Ever-Glory Reports Second Quarter 2020 Financial Results

Ever-Glory International Group, Inc.

2020-08-14 17:30 6156

NANJING, China, Aug. 14, 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 second quarter ended June 30, 2020.

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 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 9 stores during 2020, we operated a nationwide network of 935 stores as of June 30, 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 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 2020 Financial Results

Total sales for the second quarter of 2020 were $50.1 million, a decrease of 35.2% from $77.3 million in the second quarter of 2019. This decrease was primarily driven by a 30.0% decrease in our retail business and a 40.8% decrease in wholesale business.

Sales for the Company's branded fashion apparel retail division decreased by 30.0% to $28.1 million for the second quarter of 2020, compared with $40.1 million for the second quarter of 2019. This decrease was primarily due to a decrease in the amounts of stores and same-store sales. The Company had 935 retail stores as of June 30, 2020, compared with 1,235 retail stores as of June 30, 2019.

Sales for the Company's wholesale division decreased by 40.8% to $22.0 million for the second quarter of 2020, compared with $37.3 million for the second quarter of 2019. This decrease was primarily attributable to a decrease in sales in Hong Kong, Germany, Europe-Other, Mainland China, United Kingdom and United States, partially offset by an increase in sales in Japan.

Total gross profit for the second quarter of 2020 decreased by 50.2% to $14.4 million, compared with $29.0 million for the second quarter of 2019. Total gross margin decreased to 28.8% from 37.5% for the second quarter of 2019.

Gross profit for the retail business decreased by 56.1% to $10.1 million for the second quarter of 2020, compared with $23.0 million for the second quarter of 2019. Gross margin was 36.2%, compared to 57.3% for the second quarter of 2019.

Gross profit for the wholesale business decreased by 27.5% to $4.4 million for the second quarter of 2020, compared with $6.0 million for the second quarter of 2019. Gross margin increased to 19.7% from 16.1% for the second quarter of 2019.

Selling expenses for the second quarter of 2020 decreased by 35.9% to $12.6 million, or 25.2% of total sales, compared with $19.7 million, or 25.5% of total sales for the second quarter of 2019. 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 2020 decreased by 18.6% to $6.0 million, or 11.9% of total sales, compared with $7.3 million, or 9.5% of total sales for the second quarter of 2019. The decrease was attributable to the decline in number of stores.

(Loss) Income from operations for the second quarter of 2020 decreased by 312.8% to ($4.2 million) compared with $2.0 million for the second quarter of 2019.

Net (loss) income attributable to the Company for the second quarter of 2020 was ($3.8 million) compared with $1.9 million for the second quarter of 2019. Basic and diluted (loss) earnings per share were ($0.26) for the second quarter of 2020 compared with $0.13 for the second quarter of 2019.

Balance Sheet

As of June 30, 2020, Ever-Glory had approximately $59.2 million of cash and cash equivalents, compared with approximately $48.6 million as of December 31, 2019. Ever-Glory had working capital of approximately $54.4 million as of June 30, 2020, and outstanding bank loans of approximately $40.3 million as of June 30, 2020.

Conference Call

The Company will hold a conference call at 8:00 a.m. Eastern Time on August 14, 2020 (8:00 p.m. Beijing Time on August 14, 2020). Listeners can access the conference call by dialing +1-800-263-0877 or + 1-646-828-8143 and using the access code 4455706. 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 4455706.

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 JUNE 30, 2020 AND DECEMBER 31, 2019 (UNAUDITED)

	2020		2019
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	59,238	$	48,551
Restrict cash		17,716		2,204
Trading securities		825		-
Accounts receivable, net		45,766		78,053
Inventories		51,254		67,355
Advances on inventory purchases		5,726		9,681
Value added tax receivable		1,340		2,495
Other receivables and prepaid expenses		4,328		5,293
Amounts due from related parties		329		123
Total Current Assets		186,522		213,755

NONCURRENT ASSETS
Intangible assets, net		4,499		4,729
Property and equipment, net		25,964		28,812
Operating lease right-of-use assets		34,496		53,379
Deferred tax assets		807		996
Total Non-Current Assets		65,766		87,916
TOTAL ASSETS	$	252,288	$	301,671

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Bank loans	$	40,271	$	29,931
Accounts payable		51,169		72,418
Accounts payable and other payables – related parties		4,050		4,811
Other payables and accrued liabilities		10,118		19,137
Value added and other taxes payable		-		1,657
Income tax payable		222		1,142
Current operating lease liabilities		26,309		44,888
Total Current Liabilities		132,139		173,984

NONCURRENT LIABILITIES
Non-current operating lease liabilities		8,256		8,537
TOTAL LIABILITIES		140,395		182,521

COMMITMENTS AND CONTINGENCIES (Note 8)

