NANJING, China, May 6 /Xinhua-PRNewswire-FirstCall/ -- Ever-Glory International Group, Inc. (OTC Bulletin Board: EVGY) ("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, 2008.
First Quarter 2008 Highlights
-- Total net sales increased 20.2% year-over-year to $19.7 million
-- Gross profit increased 55.5% year-over-year to $3.7 million
-- Gross margin improved to 18.8% from 14.6% a year ago
-- Operating income increased 53.9% to $2.2 million
-- Operating margin improved to 11.3% from 8.8% a year ago
-- Net income was $1.2 million, or $0.10 per fully diluted share
-- Non-GAAP net income increased 30.9% year-over-year to $1.6 million, or
$0.13 per fully diluted share
-- Launched the private label La Go Go line of women's apparel and opened
retail counters
-- Received production orders valued at about $2.5 million from CAbi,
Carol Anderson, by invitation
-- Appointed three independent directors to strengthen the Company's
corporate governance
-- Applied for a listing on the American Stock Exchange
First Quarter 2008 Results
During the first quarter of 2008, total net sales were $19.7 million, up 20.2% from $16.4 million in the same quarter of 2007. The increase in sales was primarily attributable to overall increases in sales to customers in Europe, Japan and China, where sales grew 22%, 28% and 95%, respectively, from a year ago. Sales to the U.S. declined 20%, due to a decrease in order volume from one customer in the U.S. However, the Company expects this decline to be offset by increased orders from new U.S. customers during the remainder of the year. The newly established La Go Go private label began contributing to revenues during the quarter.
"We are very pleased with this strong beginning to the 2008 fiscal year, as we worked strategically to allocate our labor and capital resources in order to increase order volume and launch our new La Go Go retail business," said Mr. Yihua Kang, Chairman and Chief Executive Officer of Ever-Glory. "We will continue to strengthen our relationships with existing business customers, which provide us a solid base for new business development. As manufacturing costs in China continue to rise and the Chinese renminbi appreciates, we look forward to providing more value-added services and efficient management to improve our margins and further distinguish ourselves from competitors."
Gross profit during the quarter increased 55.5% to $3.7 million, or 18.8% of total sales, from $2.4 million, or 14.6% of total sales, a year ago. The increase in gross margin was due to increased sales of higher-margin,
brand-name women's casual clothing to customers in Europe and Japan.
Operating expenses increased 58.0% to $1.5 million. This increase was primarily due to higher general and administrative expenses, including higher payroll expenses related to the expansion of the business, higher depreciation expense on office facilities and expenditures on new office equipment, and increased public company expenses.
Operating income was $2.2 million, or 11.3% of sales, an increase of 53.9% from $1.4 million, or 8.8% of sales, in the same quarter of 2007.
Interest expenses for the first quarter were $0.6 million, compared to $0.1 million a year ago. The increase resulted from the conversion of a portion of the Company's convertible notes into common shares. To date, $0.8 million of the $2.0 million in notes have been converted into shares of the Company's common stock.
For the first quarter of 2008, net income was $1.2 million, or $0.10 per fully diluted share, compared with net income of $1.2 million, or $0.11 per fully diluted share, in the same quarter of 2007. Diluted earnings per share for the first quarter of 2008 include shares that may be issued upon conversion of the $2 million in convertible notes issued in August 2007.
Adjusting net income to exclude non-cash expenses related to the convertible notes, non-GAAP net income was $1.6 million, or $0.13 per fully diluted share, in the first quarter of 2008, up 30.9% from the same period in the prior year.
Financial Condition
As of March 31, 2008, the Company had $2.1 million in cash and cash equivalents. Working capital stood at $11.1 million, bank loans totaled $2.9 million and convertible notes payable, including unamortized discount, totaled $1.7 million at quarter end. As of March 31, 2008, stockholders' equity stood at $23.3 million. The Company generated operating cash flow of $4.3 million during the quarter.
Recent Events
The Company filed an application to be listed on the American Stock Exchange at the end of March 2008.
On April 3, 2008, La Go Go obtained a new registration certificate for retail business. By April 30, 2008, La Go Go had opened 40 retail locations in 18 cities in China. La Go Go has also established a retail presence in second-tier cities such as Changchun in Jilin Province, Jinan in Shandong Province and Kunming in Yunnan Province.
Business Outlook
For the 2008 fiscal year, the Company expects to generate revenues of $90 to $100 million and net income of $8.0 million to $8.6 million, excluding the impact of non-cash charges related to the Company's convertible notes and warrants.
"We continue to make great progress in our strategy of strong, profitable growth, and we look forward to further progress throughout 2008," Mr. Kang said. "The launch of our La Go Go fashion line further supports our mission to become a leader in the Chinese apparel and design industry, while our strong reputation is enabling us to increase sales of high-margin women's products in Europe and Japan and add new customers in the U.S.
