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Ever-Glory Reports Annual Financial Results


NANJING, China, March 19 /Xinhua-PRNewswire-FirstCall/ -- Ever-Glory International Group, Inc. (OTC Bulletin Board: EGLY) ("Ever-Glory"), a leading apparel manufacturer in the People's Republic of China ("PRC"), announced its financial results for the fiscal year ended December 31, 2006.

Full Year 2006 Highlights

-- Total net revenues increased 106.5% to $22.3 million

-- Operating income increased 82.1% to $2.1 million

-- Net income increased 43.1% to $1.5 million

-- Completed construction of new state-of-the-art factory and

corporate headquarters in Jiangning Economic and Technological

Development Zone, Nanjing, China

-- Completed strategic acquisition for a total of $12.0 million in cash

and stock, adding 900 new employees and annual production capacity of

2.5 million garment pieces per year

-- Levi Strauss added to list of high-profile customers

Full Year 2006 Results

For the full year 2006, net revenues were $22.3 million, up 106.5% from $10.8 million in 2005. In 2006, sales to customers in Europe and the U.S. increased by 185%, and 192%, respectively. Gross profit for the full year 2006 was $4.1 million, an increase of 94.6% from $2.1 million in 2005. Gross margin was 18.3% in 2006, compared to 19.4% in 2005. Operating income for the full year 2006 was $2.1 million, up 82.1% from $1.1 million in 2005. Operating margin was 9.2% in 2006, compared to 10.5% in 2005. The decline in operating margin in 2006 was primarily caused by higher salaries and selling expenses related to the growth of the company's business in 2006. Net income for the full year 2006 was $1.5 million, or $0.02 per diluted share, an increase of 43.1% from $1.0 million, or $0.01 per diluted share, in 2005.

In 2006, all Chinese manufacturers of certain garments were subject to aggregate export quotas, or limitations, to the United States and Europe. Companies were allocated a portion of the aggregate export quota based on their export performance in the prior year. As a result of its good export performance in the prior year, Ever-Glory was allocated sufficient export quotas to enable it to increase its sales to customers in Europe and the U.S. Overall, the imposition of such quotas did not have a material effect on the Company's net sales and its net margin.

At year-end, total annual production capacity increased to 2.85 million garment pieces, up from 1.70 million garment pieces at the end of 2005. This increase was mainly related to the great increase of outsourced production capacity in 2006. The recently acquired New-Tailun will increase Ever-Glory's total annual production capacity to more than 5.0 million garment pieces in 2007, including outsourced production capacity.

Financial Condition

As of December 31, 2006, the company had $660,096 in cash and cash equivalents and $1.9 million available under its credit facility. At year end, shareholders' equity stood at $17.8 million, up from $5.7 million at December 31, 2005.

Outlook for 2007

Based on its expectations of continued strong demand from its existing customers, potential new business, and the contribution from New-Tailun, Ever-Glory is anticipating another year of growth in revenue and net income in the double-digits. In addition, the company expects to achieve operational synergies as it integrates its recent acquisitions with its existing operations. The company also plans to expand its operations in the future by adding capacity, improving manufacturing operations and exploring growth opportunities in new markets.

"In 2007, our focus will be on internal growth and integrating New-Tailun into our existing operations. We also plan to improve quality control systems, supplement our product lines with more jeans products, expand our customer base in the Japanese market and increase capacity to meet demand," said Mr. Kang. "We also expect that Ever-Glory's strong brand recognition and reputation for high-quality products will lay a foundation for a highly successful launch of our self-owned brands in the Chinese market in the near future."

