Ever-Glory Reports Third Quarter 2019 Financial Results

2019-11-13 18:00 6247

NANJING, China, Nov. 13, 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 third quarter ended September 30, 2019.

Mr. Yihua Kang, Chairman, President and Chief Executive Officer of Ever-Glory, said, "During the third 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 third 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 89 stores during 2019, we operated a nationwide network of 1,157 stores as of September 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 third 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."

Third Quarter 2019 Financial Results

Total sales for the third quarter of 2019 were $113.3 million, a decrease of 9.7% from $125.5 million in the third quarter of 2018. This decrease was primarily driven by a 20.6% decrease in our retail business and a 4.6% decrease in wholesale business.

Sales for the Company's branded fashion apparel retail division decreased by 20.6% to $31.6 million for the third quarter of 2019, compared with $39.8 million for the third quarter of 2018. This decrease was primarily due to a decrease in the amounts of stores and same-store sales. The Company had 1,157 retail stores as of September 30, 2019, compared with 1,396 retail stores as of September 30, 2018.

Sales for the Company's wholesale division decreased by 4.6% to $81.7 million for the third quarter of 2019, compared with $85.7 million for the third quarter of 2018. This decrease was primarily attributable to a decrease in sales in Mainland China, Hong Kong, Germany and Europe-Other partially offset by an increase in sales in United Kingdom, Japan and United States.

Total gross profit for the third quarter of 2019 decreased by 19.0% to $24.4 million, compared with $30.1 million for the third quarter of 2018. Total gross margin decreased to 21.5% from 24.0% for the third quarter of 2018.

Gross profit for the retail business decreased by 28.9% to $14.1 million for the third quarter of 2019, compared with $19.8 million for the third quarter of 2018. Gross margin was 44.7%, compared to 49.8% for the third quarter of 2018.

Gross profit for the wholesale business increased by 0.2% to $10.3 million for the third quarter of 2019, compared with $10.2 million for the third quarter of 2018. Gross margin increased to 12.6% from 12.0% for the third quarter of 2018.

Selling expenses for the third quarter of 2019 increased by 2.0% to $17.9 million, or 15.8% of total sales, compared with $17.6 million, or 14.6% of total sales for the third quarter of 2018. The increase was attributable to the marketing expenses associated with the promotion of the retail brand.

General and administrative expenses for the third quarter of 2019 decreased by 11.0% to $7.6 million, or 6.7% of total sales, compared with $8.5 million, or 7.1% of total sales for the third quarter of 2018. The decrease was mainly attributable to the decline in number of stores.

Income (Loss) from operations for the third quarter of 2019 decreased by 129.6% to ($1.2) million compared with $4.0 million for the third quarter of 2018.

Net income (Loss) attributable to the Company for the third quarter of 2019 was ($1.1) million compared with $3.3 million for the third quarter of 2018. Basic and diluted earnings (loss) per share were ($0.07) for the third quarter of 2019 compared with $0.22 for the third quarter of 2018.

Balance Sheet

As of September 30, 2019, Ever-Glory had approximately $45.8 million of cash and cash equivalents, compared with approximately $47.0 million as of December 31, 2018. Ever-Glory had working capital of approximately $54.0 million as of September 30, 2019, and outstanding bank loans of approximately $35.5 million as of September 30, 2019.

Conference Call

The Company will hold a conference call at 7:00 a.m. Eastern Time on November 13, 2019 (8:00 p.m. Beijing Time on November 13, 2019). Listeners can access the conference call by dialing +1-866-548-4713 or + 1-323-794-2093 and using the access code 2080253. 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 November 13 through 11:59 p.m. Eastern Time on November 20, by dialing +1-844-512-2921 or +1-412-317-6671 and using the access code 2080253.

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

	2019		2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	45,837	$	47,012
Accounts receivable, net		83,863		86,527
Inventories		65,288		65,929
Advances on inventory purchases		9,358		6,420
Value added tax receivable		3,799		2,580
Other receivables and prepaid expenses		7,563		10,204
Amounts due from related parties		123		192
Total Current Assets		215,831		218,864

NONCURRENT ASSETS
Intangible assets, net		4,711		4,962
Property and equipment, net		27,615		28,445
Operating lease right-of-use assets		35,226		-
Deferred tax assets		1,862		-
Total Non-Current Assets		69,414		33,407
TOTAL ASSETS	$	285,245	$	252,271

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Bank loans	$	35,492	$	29,497
Accounts payable		77,172		78,412
Accounts payable and other payables – related parties		4,355		4,756
Other payables and accrued liabilities		15,230		21,958
Value added and other taxes payable		530		2,569
Income tax payable		2,249		1,569
Current operating lease liabilities		26,757		-
Total Current Liabilities		161,785		138,761

NONCURRENT LIABILITIES
Deferred tax liabilities		-		354
Non-current operating lease liabilities		8,504		-
TOTAL LIABILITIES		170,289		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, 14,801,770 and 14,798,198 shares issued and outstanding As of September 30, 2019 and December 31, 2018, respectively)		15		15
Additional paid-in capital		3,640		3,627
Retained earnings		106,173		105,914
Statutory reserve		19,083		19,083
Accumulated other comprehensive income		(5,822)		(3,578)
Amounts due from related party		(6,648)		(10,354)
Total equity attributable to stockholders of the Company		116,441		114,707
Noncontrolling interest		(1,485)		(1,551)
Total Equity		114,956		113,156
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	285,245	$	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 NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED)

