Ever-Glory Reports Second Quarter 2016 Financial Results

2016-08-15 18:00 2684

NANJING, China, August 15, 2016 /PRNewswire/ -- Ever-Glory International Group, Inc. (the "Company" or "Ever-Glory") (NASDAQ-GM: EVK), a retailer of branded fashion apparel and a leading global apparel supply chain solution provider, today reported its financial results for the second quarter ended June 30, 2016.

Mr. Yihua Kang, Chairman, President and Chief Executive Officer of Ever-Glory, said, "We are pleased with our financial results in the second quarter with top line increasing by 6.5% year-over-year and bottom line returning to profitability. The strategic initiatives we have implemented in the last few months have contributed to these solid results."

"Despite soft year-over-year retail sales, the performance of this segment was within our expectation. In the second quarter, we continued to execute our key strategies to maintain stability in the retail business in the short term, while focusing on store network optimization, inventory and operation management and branding to drive profitable growth over the long run."

"Our second quarter wholesale sales grew by 26.9% year-over-year, with strong results recorded in the United States, other European markets (excluding Germany and the United Kingdom) and China. We believe this reflects our recovery efforts as we strive to strengthen product development and supply chain management, as well as optimize our customer base by focusing on high-quality mid-to-high end customers with good credit histories. Looking at the remainder of 2016, we expect the challenging market conditions to remain. We are committed to our strategic initiatives and laying a firm foundation for a sustainable and profitable business in the long term," concluded Mr. Kang.

Mr. Jason Jiansong Wang, Chief Financial Officer of Ever-Glory, added, "Our solid financial performance reflects the prudent steps that we've taken to improve our cost structure, resulting in decreased operating expenses as percentage of total sales in the second quarter. Meanwhile, as part of our effort to reduce inventory levels for our retail business, we increased in-store discounts on out-of-season products during the second quarter, which led to higher production costs as percentage of retail sales and slightly impacted the gross margin for the retail segment. As we remain committed to maximizing operating efficiency and further reducing our inventory levels, we are confident in our long-term growth prospects."

Second Quarter 2016 Financial Results

Total sales for the second quarter of 2016 were $80.7 million, an increase of 6.5% from $75.7 million in the second quarter of 2015. This increase was primarily driven by a 26.9% increase in our wholesale business partially offset by a 6.7% decrease in our retail business.

Sales for the Company's branded fashion apparel retail division decreased by 6.7% to $42.9 million for the second quarter of 2016, compared with $45.9 million for the second quarter of 2015. This decrease was primarily due to a decrease in the same-store sales. The Company had 1,275 retail stores as of June 30, 2016, compared with 1,204 retail stores as of June 30, 2015.

Sales for the Company's wholesale division increased by 26.9% to $37.8 million for the second quarter of 2016, compared with $29.8 million for the second quarter of 2015. This increase was primarily due to an increase in sales in the United States, other European markets (excluding Germany and the United Kingdom) and China, partially offset by a decrease in sales in Germany and Japan.

Total gross profit for the second quarter of 2016 decreased by 11.1% to $26.7 million, compared with $30.0 million for the second quarter of 2015. Total gross margin decreased to 33.1% from 39.7% for the second quarter of 2015.

Gross profit for the retail business decreased by 13.4% to $20.6 million for the second quarter of 2016, compared with $23.8 million for the second quarter of 2015. Gross margin decreased to 48.1% from 51.8% for the second quarter of 2015.

Gross profit for the wholesale business decreased by 2.5% to $6.1 million for the second quarter of 2016, compared with $6.2 million for the second quarter of 2015. Gross margin decreased to 16.1% from 21.0% for the second quarter of 2015.

Selling expenses for the second quarter of 2016 decreased by 8.8% to $16.0 million, or 19.9% of total sales, compared with $17.6 million, or 23.2% of total sales for the second quarter of 2015. This decrease was mainly attributable to lower retail sales and a decrease in store management expense.

General and administrative expenses for the second quarter of 2016 decreased by 3.8% to $7.3 million, or 9.1% of total sales, compared with $7.6 million, or 10.0% of total sales for the second quarter of 2015.

Income from operations for the second quarter of 2016 decreased by 30.9% to $3.4 million compared with $4.9 million for the second quarter of 2015.

