NANJING, China, May 14 /Xinhua-PRNewswire-FirstCall/ -- Ever-Glory International Group, Inc. (OTC Bulletin Board: EGLY) (“Ever-Glory,” “the Company”), a leading apparel manufacturer in the People’s Republic of China (“PRC”), announced its financial results for the first quarter ended March 31, 2007.
First Quarter 2007 Highlights
-- Revenue increased 118.6% year-over-year to $11.4 million
-- Gross profit increased 87.6% to $1.7 million
-- Net income increased 70.8% to $0.7 million
First Quarter 2007 Results
For the first quarter 2007, net revenues were $11.4 million, up 118.6% from $5.2 million in the same quarter of 2006. The increase in revenues was primarily attributable to two factors. The acquisition of New-Tailun in the fourth quarter of 2006 contributed an increase of $4.1 million, or 78%, to the revenues. Besides, an organic growth of Ever-Glory increased its sales to customers in Europe, the U.S. and Japan by 38%, 55% and 95%, respectively compared to 2006.
Gross profit for the first quarter was $1.7 million, an increase of 87.6% from $0.9 million a year ago. Gross margin was 14.9% in the first quarter of 2007, compared to 17.4% in the first quarter of 2006. This decline was primarily caused by increases in the cost of raw materials that could not be passed on to customers.
Operating expenses in the first quarter were $0.8 million, an increase of 84.9% from $0.5 million in the same quarter of 2006. This increase was due to higher selling expenses in support of new business, higher general and administrative expenses related to the acquisition of New-Tailun and higher depreciation and amortization expenses associated with the company’s new headquarters. As a percentage of revenues, operating expenses totaled 7.3% in the first quarter of 2007, compared to 8.6% in the same quarter last year.
Operating income in the first quarter was $0.9 million, an increase of 90.2% from $0.5 million in the same quarter the prior year. Operating margin was 7.6%, compared to 8.8% a year ago.
Net income for the first quarter of 2007 was $0.7 million, or $0.01 per diluted share, an increase of 70.8% from $0.4 million, or $0.00 per diluted share, in the same quarter of 2006.
“The first quarter demonstrated Ever-Glory’s capacity for rapid growth based on the strength of our customer relationships and top-level product quality,” said Mr. Edward Kang, Chairman and Chief Executive Officer of Ever-Glory. “The acquisition of New-Tailun increased our market share in Japan, while the added production capacity improved our ability to fill larger orders from our major customers in Europe and the United States.”
At quarter-end, total annual production capacity increased to 5.5 million garment pieces, up from 2.85 million garment pieces at the end of 2006. This increase was related to the Company’s new factory and corporate headquarters in the Nanjing Jiangning Economic and Technological Development Zone in Nanjing, higher levels of outsourced production and the acquisition of New-Tailun.
Financial Condition
During the first quarter of 2007, the Company generated $1.6 million in cash from operations, up from $0.3 million in the same period a year ago. As of March 31, 2007, the company had $1.3 million in cash and cash equivalents and $1.9 million available under its credit facility. At the end of the quarter, shareholders’ equity stood at $18.6 million, up from $17.8 million on December 31, 2006.
Outlook for 2007
Ever-Glory continues to explore opportunities to expand its production capacity. The Company hopes to increase its entire production capacity to more than 7.0 million garment pieces per year by the end of 2007.
We are very pleased with the progress we have made to date and are excited about the opportunities going forward,” Mr. Kang said. “In the near term, we are focusing on strategic acquisitions to expand capacity and to meet strong demand and increase our market share. Combined with our existing capacity, we expect to achieve another year of healthy top-line and net profit growth.”
Recent Events
In late March 2007, Ever-Glory requested national accreditation of its state-of-the-art fabric and accessories inspection and testing center. The Company submitted a laboratory accreditation application form to CNAS (China National Accreditation Service for Conformity Assessment). Ever-Glory management expects to receive the accreditation during the third quarter of 2007. After receiving the honor, Ever-glory hopes to expand its international market on the strength of China’s highest fabric testing standard.
On April 20, 2007, Ever-Glory received a new, $2.8 million production order from Dallas-based Walls Industries, Inc. The new production order marks the third year of the two companies’ strategic partnership.