Recent Events

In December 2006, Ever-Glory completed the acquisition of Nanjing New-Tailun Garments Co., Ltd. through a combination of cash and stock valued at approximately $12.0 million. New-Tailun is mainly engaged in the sales and manufacturing of casual wear, sportswear, jeans and trousers for middle-high, well-known brands and retail chain stores in Japan, the United Kingdom, Europe and the United States. New-Tailun generated revenues of $9.7 million and net income of $1.0 million for the fiscal year of 2006. During the same period, sales to customers in Japan and the United Kingdom accounted for 45% and 19% of total revenues, respectively. The acquisition was funded by a combination of cash and stock valued at approximately $12 million. To close the transaction, Ever-Glory will pay the seller the equivalent of $2.0 million in Renminbi ("RMB") and issue approximately 20.8 million shares of its restricted common stock. Upon completion of this transaction, New-Tailun Co., Ltd. became a wholly owned subsidiary of Ever-Glory. Ever-Glory has received an opinion as to the fairness of the transaction from Savills Valuation and Professional Services Ltd, dated November 9, 2006.

About Ever-Glory International Group, Inc.

Ever-Glory International Group is a U.S. publicly traded company engaged in international garment manufacturing for well-known middle- to high-grade casual, outer, and sportswear brands. The company's U.S. headquarters is based in Los Angeles, CA, although Ever-Glory also owns two full subsidiary companies, Nanjing Goldenway Garments Co. Ltd., and New-Tailun Garment Co, Ltd. Ever-Glory has strategic business partners in countries including China, Europe and the U.S. The Company cooperates with well-respected garment retailer chains such as Itochu, Shinko, Debenhams, Next, C&A, Itoyokado and others in handling high- and middle-grade casual wear and sportswear. The company entered into production and sales cooperation agreements with a number of internationally famous brands such as Matalan, Eddie Bauer, Best-Seller, BB Dakota and others. Ever-Glory employs more than 1,500 people. At present, the market distribution is segmented as 5% in Japan, 64% in Europe, 22% in United States and 5% in China. For more information about Ever-Glory International Group, please visit: http://www.everglorygroup.com .

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This press release contains certain "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to the company's ability to accurately complete product orders, coordinate product design with its customers, ability to expand and grow its distribution channels, political and economic factors in the People's Republic of China, the company's ability to find attractive acquisition candidates, dependence on a limited number of larger customers and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

- FINANCIAL TABLES FOLLOW -

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

For the years ended

December 31,

2006 2005

NET SALES

To related parties $86,672 $713,580

To third parties 22,245,696 10,100,381

Total net sales 22,332,368 10,813,961

COST OF SALES

From related parties (2,792,554) (2,246,856)

From third parties (15,450,823) (6,465,709)

Total cost of sales (18,243,377) (8,712,565)

GROSS PROFIT 4,088,991 2,101,396

OPERATING EXPENSES

Stock issued for services -- 42,045

Export quota charges 153,997 --

Selling expenses 450,832 85,108

General and administrative expenses 888,447 597,727

Salaries and allowances 476,071 213,825

Loss on disposal of fixed assets 5,233 2,065

Depreciation and amortization 53,251 28,893

Total Operating Expenses 2,027,831 969,663

INCOME FROM OPERATIONS 2,061,160 1,131,733

OTHER INCOME (EXPENSES)

Interest income 5,520 131,610

Interest expenses (285,876) (74,284)

Other income from a related company 18,811 18,337

Other income 6,113 64

Other expenses (293) (2,240)

Total Other Income (Expenses) (255,725) 73,487

INCOME BEFORE INCOME TAX EXPENSE 1,805,435 1,205,220

INCOME TAX EXPENSE (312,010) (161,680)