	Three months ended				Nine months ended
	September 30,				September 30,
	2019		2018		2019		2018
NET SALES	$	113,326	$	125,480	$	278,598	$	306,806
COST OF SALES		88,967		95,419		195,895		210,858

GROSS PROFIT		24,359		30,061		82,703		95,948

OPERATING EXPENSES
Selling expenses		17,944		17,588		58,651		62,405
General and administrative expenses		7,584		8,519		22,450		25,015
Total Operating Expenses		25,528		26,107		81,101		87,420

(LOSS)INCOME FROM OPERATIONS		(1,169)		3,954		1,602		8,528

OTHER INCOME (EXPENSES)
Interest income		215		307		699		1,003
Interest expense		(265)		(278)		(1,036)		(1,202)
Other income		502		101		1,616		1,102
Total Other Income, Net		452		130		1,279		903

(LOSS) INCOME BEFORE INCOME TAX EXPENSE		(717)		4,084		2,881		9,431
Income tax expense		(387)		(908)		(2,667)		(2,949)

NET (LOSS) INCOME		(1,104)		3,176		214		6,482

Net loss attributable to the non-controlling interest		28		140		46		425
NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY		(1,076)		3,316		260		6,907

NET (LOSS) INCOME	$	(1,104)	$	3,176	$	214	$	6,482

Foreign currency translation (loss) gain		(3,729)		(3,674)		(2,244)		(5,742)
Unrealized loss of derivative contracts designated as cash flow hedge		-		(614)		-		(1,083)
COMPREHENSIVE (LOSS) INCOME		(4,833)		(1,112)		(2,030)		(343)

Comprehensive (loss) income attributable to the non-controlling interest		15		57		67		366
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY	$	(4,818)	$	(1,055)	$	(1,963)	$	23

EARNINGS PER SHARE ATTRIBUTABLE TO THE COMPANY'S STOCKHOLDERS
Basic and diluted	$	(0.07)	$	0.22	$	0.02	$	0.47
Weighted average number of shares outstanding Basic and diluted		14,801,770		14,798,198		14,801,770		14,796,527

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 NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED)

							Retained Earnings								Total equity
	Common Stock				Additional paid-in				Statutory		Accumulated other Comprehensive		Amounts due from related		attributable to stockholders of the		Non- 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
Stock issued for compensation		1,630		0.002		5										5				5

Net income (loss)								(1,076)								(1,076)		(28)		(1,104)
Net cash advanced to related party under counter guarantee agreement														1,215		1,215				1,215
Foreign currency translation loss												(3,729)				(3,729)		43		(3,686)
Balance at September 30, 2019		14,801,770	$	15	$	3,640	$	106,173	$	19,083	$	(5,822)	$	(6,648)	$	116,441		(1,485)	$	114,956


							Retained Earnings				Accumulated		Amounts		Total equity attributable
	Common Stock				Additional paid-in				Statutory		other Comprehensive		due from related		to stockholders of the		Non- 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		-		-		-		-		-		-		(8,479)		(8,479)		-		(8,479)
Foreign currency translation gain (loss)												4,023		-		4,023		(42)		3,981
Balance at March 31, 2018		14,795,992		15		3,620		96,010		17,794		6,608		(23,928)		100,119		(1,332)		98,787
Net income (loss)								2,776								2,776		(57)		2,719
Net cash advanced to related party under counter guarantee agreement														2,339		2,339				2,339
Foreign currency translation loss												(6,656)				(6,656)		70		(6,586)
Balance at June 30, 2018		14,795,992	$	15	$	3,620	$	98,786	$	17,794	$	(48)	$	(21,589)	$	98,578		(1,319)	$	97,259
Stock issued for compensation		2,206				7										7				7
Net income (loss)								3,316								3,316		(140)		3,176
Net cash advanced to related party under counter guarantee agreement														1,337		1,337				1,337
Foreign currency translation loss												(4,192)				(4,192)		31		(4,161)
Balance at September 30, 2018		14,798,198	$	15	$	3,627	$	102,102	$	17,794	$	(4,240)	$	(20,252)	$	99,046		(1,428)	$	97,618

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 NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED)

	2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	214	$	6,482
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		6,824		6,523
Loss from sale of property and equipment		16		102
Provision of bad debt allowance		820		-
Provision for obsolete inventories		3,846		2,697
Deferred income tax		(2,388)		(1,706)
Stock-based compensation		12		7
Changes in operating assets and liabilities
Accounts receivable		312		(15,012)
Inventories		(4,979)		(32,831)
Value added tax receivable		(281)		430
Other receivables and prepaid expenses		966		(19,792)
Advances on inventory purchases		(3,214)		(8,199)
Amounts due from related parties		16		4
Accounts payable		6,253		29,547
Accounts payable and other payables- related parties		(692)		153
Other payables and accrued liabilities		(10,594)		14,054
Value added and other taxes payable		(4,120)		(3,892)
Income tax payable		746		311
Net cash used in operating activities		(6,243)		(21,122)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(6,555)		(9,144)
Net cash used in investing activities		(6,555)		(9,144)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		42,570		39,872
Repayment of bank loans		(35,620)		(40,225)
Repayment of loans from related party		10,692		3,232
Advances to related party		(6,755)		(8,183)
Net cash used in financing activities		10,887		(5,304)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(650)		(2,827)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(2,561)		(38,397)

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	44,451	$	24,479
RESTRICTED CASH	$	1,386	$	-

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
Interest	$	1,036	$	1,202
Income taxes	$	4,196	$	4,427