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 June 30, 2020 and December 31, 2019, respectively)		15		15
Additional paid-in capital		3,645		3,640
Retained earnings		99,833		106,328
Statutory reserve		19,939		19,939
Accumulated other comprehensive (loss)		(6,031)		(4,330)
Amounts due from related party		(3,996)		(4,932)
Total equity attributable to stockholders of the Company		113,405		120,660
Noncontrolling interest		(1,512)		(1,510)
Total Equity		111,893		119,150
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	252,288	$	301,671

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) 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, 2020 AND 2019 (UNAUDITED)

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
NET SALES	$	50,086	$	77,316	$	108,441	$	165,272
COST OF SALES		35,641		48,330		77,958		106,928

GROSS PROFIT		14,445		28,986		30,483		58,344

OPERATING EXPENSES
Selling expenses		12,626		19,699		26,105		40,706
General and administrative expenses		5,971		7,337		11,755		14,867
Total Operating Expenses		18,597		27,036		37,860		55,573

(LOSS) INCOME FROM OPERATIONS		(4,152)		1,950		(7,377)		2,771

OTHER INCOME (EXPENSES)
Interest income		339		277		616		484
Interest expense		(566)		(408)		(907)		(771)
Other income		845		1,409		1,663		1,114
Total Other Income, Net		618		1,278		1,372		827

(LOSS) INCOME BEFORE INCOME TAX EXPENSE		(3,534)		3,228		(6,005)		3,598
Income tax expense		(266)		(1,455)		(493)		(2,280)

NET (LOSS) INCOME		(3,800)		1,773		(6,498)		1,318

Non-controlling interest		6		83		3		17
NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY		(3,794)		1,856		(6,495)		1,335

NET (LOSS) INCOME	$	(3,800)	$	1,773	$	(6,498)	$	1,318

Foreign currency translation (loss) gain		(263)		(2,453)		(1,700)		1,553
COMPREHENSIVE (LOSS) INCOME		(4,063)		(680)		(8,198)		2,871

Comprehensive loss (income) attributable to the non- controlling interest		8		49		2		(51)
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY	$	(4,055)	$	(631)	$	(8,196)	$	2,820

(LOSS) EARNINGS PER SHARE ATTRIBUTABLE TO THE COMPANY'S STOCKHOLDERS
Basic and diluted	$	(0.26)	$	0.13	$	(0.44)	$	0.09
Weighted average number of shares outstanding Basic and diluted		14,804,832		14,800,140		14,804,595		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 AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)

															Total
															equity
															attributable
					Additional		Retained Earnings				Accumulated other		Amounts due from		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 issued for compensation	3,062		0.003		5		-		-		-		-		5			5
Net income (loss)	-		-		-		(2,701)		-		-		-		(2,701)	3		(2,698)
Net cash received from related party under counter guarantee agreement	-		-		-		-		-		-		785		785	-		785
Foreign currency translation gain (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
Net (loss)							(3,794)								(3,794)	(6)		(3,800)
Net cash received from related party under counter guarantee agreement													151		151			151
Foreign currency translation loss											(261)				(261)	(2)		(263)
Balance at June 30, 2020	14,804,832	$	15	$	3,645	$	99,833	$	19,939	$	(6,031)	$	(3,996)	$	113,405	(1,512)	$	111,893

															Total
															equity
															attributable
							Retained Earnings				Accumulated		Amounts		to
	Common Stock				Additional paid-in				Statutory		other Comprehensive		due from related		stockholders of the	Non- controlling		Total
	Shares		Amount		capital		Unrestricted		reserve		(loss) 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

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, 2020 AND 2019 (UNAUDITED)

	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(6,498)	$	1,318
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		3,597		4,491
Loss from sale of property and equipment		189		53
Provision of bad debt allowance		969		682
Provision for obsolete inventories		3,681		1,824
Deferred income tax		71		(1,461)
Stock-based compensation		3		8
Changes in operating assets and liabilities
Accounts receivable		30,444		21,793
Inventories		11,659		1,145
Value added tax receivable		1,076		504
Other receivables and prepaid expenses		737		3,502
Advances on inventory purchases		3,845		(2,353)
Amounts due from related parties		(214)		(129)
Accounts payable		(22,522)		(25,954)
Accounts payable and other payables- related parties		(466)		58
Other payables and accrued liabilities		(7,027)		(10,789)
Value added and other taxes payable		(1,593)		(4,684)
Income tax payable		(910)		207
Net cash provided (used in) operating activities		17,041		(9,785)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(1,018)		(4,082)
Purchases of trading securities		(825)		-
Net cash used in investing activities		(1,843)		(4,082)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		31,995		16,320
Repayment of bank loans		(21,173)		(19,904)
Repayment of loans from related party		4,027		8,149
Advances to related party		(3,129)		(5,454)
Net cash provided (used in) financing activities		11,720		(889)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(721)		2,270

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		26,197		(12,486)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		50,755		47,012

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	76,952	$	34,526

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

Cash and Cash Equivalents		59,236		47,012
Restricted cash		17,716		-
	$	76,952	$	47,012

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
Interest	$	907	$	771
Income taxes	$	493	$	2,436