Ever-Glory Reports Second Quarter 2019 Financial Results

2019-08-14 17:45 6515

NANJING, China, Aug. 14, 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 second quarter ended June 30, 2019.

Mr. Yihua Kang, Chairman, President and Chief Executive Officer of Ever-Glory, said, "During the second 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 second quarter of 2019, 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 39 stores during 2019, we operated a nationwide network of 1,235 stores as of June 30, 2019."

"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 second 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."

Second Quarter 2019 Financial Results

Total sales for the second quarter of 2019 were $77.3 million, a decrease of 12.7% from $88.5 million in the second quarter of 2018. This decrease was primarily driven by an 19.4% decrease in our retail business and a 4.0% decrease in wholesale business.

Sales for the Company's branded fashion apparel retail division decreased by 19.4% to $40.1 million for the second quarter of 2019, compared with $49.7 million for the second quarter of 2018. This decrease was primarily due to a decrease in the amounts of stores and same-store sales. The Company had 1,235 retail stores as of June 30, 2019, compared with 1,417 retail stores as of June 30, 2018.

Sales for the Company's wholesale division decreased by 4.0% to $37.3 million for the second quarter of 2019, compared with $38.8 million for the second quarter of 2018. This decrease was primarily attributable to decreased sales in Mainland China, Hong Kong China, Japan, Germany, United Kingdom and other European markets partially offset for increased sales in the United States.

Total gross profit for the second quarter of 2019 decreased by 16.1% to $29.0 million, compared with $34.5 million for the second quarter of 2018. Total gross margin decreased to 37.5% from 39.0% for the second quarter of 2018.

Gross profit for the retail business decreased by 16.1% to $23.0 million for the second quarter of 2019, compared with $27.4 million for the second quarter of 2018. Gross margin was 57.3%, compared to 55.1% for the second quarter of 2018.

Gross profit for the wholesale business decreased by 16.0% to $6.0 million for the second quarter of 2019, compared with $7.2 million for the second quarter of 2018. Gross margin decreased to 16.1% from 18.4% for the second quarter of 2018.

Selling expenses for the second quarter of 2019 decreased by 12.8% to $19.7 million, or 25.5% of total sales, compared with $22.6 million, or 25.5% of total sales for the second quarter of 2018. The decrease was attributable to the marketing expenses associated with the promotion of the retail brand.

General and administrative expenses for the second quarter of 2019 decreased by 16.8% to $7.3 million, or 9.5% of total sales, compared with $8.8 million, or 10.0% of total sales for the second quarter of 2018. The decrease was mainly attributable to the decline in number of stores.

Income from operations for the second quarter of 2019 decreased by 37.7% to $2.0 million compared with $3.1 million for the second quarter of 2018.

Net income attributable to the Company for the second quarter of 2019 was $1.9 million compared with $2.8 million for the second quarter of 2018. Basic and diluted earnings per share were $0.13 for the second quarter of 2019 compared with $0.19 for the second quarter of 2018.

Balance Sheet

As of June 30, 2019, Ever-Glory had approximately $34.5 million of cash and cash equivalents, compared with approximately $47.0 million as of December 31, 2018. Ever-Glory had working capital of approximately $42.6 million as of June 30, 2019, and outstanding bank loans of approximately $26.0 million as of June 30, 2019.

Conference Call

The Company will hold a conference call at 8:00 a.m. Eastern Time on August 14, 2019 (8:00 p.m. Beijing Time on August 14, 2019). Listeners can access the conference call by dialing +1-800-289-0438 or + 1-323-794-2423 and using the access code 5902045. 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 14 through 11:59 p.m. Eastern Time on August 21, by dialing +1-844-512-2921 or +1-412-317-6671 and using the access code 5902045.

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
Dandan Song
Tel: +86-25-5209-6817
E-Mail: sdd@ever-glory.com.cn

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 JUNE 30, 2019 AND DECEMBER 31, 2018 (UNAUDITED)

	2019		2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	34,526	$	47,012
Accounts receivable, net		64,704		86,527
Inventories		63,127		65,929
Advances on inventory purchases		8,754		6,420
Value added tax receivable		3,102		2,580
Other receivables and prepaid expenses		6,648		10,204
Amounts due from related parties		144		192
Total Current Assets		181,005		218,864

NONCURRENT ASSETS
Intangible assets, net		4,886		4,962
Property and equipment, net		28,245		28,445
Operating lease right-of-use assets		51,623		-
Total Non-Current Assets		84,754		33,407
TOTAL ASSETS	$	265,759	$	252,271

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Bank loans	$	25,999	$	29,497
Accounts payable		50,352		78,412
Accounts payable and other payables – related parties		4,796		4,756
Other payables and accrued liabilities		12,665		21,958
Value added and other taxes payable		-		2,569
Income tax payable		1,774		1,569
Current operating lease liabilities		42,808		-
Total Current Liabilities		138,394		138,761

NONCURRENT LIABILITIES
Deferred tax liabilities		-		354
Non-current operating lease liabilities		8,839		-
TOTAL LIABILITIES		147,233		139,115

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, 14,800,140 and 14,798,198 shares issued and outstanding As of June 30, 2019 and December 31, 2018, respectively)		15		15
Additional paid-in capital		3,635		3,627
Retained earnings		107,249		105,914
Statutory reserve		19,083		19,083
Accumulated other comprehensive income		(2,093)		(3,578)
Amounts due from related party		(7,863)		(10,354)
Total equity attributable to stockholders of the Company		120,026		114,707
Noncontrolling interest		(1,500)		(1,551)
Total Equity		118,526		113,156
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	265,759	$	252,271

