Ever-Glory Reports Third Quarter 2021 Financial Results

2021-11-12 17:03 3041

NEW YORK, Nov. 12, 2021 /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, 2021.

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 2021, 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 113 stores during 2021, we operated a nationwide network of 893 stores as of September 30, 2021."

"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," Mr. Kang concluded.

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 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."

Third Quarter 2021 Financial Results

Total sales for the third quarter of 2021 were $94.4 million, an increase of 18.1% from $79.9 million in the third quarter of 2020. This increase was primarily driven by a 38.0% increase in our wholesale business partially offset by a 7.6% decrease in retail business.

Sales for the Company's branded fashion apparel retail division decreased by 7.6% to $32.2 million for the third quarter of 2021, compared with $34.8 million for the third quarter of 2020. This decrease was primarily due to a decrease in the e-commerce sales. The Company operated 893 retail stores as of September 30, 2021, compared with 923 retail stores as of September 30, 2020.

Sales for the Company's wholesale division increased by 38.0% to $62.2 million for the third quarter of 2021, compared with $45.1 million for the third quarter of 2020. This increase was primarily attributable to an increase in sales in Mainland China, Europe-Other, Japan and United States partially offset by a decrease in sales in Hong Kong and United Kingdom.

Total gross profit for the third quarter of 2021 decreased by 2% to $23.2 million, compared with $23.7 million for the third quarter of 2020. Total gross margin for the third quarter of 2021 decreased to 24.6% from 29.6% for the third quarter of 2020.

Gross profit for the retail business decreased by 10.3% to $13.0 million for the third quarter of 2021, compared with $14.5 million for the third quarter of 2020. Gross margin for the third quarter of 2021 was 40.3% compared to 41.6% for the third quarter of 2020.

Gross profit for the wholesale business increased by 11.2% to $10.2 million for the third quarter of 2021, compared with $9.2 million for the third quarter of 2020. Gross margin for the third quarter of 2021 decreased to 16.4% from 20.4% for the third quarter of 2020.

Selling expenses for the third quarter of 2021 increased by 11.1% to $14.4 million, or 15.3% of total sales, compared with $13.0 million, or 16.3% of total sales for the third quarter of 2020. The increase was attributable to the higher travelling expenses.

General and administrative expenses for the third quarter of 2021 increased by 21.1% to $9.5 million, or 10% of total sales, compared with $7.8 million, or 9.8% of total sales for the third quarter of 2020. The increase was attributable to the increased salaries.

(Loss) Income from operations was ($0.7 million) for the third quarter of 2021, compared to $2.9 million for the third quarter of 2020.

Net loss attributable to the Company for the third quarter of 2021 was ($3.2 million) compared with $2.2 million for the third quarter of 2020. Basic and diluted loss per share were ($0.22) for the third quarter of 2021 compared with $0.15 for the third quarter of 2020.

Balance Sheet

As of September 30, 2021, Ever-Glory had approximately $48.3 million of cash and cash equivalents, compared with approximately $81.9 million as of December 31, 2020. Ever-Glory had working capital of approximately $44.6 million as of September 30, 2021, and outstanding bank loans of approximately $67.8 million as of September 30, 2021.

Conference Call

The Company will hold a conference call at 7:00 a.m. Eastern Time on November 12, 2021(8:00 p.m. Beijing Time on November 12, 2021). Listeners can access the conference call by dialing +1-800-289-0438 or +1-323-794-2423 and using the access code 7678571. 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 10:00 a.m. Eastern Time on November 12 through 11:59 p.m. Eastern Time on November 19 by calling +1-844-512-2921 or +1-412-317-6671 with pin number 7678571.

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

	September 30, 2021		December 31, 2020
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	48,336	$	81,865
Restricted cash		43,176		39,858
Trading securities		3,068		1,792
Accounts receivable, net		61,525		53,285
Inventories		67,275		53,893
Advances on inventory purchases		9,864		10,261
Value added tax receivable		2,484		1,244
Other receivables and prepaid expenses		6,638		5,479
Amounts due from related parties		1,994		567
Total Current Assets		243,360		248,244

NON-CURRENT ASSETS
Equity security investment		5,903		3,932
Intangible assets, net		4,686		4,794
Property and equipment, net		32,747		32,164
Operating lease right-of-use assets		49,002		41,690
Deferred tax assets		265		902
Other non-current assets		771		-
Total Non-Current Assets		93,374		83,482
TOTAL ASSETS	$	337,734	$	331,726

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Bank loans	$	67,848	$	65,919
Accounts payable		73,120		67,762
Accounts payable and other payables – related parties		1,016		3,764
Other payables and accrued liabilities		13,758		16,073
Value added and other taxes payable		554		909
Income tax payable		1,900		1,062
Current operating lease liabilities		40,590		33,481
Total Current Liabilities		198,786		188,970

NON-CURRENT LIABILITIES
Non-current operating lease liabilities		8,549		8,307
TOTAL LIABILITIES		207,335		197,277

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY
Common stock ($0.001 par value, authorized 50,000,000 shares, 14,812,312 and 14,809,160 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively)		15		15
Additional paid-in capital		3,660		3,650
Retained earnings		103,013		109,171
Statutory reserve		20,376		20,376
Accumulated other comprehensive income		5,610		4,590
Amounts due from related party		(2,275)		(3,353)
Total equity		130,399		134,449
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	337,734	$	331,726

