8-K
IT TECH PACKAGING, INC. (ITP)
UNITEDSTATES
SECURITIESAND EXCHANGE COMMISSION
WASHINGTON,DC 20549
FORM8-K
CURRENTREPORTPursuant to Section 13 or 15(d) of the
SecuritiesExchange Act of 1934
Date of report (Date of earliest event reported): March 23, 2020
ITTECH PACKAGING, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
| 001-34577 | 20-4158835 |
|---|---|
| (Commission<br> File Number) | (IRS<br> Employer Identification No.) |
| Science<br> Park, Juli Road<br><br> <br>Xushui<br> District, Baoding City<br><br> <br>Hebei<br> Province, People’s Republic of China | 072550 |
| --- | --- |
| (Address<br> of principal executive offices) | (Zip<br> Code) |
(86) 312-8698215
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written<br>communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting<br>material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement<br>communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement<br>communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title<br> of each class | Trading<br> Symbol(s) | Name<br> of each exchange on which registered |
|---|---|---|
| Common Stock | ITP | NYSE MKT LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On March 23, 2020, IT Tech Packaging, Inc. (the “Company”) issued a press release announcing its financial results and operational results for the fourth quarter and fiscal year ended December 31, 2019. A copy of the press release making the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) Exhibits.
The following exhibits are filed herewith:
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| IT<br> TECH PACKAGING, INC. | |||
|---|---|---|---|
| Date: March 24, 2020 | By: | /s/<br> Zhenyong Liu | |
| Name: | Zhenyong Liu | ||
| Title: | Chief Executive Officer |
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Exhibit 99.1
IT Tech Packaging, Inc. Announces FourthQuarter and Fiscal Year 2019 Financial Results
Continued Solid Growth in Sales Volume,Revenue, and Net Income, with Increases of 59.5%, 35.6% and 121.1%, Respectively, in FY2019
Company to Host Earnings Conference Callon Tuesday, March 24, 2020, at 8:00 am EST
BAODING, China, March 23, 2020 /PRNewswire/ -- IT Tech Packaging, Inc. (NYSE MKT: ITP) (“IT Tech Packaging” or the “Company”), a leading manufacturer and distributor of diversified paper products in North China, today announced its unaudited financial results for the fourth quarter and audited financial results for the fiscal year ended December 31, 2019.
“Our revenues and profitability continued to improve in 2019 as we shook off the effects of the 2018 production suspensions resulting from air-pollution controls, in part due to our 2018 equipment upgrades. Our total revenue was $117.6 million, a 35.6% year-over-year increase, resulting from a 59.5% growth of overall sales volume that was partially offset by a 15% decrease in average selling prices over all categories of products,” commented by Mr. Zhengyong Liu, Chairman and Chief Executive Officer of the Company.
“With 135.1% and 121.1% growth in gross profit and net income, respectively, our margins and profitability substantially improved in fiscal year 2019 thanks to a continued increase in sales volume for all products, combined with decreases in operating expenses. With completion of trial operation of our PM9 production line in the fourth quarter of 2019, our tissue paper products recorded total sales of $6.4 million from both PM8 and PM9 in the year. In addition, with $20.4 million of sales, we delivered 297.8% growth in offset printing paper for 2019.
“Despite a short delay in production resulting from Covid-19 in China in early 2020, the stabilization of orders in recent months gives us reason to be optimistic for stable growth in 2020. As a leading papermaking enterprises situated in Hebei Province which surrounds Beijing-Tianjin, the largest metropolitan area in North China, we have a large market for our products and easy access to lower costs of raw materials and logistics. Thus we will continue take such advantages to improve our capabilities to deliver sustainable growth and create long-term value to our shareholders.”
