.5% of net revenue, of sales to wholesale distributors.
Le tableau suivant présente la répartition des revenus nets:
For the years ended December 31, 2019 2018 Changes Amount % Amount % Amount % Net revenue Sales to independent restaurants
$ 366,432,44894.4 % $ 272,172,10693.5 % $ 94,260,34234.6 % Wholesale 21,729,833 5.6 % 18,834,592 6.5 % 2,895,241 15.4 % Total $ 388,162,281100.0 % $ 291,006,698100.0 % $ 97,155,58333.4 % Compared with the year ended December 31, 2018, net revenue increased by $97.2 million, or 33.4%, for the year ended December 31, 2019, primarily attributable to the acquisition of B&R Global, which contributed $1.8 millionin sales to wholesale customers and $84.3 millionin sales to independent restaurants. The increase in revenue is also due to a $10.0 millionincrease in sales to independent restaurants of HF, resulting primarily from slightly increased commodity prices in 2019 and increases in the average order size of existing customers by introducing new products during the year. Additionally, HF sales to wholesale customers increased $1.1 millionprimarily due to the increase in sales to three wholesale customers and sales to two new customers. 30 --------------------------------------------------------------------------------
Coût du revenu et du bénéfice brut
Le tableau suivant présente le calcul de la marge brute et de la marge brute
pour les ventes aux restaurants indépendants, aux grossistes et le revenu net total:
For the years ended December 31, Changes 2019 2018 Amount % Sales to independent restaurants Net revenue
$ 366,432,448 $ 272,172,106 $ 94,260,34234.6 % Cost of revenue 304,139,896 223,535,244 80,604,652 36.1 % Gross profit $ 62,292,552 $ 48,636,862 $ 13,655,69028.1 % Gross Margin 17.0 % 17.9 % (0.9 )% Wholesale Net revenue $ 21,729,833 $ 18,834,592 $ 2,895,24115.4 % Cost of revenue 20,813,862 17,905,905 2,907,957 16.2 % Gross profit $ 915,971 $ 928,687 $ (12,716 )(1.4 )% Gross Margin 4.2 % 4.9 % (0.7 )% Total sales Net revenue $ 388,162,281 $ 291,006,698 $ 97,155,58333.4 % Cost of revenue 324,953,758 241,441,149 83,512,609 34.6 % Gross profit $ 63,208,523 $ 49,565,549 $ 13,642,97427.5 % Gross Margin 16.3 % 17.0 % (0.7 )% Cost of revenue was $325.0 millionfor the year ended December 31, 2019, an increase of $83.5 million, or 34.6%, from $241.4 millionfor the year ended December 31, 2018, attributable primarily to the acquisition of B&R Global, with $71.2 millionand $1.7 millionin cost of revenue for sales to independent restaurants and wholesale customers, respectively. The remaining increase is attributable to the $9.4 millionincrease in cost of revenue for the sales to independent restaurants of HG driven by the increase in sales. Gross profit was $63.2 millionfor the year ended December 31, 2019, an increase of $13.6 million, or 27.5%, from $49.6 millionfor the year ended December 31, 2018, attributable primarily to B&R Global, with $13.1 millionand $0.1 millionin gross profit derived from sales to independent restaurants and wholesale customers, respectively. Gross margin decreased from 17.0% for the year ended December 31, 2018to 16.3% for the year ended December 31, 2019, primarily attributable to the lower gross margin of B&R Global. B&R Global's gross margin for 2019 was 15.3%. 31 --------------------------------------------------------------------------------
Frais de distribution, de vente et d'administration
Distribution, selling and administrative expenses were
$54.9 millionfor the year ended December 31, 2019, an increase of $13.9 million, or 33.8%, from $41.0 millionfor the year ended December 31, 2018. The increase was mainly attributable to the Business Combination with B&R Global of $10.1 million, the amortization expense of $1.8 millionrelating to the intangible assets acquired from the Business Combination, and $0.8 millionof professional fees associated with the Business Combination.