"Because of slower sales related to the Chinese New Year holiday, the majority of our revenues and profits are generated in the latter part of the year. We plan to open between 80 and 100 La Go Go retail stores in China in 2008, with expected average monthly revenue of $4,000-7,000 (30,000-50,000 RMB) per store by the end of the year," Mr. Kang added. "We are very confident in the growth of this retail business, which we continue to expect will be a significant new profit driver in our long-term development."
Conference Call
The company will host a conference call at 9:00 a.m. EDT on, Tuesday, May 6, 2008, to discuss its financial results for the first quarter ended March 31, 2008. To participate in the event by telephone, please dial (888) 482-0024 five to 10 minutes prior to the start time (to allow time for registration) and reference passcode 67156466. International callers should dial (617)
801-9702. A digital replay of the call will also be available on Tuesday, May 6 at approximately 11:00 a.m. EDT, through Tuesday, May 13 at midnight EDT. Dial 888-286-8010 and enter the conference ID number 90269281. International callers should dial (617) 801-6888 and enter the same conference ID number.
An audio replay of the event will be archived on Ever-Glory's Web site at http://www.everglorygroup.com .
Use of Non-GAAP Financial Information
GAAP results for the first quarter ended March 31, 2008, include certain non-cash charges and expenses related to the Company's convertible notes and warrants. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of these items in this release. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of adjustments to GAAP results appears in the tables accompanying this press release. This additional
non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.
Restatement of Financial Results
The financial statements for the three-month period ended March 31, 2007, have been restated to reflect the acquisitions of Nanjing New-Tailun Garments Co., Ltd. ("New-Tailun"), on December 11, 2006, and Nanjing Catch-Luck Garments Co., Ltd. ("Catch-Luck"), on August 27, 2007, to record the assets and liabilities of New-Tailun and Catch-Luck at their carrying values rather than their fair-market values at the time of the acquisitions.
About Ever-Glory International Group, Inc.
Ever-Glory International Group (OTC Bulletin Board: EVGY) is a U.S. publicly-traded company engaged in international garment manufacturing for well-known middle- to high-grade casual, outerwear and sportswear brands. The company's U.S. headquarters is based in Los Angeles, California, although Ever-Glory also has three subsidiaries, Goldenway Nanjing Garments Co. Ltd., Nanjing New-Tailun Garments Co, Ltd. and Nanjing Catch-Luck Garments Co., Ltd. Ever-Glory has strategic business partners in countries including China, Japan, Europe and the U.S. The company conducts business with well-known garment retail chains. In 2007, 57% of the company's total sales revenue came from customers in Europe, 16% from Japan, 21% from the United States and 6% from within 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 candidate and/or joint venture partners, the performance of third parties with whom the company does business, 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
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
As of March 31, As of December 31,
2008 2007
(Audited)
CURRENT ASSETS
Cash and cash equivalents $2,144,669 $641,739
Accounts receivable 11,594,154 13,035,299
Accounts receivable - related
parties -- 158,235
Inventories 1,851,672 1,897,023
Other receivables and prepaid
expenses 165,127 150,855
Advances on inventory purchase 9,255 --
Advances on inventory purchase
- related parties 2,872,189 2,568,040
Deferred financing costs 248,401 191,995
Total Current Assets 18,885,467 18,643,186
LAND USE RIGHT, NET 2,826,643 2,729,183
PROPERTY AND EQUIPMENT, NET 12,503,848 12,140,903
LONG TERM INVESTMENT 1,428,000 --
TOTAL ASSETS $35,643,958 $33,513,272
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable $2,177,368 $1,796,655
Accounts payable related parties -- 245,589
Other payables - related party 980,392 650,000
Other payables and accrued
liabilities 903,537 1,069,682
Value added tax payable 518,312 378,898
Income tax payable and other taxes
payable 355,013 146,226
Bank loans 2,856,000 4,798,500
Convertible notes payable,
(net of unamortized discount of
$1,625,160) 35,140 25,503
Total Current Liabilities 7,825,762 9,111,053
COMMITMENTS AND CONTINGENCIES -- --
LONG-TERM LIABILITIES
Loan from related party under
common control 4,534,100 4,474,985
TOTAL LIABILITIES 12,359,862 13,586,038
MINORITY INTEREST 556,993 --
STOCKHOLDERS’ EQUITY
Preferred stock ($.001 par value,
authorized 5,000,000 shares,
10000 shares designated as
Series A Preferred Stock) -- --
Series A Convertible Preferred
Stock (0 shares issued and
Outstanding as of March 31, 2008
and December 31, 2007, respectively) -- --