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 1,300 people. At present, the market distribution is segmented as 15 % in Japan, 59 % in Europe, 23 % in United States and 3% 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
(unaudited)
For the three For the three
months ended months ended
March 31, 2007 March 31, 2006
NET SALES
To related parties $ 27,016 $ --
To third parties 11,402,701 5,229,520
Total Net Sales 11,429,717 5,229,520
COST OF SALES
From related parties (655,810) (810,174)
From third parties (9,069,122) (3,510,466)
Total Cost Of
Sales (9,724,932) (4,320,640)
GROSS PROFIT 1,704,785 908,880
OPERATING EXPENSES
Selling expenses 155,259 119,175
General and administrative
expenses 615,090 321,594
Depreciation and
amortization 60,739 8,709
Total Operating
Expenses 831,088 449,478
INCOME FROM OPERATIONS 873,697 459,402
OTHER INCOME (EXPENSES)
Interest income 1,378 741
Interest expenses (132,290) (9,936)
Other income 26 7,235
Other expenses (84) --
Total Other
Expenses, net (130,970) (1,960)
INCOME BEFORE INCOME TAX EXPENSE 742,727 457,442
INCOME TAX EXPENSE (75,694) (66,852)
NET INCOME 667,033 390,590
OTHER COMPREHENSIVE INCOME
Foreign currency
translation gain 130,336 87,061
COMPREHENSIVE INCOME 797,369 $ 477,651
Net income share-basic 0.02 $ 0.02
Net income share-diluted 0.01 $ 0.00
Weighted average number of shares
outstanding during the period-basic 40,805,091 19,971,758
Weighted average number of shares
outstanding during the period-diluted 100,720,079 79,886,746
EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2007 AND December 31, 2006
As of March 31, As of December 31,
ASSETS 2007 2006
CURRENT ASSETS (unaudited)
Cash and cash equivalents $ 1,298,417 $ 660,096
Accounts receivable, net of
allowances 4,934,186 6,225,936
Accounts receivable - related
companies 2,266,184 2,516,767
Inventories, net 481,238 746,817
Other receivables and prepaid
expenses 226,140 83,923
Total Current Assets 9,206,165 10,233,539
GOODWILL, NET 10,079,156 10,079,156
LAND USE RIGHT, NET 2,530,324 2,521,109
PROPERTY AND EQUIPMENT, NET 13,220,710 12,158,912
TOTAL ASSETS 35,036,355 34,992,716
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable 1,123,106 $ 897,609
Accounts payable - a related
company 420,013 1,408,504
Due to related parties 2,678,129 2,621,130
Other payables and accrued
liabilities 3,154,476 3,305,778
Note payable 4,521,438 4,482,180
Value added tax 173,330 202,243
Income tax payable and other tax
payable 96,063 61,536
Total Current Liabilities 12,166,555 12,978,980
LONG-TERM LIABILITIES
Due to a related company 4,297,221 $4,238,526
TOTAL LIABILITIES 16,463,776 $17,217,506
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock ($.0001 par value,
authorized 5,000,000 shares,
Nil shares issued and outstanding) -- --
Series A Convertible Preferred
Stock ($.0001 par value,
authorized 10,000 shares, 7,883
shares issued and outstanding) 1 1
Common stock ($.0001 par value,
authorized 100,000,000 shares,
issued and outstanding
19,971,758 shares) 1,997 1,997
Common stock to be issued for
acquisition (20,833,333 shares) 2,083 2,083
Additional paid-in capital 11,261,666 11,261,666
Retained earnings
Unappropriated 4,380,177 3,713,144
Appropriated 2,230,145 2,230,145
Accumulated other comprehensive
income 696,510 566,174
Total Stockholders’ Equity 18,572,579 17,775,210
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY 35,036,355 34,992,716
EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2007 AND 2006
(unaudited)
For the three For the three
months ended March months ended March
31, 2007 31, 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 667,033 $ 390,590
Adjusted to reconcile net
income to cash provided
by (used in) operating
activities:
Depreciation and
amortization - cost of
sales 121,193 38,315
Depreciation and
amortization 60,739 8,709
Changes in operating assets
and liabilities
(increase)decrease in:
Accounts receivable 1,341,005 (1,898,058)
Accounts receivable -
related companies 271,549 --
Other receivable and
prepaid expenses (140,926) (44,922)
Inventories 271,053 (23,246)
Increase (decrease) in:
Accounts payable 216,782 2,178,068
Accounts payable -
related companies (996,903) (166,957)
Other payables and
accrued liabilities (179,372) (185,957)
Value add tax payables (30,564) 44,511
Income tax and other tax
payables 33,855 (38,239)
Net cash provided by
operating activities 1,635,444 302,814
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and
equipment (1,120,674) (569,881)
Net cash used in
investing activities (1,120,674) (569,881)
CASH FLOWS FROM FINANCING ACTIVITIES
Due to related parties 115,694 --
Repayment of note payable (1,292,959) --
Proceeds from notes payable 1,292,959 --
Net cash provided by
financing activities 115,694 --
EFFECT OF EXCHANGE RATE ON CASH 7,857 87,061
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 638,321 (180,006)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 660,096 1,467,245
CASH AND CASH EQUIVALENTS AT END OF
PERIOD 1,298,417 $ 1,287,239
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest expenses 73,595 $9,936
Cash paid during the period for:
Income taxes 41,827 $104,577