Ever-Glory Reports Third Quarter 2016 Financial Results

2016-11-14 19:15 2582

NANJING, China, Nov 14, 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 third quarter ended September 30, 2016.

Mr. Yihua Kang, Chairman, President and Chief Executive Officer of Ever-Glory, said, "While our overall business continued to be impacted by the lackluster macroeconomic environment in the third quarter, the tough operating environment did not slow us from continuing to execute our strategic initiatives with a keen focus on building a long-term sustainable business. In addition, our two complementary segments, retail and wholesale, provide us formidable competitive advantages in the market with deep insight into local fashion buying behaviors and changing retail trends and valuable experience and resources across every aspect of supply chain management.

"For our retail business, we remain focused on store network optimization, inventory and operation management and branding. As of September 30, 2016, we operated a nationwide network of 1,345 stores by adding a net total of 70 stores during the third quarter and expect to have over 1,400 stores at the end of this year.

"The global macroeconomic headwinds and weak consumer confidence continued to impact our wholesale business in the third quarter, however, we believe our extensive product development and supply chain management expertise, as well as network of high quality, reliable and cost-efficient sourcing channels and manufacturers will benefit the long-term foundation of our wholesale business. In addition, despite the lower sales in Japan, the United Kingdom and Mainland China, we are pleased to record higher sales in Hong Kong, other European areas and the United States in the third quarter," concluded Mr. Kang.

Mr. Jason Jiansong Wang, Chief Financial Officer of Ever-Glory, added, "During the soft market conditions of the third quarter, we are pleased that our business foundation remains solid. We have been diligently executing our strategic initiatives and have made important progress. In the third quarter, despite the decreased total sales, we maintained the gross margin for retail business at the same level compared with the year-ago period while improving the gross margin for wholesale business by 70 basis points, mainly due to our effective procurement system and lower cotton prices. While we expect the remainder of 2016 to remain challenging, we will continue implementing our margin enhancement and cost control measures to further strengthen the foundation of our business."

Third Quarter 2016 Financial Results

Total sales for the third quarter of 2016 were $109.9 million, a decrease of 7.3% from $118.6 million in the third quarter of 2015. This decrease was primarily driven by a 3.4% decrease in our wholesale business and a 13.2% decrease in retail business.

Sales for the Company's branded fashion apparel retail division decreased by 13.2% to $41.1 million for the third quarter of 2016, compared with $47.3 million for the third quarter of 2015. This decrease was primarily due to a decrease in same-store sales. The Company had 1,345 retail stores as of September 30, 2016, compared with 1,188 retail stores as of September 30, 2015.

Sales for the Company's wholesale division decreased by 3.4% to $68.9 million for the third quarter of 2016, compared with $71.3 million for the third quarter of 2015. This decrease was primarily due to a decrease in sales in Japan, the United Kingdom and Mainland China, partially offset by an increase in sales in Hong Kong, Germany, Europe-Other and the United States.

Total gross profit for the third quarter of 2016 decreased by 8.4% to $29.6 million, compared with $32.3 million for the third quarter of 2015. Total gross margin decreased to 26.9% from 27.3% for the third quarter of 2015.

Gross profit for the retail business decreased by 12.9% to $19.6 million for the third quarter of 2016, compared with $22.4 million for the third quarter of 2015. Gross margin increased to 47.6% from 47.5% for the third quarter of 2015.

Gross profit for the wholesale business increased by 1.6% to $10.1 million for the third quarter of 2016, compared with $9.9 million for the third quarter of 2015. Gross margin increased to 14.6% from 13.9% for the third quarter of 2015.

Selling expenses for the third quarter of 2016 decreased by 3.5% to $18.5 million, or 16.8% of total sales, compared with $19.2 million, or 16.2% of total sales for the third quarter of 2015. This decrease was attributable to lower retail sales and decreased store management expense.

General and administrative expenses for the third quarter of 2016 increased by 5.7% to $9.9 million, or 9.0% of total sales, compared with $9.3 million, or 7.9% of total sales for the third quarter of 2015. The increase was attributable to an increase of $1.9 million for bad-debt expense for the three months ended September 30, 2016 compared with the three months ended September 30, 2015.

Income from operations for the third quarter of 2016 decreased by 67.7% to $1.2 million compared with $3.8 million for the third quarter of 2015.

Net income attributable to the Company for the third quarter of 2016 was $0.4 million compared with $2.7 million for the third quarter of 2015. Basic and diluted earnings per share were $0.04 for the third quarter of 2016 compared with $0.19 for the third quarter of 2015.

Balance Sheet

As of September 30, 2016, Ever-Glory had approximately $38.3 million of cash and cash equivalents, compared with approximately $22.7 million as of December 31, 2015. Ever-Glory had working capital of approximately $51.6 million as of September 30, 2016, and outstanding bank loans of approximately $49.8 million as of September 30, 2016.

Conference Call

The Company will hold a conference call at 8:00 a.m. Eastern Time on November 14, 2016 (9:00 p.m. Beijing Time on November 14, 2016). Listeners can access the conference call by dialing +1-888-539-3624 or +1-719-457-2552 and using the access code 6572776. 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 November 14 through 11:59 p.m. Eastern Time on November 21, by dialing +1-844-512-2921 or +1-412-317-6671 and using the access code 6572776.

