Ever-Glory Reports Second Quarter 2022 Financial Results

2022-08-12 17:00 3808

NEW YORK, Aug. 12, 2022 /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, 2022.

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 2022, our retail brands continue to attract new customers and retain existing customers by focusing on design, quality and value," Mr. Kang continued. "We operated a nationwide network of 816 stores as of June 30, 2022."

"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 will 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," Mr. Kang concluded.

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 confidence 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 2022 Financial Results

Total sales for the second quarter of 2022 were $63.8 million, an increase of 5.4% from $60.6 million in the second quarter of 2021. This increase was primarily attributable to a 60.5% ($16.0 million) increase in our wholesale business, offset by a 37.3% ($12.7 million) decrease in our retail business.

Sales for the Company's branded fashion apparel retail division decreased by 37.3% to $21.4 million for the second quarter of 2022, compared to $34.1 million for the second quarter of 2021. This decrease was primarily due to outbreak of COVID-19. The outbreak in China resulted in the reduction of customer traffic and temporary closures of shopping malls as mandated by the provincial governments in various provinces of China, which had adversely affected our retail business with a decline in sales.

Sales for the Company's wholesale division increased by 60.5% to $42.4 million for the second quarter of 2022, compared to $26.4 million for the second quarter of 2021. This increase was primarily attributable to an increase in sales in Mainland China, Hong Kong, the United Kingdom, Europe and the United States, partially offset by a decrease in sales in Japan.

Total gross profit for the second quarter of 2022 increased by 11.0% to $20.4 million, compared to $18.4 million for the second quarter of 2021. Total gross margin for the second quarter of 2022 increased to 32.0% from 30.4% for the second quarter of 2021.

Gross profit for the retail business decreased by 16.0% to $12.4 million for the second quarter of 2022, compared to $14.8 million for the second quarter of 2021. Gross margin for the second quarter of 2022 was 58.1% compared to 43.4% for the second quarter of 2021.

Gross profit for the wholesale business increased by 122.1% to $8.0 million for the second quarter of 2022, compared to $3.6 million for the second quarter of 2021. Gross margin for the second quarter of 2022 increased to 18.8% from 13.6% for the second quarter of 2021.

Selling expenses for the second quarter of 2022 decreased by 19.5% to $11.7 million, or 18.3% of total sales, compared to $14.5 million, or 24.0% of total sales for the second quarter of 2021. The decrease was attributable to the decreased average salaries and decreased business trips.

General and administrative expenses for the second quarter of 2022 decreased by 27.9% to $5.5 million, or 8.7% of total sales, compared to $7.7 million, or 12.7% of total sales for the second quarter of 2021. The decrease was attributable to the decreased publicity expense and the depreciation of RMB.

Income (loss) from Operations was $3.2 million for the second quarter of 2022, compared to ($3.8 million) for the second quarter of 2021.

Net income (loss) for the second quarter of 2022 was $2.4 million compared to ($1.8 million) for the second quarter of 2021. Basic and diluted loss per share were $0.16 for the second quarter of 2022 compared to ($0.12) for the second quarter of 2021.

Balance Sheet

As of June 30, 2022, Ever-Glory had approximately $32.9 million of cash and cash equivalents, compared to approximately $56.6 million as of December 31, 2021. Ever-Glory had working capital of approximately $51.3 million as of June 30, 2022, and outstanding bank loans of approximately $65.6 million as of June 30, 2022.

Conference Call

The Company will hold a conference call at 8:00 a.m. Eastern Time on August 12, 2022(8:00 p.m. Beijing Time on August 12, 2022). Listeners can access the conference call by dialing +1-877-704-4453 or +1-201-389-0920 and using the access code 13732317. 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 call will be available from 11:00 a.m. Eastern Time on August 12 through 11:59 p.m. Eastern Time on August 19 by calling +1-844-512-2921 or +1-412-317-6671 with pin number 13732317.

