NANJING, China, Aug. 15 /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 second quarter ended June 30, 2007.
Second Quarter 2007 Highlights
-- Net sales increased 3.8% year-over-year to $9.6 million
-- Net income totaled $0.5 million, compared to $0.7 million a year ago
-- Began shipping on new $2.8 million annual production order to Walls
Industries
-- Received $1.0 million in annual production orders from Levi Strauss
(Hong Kong) Limited
-- Filed Definitive 14C Information Statement related to acquisition of
Catch-Luck Garments Limited in August 2007
-- Closed private placement financing, generating $2.0 million in gross
proceeds in August 2007
Second Quarter 2007 Results
For the second quarter of 2007, net sales were $9.6 million, up 3.8% from $9.2 million in the same quarter of 2006. The increase in sales was mainly attributed to a slight increase in sales to customers in the U.S. market.
"During the second quarter, we continued to make inroads into the U.S. market, as we began shipping under our new production order with Walls Industries and increased our production for QVC," said Mr. Edward Kang, Chairman and Chief Executive Officer of Ever-Glory. "Appreciation in the RMB put some pressure on gross margin, and we were not able to pass all of this on to our customers in the form of higher prices. However, we should be able to gradually absorb this cost and achieve a higher margin later in the year."
Gross profit for the second quarter was $1.4 million, a decline of 3.3% from $1.5 million a year ago. Gross margin was 14.9% in the second quarter of 2007, compared to 15.9% in the second quarter of 2006. This decline was caused by an increase in raw materials costs because of appreciation in the Chinese RMB relative to the U.S. dollar.
Operating expenses in the second quarter were $0.8 million, an increase of 32.2% from $0.6 million in the same quarter of 2006. This increase was primarily caused by an increase of 73.1% in general and administrative expenses due to higher management salaries and other expenses related to expansion of the business. Depreciation expenses were also higher due to the company's new corporate headquarters, plant and testing facilities and the new Goldenway factory, which was completed in December 2006. Selling expenses and professional fees declined 27.6% and 19.7%, respectively, from the second quarter of 2007. Operating expenses totaled 8.6% of revenues in the second quarter of 2007, compared to 6.7% in the same period the prior year.
Operating income in the second quarter was $0.6 million, a decline of 29.2% from $0.9 million in the same quarter the prior year. Operating margin was 6.3%, compared to 9.2% a year ago.
Net income for the second quarter of 2007 was $0.5 million, or $0.005 per diluted share, a decrease of 35.3% from $0.7 million, or $0.01 per diluted share, in the same quarter of 2006.
At quarter-end, total annual production capacity increased to 5.6 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.
Six Month Results
Net revenues for the first six months of 2007 were $21.0 million, up 45.3% from revenues of $14.5 million during the same period a year ago. Gross profit was $3.1 million, or 14.9% of sales, up 31.4% from $2.4 million, or 16.5% of sales, in the first half of 2006. Operating income was $1.5 million, or 7.0% of sales, up 12.7% from $1.3 million, or 9.1% of sales, in the first half of 2006. Net income for the first six months of 2007 was $1.1 million, or $0.01 per diluted share, compared to net income of $1.1 million, or $0.01 per diluted share, in the same period a year ago.
Financial Condition
As of June 30, 2007, the company had $0.4 million in cash and cash equivalents and $0.1 million in working capital. At June 30, 2007, the Company had $4.4 million available under its credit facility and shareholders' equity stood of $9.2 million. During the first six months of 2007, the Company generated $4.2 million in cash from operations, compared to $0.8 million used in operating activities in the first half of 2006.
Business Outlook
For the 2007 fiscal year, the Company expects to generate revenues of $68 million to $70 million and net income of $5.8 million to $6.0 million. Full year guidance includes the consolidated financial results of the Company's Goldenway and New-Tailun subsidiaries, as well as the pending acquisition of and Catch-Luck, which is expected to close in the third quarter of 2007.