Charges d'intérêts et frais bancaires
Interest expenses and bank charges are generated primarily from lines of credit, long-term debt, and finance leases. Interest expenses and bank charges were
$1.7 millionand $1.4 millionfor the years ended December 31, 2019and 2018, respectively. The increase was mainly attributable to B&R Global, with interest expenses of $0.2 millionfor the two months ended December 31, 2019. Other Income Other income consists primarily of non-operating income and rental income. Other income was $1.1 millionfor the year ended December 31, 2019as compared to $1.2 millionfor the year ended December 31, 2018, representing a decrease of $0.1 million, or 11.6%. Income taxes Provision Provision for income taxes decreased by $0.3 million, or 11.8%, from $2.5 millionfor the year ended December 31, 2018to $2.2 millionfor the year ended December 31, 2019. The decrease is mainly attributable to lower income before tax provision for HF Group from $8.8 millionfor the year ended December 31, 2018to $8.0 millionfor the year ended December 31, 2019.
Bénéfice net attribuable aux intérêts non contrôlés
Net income attributable to noncontrolling interest was derived from four minority owned subsidiaries and increased by
$438,370, or 652.0%, from $67,240for the year ended December 31, 2018to $505,608for the year ended December 31, 2019, as a result of the increase of net income of the subsidiaries which are partially owned by noncontrolling interest shareholders. 32 --------------------------------------------------------------------------------
Résultat net attribuable à
As a result of above, net income attributable to our stockholders decreased by
$0.9 million, or 14.3%, from $6.3 millionfor the year ended December 31, 2018to $5.4 millionfor the year ended December 31, 2019. Adjusted EBITDA
Le tableau suivant présente le calcul de notre BAIIA ajusté et
rapprochement avec le bénéfice net, la mesure la plus proche des PCGR des États-Unis:
For the years ended December 31, Changes 2019 2018 Amount % Net income
$ 5,895,286 $ 6,353,695 $ (458,409 )(7.2 )% Interest expense 1,661,454 1,372,508 288,946 21.1 % Income tax provision 2,197,092 2,490,255 (293,163 ) (11.8 %) Depreciation & Amortization 6,754,508 2,134,832 4,619,676 216.4 % Non-recurring expenses* 375,000 1,831,167 (1,456,167 ) (79.5 %) Adjusted EBITDA $ 16,883,340 $ 14,182,457 $ 2,700,88319.0 % Percentage of revenue 4.3 % 4.9 % (0.6 )% * For the year ended December 31, 2018, represents labor dispute expenses accrued in connection with United States Department of Laborinvestigation of our subsidiary Kirnland Food Distribution, Inc.For the year ended December 31, 2019, represents a non-recurring expense for a loss related to negligence claim(s) for damages arising in the ordinary course of business. Adjusted EBITDA was $16.9 millionfor the year ended December 31, 2019, an increase of $2.7 million, or 19.0%, compared to $14.2 millionfor the year ended December 31, 2018, resulting mainly from the acquisition of B&R Global, totaled $2.5 million. Excluding the B&R Global impact, the increase is offset by $1.4 milliondecrease in non-recurring expenses, $0.5 milliondecrease in net income, $0.3 milliondecrease in income tax provision and $0.8 millionincrease in depreciation and amortization.