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Fourth Quarter 2019 Unaudited Financial Results
| For the Three Months Ended<br><br> December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| ($ millions) | 2019 | 2018 | % Change | ||||||
| Revenues | 33.61 | 24.99 | 34.5 | % | |||||
| Regular Corrugating Medium Paper (“CMP”)* | 19.61 | 19.77 | -0.8 | % | |||||
| Light-Weight CMP** | 5.08 | 5.30 | -4.0 | % | |||||
| Offset Printing Paper | 7.16 | -0.08 | NM | ||||||
| Tissue Paper Products | 1.75 | 0.00 | NM | ||||||
| Gross profit | 5.60 | 2.24 | 149.9 | % | |||||
| Gross profit (loss) margin | 16.7 | % | 9.0 | % | 7.7 pp**** | ||||
| Regular Corrugating Medium Paper (“CMP”)* | 15.4 | % | 10.0 | % | 5.3 pp**** | ||||
| Light-Weight CMP** | 18.3 | % | 4.9 | % | 13.4 pp**** | ||||
| Offset Printing Paper | 33.7 | % | 4.2 | % | 29.5 pp**** | ||||
| Tissue Paper Products*** | -43.1 | % | - | NM | |||||
| Operating income (loss) | 3.19 | -5.08 | 162.8 | % | |||||
| Net income | 2.16 | -5.16 | 119.4 | % | |||||
| EBITDA | 7.00 | -1.66 | 521.7 | % | |||||
| Basic and Diluted earnings (loss) per share | 0.10 | -0.24 | 142.1 | % | |||||
| * | Products from PM6 | ||||||||
| --- | --- | ||||||||
| ** | Products from PM1 | ||||||||
| --- | --- | ||||||||
| *** | Products from PM8 andPM9 | ||||||||
| --- | --- | ||||||||
| **** | pp represents percentagepoints | ||||||||
| --- | --- | ||||||||
| · | Total sales volume of CMP, offset printing paper and tissue paper products increased by 36.1% to<br>72,654tonnes | ||||||||
| --- | --- | ||||||||
| · | Revenue increased by 34.5% to $33.6 million, primarily attributable to increase in sales volume<br>of corrugating medium paper (“CMP”), offset printing paper and tissue paper products, partially offset by the decreases<br>in average selling prices (ASP) for both CMP | ||||||||
| --- | --- | ||||||||
| · | Gross profit increased by 149.9% to $5.6 million. Gross margin increased by 7.7 percentage point<br>to 16.7%. The increase in gross profit were primarily due to the decrease in average cost of sales per tonne for CMP, which was<br>attributable to the lower average unit purchase costs of recycled paper board and recycled white scrap paper used as raw material<br>for CMP products. Gross margins over regular CMP, Light-Weight CMP products and offset printing paper product increased to 15.4%,<br>18.3% and 33.7%, respectively | ||||||||
| --- | --- | ||||||||
| · | Income from operations increased by 162.8% to $3.2 million, compared to loss from operations of<br>$5.1 million for the same period of last year | ||||||||
| --- | --- | ||||||||
| · | Net income was $2.2 million, an increase of $7.4 million, or 119.4%, from net loss of $5.2 million<br>for the same period of last year. Earnings per basic and diluted share was $0.10, compared to loss per basic and diluted share<br>of $0.24, for the same period of last year | ||||||||
| --- | --- | ||||||||
| · | Earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased by<br>521.7% to $7 million | ||||||||
| --- | --- |
Revenue
For the fourth quarter of 2019, total revenue increased by $8.6 million, or 34.5%, to $33.6 million from $25 million for the same period of last year. The increase in total revenue was mainly due to contribution of sales from offset printing paper and tissue paper products, partially offset by the decreases in average selling prices (ASP) for both CMP products. Total sales volume of CMP, offset printing paper and tissue paper products during the period increased by 36.1% to 72,654 tonnes, compared to 53,402 tonnes sold during the same period of 2018.
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The following table summarizes revenue, volume and ASP by product for the fourth quarter of 2019 and 2018, respectively:
| For the Three Months Ended <br>December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | ||||||||
| Revenue (’000) | Volume (tonne) | ASP (/tonne) | Revenue (’000) | Volume (tonne) | ASP (/tonne) | ||||
| Regular CMP | 47,063 | 41,871 | |||||||
| Light-Weight CMP | 12,582 | 11,533 | |||||||
| Offset Printing Paper | 10,450 | ) | - | ||||||
| Tissue Paper Products | 2,558 | - | |||||||
| Total | 72,653 | 53,404 |
All values are in US Dollars.
Revenue from CMP, including both regular CMP and light-Weight CMP, decreased by $0.4 million, or 1.5%, to $24.7 million and accounted for 73.5% of total revenue for the fourth quarter of 2019, compared to $25 million, or 100% of total revenue, for the same period of the prior year. The Company sold 59,646 tonnes of CMP at an ASP of $414/tonne in the fourth quarter of 2019, compared to 53,402 tonnes at an ASP of $469/tonne in the same period of the prior year.