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED
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, 2019 AND 2018 (UNAUDITED)

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
NET SALES	$	77,316	$	88,541	$	165,272	$	181,326
COST OF SALES		48,330		53,999		106,928		115,439

GROSS PROFIT		28,986		34,542		58,344		65,887

OPERATING EXPENSES
Selling expenses		19,699		22,590		40,706		44,817
General and administrative expenses		7,337		8,823		14,867		16,496
Total Operating Expenses		27,036		31,413		55,573		61,313

INCOME FROM OPERATIONS		1,950		3,129		2,771		4,574

OTHER INCOME (EXPENSES)
Interest income		277		370		484		696
Interest expense		(408)		(360)		(771)		(924)
Other income		1,409		865		1,114		1,001
Total Other Income, Net		1,278		875		827		773

INCOME BEFORE INCOME TAX EXPENSE		3,228		4,004		3,598		5,347
Income tax expense		(1,455)		(1,285)		(2,280)		(2,041)

NET INCOME		1,773		2,719		1,318		3,306

Net loss attributable to the non-controlling interest		83		57		17		285
NET INCOME ATTRIBUTABLE TO THE COMPANY		1,856		2,776		1,335		3,591

NET INCOME	$	1,773	$	2,719	$	1,318	$	3,306

Foreign currency translation (loss) gain		(2,487)		(6,091)		1,485		(2,068)
Unrealized loss of derivative contracts designated as cash flow hedge		-		(469)		-		(469)
COMPREHENSIVE INCOME (LOSS)		(714)		(3,841)		2,803		769

Comprehensive (loss)income attributable to the non- controlling interest		(48)		(13)		52		309
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	(762)	$	(3,854)	$	2,855	$	1,078

EARNINGS PER SHARE ATTRIBUTABLE TO THE COMPANY'S STOCKHOLDERS
Basic and diluted	$	0.13	$	0.19	$	0.09	$	0.24
Weighted average number of shares outstanding Basic and diluted		14,800,140		14,795,992		14,800,140		14,795,992

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 AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (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		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 issued for compensation		1,942		0.004		8		-		-		-		-		8		-		8
Net income (loss)		-		-		-		(521)		-		-		-		(521)		66		(455)
Net cash received from related party under counter guarantee agreement		-		-		-		-		-		-		1,101		1,101		-		1,101
Foreign currency translation gain												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
Net income (loss)		-		-		-		1,856		-		-				1,856		(83)		1,773
Net cash received from related party under counter guarantee agreement		-		-		-		-		-				1,390		1,390		-		1,390
Foreign currency translation loss		-		-		-		-		-		(2,487)				(2,487)		34		(2,453)
Balance at June 30, 2019		14,800,140	$	15	$	3,635	$	107,249	$	19,083	$	(2,093)	$	(7,863)	$	120,026		(1,500)	$	118,526

					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, 2018		14,795,992	$	15	$	3,620	$	95,195	$	17,794	$	2,585	$	(15,449)	$	103,760		(1,062)	$	102,698

Net income (loss)		-		-		-		815		-		-		-		815		(228)		587
Net cash paid to related party under counter guarantee agreement		-		-		-		-		-		-		(8,480)		(8,480)		-		(8,480)
Foreign currency translation gain(loss)												4,023		-		4,023		(94)		3,929
Balance at March 31, 2018		14,795,992		15		3,620		96,010		17,794		6,608		(23,929)		100,118		(1,384)		98,734
Net income (loss)		-		-		-		2,776		-		-		-		2,776		(58)		2,718
Net cash received from related party under counter guarantee agreement		-		-		-		-		-		-		2,340		2,340		-		2,340
Foreign currency translation loss		-		-		-		-		-		(6,656)		-		(6,656)		123		(6,533)
Balance at June 30, 2018		14,795,992	$	15	$	3,620	$	98,786	$	17,794	$	(48)	$	(21,589)	$	98,578		(1,319)	$	97,259

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 SIX MONTHS ENDED JUNE 30, 2019 AND 2018 (UNAUDITED)

	2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,318	$	3,306
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		4,491		4,903
Loss from sale of property and equipment		53		6
Provision of bad debt allowance		682		-
Provision for obsolete inventories		1,824		1,626
Deferred income tax		(1,461)		(843)
Stock-based compensation		8		-
Changes in operating assets and liabilities
Accounts receivable		21,793		20,150
Inventories		1,145		(10,873)
Value added tax receivable		504		681
Other receivables and prepaid expenses		3,502		(8,942)
Advances on inventory purchases		(2,353)		(7,145)
Amounts due from related parties		(129)		1,117
Accounts payable		(25,954)		(14,296)
Accounts payable and other payables- related parties		58		(1,485)
Other payables and accrued liabilities		(10,789)		8,006
Value added and other taxes payable		(4,684)		(5,924)
Income tax payable		207		(942)
Net cash used in operating activities		(9,785)		(10,655)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(4,082)		(6,295)
Net cash used in investing activities		(4,082)		(6,295)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		16,320		28,111
Repayment of bank loans		(19,904)		(30,533)
Repayment of loans from related party		8,149		2,556
Advances to related party		(5,454)		(8,734)
Net cash used in financing activities		(889)		(8,600)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		2,270		(887)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(12,486)		(26,437)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		47,012		62,876

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	34,526	$	36,439

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
Interest	$	771	$	924
Income taxes	$	2,436	$	3,016