Informations financières combinées pro forma supplémentaires non auditées
As described above, the Company completed the Business Combination with B&R Global on
November 4, 2019. For comparative purposes, the Company is presenting supplemental unaudited pro forma combined statements of operations for the years ended December 31, 2019and 2018, and the Company discusses such unaudited pro forma combined results as well as our actual results of operations for the years ended December 31, 2019and 2018. The unaudited pro forma combined statements of operations for these periods present our consolidated results of operations giving pro forma effect to the Business Combination as if it had occurred on January 1, 2018. The pro forma combined adjustments give effect to the items identified in the unaudited pro forma combined tables below in connection with the Business Combination. The unaudited pro forma combined adjustments are based on available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma combined basis, the impact of the Business Combination on our historical financial information, as applicable. 33 --------------------------------------------------------------------------------
Les états financiers mondiaux B&R et nos états financiers ont été
ajusté dans les informations financières pro forma pour donner effet aux événements
sont (1) directement attribuables au regroupement d'entreprises, (2) factuellement
soutenable et (3) devrait avoir un impact continu sur l’ensemble des
The unaudited pro forma combined financial information has been prepared for informational purposes only and is not necessarily indicative of or intended to represent what the combined company's financial position or results of operations actually would have been had the Business Combination occurred as of the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future financial position or operating results of the combined company. The unaudited pro forma adjustments are based on information available at the time of the preparation of the unaudited pro forma combined financial information. The unaudited pro forma combined financial information does not reflect cost savings, synergies or revenue enhancements that the Company may achieve with respect to combining the companies or costs to integrate the B&R Global business or the impact of any non-recurring activity and any one-time transaction related costs. Synergies and integration costs have been excluded from consideration because they do not meet the criteria for unaudited pro forma adjustments.
Résultats d'exploitation Pro Forma non audités
The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma financial statements: Year ended December 31, 2019 B&R Pro Forma HF Global Adjustments Combined Net revenue
$ 302,103,038 $ 525,942,665$ - $ 828,045,703Net income 5,864,471 11,825,523 (10,890,300 )(1) 6,799,694 Net Income Attributable to HF Foods Group Inc. $ 5,406,526 $ 11,146,273 $ (10,890,300 ) $ 5,662,499Year ended December 31, 2018 B&R Pro Forma HF Global Adjustments Combined Net revenue $ 291,006,698 $ 526,974,506$ - $ 817,981,204Net income 6,353,695 20,650,852
(10 890 300) (1) 16 114 247
Résultat net attribuable à
$ (10,890,300 ) $ 15,774,413(1) Includes intangibles asset amortization expense of $10,890,300and
Liquidité et ressources en capital
December 31, 2019, the Company had cash of approximately $14.5 million. The Company funded working capital and other capital requirements primarily by equity contribution from shareholders, cash flows from operations, and bank loans and lines of credit. Cash is required to pay purchase costs for inventory, salaries, fuel and trucking expenses, selling expenses, rental expenses, income taxes, other operating expenses and repay debts. On April 18, 2019, the Company and its operating subsidiaries Han Feng, New Southern Food Distributers and Kirnland entered into a credit agreement with East West Bank, which replaced our prior credit agreement with East West Bank. The credit agreement provides a $25,000,000revolving credit facility which was due August 18, 2021, accrued interest based on the prime rate less 0.375% or 2.20% above LIBOR, but in no event less than 4.214% per annum, and was secured by virtually all assets of the Company and our domestic subsidiaries. On November 4, 2019, the East West Bankrevolving credit facility loan was paid off from borrowings under the Amended and Restated Credit Agreement entered into connection with the merger with B&R Global, as described below. On November 4, 2019, the Company entered into an Amended and Restated Credit Agreement with JP Morgan. The Amended and Restated Credit Agreement provides for (a) a $100 millionasset-secured revolving credit facility maturing on November 4, 2022, and (b) mortgage-secured term loans of $55.4 million. On January 17, 