Net income attributable to the Company for the second quarter of 2016 was $3.1 million compared with $3.6 million for the second quarter of 2015. Basic and diluted earnings per share were $0.21 for the second quarter of 2016 compared with $0.24 for the second quarter of 2015.

Balance Sheet

As of June 30, 2016, Ever-Glory had approximately $27.5 million of cash and cash equivalents, compared with approximately $22.7 million as of December 31, 2015. Ever-Glory had working capital of approximately $53.8 million as of June 30, 2016, and outstanding bank loans of approximately $43.7 million as of June 30, 2016.

Conference Call

The Company will hold a conference call at 8:00 a.m. Eastern Time on August 15, 2016 (8:00 p.m. Beijing Time on August 15, 2016). Listeners can access the conference call by dialing +1-888-318-7451 or +1-719-457-2659 and using the access code 2412954. The conference call will also be webcast live over the Internet and can be accessed at the Company's website at http://www.everglorygroup.com.

A replay of the conference call will be available from 11:00 a.m. Eastern Time on August 15 through 11:59 p.m. Eastern Time on August 22, by dialing +1-877-870-5176 or +1-858-384-5517 and using the access code 2412954.

About Ever-Glory International Group, Inc.

Based in Nanjing, China, Ever-Glory International Group, Inc. is a retailer of branded fashion apparel and a leading global apparel supply chain solution provider. Ever-Glory is the first Chinese apparel Company listed on the American Stock Exchange (now named as NYSE MKT) in July 2008 and then transferred to The NASDAQ Global Market on December 31, 2015. Ever-Glory offers apparel to woman in China under its own brands "La go go", "Velwin", "Sea To Sky" and "idole" Ever-Glory is also a leading global apparel supply chain solution provider with a focus on middle-to-high end casual wear, outerwear, and sportswear brands. Ever-Glory services a number of well-known brands and retail stores by providing a complete set of supply chain management services, including: fabric development and design, sampling, sourcing, quality control, manufacturing, logistics, customs clearance and distribution.

Forward-Looking Statements

Certain statements in this release and other written or oral statements made by or on behalf of Ever-Glory International Group, Inc. (the "Company") are "forward looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and the Company's future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. The forward looking statements are subject to a number of risks and uncertainties including, without limitation, market acceptance of the Company's products and offerings, development and expansion of the Company's wholesale and retail operations, the Company's continued access to capital, currency exchange rate fluctuation and other risks and uncertainties. The actual results the Company achieves (including, without limitation, the results stemming from the future implementation of the Company's strategies and the revenue, net income and new retail store projections set forth herein) may differ materially from those contemplated by any forward-looking statements due to such risks and uncertainties (many of which are beyond the Company's control). These statements are based on management's current expectations and speak only as of the date of such statements. Readers should carefully review the risks and uncertainties described in the Company's latest Annual Report on Form 10-K and other documents that the Company files from time to time with the U.S. Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

For investor and media inquiries, please contact:

Ever-Glory International Group
Yanhua Huang
Tel: +86-25-52096875
E-Mail: xxnfff@126.com

The Piacente Group, Inc.
Emilie Wu
China: +86-10-6535-0148
US: +1-212-481-2050
E-Mail: everglory@tpg-ir.com

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. Dollars, except share and per share data or otherwise stated)
AS OF JUNE 30, 2016 (UNAUDITED) AND DECEMBER 31, 2015

	2016		2015
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	27,475	$	22,702
Accounts receivable		62,233		87,527
Inventories		62,720		75,063
Value added tax receivable		5,215		2,736
Other receivables and prepaid expenses		4,899		3,840
Advances on inventory purchases		3,658		6,193
Amounts due from related parties		1,054		2,535
Total Current Assets		167,254		200,596

INTANGIBLE ASSETS		6,041		6,217
PROPERTY AND EQUIPMENT, NET		23,791		21,906
TOTAL ASSETS	$	197,086	$	228,719

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Bank loans	$	43,675	$	44,841
Accounts payable		44,240		66,118
Accounts payable and other payables - related parties		2,530		2,823
Other payables and accrued liabilities		16,949		22,221
Value added and other taxes payable		4,317		6,882
Income tax payable		1,701		4,052
Total Current Liabilities		113,412		146,937

NONCURRENT LIABILITIES
Deferred tax liabilities		2,910		2,992
TOTAL LIABILITIES		116,322		149,929

