Ever-Glory Reports First Quarter 2020 Financial Results

2020-05-15 17:45 11993

NANJING, China, May 15, 2020 /PRNewswire/ -- Ever-Glory International Group, Inc. (the "Company" or "Ever-Glory") (NASDAQ: EVK), a retailer of branded fashion apparel and a leading global apparel supply chain solution provider, reported its financial results today for the first quarter ended March 31, 2020.

Mr. Yihua Kang, Chairman, President and Chief Executive Officer of Ever-Glory, said, "During the first quarter, we maintained our focus on developing the retail business through our multi-brand strategy and store network optimization initiative, while improving our wholesale business by upgrading customer portfolio and enhancing our account receivables."

"During the first quarter of 2020, our retail brands continue to attract new customers and retain existing customers by focusing on design, quality and value," Mr. Kang continued. "Following the remodeling or relocation of 2 stores during 2020, we operated a nationwide network of 1,038 stores as of March 31, 2020."

"Looking at our wholesale business, we maintained focus on upgrading customer portfolio to reduce credit risk and improve margin in light of weak micro-environment and enhancing our account receivables. Going forward, we'll implement a stricter client evaluation system and remain diligent in our account receivables collection. We believe the enduring strength of our wholesale business will support its long-term profitability," concluded Mr. Kang.

Mr. Jason Jiansong Wang, Chief Financial Officer of Ever-Glory, added, "The first quarter results, are coupled with our ability to increase operating leverage. Going forward, we remain confident in the long-term prospects of our business and we will continue implementing our margin enhancement and cost control measures to further strengthen the profitability of our business."

First Quarter 2020 Financial Results

Total sales for the first quarter of 2020 were $58.4 million, a decrease of 33.7% from $88.0 million in the first quarter of 2019. This decrease was primarily driven by a 20.7% decrease in our wholesale business and a 39.7% decrease in our retail business.

Sales for the Company's wholesale division decreased by 20.7% to $22.3 million for the first quarter of 2020, compared with $28.1 million for the first quarter of 2019. This decrease was primarily attributable to decreased sales in Mainland China, Germany, other European markets and Japan partially offset for increased sales in Hong Kong, the United States and the United Kingdom.

Sales for the Company's branded fashion apparel retail division decreased by 39.7% to $36.1 million for the first quarter of 2020, compared with $59.9 million for the first quarter of 2019. This decrease was primarily due to a decrease in same-store sales. The Company had 1,038 retail stores as of March 31, 2020, compared with 1,315 retail stores as of March 31, 2019.

Total gross profit for the first quarter of 2020 decreased by 45.4% to $16.0 million, compared with $29.4 million for the first quarter of 2019. Total gross margin decreased to 27.5% from 33.4% for the first quarter of 2019.

Gross profit for the wholesale business increased by 46.7% to $3.5 million for the first quarter of 2020, compared with $6.6 million for the first quarter of 2019. Gross margin decreased to 15.7% from 23.3% for the first quarter of 2019.

Gross profit for the retail business decreased by 45.0% to $12.5 million for the first quarter of 2020, compared with $22.8 million for the first quarter of 2019. Gross margin was 34.8%, compared to 38.1% for the first quarter of 2019.

Selling expenses for the first quarter of 2020 decreased by 35.8% to $13.5 million, or 23.1% of total sales, compared with $21.0 million, or 23.9% of total sales for the first quarter of 2019. The decrease was attributable to the decreased sales.

General and administrative expenses for the first quarter of 2020 decreased by 23.2% to $5.8 million, or 9.9% of total sales, compared with $7.5 million, or 8.6% of total sales for the first quarter of 2019. The decrease was mainly attributable to the decreased office expenses.

(Loss) Income from operations for the first quarter of 2020 decreased by 493.0% to ($3.2) million compared with $0.8 million for the first quarter of 2019.

Net loss attributable to the Company for the first quarter of 2020 was $2.7 million compared with $0.5 million for the first quarter of 2019. Basic and diluted loss per share were $0.18 for the first quarter of 2020 compared with basic and diluted earnings per share of $0.04 for the first quarter of 2019.