2020, the Company, B&R Global, and the Borrowers, and certain material subsidiaries of the Company as guarantors, entered into a Second Amended and Restated Credit Agreement (the "Second Amended Credit Agreement") by and among JPMorgan, as Administrative Agent, and certain lender parties thereto, including Comerica Bank. The Second Amended Credit Agreement provided for (a) a $100 millionasset-secured revolving credit facility maturing on November 4, 2022(the "Facility"), and (b) mortgage-secured Term Loans of $75.6 million. The Second Amended Credit Agreement amended and restated the existing $55.0 millionof real estate term loans under the Amended Credit Agreement. As of January 17, 2020, the existing balance of revolving debt under the Amended Credit Agreement, $41.2 million, was rolled over, and an additional $18.7 millionavailable to the Company under the Facility was drawn. The Company used the $75.6 millionin mortgage-secured term loans and $18.7 milliondrawn from the revolving credit facility to fund in part the Acquisition of the B&R Realty Subsidiaries, as noted above. Borrowings under the Second Amended Credit Agreement may be used for, among other things, working capital and other general corporate purposes of the Company and its subsidiaries (including permitted acquisitions). The Borrowers have the ability to increase the amount of the Facility, which increases may take the form of increases to the revolving credit commitments, by an aggregate amount of up $30 millionupon satisfaction of customary conditions precedent for such increases or incremental loans and receipt of additional commitments by one or more existing or new lenders. Borrowings under the Facility bear interest at a floating rate, which will be, at the Borrowers' option, either LIBOR plus 1.375%, or a base rate of prime rate minus 1.125%. The mortgage-secured Term Loans bear interest at a floating rate, which will be, at the Borrowers' option, either LIBOR plus 1.875%, or a base rate of prime rate minus 0.625%. A commitment fee of 0.15% is payable monthly in arrears based on the daily amount of the undrawn portion of each lender's revolving credit commitments under the Facility. The Borrowers are obligated to pay monthly installments on the mortgage-secured Term Loans in the amount of $252,000.00, with a final installment of the remaining principal balance of the Term Loans due on January 17, 2030, the Term Loan Maturity Date. 35 -------------------------------------------------------------------------------- Although management believes that the cash generated from operations will be sufficient to meet our normal working capital needs for at least the next twelve months, our ability to repay our current obligations will depend on the future realization of our current assets. Management has considered the historical experience, the economy, trends in the foodservice distribution industry, the expected collectability of accounts receivable and the realization of the inventories as of December 31, 2019. Based on the above considerations, management is of the opinion that the Company has sufficient funds to meet our working capital requirements and debt obligations as they become due. However, there is no assurance that the Company will be successful in our plan. There are a number of factors that could potentially arise that could result in shortfalls to our plan, such as the demand for our products, economic conditions, the competitive pricing in the foodservice distribution industry and the ability of our banks and suppliers to provide continued support. If the future cash flow from operations and other capital resources are insufficient to fund our liquidity needs, the Company may be forced to reduce or delay our acquisition plan, sell assets, obtain additional debt or equity capital which may not be available on terms acceptable to us, if at all, or refinance all or a portion of our debt. The following table summarizes cash flow data for the years ended December 31, 2019and 2018: For the years ended December 31, 2019 2018 Net cash provided by operating activities $ 4,666,528 $ 11,953,466Net cash provided by (used) in investing activities 2,775,115 (6,365,313 ) Net cash provided by (used) in financing activities 1,607,239 (6,184,793 )
Augmentation (diminution) nette de la trésorerie et des équivalents de trésorerie