With the acquisition of Catch Luck, Ever-Glory will add annual production capacity of 800,000 garment pieces to its existing capacity. When combined with greater outsourced capacity, this will increase the Company's entire production capacity to more than 7.0 million garment pieces per year by the end of 2007.
"We look forward to delivering on our strategy of strong, profitable growth during the second half of 2007. Our recent private placement financing provides us the additional working capital requirements and provides a solid foundation for continued growth through the remainder of the year. We are hopeful that our new state-of-the-art testing center will receive accreditation during the third quarter, allowing us to provide fabric testing services to our international customers," Mr. Kang said. "We look forward to closing the Catch-Luck transaction which will increase capacity as we seek to become a leader in the Chinese apparel and design industry."
Recent Events
On August 1, the Company filed a Definitive 14C Information Statement related to the acquisition of apparel manufacturer Nanjing Catch-Luck Garments Co, Ltd. Founded in 1995, Catch-Luck has 500 non-union employees with annual production capacity of 800,000 garment pieces. Catch-Luck currently operates one factory covering 6,000 square meters in the Nanjing Jiangning Economic and Technological Development Zone. During the 2006 fiscal year, approximately 52% of the Company's revenues came from customers in Europe, 18% from customers in Japan, 18% from customers in the U.S. and 11% from customers in China. In the first half of 2007, Catch-Luck generated revenues of $9.7 million and net income of $1.2 million. The transaction is valued at $10.0 million, with a cash payment of $0.6 million and $9.4 million in stock, and is expected to close in August 2007.
On August 9, Ever-Glory announced the completion of a $2.0 million private placement of its secured convertible notes. The proceeds will be used to satisfy the Company's working capital needs and for other administrative expenses.
Restatement of Financial Results
The financial statements for the three and six month periods ended June 30, 2006, and the three months ended March 31, 2007, have been restated to reflect the acquisition of Nanjing New-Tailun Garments Co., Ltd, a Chinese limited liability company ("New-Tailun"), on December 11, 2006, to record the assets and liabilities of New-Tailun at their carrying values rather than their fair-market values at the time of the acquisition.
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 15% in Japan, 54% in Europe, 27% 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
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
ASSETS
As of
As of June 30, December 31,
2007 2006
CURRENT ASSETS
Cash and cash equivalents 430,217 660,096
Accounts receivable, net 5,907,370 6,225,936
Accounts receivable - related companies 153,721 2,516,767
Inventories, net 973,777 746,817
Other receivables and prepaid expenses 185,219 83,923
Total Current Assets 7,650,304 10,233,539
PROPERTY AND EQUIPMENT, NET 10,906,513 12,158,912
LAND USE RIGHTS, NET 2,555,790 2,521,109
TOTAL ASSETS 21,112,607 24,913,560
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable 1,495,840 897,609
Accounts payable - related companies 1,272,674 1,408,504
Other payables and accrued liabilities 409,194 3,305,778
Due to related parties 2,215,048 2,621,130
Notes payable 1,967,265 4,482,180
Value added tax 176,445 202,243
Other tax payables 20,831 61,536
Total Current Liabilities 7,557,297 12,978,980
LONG-TERM LIABILITIES
Due to a related company 4,356,755 4,238,526
TOTAL LIABILITIES 11,914,052 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 161,666 161,666
Retained earnings
Unappropriated 5,635,829 4,495,408
Appropriated 2,425,711 2,425,711
Accumulated other comprehensive income 971,268 609,188
Total Stockholders' Equity 9,198,555 7,696,054
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 21,112,607 24,913,560