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 SEPTEMBER 30, 2016 (UNAUDITED) AND DECEMBER 31, 2015
	2016		2015

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	38,317	$	22,702
Accounts receivable		80,515		87,527
Inventories		47,123		75,063
Value added tax receivable		5,081		2,736
Other receivables and prepaid expenses		4,366		3,840
Advances on inventory purchases		4,432		6,193
Amounts due from related parties		547		2,535
Total Current Assets		180,381		200,596

INTANGIBLE ASSETS		5,992		6,217
PROPERTY AND EQUIPMENT, NET		24,566		21,906
TOTAL ASSETS	$	210,939	$	228,719

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Bank loans	$	49,832	$	44,841
Accounts payable		50,268		66,118
Accounts payable and other payables - related parties		3,982		2,823
Other payables and accrued liabilities		18,398		22,221
Value added and other taxes payable		4,738		6,882
Income tax payable		1,518		4,052
Total Current Liabilities		128,736		146,937

NONCURRENT LIABILITIES
Deferred tax liabilities		2,834		2,992
TOTAL LIABILITIES		131,570		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 September 30, 2016 and December 31, 2015, respectively)		15		15
Additional paid-in capital		3,602		3,597
Retained earnings		81,844		78,439
Statutory reserve		15,327		15,327
Accumulated other comprehensive income		389		3,249
Amounts due from related party		(21,314)		(21,776)
Total equity attributable to stockholders of the Company		79,863		78,851
Noncontrolling interest		(494)		(61)
Total Equity		79,369		78,790
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	210,939	$	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 NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015 (UNAUDITED)
	Three months ended				Nine months ended
	September 30,				September 30,
	2016		2015		2016		2015
NET SALES	$	109,926	$	118,601	$	282,295	$	292,231
COST OF SALES		80,312		86,258		197,623		199,232

GROSS PROFIT		29,614		32,343		84,672		92,999

OPERATING EXPENSES
Selling expenses		18,522		19,199		55,477		57,036
General and administrative expenses		9,862		9,335		24,128		23,856
Total Operating Expenses		28,384		28,534		79,605		80,892

INCOME FROM OPERATIONS		1,230		3,809		5,067		12,107

OTHER INCOME (EXPENSES)
Interest income		233		212		854		751
Interest expense		(580)		(572)		(1,511)		(2,064)
Other income		253		341		939		1,114
Total Other Income (Expenses)		(94)		(19)		282		(199)

INCOME BEFORE INCOME TAX EXPENSE		1,136		3,790		5,349		11,908
Income tax expense		(724)		(1,066)		(2,385)		(3,270)

NET INCOME		412		2,724		2,964		8,638

Net loss attributable to the non-controlling interest		208		87		441		167
NET INCOME ATTRIBUTABLE TO THE COMPANY		620		2,811		3,405		8,805

NET INCOME	$	412	$	2,724	$	2,964	$	8,638

Foreign currency translation loss		(471)		(3,265)		(2,860)		(2,937)
COMPREHENSIVE (LOSS) INCOME		(59)		(541)		104		5,701

Comprehensive loss attributable to the non-controlling interest		205		90		434		170
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	146	$	(451)	$	539	$	5,871

EARNINGS PER SHARE ATTRIBUTABLE TO THE COMPANY'S STOCKHOLDERS
Basic and diluted	$	0.04	$	0.19	$	0.23	$	0.60
Weighted average number of shares outstanding
Basic and diluted		14,787,940		14,785,309		14,787,044		14,784,503

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 NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015 (UNAUDITED)
	2016		2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,964	$	8,638
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		5,337		6,826
Provision (recovering) for doubtful accounts		975		(28)
Provision for obsolete inventories		7,111		3
Deferred income tax		(79)		(1,885)
Stock-based compensation		5		-
Changes in operating assets and liabilities
Accounts receivable		4,127		10,592
Inventories		19,293		(9,507)
Value added tax receivable		(2,452)		(1,791)
Other receivables and prepaid expenses		(638)		13
Advances on inventory purchases		1,618		(4,866)
Amounts due from related parties		1,918		1,998
Accounts payable		(14,467)		6,361
Accounts payable and other payables- related parties		630		(3,789)
Other payables and accrued liabilities		(3,289)		752
Value added and other taxes payable		(1,987)		(1,330)
Income tax payable		(2,460)		644
Net cash provided by operating activities		18,606		12,631

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(8,577)		(8,717)
Proceeds from sale of property and equipment		40		49
Purchase of intangible assets		-		(1,720)
Acquisition of Yiduo net of cash acquired		-		(457)
Net cash used in investing activities		(8,537)		(10,845)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		75,263		86,297
Repayment of bank loans		(69,125)		(93,557)
Repayment of loans from related party		1,824		(3,105)
Advances to related party		(1,216)		2,426
Net cash provided by (used in) financing activities		6,746		(7,939)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(1,200)		(1,107)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		15,615		(7,260)

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	38,317	$	26,874

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest	$	1,511	$	2,064
Income taxes	$	5,362	$	4,511
SUPPLEMENTAL INFORMATION OF NONCASH INVESTING ACTIVITIES
Increase in intangible assets and non-controlling interests		-	$	233