Balance Sheet

As of March 31, 2020, Ever-Glory had approximately $70.0 million of cash and cash equivalents, compared with approximately $48.6 million as of December 31, 2019. Ever-Glory had working capital of approximately $49.3 million as of March 31, 2020, and outstanding bank loans of approximately $26.1 million as of March 31, 2020.

Conference Call

The Company will hold a conference call at 8:00 a.m. Eastern Time on May 15, 2020 (8:00 p.m. Beijing Time on May 15, 2020). Listeners can access the conference call by dialing +1-800-263-0877 or + 1-646-828-8143 and using the access code 2134878. 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 May 15 through 11:59 p.m. Eastern Time on May 22, by dialing +1-844-512-2921 or +1-412-317-6671 and using the access code 2134878.

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.

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. Dollars, except share and per share data or otherwise stated)
AS OF MARCH 31, 2020 AND DECEMBER 31, 2019 (UNAUDITED)

	2020		2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	70,036	$	48,551
Accounts receivable, net		42,265		78,053
Inventories		52,152		67,355
Advances on inventory purchases		1,248		2,495
Value added tax receivable		6,961		7,497
Other receivables and prepaid expenses		6,723		9,681
Amounts due from related parties		102		123
Total Current Assets		179,487		213,755

NONCURRENT ASSETS
Intangible assets, net		4,529		4,729
Property and equipment, net		26,886		28,812
Operating lease right-of-use assets		42,583		53,379
Deferred tax assets		878		996
Total Non-Current Assets		74,876		87,916
TOTAL ASSETS	$	254,363	$	301,671

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Bank loans	$	26,104	$	29,931
Accounts payable		52,173		72,418
Accounts payable and other payables – related parties		3,889		4,811
Other payables and accrued liabilities		13,033		19,137
Value added and other taxes payable		598		1,657
Income tax payable		121		1,142
Current operating lease liabilities		34,315		44,888
Total Current Liabilities		130,233		173,984

NONCURRENT LIABILITIES
Non-current operating lease liabilities		8,325		8,537
TOTAL LIABILITIES		138,558		182,521

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Stockholders' equity:
Preferred stock ($0.001 par value, authorized 5,000,000 shares, no shares issued and outstanding)		-		-
Common stock ($0.001 par value, authorized 50,000,000 shares, 14,804,832 and 14,801,770 shares issued and outstanding As of March 31, 2020 and December 31, 2019, respectively)		15		15
Additional paid-in capital		3,645		3,640
Retained earnings		103,627		106,328
Statutory reserve		19,939		19,939
Accumulated other comprehensive loss		(5,770)		(4,330)
Amounts due from related party		(4,147)		(4,932)
Total equity attributable to stockholders of the Company		117,309		120,660
Noncontrolling interest		(1,504)		(1,510)
Total Equity		115,805		119,150
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	254,363	$	301,671

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE LOSS (INCOME)
(In thousands of U.S. Dollars, except share and per share data or otherwise stated)
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)

	2020		2019

SALES	$	58,355	$	87,956

COST OF SALES		42,317		58,598

GROSS PROFIT		16,038		29,358

OPERATING EXPENSES
Selling expenses		13,478		21,008
General and administrative expenses		5,785		7,529
Total operating expenses		19,263		28,537

(LOSS) INCOME FROM OPERATIONS		(3,225)		821

OTHER INCOME (EXPENSE)
Interest income		277		207
Interest expense		(341)		(363)
Other income (expense), net		818		(295)
Total other income (expense), net		754		(451)

(LOSS) INCOME BEFORE INCOME TAX		(2,471)		370

INCOME TAX EXPENSE		(227)		(825)

NET LOSS		(2,698)		(455)
Net (income) loss attributable to the non-controlling interest		(3)		(66)
NET LOSS ATTRIBUTABLE TO THE COMPANY	$	(2,701)	$	(521)

NET LOSS	$	(2,698)	$	(455)
Foreign currency translation gain (loss)		(1,437)		4,006
COMPREHENSIVE (LOSS) INCOME	$	(4,135)	$	3,551