Of the total CMP sales, revenue from regular CMP slightly decreased by $0.2 million, or 0.8%, to $19.6 million, resulting from sales of 47,063 tonnes at an ASP of $417/tonne, during the fourth quarter of 2019, compared to revenue of $19.8 million, resulting from sales of 41,870 tonnes at an ASP of $472/tonne, for the same period of the prior year. Revenue from light-weight CMP decreased by $0.2 million, or 4%, to $5.1 million, resulting from sales of 12,582 tonnes at an ASP of $404/tonne for the fourth quarter of 2019, compared to revenue of $5.3 million, resulting from sales of 11,532 tonnes at an ASP of $459/tonne for the same period of the prior year.
Revenues from offset printing paper was $7.2 million for the fourth quarter of 2019 and $0 million for the same period of the prior year. The Company sold 10,450 tonnes of offset printing paper at an ASP of $685/tonne in the fourth quarter of 2019.
With the completion of installation and trial operation of PM8 and PM9, the production and sales of tissue paper products have increased steadily in 2019. Revenue from tissue paper products was $1.8 million, resulting from sales of 2,558 tonnes at an ASP of $684/tonne, for the fourth quarter of 2019.
Gross Profit and Gross Margin
Total cost of sales increased by $5.3 million, or 23.2%, to $28 million for the fourth quarter of 2019 from $22.7 million for the same period of last year. The increase in the total cost of sales was mainly a result of the increase in sales volume, partially offset by the decreases in costs of recycled paper board and recycled white scrap paper. Overall cost of sales per tonne was $388 for the fourth quarter of 2019, compared to $426 for the same period of the prior year. The decrease in overall cost of sales per tonne was mainly due to decreased material costs, especially lower average unit purchase costs of recycled paper board and recycled white scrap paper in the fourth quarter of 2019. Costs of sales per tonne for regular CMP, light-weight CMP, offset printing paper, and tissue paper products were $353, $330, $454, and $979, respectively, for the fourth quarter of 2019, compared to $425, $437, $nil and $nil, respectively, for the same period of the prior year.
Gross profit increased by $3.4 million, or 149.9%, to $5.6 million for the fourth quarter of 2019 from $2.2 million for the same period of the prior year. Overall gross margin was 16.7% for the fourth quarter of 2019, compared to 9.0% for the same period of the prior year. The increase in gross profit and gross margin were mainly related to i) the increase in sales volume of CMP, offset printing paper and tissue paper and ii) the decrease of average unit purchase price of recycled paper board as raw material for CMP, partially offset by the decrease of ASP of CMP products. Gross margins for regular CMP, light-weight CMP, offset printing paper, and tissue paper products were 15.4%, 18.3%, 33.7%, and negative 43.1%, respectively, for the fourth quarter of 2019, compared to 10.0%, 4.9%, 4.2%, and nil, respectively, for the same period of the prior year.
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Selling, General and AdministrativeExpenses
Selling, general and administrative expenses (“SG&A”) decreased by $1.1 million, or 30.9%, to $2.3 million for the fourth quarter of 2019 from $3.4 million for the same period of the prior year. The decrease was mainly related to less repair and maintenance costs incurred for the fourth quarter of 2019 as all of our production resumed since the first quarter of 2019, compared to the same period in 2018 that production was suspended and additional repair and maintenance costs incurred. As a percentage of total revenue, SG&A was 6.8% for the fourth quarter of 2019, compared to 13.7% for the same period of the prior year.
Income (loss) from Operations
Income from operations was $3.2 million for the fourth quarter of 2019, compared to loss from operations of $5.1 million for the same period of the prior year. The increase in income from operations was primarily due to substantial increase in gross profit combined with decreased SG&A expenses as discussed above. Operating margin was 9.5% for the fourth quarter of 2019, compared to operating loss margin of 20.3% for the same period of the prior year.
Net Income
Net income was $2.2 million, or $0.10 per basic and diluted share, for the fourth quarter of 2019, compared to net loss of $5.2 million, or $0.24 loss per basic and diluted share, for the same period of the prior year.
EBITDA
EBITDA was $7 million for the fourth quarter of 2019, compared to negative $1.7 million for the same period of the prior year.