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", "idole" and "Jizhu". 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 (Unaudited) (In thousands of U.S. Dollars, except share and per share data or otherwise stated)

	June 30, 2022		December 31, 2021
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	32,880	$	56,573
Restricted cash		42,316		40,768
Trading securities		2,550		3,251
Accounts receivable, net		60,039		69,859
Inventories		66,003		63,841
Advances on inventory purchases		4,683		8,179
Value added tax receivable		2,072		1,693
Other receivables and prepaid expenses		6,118		6,345
Amounts due from related parties		1,387		220
Total Current Assets		218,048		250,729

NON-CURRENT ASSETS
Equity security investment		5,416		5,682
Intangible assets, net		4,494		4,794
Property and equipment, net		33,621		36,340
Operating lease right-of-use assets		40,131		50,077
Deferred tax assets		-		899
Other non-current assets		2,980		784
Total Non-Current Assets		86,642		98,576
TOTAL ASSETS	$	304,690	$	349,305

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Bank loans	$	65,560	$	68,992
Accounts payable		52,362		67,930
Accounts payable and other payables – related parties		1,752		1,332
Other payables and accrued liabilities		13,833		18,531
Value added and other taxes payable		425		999
Income tax payable		558		334
Current operating lease liabilities		32,229		41,633
Total Current Liabilities		166,719		199,751

Deferred tax liabilities		243		-
Non-current operating lease liabilities		8,070		8,596
TOTAL LIABILITIES		175,032		208,347

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY
Common stock ($0.001 par value, authorized 50,000,000 shares, 14,814,354 and 14,652,274 issued and outstanding as of June 30, 2022, respectively, 14,812,312 and 14,664,978 issued and outstanding as of December 31, 2021, respectively)		15		15
Additional paid-in capital		3,665		3,660
Retained earnings		105,521		108,210
Statutory reserve		21,245		21,245
Treasury stock (at cost,162,080 and 147,334 shares at June 30, 2022 and December 31, 2021, respectively)		(400)		(363)
Accumulated other comprehensive (loss) income		(388)		8,191

Total Equity		129,658		140,958
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	304,690	$	349,305

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) (In thousands of U.S. Dollars, except share and per share data or otherwise stated)

	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
NET SALES	$	63,812	$	60,555	$	128,585	$	131,369
COST OF SALES		43,403		42,163		90,804		90,541

GROSS PROFIT		20,409		18,392		37,781		40,828

OPERATING EXPENSES
Selling expenses		11,675		14,503		25,361		30,052
General and administrative expenses		5,521		7,662		12,515		15,513
Total Operating Expenses		17,196		22,165		37,876		45,565

INCOME (LOSS) FROM OPERATIONS		3,213		(3,773)		(95)		(4,737)

OTHER INCOME (EXPENSES)
Interest income		91		527		277		752
Interest expense		(321)		(200)		(934)		(692)
Government subsidy		202		243		205		502
Gain (loss) from changes in fair values of investments		90		2,041		(672)		2,275
Other income		51		477		568		774
Total Other Income (Expenses), Net		113		3,088		(556)		3,611

INCOME (LOSS) BEFORE INCOME TAX EXPENSE		3,326		(685)		(651)		(1,126)

Income tax expense		(926)		(1,086)		(2,038)		(1,815)

NET INCOME (LOSS)	$	2,400	$	(1,771)	$	(2,689)	$	(2,941)

Foreign currency translation (loss) gain		(7,743)		3,434		(8,579)		2,083

COMPREHENSIVE (LOSS) INCOME	$	(5,343)		1,663	$	(11,268)	$	(858)

EARNINGS (LOSS) PER SHARE
Basic and diluted	$	0.16	$	(0.12)	$	(0.18)	$	(0.20)
Weighted average number of shares outstanding basic and diluted		14,814,354		14,810,660		14,814,072		14,810,330

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (In thousands of U.S. Dollars, except share and per share data or otherwise stated)