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Stockholders' equity:
Preferred stock ($.001 par value, authorized 5,000,000 shares, no shares issued and outstanding)		-		-
Common stock ($.001 par value, authorized 50,000,000 shares, 14,787,940 and 14,785,868 shares issued and outstanding As of June 30, 2016 and December 31, 2015, respectively)		15		15
Additional paid-in capital		3,602		3,597
Retained earnings		81,223		78,439
Statutory reserve		15,327		15,327
Accumulated other comprehensive income		853		3,249
Amounts due from related party		(19,967)		(21,776)
Total equity attributable to stockholders of the Company		81,053		78,851
Noncontrolling interest		(289)		(61)
Total Equity		80,764		78,790
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	197,086	$	228,719

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(In thousands of U.S. Dollars, except share and per share data or otherwise stated)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)

	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
NET SALES	$	80,676	$	75,727	$	172,369	$	173,630
COST OF SALES		53,961		45,679		117,311		112,974

GROSS PROFIT		26,715		30,048		55,058		60,656

OPERATING EXPENSES
Selling expenses		16,043		17,583		36,956		37,838
General and administrative expenses		7,316		7,606		14,265		14,520
Total Operating Expenses		23,359		25,189		51,221		52,358

INCOME FROM OPERATIONS		3,356		4,859		3,837		8,298

OTHER INCOME (EXPENSES)
Interest income		237		215		621		539
Interest expense		(334)		(716)		(931)		(1,492)
Other income		621		539		687		772
Total Other Income (Expenses)		524		38		377		(181)

INCOME BEFORE INCOME TAX EXPENSE		3,880		4,897		4,214		8,117
Income tax expense		(828)		(1,379)		(1,662)		(2,204)

NET INCOME		3,052		3,518		2,552		5,913

Net loss attributable to the non-controlling interest		93		80		233		81
NET INCOME ATTRIBUTABLE TO THE COMPANY		3,145		3,598		2,785		5,994

NET INCOME	$	3,052	$	3,518	$	2,552	$	5,913

Foreign currency translation (loss) gain		(3,178)		(127)		(2,396)		329
COMPREHENSIVE INCOME		(126)		3,391		156		6,242

Comprehensive loss attributable to the non-controlling interest		85		80		228		81
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	(41)	$	3,471	$	384	$	6,323

EARNINGS PER SHARE ATTRIBUTABLE TO THE COMPANY'S STOCKHOLDERS
Basic and diluted	$	0.21	$	0.24	$	0.19	$	0.41
Weighted average number of shares outstanding
Basic and diluted		14,787,302		14,784,094		14,786,589		14,784,094

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. Dollars, except share and per share data or otherwise stated)
FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED)

	2016		2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,552	$	5,913
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		3,331		4,678
Recovering for doubtful accounts		-		(143)
Provision for obsolete inventories		7,111		-
Deferred income tax		(14)		3
Stock-based compensation		5		-
Changes in operating assets and liabilities
Accounts receivable		23,903		34,101
Inventories		3,901		(7,266)
Value added tax receivable		(2,583)		(1,333)
Other receivables and prepaid expenses		(1,166)		865
Advances on inventory purchases		2,434		1,055
Amounts due from related parties		1,092		186
Accounts payable		(20,847)		(13,416)
Accounts payable and other payables- related parties		(275)		(1,074)
Other payables and accrued liabilities		(4,852)		(1,987)
Value added and other taxes payable		(2,448)		(779)
Income tax payable		(2,297)		(1,099)
Net cash provided by operating activities		9,847		19,704

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(5,692)		(5,438)
Proceeds from sale of property and equipment		-		4
Purchase of intangible assets		-		(1,732)
Acquisition of Yiduo net of cash acquired		-		(457)
Net cash (used in) investing activities		(5,692)		(7,623)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		48,295		52,715
Repayment of bank loans		(48,521)		(72,217)
Repayment of loans from related party		1,836		2,444
Advances to related party		-		(815)
Net cash provided by (used in) financing activities		1,610		(17,873)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(992)		(91)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		4,773		(5,883)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		22,702		34,134

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	27,475	$	28,251

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest	$	931	$	1,492
Income taxes	$	4,442	$	3,301
SUPPLEMENTAL INFORMATION OF NONCASH INVESTING ACTIVITIES
Increase in intangible assets and non-controlling interests		-	$	233