Ever-Glory Reports Fourth Quarter 2018 Financial Results

Full year 2018 wholesale revenue increased by 14.9% year-over-year to $218.6 million

2019-03-29 17:30 11219

NANJING, China, March 29, 2019 /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 fourth quarter ended December 31, 2018.

Mr. Yihua Kang, Chairman, President and Chief Executive Officer of Ever-Glory, said, "During the fourth 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. Notably, we achieved year-over-year improvement in gross margin of 15.7% for our wholesale businesses, as well as 6.0% for our retail business."

"During the fourth quarter of 2018, we remained our focus on driving retail business through store network optimization strategy, as well as inventory management strategy," Mr. Kang continued. "Following the remodeling or relocation of 250 stores during 2018, we operated a nationwide network of 1,381 stores as of December 31, 2018."

"Looking at our wholesale business, we maintained focus on upgrading customer portfolio to reduce credit risk and improve margin in the light of weak micro environment and enhancing our account receivables. Going forward, we'll implement a stricter client evaluation system and remain diligent in 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 solid fourth quarter results, coupled with our ability to increase operating leverage, resulted in expanded wholesale operating income during this quarter. 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."

Full Year 2018 Financial Results

Total sales for the full year of 2018 were $448.5 million, a 7.9% increase from $415.6 million in the full year of 2017. This increase was primarily due to a 14.9% increase in wholesale sales and a 2.0% increase in retail sales.

Wholesale sales from the Company's wholesale business increased by 14.9% to $218.6 million for the full year of 2018, compared with $190.2 million for the full year of 2017. This increase was primarily due to increased sales in Japan, Mainland China, United Kingdom and United States partially offset by decreased sales in Hong Kong China, Germany and Europe-Other.

Retail sales from the Company's branded fashion apparel retail division increased by 2.0% to $229.9 million for the full year of 2018, compared with $225.3 million for the full year of 2017. This increase was primarily due to an increase in same store sales.

Total gross profit for the full year of 2018 increased by 8.6% to $147.4 million, compared with $135.7 million for the full year of 2017. Total gross margin for the full year of 2018 increased to 32.9% from 32.7% for the full year of 2017.

Gross profit for wholesale business increased by 15.7% to $41.8 million for the full year of 2018, compared with $36.1 million for the full year of 2017. Gross margin for the full year of 2018 increased to 19.1% compared with 19.0% for the full year of 2017.

Gross profit for retail business increased by 6.0% to $105.6 million for the full year of 2018, compared with $99.6 million for the full year of 2017. Gross margin for the full year of 2018 increased to 45.9% from 44.2% for the full year of 2017.

Selling expenses for the full year of 2018 increased by 6.4% to $91.4 million, or 20.4% of total sales, compared with $85.9 million, or 20.7% of total sales for the full year of 2017. The increase was attributable to higher retail sales.

General and administrative expenses for the full year of 2018 increased by 13.6% to $39.8 million, or 8.9% of total sales, compared with $35.1 million, or 8.4% of total sales for the full year of 2017. The increase was mainly due to increased average salaries.

Income from operations for the full year of 2018 increased by 1.8% to $15.0 million compared with $14.7 million for the full year of 2017.

Net income attributable to the Company for the full year of 2018 decreased by 3.6% to $12.0 million compared with $12.5 million for the full year of 2017. Basic and diluted earnings per share were $0.81 and $0.84 for the full year of 2018 and 2017, respectively.

Balance Sheet

As of December 31, 2018, Ever-Glory had approximately $47.0 million of cash and cash equivalents, compared with approximately $62.9 million as of December 31, 2017. Ever-Glory had working capital of approximately $80.1 million as of December 31, 2018, and outstanding bank loans of approximately $29.5 million as of December 31, 2018.

Conference Call

The Company will hold a conference call at 8:00 a.m. Eastern Time on March 29, 2019 (8:00 p.m. Beijing Time on March 29, 2019). Listeners can access the conference call by dialing +1-888-394-8218 or + 1-323-701-0225 and using the access code 1693644. 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 10:00 a.m. Eastern Time on March 29 through 11:59 p.m. Eastern Time on April 5, by dialing +1-844-512-2921 or +1-412-317-6671 and using the access code 1693644.