Note 1: Non-GAAP Financial Measures
In addition to our U.S. GAAP results, this press release includes a discussion of EBITDA, a non-GAAP financial measure as defined by the Securities and Exchange Commission (“SEC”). The Company defines EBITDA as net income before interest, income taxes, depreciation and amortization. EBITDA is a key measure used by management to evaluate our results and make strategic decisions. Management believes this measure is useful to investors because it is an indicator of operational performance. Because not all companies use identical calculations, the Company’s presentation of EBITDA may not be comparable to similarly titled measures of other companies, and should not be viewed as an alternative to measures of financial performance or changes in cash flows calculated in accordance with the U.S. GAAP.
4
Reconciliation of Net Income to EBITDA
(Amounts expressed in US$)
| For the Three Months Ended <br><br>December 31, | ||||
|---|---|---|---|---|
| ($ millions) | 2019 | 2018 | ||
| Net income (loss) | 2.16 | -5.16 | ||
| Add: Income tax | 0.88 | -0.22 | ||
| Net interest expense | 0.20 | 0.31 | ||
| Depreciation and amortization | 3.76 | 3.42 | ||
| EBITDA | 7.00 | -1.66 |
Full Year 2019 Financial Results
| For the Twelve Months Ended<br><br> December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| ($ millions) | 2019 | 2018 | % Change | ||||||
| Revenues | 117.61 | 86.75 | 35.6 | % | |||||
| Regular Corrugating Medium Paper (“CMP”)* | 72.05 | 63.20 | 14.0 | % | |||||
| Light-Weight CMP** | 18.78 | 18.40 | 2.1 | % | |||||
| Offset Printing Paper | 20.44 | 5.14 | 297.8 | % | |||||
| Tissue Paper Products | 6.35 | 0.00 | NM | ||||||
| Gross profit | 13.68 | 5.82 | 135.4 | % | |||||
| Gross margin | 11.6 | % | 6.7 | % | 4.9 pp**** | ||||
| Regular Corrugating Medium Paper (“CMP”)* | 10.3 | % | 7.7 | % | 2.6 pp**** | ||||
| Light-Weight CMP** | 10.1 | % | 5.0 | % | 5.1 pp**** | ||||
| Offset Printing Paper | 31.2 | % | 0.8 | % | 30.4 pp**** | ||||
| Tissue Paper Products*** | -32.0 | % | NM | NM | |||||
| Operating income (loss) | 3.90 | -11.18 | 134.9 | % | |||||
| Net income (loss) | 2.22 | -10.55 | 121.1 | % | |||||
| EBITDA | 19.54 | 3.39 | 476.4 | % | |||||
| Basic and Diluted earnings per share | 0.10 | -0.49 | 120.4 | % | |||||
| * | Products from PM6 | ||||||||
| --- | --- | ||||||||
| ** | Products from PM1 | ||||||||
| --- | --- | ||||||||
| *** | Products from PM8 and PM9 | ||||||||
| --- | --- | ||||||||
| **** | pp represents percentage points | ||||||||
| --- | --- |
5
Revenue
For the year ended December 31, 2019, total revenue increased by $30.9 million, or 35.6%, to $117.6 million from $86.7 million for 2018. The increase in total revenue was mainly due to increase in sales volume of CMP, offset printing paper and tissue paper products, which was partially offset by the decrease in ASP of CMP and offset printing paper. Total sales volume of CMP, offset printing paper and tissue paper products increased by 59.5% to 250,144 tonnes, compared to 156,849 tonnes in 2018.
The following table summarizes revenue, volume and ASP by product for the year ended December 31, 2019 and 2018, respectively:
| For the Twelve Months Ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||||
| Revenue (’000) | Volume (tonne) | ASP (/tonne) | Revenue (’000) | Volume (tonne) | ASP (/tonne) | |||
| Regular CMP | 168,837 | 116,012 | ||||||
| Light-Weight CMP | 45,310 | 34,646 | ||||||
| Offset Printing Paper | 29,207 | 6,191 | ||||||
| Tissue Paper Products | 6,790 | - | ||||||
| Total | 250,144 | 156,849 |
All values are in US Dollars.
Revenue from CMP, including both regular CMP and light-Weight CMP increased by $9.2 million, or 11.3%, to $90.8 million, and accounted for 77.2% of total revenue for the year ended December 31, 2019, compared to $81.6 million, or 94.1% of total revenue for 2018. The Company sold 214,147 tonnes of CMP at an ASP of $424/tonne in the year ended December 31, 2019, compared to 150,658 tonnes at an ASP of $542/tonne in 2018.