Comprehensive loss attributable to the noncontrolling interest		6		100

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY	$	(4,129)	$	3,651
EARNINGS (LOSS) PER SHARE:
Basic and diluted	$	(0.18)	$	(0.04)
Weighted average number of shares outstanding Basic and diluted		14,804,832		14,800,140

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands of U.S. Dollars, except share and per share data or otherwise stated)
FOR THE THREE MONTHS ENDED March 31, 2020 AND 2019 (Unaudited)

					Additional		Retained Earnings				Accumulated other		Amounts due from		Total equity attributable to stockholders		Non-
	Common Stock				paid-in				Statutory		Comprehensive		related		of the		controlling		Total
	Shares		Amount		capital		Unrestricted		reserve		loss		party		Company		Interest		equity
Balance at January 1, 2020		14,801,770	$	15	$	3,640	$	106,328	$	19,939	$	(4,330)	$	(4,932)	$	120,660		(1,510)	$	119,150

Stock-based compensation		3,062		0.003		5		-		-		-		-		5				5
Net income (loss)		-		-		-		(2,701)				-		-		(2,701)		3		(2,698)
Net cash received (paid) to related party under counter guarantee agreement		-		-		-		-		-		-		785		785		-		785
Foreign currency translation income (loss)												(1,440)		-		(1,440)		3		(1,437)
Balance at March 31, 2020		14,804,832	$	15	$	3,645	$	103,627	$	19,939	$	(5,770)	$	(4,147)	$	117,309		(1,504)	$	115,805


					Additional		Retained Earnings				Accumulated other		Amounts due from		Total equity attributable to stockholders		Non-
	Common Stock				paid-in				Statutory		Comprehensive		related		of the		controlling		Total
	Shares		Amount		capital		Unrestricted		reserve		income		party		Company		Interest		equity
Balance at January 1, 2019		14,798,198	$	15	$	3,627	$	105,914	$	19,083	$	(3,578)	$	(10,354)	$	114,707		(1,551)	$	113,156

Stock-based compensation		1,942		0.004		8		-		-		-		-		8				8
Net (loss) income		-		-		-		(521)		-		-		-		(521)		66		(455)
Net cash received (paid) to related party under counter guarantee agreement		-		-		-		-		-		-		1,101		1,101		-		1,101
Foreign currency translation income (loss)												3,972		-		3,972		34		4,006
Balance at March 31, 2019		14,800,140	$	15	$	3,635	$	105,393	$	19,083	$	394	$	(9,253)	$	119,267		(1,451)	$	117,816

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. Dollars, except share and per share data or otherwise stated)
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)


	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,698)	$	(455)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		1,587		2,225
Gain on disposal of intangible assets		(268)		-
Loss from sale of property and equipment		102		52
Provision of bad debt allowance		278		-
Provision for obsolete inventories		4,204		1,824
Deferred income tax		104		(145)
Stock-based compensation		5		8
Changes in operating assets and liabilities
Accounts receivable		34,906		31,027
Inventories		10,303		10,557
Value added tax receivable		210		1,406
Other receivables and prepaid expenses		364		3,975
Advances on inventory purchases		2,855		490
Amounts due from related parties		142		103
Accounts payable		(19,864)		(26,505)
Accounts payable and other payables- related parties		(1,038)		(741)
Other payables and accrued liabilities		(5,587)		(9,565)
Value added and other taxes payable		(31)		(2,788)
Income tax payable		(1,019)		(327)
Net cash provided by operating activities		24,555		11,141

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(78)		(2,131)
Disposal of intangible assets		353		-
Net cash provided by (used in) investing activities		275		(2,131)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		11,464		6,029
Repayment of bank loans		(14,884)		(7,408)
Repayment of counter guarantee from related party		748		3,488
Advances to related party		-		(2,163)
Net cash provided by (used in) financing activities		(2,672)		(54)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		1,497		1,908

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		23,655		10,864

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		48,551		47,012

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	72,206	$	57,876

Reconciliation of cash, cash equivalents and restricted cash reported within their consolidated balance sheets:

Cash and Cash Equivalents		70,036		47,012
Restricted cash (booked in other receivables and prepaid expenses)		2,170		-
	$	72,206	$	47,012

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
Interest	$	341	$	363
Income taxes	$	1,218	$	126