Common stock ($.001 par value,
authorized 50,000,000 shares,
11,547,110 and 11,379,309 shares
issued and outstanding as of March
31, 2008 and December 31, 2007,
respectively) 11,547 11,379
Common stock to be issued for
acquisition (0 shares as of
March 31, 2008 and December 31,
2007, respectively) -- --
Additional paid-in capital 2,656,892 2,154,368
Retained earnings 13,445,041 12,247,748
Statutory reserve 3,437,379 3,437,379
Accumulated other comprehensive
income 3,176,244 2,076,360
Total Stockholders’ Equity 22,727,103 19,927,234
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY $35,643,958 $33,513,272
EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
For the Three
Months Ended March 31,
2008 2007
Restated
NET SALES
To related parties $425,102 46,828
To third parties 19,322,106 16,378,571
Total net sales 19,747,208 16,425,399
COST OF SALES
From related parties 402,748 44,874
From third parties 15,623,424 13,987,839
Total cost of sales 16,026,172 14,032,713
GROSS PROFIT 3,721,036 2,392,686
OPERATING EXPENSES
Selling expenses 277,528 175,898
General and administrative expenses 1,221,487 772,888
Total Operating Expenses 1,499,015 948,786
INCOME FROM OPERATIONS 2,222,021 1,443,900
OTHER INCOME (EXPENSES)
Interest income 31,974 1,814
Interest expenses (577,828) (132,290)
Other income -- 96
Other expenses (191,167) (84)
Total Other (Expenses) (737,021) (130,464)
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 1,485,000 1,313,436
INCOME TAX EXPENSE (283,838) (75,694)
INCOME BEFORE MINORITY INTEREST 1,201,162 1,237,742
LESS MINORITY INTEREST 3,869 --
NET INCOME 1,197,293 1,237,742
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain 1,099,884 159,133
COMPREHENSIVE INCOME $2,301,046 1,396,875
Net income per share - basic $0.10 0.24
Net income per share - diluted $0.10 0.11
Weighted average number of shares
outstanding during the period
- basic 11,449,682 5,080,609
Weighted average number of shares
outstanding during the period
- diluted 12,204,363 11,072,008
EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(UNAUDITED)
2008 2007
Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,197,293 $1,237,742
Adjusted to reconcile net income
to cash provided by operating
activities:
Minority interest 3,869
Depreciation 222,765 207,412
Amortization 15,667 14,424
Amortization of discount on
convertible notes 349,337 --
Amortization of deferred
financing costs 73,676 --
Stock issued for interest 2,006 --
Changes in operating assets and
liabilities
Accounts receivable 1,941,016 1,579,037
Accounts receivable - related
parties 161,317 (510,749)
Inventories 121,586 238,961
Other receivables and prepaid
expenses (8,636) (138,761)
Advance on inventory purchase (9,058) --
Advance on inventory purchase to
related party (44,291) --
Accounts payable 299,523 118,312
Accounts payable - related
companies (68,882) (1,089,852)
Other payables and accrued
liabilities (204,734) (553,058)
Payables to related parties --
Value added tax payables 121,036 (24,551)
Income tax and other tax
payables 198,408 33,776
Long term deferred expense (56,406) --
Net cash provided by
operating activities 4,315,492 1,112,693
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in La Chapelle (1,397,700) --
Purchase of property and equipment (84,333) (1,126,622)
Proceeds from sale of equipment 377 --
Net cash used in investing
activities (1,481,656) (1,126,622)
CASH FLOWS FROM FINANCING ACTIVITIES
Due to related parties -- --
Contribution from minority
shareholders 553,040 --
Proceeds from bank loan -- 1,292,959
Repayment of bank loan (2,096,550) (1,292,959)
Proceeds from long term loan 59,116 115,694
Net proceeds from convertible
notes -- --
Net cash (used in) provided by
financing activities (1,484,394) 115,694
EFFECT OF EXCHANGE RATE ON CASH 153,487 382,142
NET DECREASE IN CASH AND CASH
EQUIVALENTS 1,502,930 483,907
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 641,739 897,093
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $2,144,669 $1,381,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest expense $68,859 $73,595
Income taxes $84,576 $41,827
EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL DATA
Non-GAAP Net income Q1 2008 Q1 2007(Restated)
Net Income (Loss) and
Diluted EPS Net Income Diluted EPS Net Income Diluted EPS
Adjusted Amount $1,620,306 $0.13 $1,237,742 $0.11
Adjustments
Non-cash expense
for convertible
notes (1) $423,013 $0.03 -- --
Amount per
consolidated
statement of
operations $1,197,293 $0.10 $1,237,742 $0.11
Non-cash debt financing costs includes $349,337 of the amortization of
the discount on convertible notes and $73,676 amortization of deferred
financing costs from convertible notes and warrants.
For more information, please contact:
Ever-Glory International Group, Inc.
Emily Guo, Chief Financial Officer
Tel: +86-25-5209-6222
Email: emily@ever-glory.com
CCG Elite Investor Relations
Crocker Coulson, President
Tel: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