	Common Stock				Additional				Retained Earnings				Accumulated other		Amounts due from
	Shares		Amount		paid-in capital		Treasury stock		Unrestricted		Statutory reserve		comprehensive income (loss)		related party		Total equity
Balance at January 1, 2022		14,812,312	$	15	$	3,660	$	(363)	$	108,210	$	21,245	$	8,191	$	-	$	140,958
Stock issued for compensation		2,042		-		5		-		-		-		-		-		5
Net loss		-		-		-		-		(5,089)		-		-		-		(5,089)
Repurchase of 14,746 shares of common stock		-		-		-		(37)				-		-		-		(37)
Foreign currency translation loss														(836)				(836)
Balance at March 31, 2022		14,814,354	$	15	$	3,665	$	(400)	$	103,121	$	21,245	$	7,355	$	-	$	135,001
Net income		-		-		-		-		2,400		-		-		-		2,400
Foreign currency translation loss														(7,743)				(7,743)
Balance at June 30, 2022		14,814,354	$	15	$	3,665	$	(400)	$	105,521	$	21,245	$	(388)		-	$	129,658


	Common Stock				Additional				Retained Earnings				Accumulated other		Amounts due from
	Shares		Amount		paid-in capital		Treasury Stock		Unrestricted		Statutory reserve		Comprehensive income		related party		Total equity
Balance at January 1, 2021		14,809,160	$	15	$	3,650	$	-	$	109,171	$	20,376	$	4,590	$	(3,353)	$	134,449
Stock issued for compensation		1,500		-		5		-		-		-		-		-		5
Net loss		-		-		-		-		(1,170)		-		-		-		(1,170)
Net cash received from related party under counter guarantee agreement		-		-		-		-		-		-		-		379		379
Foreign currency translation adjustment														(1,352)				(1,352)
Balance at March 31, 2021		14,810,660	$	15	$	3,655	$	-	$	108,001	$	20,376	$	3,238	$	(2,974)	$	132,311
Net loss		-		-		-		-		(1,771)		-		-		-		(1,771)
Transfer to reserve		-		-		-		-		-		-		-		-		-
Net cash received from related party under counter guarantee agreement		-		-		-		-		-		-		-		386		386
Foreign currency translation adjustment														3,434				3,434
Balance at June 30, 2021		14,810,660	$	15	$	3,655	$	-	$	106,230	$	20,376	$	6,672	$	(2,588)	$	134,360

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands of U.S. Dollars, except share and per share data or otherwise stated)

	Six Months Ended
	June 30, 2022		June 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,689)		(2,941)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		3,880		3,212
Loss from sale of property and equipment		96		463
Provision of bad debt allowance		677		652
Provision for obsolete inventories		2,611		5,530
Changes in fair value of trading securities		689		(321)
Changes in fair value of investments		(17)		(1,954)
Deferred income tax		1,136		604
Stock-based compensation		5		5
Changes in operating assets and liabilities
Accounts receivable		6,649		13,433
Inventories		(7,564)		(11,346)
Value added tax receivable		(479)		(562)
Other receivables and prepaid expenses		(122)		(632)
Advances on inventory purchases		3,197		2,928
Amounts due from related parties		(1,176)		546
Accounts payable		(11,734)		(17,753)
Accounts payable and other payables- related parties		494		(1,763)
Other payables and accrued liabilities		(5,066)		1,201
Value added and other taxes payable		(543)		(1,209)
Income tax payable		250		(581)
Net cash used in operating activities		(9,706)		(10,488)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment and intangible asset		(2,940)		(4,452)
Net proceeds from sale (purchase) of trading securities		11		(1,468)
Investment payment		(2,313)		-
Net cash used in investing activities		(5,242)		(5,920)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		24,672		12,841
Repayment of bank loans		(24,672)		(13,905)
Repurchase of common stock		(37)		-
Net collection of amounts due from related party (equity)		-		798
Net cash used in provided by financing activities		(37)		(266)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(7,160)		1,639

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(22,145)		(15,035)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		97,341		121,723

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	75,196	$	106,688

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

Cash and Cash Equivalents		32,880		63,963
Restricted cash		42,316		42,725
	$	75,196	$	106,688

Cash paid during the period for:
Interest	$	934	$	692
Income taxes	$	2,038	$	1,815