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
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. Dollars, except share and per share data or otherwise stated)
AS OF DECEMBER 31, 2018 AND 2017

	2018		2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	47,012	$	62,876
Accounts receivable, net		86,527		81,859
Inventories		65,929		56,182
Value added tax receivable		2,580		3,757
Other receivables and prepaid expenses		10,204		5,139
Advances on inventory purchases		6,420		3,028
Amounts due from related parties		192		265
Total Current Assets		218,864		213,106

INTANGIBLE ASSETS		4,962		5,995
PROPERTY AND EQUIPMENT, NET		28,445		25,891
TOTAL ASSETS	$	252,271	$	244,992

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Bank loans	$	29,497	$	37,730
Accounts payable		78,412		73,788
Accounts payable and other payables - related parties		4,756		4,675
Other payables and accrued liabilities		21,958		16,454
Value added and other taxes payable		2,569		6,052
Income tax payable		1,569		1,712
Total Current Liabilities		138,761		140,411

NONCURRENT LIABILITIES
Deferred tax liabilities		354		1,883
TOTAL LIABILITIES		139,115		142,294

Note 13 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, 14,798,198 and 14,795,992 shares issued and outstanding as of December 31, 2018 and December 31, 2017, respectively)		15		15
Additional paid-in capital		3,627		3,620
Retained earnings		105,914		95,195
Statutory reserve		19,083		17,794
Accumulated other comprehensive income		(3,578)		2,585
Amounts due from related party		(10,354)		(15,449)
Total equity attributable to stockholders of the Company		114,707		103,760
Noncontrolling interest		(1,551)		(1,062)
Total Equity		113,156		102,698
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	252,271	$	244,992

See the accompanying notes to the consolidated financial statements.

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands of U.S. Dollars, except share and per share data or otherwise stated)
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

	2018		2017

SALES	$	448,508	$	415,581

COST OF SALES		301,153		279,839

GROSS PROFIT		147,355		135,742

OPERATING EXPENSES
Selling expenses		91,439		85,940
General and administrative expenses		39,811		35,053
Marketing related intangible asset impairment		1,086		-
Total operating expenses		132,336		120,993

INCOME FROM OPERATIONS		15,019		14,749

OTHER INCOME (EXPENSE)
Interest income		1,375		1,260
Interest expense		(1,989)		(1,648)
Other income		1,977		3,509
Total other income		1,363		3,121

INCOME BEFORE INCOME TAX EXPENSE		16,382		17,870

INCOME TAX EXPENSE		(4,942)		(5,805)

NET INCOME		11,440		12,065

Net loss attributable to the non-controlling interest		568		394
NET INCOME ATTRIBUTABLE TO THE COMPANY	$	12,008	$	12,459

NET INCOME	$	11,440	$	12,065
Foreign currency translation gain		(6,163)		5,882
COMPREHENSIVE INCOME	$	5,277	$	17,947

Comprehensive loss attributable to the noncontrolling interest		79		450

COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY	$	5,198	$	18,397
EARNINGS PER SHARE ATTRIBUTABLE TO THE COMPANY'S STOCKHOLDERS:
Basic and diluted	$	0.81	$	0.84
Weighted average number of shares outstanding Basic and diluted		14,796,947		14,795,992

See the accompanying notes to the consolidated financial statements.

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 YEARS ENDED DECEMBER 31, 2018 AND 2017

	2018		2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	11,440	$	12,065
Adjustments to reconcile net income to cash provided by operating activities:
Intangible asset impairment loss		1,086		-
Depreciation and amortization		6,664		7,015
Loss from sale of property and equipment		108		24
Provision of bad debt allowance		660		1,223
Provision for obsolete inventories		3,324		4,624
Deferred income tax		(1,370)		(1,530)
Stock-based compensation		7		18
Changes in operating assets and liabilities
Accounts receivable		(9,893)		(11,204)
Inventories		(16,462)		(7,919)
Value added tax receivable		1,016		(600)
Other receivables and prepaid expenses		(5,659)		(1,136)
Advances on inventory purchases		(3,698)		307
Amounts due from related parties		(2,761)		(592)
Accounts payable		8,485		11,489
Accounts payable and other payables- related parties		6,275		351
Other payables and accrued liabilities		5,604		460
Value added and other taxes payable		(2,210)		567
Income tax payable		(54)		(238)
Net cash provided by operating activities		2,562		14,924

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(12,182)		(8,564)
Net cash used in investing activities		(12,182)		(8,564)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		64,006		62,693
Repayment of bank loans		(70,513)		(56,296)
Repayment of loans from related party		6,657		9,280
Advances to related party		(8,428)		(7,119)
Interest income received from related party		2,997		-
Net cash provided by (used in) financing activities		(5,281)		8,558

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(963)		2,670

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(15,864)		17,588

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		62,876		45,288

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	47,012	$	62,876

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
Accrued interest income on amounts due from related party under counter-guarantee agreement (Note 12)	$	738	$	818
Interest	$	1,755	$	1,648
Income taxes	$	6,350	$	6,247