NET INCOME 1,493,425 1,043,540

OTHER COMPREHENSIVE INCOME

Foreign currency translation gain 532,746 5,621

COMPREHENSIVE INCOME 2,026,171 $ 1,049,161

Net income per share - basic 0.07 $ 0.02

Net income per share - diluted 0.02 $

Weighted average number of shares 0.01

outstanding during the year - basic 20,028,836 55,224,701

Weighted average number of shares

outstanding during the year - diluted 79,943,824 115,139,689

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2006 AND 2005

ASSETS

2006 2005

CURRENT ASSETS

Cash and cash equivalents $660,096 $1,467,245

Accounts receivable, net of allowances 6,225,936 236,289

Accounts receivable - related companies 2,516,767 --

Inventories, net 746,817 396,207

Income tax recoverable -- 59,021

Other receivables and prepaid expenses 83,923 20,955

Total Current Assets 10,233,539 2,179,717

GOODWILL, NET 10,079,156 --

LAND USE RIGHT, NET 2,521,109 --

PROPERTY AND EQUIPMENT, NET 12,158,912 5,855,562

TOTAL ASSETS $34,992,716 $8,035,279

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable $897,609 $84,300

Accounts payable - related companies 1,408,504 486,475

Due to related parties 2,621,130 --

Other payables and accrued liabilities 3,305,778 1,054,942

Value added tax 202,243 49,276

Income tax payable and other taxes

payable 61,536 --

Notes payable 4,482,180 611,247

Total Current Liabilities 12,978,980 2,286,240

LONG-TERM LIABILITIES

Due to a related company 4,238,526 --

TOTAL LIABILITIES 17,217,506 2,286,240

COMMITMENTS AND CONTINGENCIES -- --

STOCKHOLDERS' EQUITY

Preferred stock ($.0001 par value,

authorized 5,000,000 shares,

Nil shares issued and outstanding) -- --

Series A Convertible Preferred Stock

($.0001 par value,

authorized 10,000 shares, 7,883 shares

issued and outstanding as of December 31,

2006 and 2005) 1 1

Common stock ($.0001 par value, authorized

100,000,000 shares,

issued and outstanding 19,971,758

shares as of December 31, 2006 and 2005 1,997 1,997

Common stock to be issued for acquisition 2,083 --

(20,833,333 shares)

Additional paid-in capital 11,261,666 1,263,749

Retained earnings

Unappropriated 3,713,144 2,437,823

Appropriated 2,230,145 2,012,041

Accumulated other comprehensive income 566,174 33,428

Total Stockholders' Equity 17,775,210 5,749,039

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $34,992,716 $8,035,279

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

2006 2005

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 1,493,425 $ 1,043,540

Adjusted to reconcile net income to

cash provided

by operating activities:

Stock issued for services -- 42,045

Depreciation and amortization -

cost of sales 234,483 134,013

Depreciation and amortization 53,251 28,893

Loss on disposal of fixed assets 5,233 2,065

Changes in operating assets and liabilities

(Increase) decrease in:

Accounts receivable (3,284,045) (55,676)

Accounts receivable - related companies (2,516,767) 130,784

Due from a related party -- 2,535,500

Other receivables and prepaid expenses (50,310) 122,460

Inventories 268,018 398,205

Increase (decrease) in:

Accounts payable 477,817 (238,025)

Accounts payable - related companies (346,507) (1,094,394)

Other payables and accrued liabilities 2,218,307 321,341

Value add tax payables (6,847) (17,241)

Income tax and other tax payables 120,143 (143,841)

Net cash (used in) provided by

operating activities (1,333,799) 3,209,669

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash inflow from business combination

(Note 2) 39,280 --

Purchase of land use right (205,693) --

Purchase of property and equipment (8,282,558) (2,519,904)

Net cash used in investing activities (8,448,971) (2,519,904)

CASH FLOWS FROM FINANCING ACTIVITIES

Due to related parties 4,859,656 --

Repayment of note payable (611,247) --

Proceeds from notes payable 4,482,180 611,247

Net cash provided by financing activities 8,730,589 611,247

EFFECT OF EXCHANGE RATE ON CASH 245,032 5,621

NET (DECREASE) INCREASE IN CASH AND CASH

EQUIVALENTS (807,149) 1,306,633

CASH AND CASH EQUIVALENTS AT BEGINNING OF

YEAR 1,467,245 160,612

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 660,096 $ 1,467,245

SUPPLEMENTAL DISCLOSURE OF CASH FLOW

INFORMATION

Cash paid during the year for:

Interest expenses $ 50,017 $ 12,594

Cash paid during the year for:

Income taxes $ 357,280 $ 306,434

Source: Ever-Glory International Group, Inc
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