$ (596,640 )Operating Activities Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, changes in deferred income taxes and others, and adjusted for the effect of working capital changes. Net cash provided by operating activities was approximately $4.7 millionfor the year ended December 31, 2019, a decrease of $7.3 million, or 61%, compared to net cash provided by operating activities of $12.0 millionfor the year ended December 31, 2018. The decrease was a combined results of a decrease of $10.5 millionfrom changes in working capital items mainly resulting from changes in accounts receivable, inventory, accounts payable, advances to suppliers, accrued expenses, other long- term assets and net income which were offset by an increase of $1.8 millionin depreciation and amortization expense, and advances from customers - related parties. In addition, the decrease was offset by an increase from newly acquired B&R Global with total net cash provided by operating activities of $3.2 million. Investing Activities Net cash provided in investing activities was approximately $2.8 millionfor the year ended December 31, 2019, an increase of $9.1 million, or 144%, compared to $6.4 millionnet cash used investing activities for the year ended December 31, 2018. The increase was a combined result of cash acquired of $7.0 millionfrom the merger with B&R Global, decreased cash paid for notes receivable to third parties and related parties of $2.9 millionand $1.4 million, respectively, offset by increased cash paid for the purchase of property and equipment of $1.6 millionand decrease of cash acquired from the reverse merger with Atlantic Acquisition Corp.of $1.4 million. Financing Activities Net cash provided in financing activities was approximately $1.6 millionfor the year ended December 31, 2019, an increase of $7.8 million, or 126%, compared with $6.2 millionof net cash used in financing activities for the year ended December 31, 2018. The increase was a combined result of increase in proceeds from lines of credit and long term debt of $38.2 millionand a decrease of $0.9 millionin cash dividend to shareholders, offset by an increase of $28.4 millionin repayment of lines of credit, long term debt and finance leases and newly acquired B&R Global with cash provided by financing activities of $2.9 million. 36
Engagements et obligations contractuelles
The following table presents our material contractual obligations as of
December 31, 2019: Less than 1 More than 5 Contractual Obligations Total year 1-3 years 3-5 years Years Lines of credit $ 41,268,554$ - $ 41,268,554$ - $ - Long-term debt 21,261,997 2,726,981 4,668,439 1,886,975 11,979,602 Finance lease liabilities 1,610,911 373,715 696,248 540,948 - Operating lease obligations 18,684,526 4,930,181 8,239,473 5,514,872 - Total $ 82,825,987 $ 8,030,876 $ 54,872,714 $ 7,942,795 $ 11,979,601On July 2, 2018, AnHeart, Inc., one of our subsidiaries, entered into two separate leases for two buildings located in Manhattan, New York, at 273 Fifth Avenueand 275 Fifth Avenue, for 30 years and 15 years, respectively, which are net leases, meaning that AnHeart is required to pay all costs associated with the buildings, including utilities, maintenance and repairs. HF Holdingprovided a guaranty for all rent and related costs of the leases, including costs associated with the construction of a two-story structure at 273 Fifth Avenueand rehabilitation of the building at 275 Fifth Avenue. Under the lease for 273 Fifth Avenue, the fixed rent costs over 30 years commence at $325,000for the first year and escalate every year during the term to $1,047,000in year 30. Under the lease for 275 Fifth Avenue, the fixed rent costs over 15 years commence at $462,000for the first year and escalate every year during the term to approximately $760,878in year 15. The 275 Fifth Avenuelease includes an option to extend the term for an additional 10 years. Under the leases, AnHeart delivered a letter of credit in favor of the Landlord in the amount of $213,000as security for AnHeart's obligations under the lease at 273 Fifth Avenue, and $115,500with respect to 275 Fifth Avenue. The Company entered into the leases for the purpose of expanding our product lines to include Chinese herb supplements, and to use the sites to develop into a hub for such products. The Company has since determined to cease this business expansion. On February 23, 2019, the Company executed an agreement to transfer all of our ownership interest in AnHeart to Jianping An, a resident of New York, for a sum of $20,000. The transfer of ownership has been disclosed and landlord consent was obtained. However, the transfer of ownership does not release HF Holding'sguaranty of AnHeart's obligations or liabilities under the original lease agreements. Under the terms of the transfer agreement, AnHeart executed a security agreement which grants us a security interest in AnHeart assets and a covenant to assign the leases to HF Group if AnHeart defaults. Further, AnHeart has tendered an unconditional guaranty of all liabilities arising under the leases, in favor of the Company, executed by Minsheng Pharmaceutical Group Company, Ltd., a Chinese manufacturer and distributor of herbal medicines.
Dispositions hors bilan
La Société n'est partie à aucun arrangement hors bilan.