Of the total CMP sales, revenue from regular CMP increased by $8.9 million, or 14.0%, to $72.1 million, resulting from sales of 168,837 tonnes at an ASP of $427/tonne during the year ended December 31, 2019, compared to revenue of $63.2 million, resulting from sales of 116,012 tonnes at an ASP of $545/tonne for 2018. Revenue from light-weight CMP increased by $0.4 million, or 2.1%, to $18.8 million, resulting from sales of 45,310 tonnes at an ASP of $414/tonne for the year ended December 31, 2019, compared to revenue of $18.4 million, resulting from sales of 34,646 tonnes at an ASP of $531/tonne for 2018.
Revenue from offset printing paper increased by $15.3 million, or 297.8%, to $20.4 million for the year ended December 31, 2019 from $5.1 million for 2018. The Company sold 29,207 tonnes of offset printing paper at an ASP of $700/tonne in the year ended December 31, 2019, compared to 6,191 tonnes at an ASP of $830/tonne in 2018.
Revenue from tissue paper products was $6.4 million for the year ended December 31, 2019, resulting from sales of 6,790 tonnes of tissue paper products at an ASP of $935/tonne in the year ended December 31, 2019.
Gross Profit and Gross Margin
Total cost of sales increased by $23 million, or 28.5%, to $104 million for the year ended December 31, 2019 from $80.9 million for 2018. The increase in overall cost of sales was mainly a result of the increase in sales volume, partially offset by the decrease of purchase cost of recycled paper board and recycled white scrap paper. Costs of sales per tonne for regular CMP, light-weight CMP, offset printing paper, tissue paper products were, $383, $372, $481, and $1,235, respectively, for the year ended December 31, 2019, compared to $503, $504, $823, and $nil, respectively, for 2018.
6
Total gross profit increased by $7.8 million, or 135.1%, to $13.6 million for the year ended December 31, 2019 from $5.8 million for 2018. The increase was mainly due to (i) the increase in quantities sold of CMP, offset printing paper, tissue paper and (ii) the decrease of material purchase price of CMP and offset printing paper, partially offset by the decrease of ASP of these products. Overall gross margin increased by 4.9 percentage points to 11.6% for the year ended December 31, 2019 from 6.7% for 2018. Gross margins for regular CMP, light-weight CMP, offset printing paper and tissue paper products were 10.3%, 10.1%, 31.2% and negative 32%, respectively, for the year ended December 31, 2019, compared to 7.7%, 5.0%, 0.8%, and nil, respectively, for 2018.
Selling, General and AdministrativeExpenses
SG&A expenses decreased by $3.3 million, or 25.3%, to $9.8 million for the year ended December 31, 2019 from $13.1 million for 2018. As a percentage of total revenue, SG&A expenses was 8.3% for the year ended December 31, 2019, compared to 15.1% for 2018.
Income from Operations
Income from operations was $3.9 million for the year ended December 31, 2019, compared to loss from operations of $11.2 million for 2018. Operating margin was 3.3% for the year ended December 31, 2019, compared to operating loss margin of 12.9% for 2018.
Net Income
Net Income increased by $12.8 million, or 121.1%, to $2.2 million, or earnings per basic and diluted share of $0.10, for the year ended December 31, 2019. This compared to net loss of $10.5 million, or loss per basic and diluted share of $0.49, for 2018.
EBITDA
EBITDA increased by $16.2 million, or 476.4%, to $19.5 million for the year ended December 31, 2019 from $3.4 million in 2018.
Note 1: Non-GAAP Financial Measures
In addition to our U.S. GAAP results, this press release includes a discussion of EBITDA, a non-GAAP financial measure as defined by the Securities and Exchange Commission (“SEC”). The Company defines EBITDA as net income before interest, income taxes, depreciation and amortization. EBITDA is a key measure used by management to evaluate our results and make strategic decisions. Management believes this measure is useful to investors because it is an indicator of operational performance. Because not all companies use identical calculations, the Company’s presentation of EBITDA may not be comparable to similarly titled measures of other companies, and should not be viewed as an alternative to measures of financial performance or changes in cash flows calculated in accordance with the U.S. GAAP.