EVER-GLORY INTERNATIONAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006
NET SALES (Restated) (Restated)
To related parties $119,844 $13,019 $146,860 $13,019
To third parties 9,457,270 9,213,532 20,859,971 14,443,052
Total net sales 9,577,114 9,226,551 21,006,831 14,456,071
COST OF SALES
From related parties (243,975) (1,500,385) (899,785) (2,310,559)
From third parties (7,911,144) (6,255,847) (16,980,266) (9,766,313)
Total cost of
sales (8,155,119) (7,756,232) (17,880,051) (12,076,872)
GROSS PROFIT 1,421,995 1,470,319 3,126,780 2,379,199
OPERATING EXPENSES
Selling expenses 108,936 150,509 264,195 269,684
Professional fees 139,607 173,759 318,097 346,520
General and
administrative
expenses 497,843 287,637 934,443 436,470
Depreciation and
amortization 73,534 8,151 134,273 16,860
Total Operating
Expenses 819,920 620,056 1,651,008 1,069,534
INCOME FROM OPERATIONS 602,075 850,263 1,475,772 1,309,665
OTHER INCOME (EXPENSES)
Interest income 2,159 629 3,537 1,370
Interest expenses (129,600) (48,194) (261,890) (58,130)
Other income 5,424 4,848 5,450 12,083
Other expenses (41) -- (125) --
Total Other
Expenses, net (122,058) (42,717) (253,028) (44,677)
INCOME BEFORE INCOME
TAX EXPENSE 480,017 807,546 1,222,744 1,264,988
INCOME TAX EXPENSE (6,629) (75,679) (82,323) (142,531)
NET INCOME 473,388 731,867 1,140,421 1,122,457
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation gain 231,744 151,246 362,080 238,307
COMPREHENSIVE INCOME 705,132 883,113 1,502,501 1,360,764
Net income share-basic $0.01 $0.02 $0.03 $0.03
Net income share-diluted $0.00 $0.01 $0.01 $0.01
Weighted average
number of shares
outstanding during
the period-basic 40,805,091 40,805,091 40,805,091 40,805,091
Weighted average
number of shares
outstanding during
the period-diluted 100,720,079 100,720,079 100,720,079 100,720,079
EVER-GLORY INTERNATIONAL GROUP, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)
For the six For the six
months ended months ended
June 30, 2007 June 30, 2006
CASH FLOWS FROM OPERATING ACTIVITIES (Restated)
Net income $1,140,421 $1,122,457
Adjusted to reconcile net income to
cash (used in) provided by
operating activities:
Depreciation and amortization - cost
of sales 222,980 94,565
Depreciation and amortization 134,273 16,860
Loss on disposal of fixed assets -- 2,467
Changes in operating assets and liabilities
(Increase)decrease in:
Accounts receivable 462,349 (1,211,181)
Accounts receivable - related companies 3,996,241 (3,449,231)
Other receivable and prepaid expenses (98,158) (41,533)
Inventories (206,105) (88,570)
Increase (decrease) in:
Accounts payable 568,736 513,915
Accounts payable - related companies (1,774,575) 2,196,303
Other payables and accrued liabilities (161,697) (169,563)
Value added tax payables (30,258) 308,260
Income tax and other tax payables (41,615) (47,969)
Net cash provided by (used in)
operating activities 4,212,592 (753,220)
CASH FLOWS FROM INVESTING ACTIVITIES
Contribution by stockholder -- 900,000
Purchase of property and equipment (1,538,683) (2,143,764)
Net cash used in investing activities (1,538,683) (1,243,764)
CASH FLOWS FROM FINANCING ACTIVITIES
Due to a related company (286,263) 2,595,158
Repayment of notes payable (4,527,814) --
Proceeds from notes payable 1,940,492 --
Net cash (used in) provided by
financing activities (2,873,585) 2,595,158
EFFECT OF EXCHANGE RATE ON CASH (30,203) 105,189
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (229,879) 703,363
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 660,096 1,467,245
CASH AND CASH EQUIVALENTS AT END OF PERIOD 430,217 2,170,608
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the
period for interest expenses 128,061 19,778
Cash paid during the period for income taxes 124,373 190,387
For more information, please contact:
Ever-Glory International Group, Inc.
Mr. Devin Jean, Corporate Secretary
Phone: +86-25-52096899
Email: jinqiu@ever-glory.com
CCG Elite Investor Relations
Crocker Coulson, President
Phone: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com