Conventions comptables critiques
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. These principles require our management to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, cash flow and related disclosure of contingent assets and liabilities. The estimates include, but are not limited to, accounts receivable, revenue recognition, impairment of long-lived assets and income taxes. The Company bases our estimates on historical experience and various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and the actual results, future financial statements will be affected. The Company believes that among our significant accounting policies, which are described in Note 2 to the audited consolidated financial statements included in this report, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, the Company believes these are the most critical to fully understand and evaluate our financial condition and results of operations. 37
Accounts receivable Accounts receivable represent amounts due from customers in the ordinary course of business and are recorded at the invoiced amount and do not bear interest. Receivables are presented net of the allowance for doubtful accounts in the accompanying unaudited condensed consolidated balance sheets. The Company evaluates the collectability of our accounts receivable and determines the appropriate allowance for doubtful accounts based on a combination of factors. When the Company becomes aware of a customer's inability to meet its financial obligation, a specific allowance for doubtful accounts is recorded, reducing the receivable to the net amount the Company reasonably expects to collect. In addition, allowances are recorded for all other receivables based on historic collection trends, write-offs and the aging of receivables. The Company uses specific criteria to determine when uncollectible receivables are to be written off, including, e.g., bankruptcy filings, the referral of customer accounts to outside parties for collection, and the length that accounts remain past due. As of
December 31, 2019, and December 31, 2018, the allowances for doubtful accounts were $623,970and $658,104, respectively. Revenue recognition The Company recognizes revenue from the sale of products when title and risk of loss passes and the customer accepts the goods, which occurs at delivery. Sales taxes invoiced to customers and remitted to government authorities are excluded from net sales. On January 1, 2018the Company adopted Accounting Standards Update ("ASU") 2014-09 Revenue from Contracts with Customers (FASB ASC Topic 606) using the modified retrospective method for contracts that were not completed as of January 1, 2018. The results of applying Topic 606 using the modified retrospective approach were insignificant and did not have a material impact on our consolidated financial condition, results of operations, cash flows, business process, controls or systems. The core principle underlying the referenced ASU is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require us to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The majority of our contracts have one single performance obligation as the promise to transfer the individual goods is not separately identifiable from other promises in the contracts and is, therefore, not distinct. Our revenue streams are recognized at a specific point in time.
Les actifs et passifs des contrats sont enregistrés dans le
Bilan consolidé en tant que débiteurs et paiements anticipés de
les périodes précédentes étaient insignifiantes.
Revenue expected to be recognized in any future periods related to remaining performance obligations is insignificant. The following table summarizes disaggregated revenue from contracts with customers by geographic locations: For the Years Ended December 31, December 31, 2019 2018 North Carolina
$ 145,756,172 $ 138,790,263Florida 91,173,814 88,670,044 Georgia 65,173,052 63,546,391 Arizona 7,196,217 - California 54,877,209 - Colorado 6,658,931 - Utah 8,249,684 - Washington 9,077,202 - Total $ 388,162,281 $ 291,006,69838
Dépréciation d'actifs à long terme
The Company assesses our long-lived assets such as property and equipment for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Factors which may indicate potential impairment include a significant underperformance related to the historical or projected future operating results or a significant negative industry or economic trend. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows which the assets are expected to generate. If property and equipment are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds their fair value. Income taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize our deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company does not believe that there were any uncertain tax positions at
December 31, 2019, and 2018.
Déclarations comptables récentes
June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 16-13 was further amended in November 2019, Codification Improvements to Topic 326, Financial Instruments-Credit losses. This guidance is effective for fiscal years beginning after December 15, 2019, including those interim periods within those fiscal years. The Company is currently assessing the impact of adopting this standard, but based on a preliminary assessment, does not expect the adoption of this guidance to have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 "Fair Value Measurement". ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning January 1, 2020. The Company is currently evaluating the impact ASU 2018-13 will have on its consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently assessing the impact of adopting this standard, but based on a preliminary assessment, does not expect the adoption of this guidance to have a material impact on its consolidated financial statements. 39
© Edgar Online, source