7
Reconciliation of Net Income to EBITDA
(Amounts expressed in US$)
| For the Twelve Months Ended <br><br>December 31, | ||||
|---|---|---|---|---|
| ($ millions) | 2019 | 2018 | ||
| Net income (loss) | 2.22 | -10.55 | ||
| Add: Income tax | 1.08 | -1.85 | ||
| Net interest expense | 0.93 | 1.49 | ||
| Depreciation and amortization | 15.30 | 14.29 | ||
| EBITDA | 19.54 | 3.39 |
Cash, Liquidity and Financial Position
As of December 31, 2019, the Company had cash and bank balances, short-term debt (including short-term bank loans, current portion of long-term loans from credit union and related party loans) and long-term debt (including loans from credit union and loans from a related party) of $5.8 million, $8.3 million and $7.4million, respectively, compared to $8.5 million, $14.7 million, and $6.9 million, respectively, at the end of 2018.
Net accounts receivable was $3.1 million as of December 31, 2019, compared to $2.9 million as of December 31, 2018. Net inventory was $1.6 million as of December 31, 2019, compared to $2.9 million at the end of 2018. As of December 31, 2019, the Company had current assets of $24.0 million and current liabilities of $16.8 million, resulting in a working capital of $7.2 million. This compared to current assets of $24.2 million, current liabilities of $29.6 million and working capital deficit of $5.5 million at the end of 2018.
Net cash provided by operating activities was $7.5 million for the year ended December 31, 2019, compared to net cash provided by operating activities of $9.2 million for 2018. Net cash used in investing activities was $7.9 million for the year ended December 31, 2019, compared to $2.2 million for 2018. Net cash used in financing activities was $5.8 million for the year ended December 31, 2019, compared to net cash used in financing activities of $3.2 million for 2018.
Recent development
On November 20, 2019, the Company announced the commercial launch of a new tissue paper production line the PM9, following the success of its trial production, the receipt of its disposed wastewater discharge permits and construction completion acceptance from Chinese environmental authorities.
On December 3, 2019, the Company and Asia Symbol (Shandong) Pulp and Paper Co. Ltd. agreed to further cooperation into aspects of technologies and enterprise supply chain, based on the existing pulp paper supply cooperation arrangement. The new partnership specifically involves technology exchange between ITP and Asia Symbol on a regular basis, and ITP’s adding into Asia Symbol’s supply chain traceability system to make sure products’ quality and environmental requirements.
On December 16, 2019, Hebei Baoding Dongfang Paper Co., Ltd., the Company’s major operating entity entered into a supplement acquisition agreement with Tengsheng Paper and its shareholders to extend the acquisition agreement signed on June 25, 2019, pursuant to which the consideration for acquiring Tengsheng Paper shall be in cash and any balance payment for the purchase price shall be paid no later than December 31, 2021.
On March 10, 2020, the Company announced that the it had resumed 70% of its full capacity of production as of March 5, 2020, following the strict measures put in place for the control and prevention of the Covid-19 spread over the country.
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Earnings Conference Call
To attend the conference call, please dial in using the information below. When prompted upon dialing-in, please provide the conference ID or ask for the “IT Tech Packaging Fourth Quarter and Fiscal 2019 Earnings Conference Call.”
| Date: | Tuesday, March 24, 2020 |
|---|---|
| Time: | 8:00 am EST |
| International Toll Free: | United States:<br> +1-866-519-4004<br><br> <br><br><br> <br>Mainland China:<br> 400-620-8038<br><br> <br><br><br> <br>Hong Kong: 800-906-601<br><br> <br><br><br> <br>International:<br> +65-6713-5090 |
| Conference ID: | 8192168 |
This conference call will be broadcast live on the Internet and can be accessed by all interested parties at: https://edge.media-server.com/mmc/p/kyuy25ew .
Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software.
A playback will be available through 11:00 am EST on March 24, 2020 to 8:59 am EST on April 1, 2020. To listen, please dial+1-855-452-5696 if calling from the United States, or +61-281-990-299 if calling internationally. Use the Conference ID 8192168 to access the replay.
About IT Tech Packaging, Inc.
Founded in 1996, IT Tech Packaging, Inc. is a leading manufacturer and distributor of diversified paper products in North China. Using recycled paper as its primary raw material (with the exception of its tissue paper products), ITP produces and distributes three categories of paper products: corrugating medium paper, offset printing paper and tissue paper products. With production based in Baoding and Xingtai in North China’s Hebei Province, ITP is located strategically close to the Beijing and Tianjin region, home to a growing base of industrial and manufacturing activities and one of the largest markets for paper products consumption in the country. ITP has been listed on the NYSE MKT since December 2009.
Safe Harbor Statements
This pressrelease may contain forward-looking statements. These forward-looking statements involve inherent risks and uncertainties thatcould cause actual results to differ materially from those projected or anticipated, including risks outlined in the Company’spublic filings with the Securities and Exchange Commission, including the Company’s latest annual report on Form 10-K. All informationprovided in this press release speaks as of the date hereof. Except as otherwise required by law, the Company undertakes no obligationto update or revise its forward-looking statements.
For more information, please contact:
At the Company Email:
ir@itpackaging.cn
Tel: +86 0312 8698215
Investor Relations:
Janice Wang
EverGreen Consulting Inc.
Email: ir@changqingconsulting.com
9
IT TECH PACKAGING, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2019 AND 2018
| December 31, | |||||
|---|---|---|---|---|---|
| 2018 | |||||
| ASSETS | |||||
| Current Assets | |||||
| Cash and bank balances | 5,837,745 | $ | 8,474,809 | ||
| Restricted cash | - | 3,642,616 | |||
| Accounts receivable (net of allowance for doubtful accounts of 59,922 and 58,707 as of December 31, 2019 and December 2018, respectively) | 3,119,311 | 2,876,632 | |||
| Inventories | 1,607,463 | 2,923,516 | |||
| Prepayments and other current assets | 11,613,241 | 6,241,299 | |||
| Due from related parties | 1,863,479 | - | |||
| Total current assets | 24,041,239 | 24,158,872 | |||
| Prepayment on property, plant and equipment | 1,433,445 | - | |||
| Property, plant, and equipment, net | 151,616,852 | 167,829,716 | |||
| Value-added tax recoverable | 2,621,841 | 2,810,331 | |||
| Deferred tax asset non-current | 10,485,053 | 8,277,091 | |||
| Total Assets | 190,198,430 | $ | 203,076,010 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
| Current Liabilities | |||||
| Short-term bank loans | 6,163,814 | $ | 11,802,075 | ||
| Current portion of long-term loans from credit union | 1,605,459 | 2,491,549 | |||
| Accounts payable | 250,486 | 629,054 | |||
| Advance from customers | 98,311 | - | |||
| Notes payable | - | 3,642,616 | |||
| Due to related parties | 539,985 | 413,336 | |||
| Accrued payroll and employee benefits | 291,924 | 213,536 | |||
| Other payables and accrued liabilities | 6,503,010 | 10,222,796 | |||
| Income taxes payable | 1,382,471 | 219,305 | |||
| Total current liabilities | 16,835,460 | 29,634,267 | |||
| Loans from credit union | 7,367,908 | 4,706,259 | |||
| Loans from a related party | - | 2,185,569 | |||
| Total liabilities (including amounts of the consolidated VIE without recourse to the Company of 19,460,257 and 34,008,908 as of December 31, 2019 and 2018, respectively) | 24,203,368 | 36,526,095 | |||
| Commitments and Contingencies | |||||
| Stockholders’ Equity | |||||
| Common stock, 500,000,000 shares authorized, 0.001 par value per share, 22,054,816 shares issued | 22,685 | 22,360 | |||
| Additional paid-in capital | 51,154,544 | 51,137,319 | |||
| Statutory earnings reserve | 6,080,574 | 6,080,574 | |||
| Accumulated other comprehensive loss | (6,057,537 | ) | (3,263,952 | ) | |
| Retained earnings | 114,794,796 | 112,573,614 | |||
| Total stockholders’ equity | 165,995,062 | 166,549,915 | |||
| Total Liabilities and Stockholders’ Equity | 190,198,430 | $ | 203,076,010 |
All values are in US Dollars.
10
IT TECH PACKAGING, INC.
CONSOLIDATED STATEMENTS OF INCOME ANDCOMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2019AND 2018
| Year Ended | ||||||
|---|---|---|---|---|---|---|
| December 31, | ||||||
| 2019 | 2018 | |||||
| Revenues | $ | 117,614,886 | $ | 86,746,758 | ||
| Cost of sales | (103,935,368 | ) | (80,926,357 | ) | ||
| Gross Profit | 13,679,518 | 5,820,401 | ||||
| Selling, general and administrative expenses | (9,781,719 | ) | (13,098,373 | ) | ||
| Loss from disposal of property, plant and equipment | - | (3,904,342 | ) | |||
| Income (Loss) from Operations | 3,897,799 | (11,182,314 | ) | |||
| Other Income (Expense): | ||||||
| Interest income | 64,717 | 36,632 | ||||
| Subsidy income | 261,136 | 241,189 | ||||
| Interest expense | (926,368 | ) | (1,492,119 | ) | ||
| Income (Loss) before Income Taxes | 3,297,284 | (12,396,612 | ) | |||
| Provision for Income Taxes | (1,076,102 | ) | 1,850,928 | |||
| Net Income (Loss) | 2,221,182 | (10,545,684 | ) | |||
| Other Comprehensive Loss | ||||||
| Foreign currency translation adjustment | (2,793,585 | ) | (8,732,751 | ) | ||
| Total Comprehensive Loss | $ | (572,403 | ) | $ | (19,278,435 | ) |
| Earnings (Losses) Per Share: | ||||||
| Basic and Diluted Earnings (Losses) per Share | $ | 0.10 | $ | (0.49 | ) | |
| Outstanding – Basic and Diluted | 22,034,905 | 21,618,305 |
11
IT TECH PACACKING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019AND 2018
| Year Ended | ||||||
|---|---|---|---|---|---|---|
| December 31, | ||||||
| 2019 | 2018 | |||||
| Cash Flows from Operating Activities: | ||||||
| Net income | $ | 2,221,182 | $ | (10,545,684 | ) | |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 15,304,039 | 14,290,919 | ||||
| Allowances for obsolete inventories, net | 75,719 | - | ||||
| Loss from disposal and impairment of property, plant and equipment | - | 3,904,342 | ||||
| (Recovery from) for bad debts | 2,192 | 23,676 | ||||
| Share-based compensation expenses | - | 470,361 | ||||
| Deferred tax | (2,369,683 | ) | (2,089,439 | ) | ||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | (294,882 | ) | (1,183,782 | ) | ||
| Prepayments and other current assets | (5,392,916 | ) | (5,726,546 | ) | ||
| Inventories | 1,207,958 | 5,322,320 | ||||
| Accounts payable | (372,728 | ) | 234,448 | |||
| Advance from customers | 99,472 | - | ||||
| Notes payable | (3,625,921 | ) | (2,261,147 | ) | ||
| Related parties | (1,757,231 | ) | 150,743 | |||
| Accrued payroll and employee benefits | 82,813 | (6,855 | ) | |||
| Other payables and accrued liabilities | 1,169,967 | 6,878,137 | ||||
| Income taxes payable | 1,180,493 | (291,119 | ) | |||
| Net Cash Provided by Operating Activities | 7,530,474 | 9,170,374 | ||||
| Cash Flows from Investing Activities: | ||||||
| Purchases of property, plant and equipment | (6,416,481 | ) | (2,198,852 | ) | ||
| Acquisition of a subsidiary | (1,450,368 | ) | - | |||
| Net Cash Used in Investing Activities | (7,866,849 | ) | (2,198,852 | ) | ||
| Cash Flows from Financing Activities: | ||||||
| Proceeds from related party loans | - | 4,522,295 | ||||
| Repayments of related party loans | (2,175,553 | ) | (12,813,169 | ) | ||
| Proceeds from short term bank loans | 10,152,579 | 12,210,196 | ||||
| Proceeds from credit union loans | 4,206,068 | 5,064,970 | ||||
| Repayment of bank loans | (17,955,561 | ) | (12,149,899 | ) | ||
| Net Cash Used in Financing Activities | (5,772,467 | ) | (3,165,607 | ) | ||
| Effect of Exchange Rate Changes on Cash and Cash Equivalents | (170,838 | ) | (705,917 | ) | ||
| Net (Decrease) Increase in Cash and Cash Equivalents | (6,279,680 | ) | 3,099,998 | |||
| Cash, Cash Equivalents and Restricted Cash - Beginning of Year | 12,117,425 | 9,017,427 | ||||
| Cash, Cash Equivalents and Restricted Cash - End of Year | $ | 5,837,745 | $ | 12,117,425 | ||
| Supplemental Disclosure of Cash Flow Information: | ||||||
| Cash paid for interest, net of capitalized interest cost | $ | 926,368 | $ | 1,393,759 | ||
| Cash paid for income taxes | $ | 2,250,546 | $ | 515,001 | ||
| Cash and bank balances | 5,837,745 | 8,474,809 | ||||
| Restricted cash | - | 3,642,616 | ||||
| Total cash, cash equivalents and restricted cash shown in the statement of cash flows | 5,837,745 | 12,117,425 |
12