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				Nine months ended
	September 30,				September 30,
	2021		2020		2021		2020
NET SALES	$	94,406	$	79,908	$	225,776	$	188,350
COST OF SALES		71,196		56,235		161,738		134,193

GROSS PROFIT		23,210		23,673		64,038		54,157

OPERATING EXPENSES
Selling expenses		14,443		12,996		44,495		39,101
General and administrative expenses		9,467		7,818		24,980		19,574
Total Operating Expenses		23,910		20,814		69,475		58,675

(LOSS) INCOME FROM OPERATIONS		(700)		2,859		(5,437)		(4,518)

OTHER INCOME (EXPENSES)
Interest income		176		313		928		930
Interest expense		(1,218)		(700)		(1,909)		(1,607)
Government subsidy		340		235		842		926
(Loss) Gain from changes in fair values of investments		(123)		(4)		2,151		-
Other income (expenses)		253		343		1,027		1,310
Total Other Income (expenses), Net		(572)		187		3,039		1,559

(LOSS) INCOME BEFORE INCOME TAX EXPENSE		(1,272)		3,046		(2,398)		(2,959)

Income tax expense		(1,945)		(822)		(3,759)		(1,315)

NET (LOSS) INCOME		(3,217)		2,224		(6,157)		(4,274)

Net loss attributable to the non-controlling interest		-		(8)		-		(4)
NET LOSS ATTRIBUTABLE TO THE COMPANY		(3,217)		2,216		(6,157)		(4,278)

NET (LOSS) INCOME	$	(3,217)	$	2,224	$	(6,157)	$	(4,274)

Foreign currency translation gain (loss)		(1,061)		4,664		1,020		2,964
COMPREHENSIVE INCOME (LOSS)		(4,278)		6,888		(5,137)		(1,310)

Comprehensive loss attributable to the non-controlling interest		-		51		-		53
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	(4,278)	$	6,939	$	(5,137)	$	(1,257)

LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY'S STOCKHOLDERS
Basic and diluted	$	(0.22)	$	0.15	$	(0.42)	$	(0.29)
Weighted average number of shares outstanding Basic and diluted		14,811,073		14,808,737		14,810,585		14,805,987

See the accompanying notes to the condensed consolidated financial statements.

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)

					Addition al		Retained Earnings				Accumulated other		Amoun ts due from		Total equity attributable to stockholders
	Common Stock				paid-in				Statutor y		Comprehens ive		related		of the		Total
	Shares		Amou nt		capital		Unrestrict ed		reserve		loss		party		Company		equity
Balance at January 1, 2021		14,809,160	$	15	$	3,650	$	109,171	$	20,376	$	4,590	$	(3,353)	$	134,449	$	134,449
Stock issued for compens ation		1,500		-		5		-		-		-		-		5		5
Net loss		-		-		-		(1,170)		-		-		-		(1,170)		(1,170)
Net cash received from related party under counter guarantee agreement		-		-		-		-		-		-		379		379		379
Foreign currency translation gain (loss)												(1,352)		-		(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		132,311
Net loss								(1,771)								(1,771)		(1,771)
Net cash received from related party under counter guarantee agreement														386		386		386
Foreign currency translation loss												3,434				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	$	134,360
Stock issued for compensatio n		1,652		-		5		-		-		-		-		5		5
Net (Loss) income								(3,217)								(3,217)		(3,217)
Net cash received from related party under counter guarantee agreement														313		313		313
Foreign currency translation gain												(1,062)				(1,062)		(1,062)
Balance at September 3 0, 2021		14,812,312	$	15	$	3,660	$	103,013	$	20,376	$	5,610	$	(2,275)	$	130,399	$	130,399

					Additio nal		Retained Earnings				Accumulate d other		Amount s due from		Total equity attributabl e to stockholde rs		Non-
	Common Stock				paid-in				Statuto ry		Comprehen sive		related		of the		controll ing		Total
	Shares		Amou nt		capital		Unrestric ted		reserv e		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 compen sation		3,062		-		5		-		-		-		-		5				5
Net 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
Stock issued for compensati on		4,328		-		5		-		-		-		-		5				5
Net income								2,216								2,216		8		2,224
Net cash received from related party under counter guarantee agreement														566		566		-		566
Foreign currency translation gain												4,723				4,723		(59)		4,664
Balance at September 30, 2020		14,809,160	$	15	$	3,650	$	102,049	$	19,939	$	(1,308)	$	(3,430)	$	120,915		(1,563)	$	119,352

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)

	Nine Months Ended
	September 30, 2021		September 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(6,157)	$	(4,274)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		4,384		4,114
Loss from sale of property and equipment		590		283
Provision of bad debt allowance		676		683
Write off obsolete inventories		7,595		5,786
Changes in fair value of investment		(2,151)		13
Deferred income tax		644		(165)
Stock-based compensation		10		10
Changes in operating assets and liabilities
Accounts receivable		(8,614)		15,571
Inventories		(20,702)		16,135
Value added tax receivable		(1,235)		(577)
Other receivables and prepaid expenses		(1,096)		50
Advances on inventory purchases		586		2,461
Amounts due from related parties		(1,514)		(848)
Accounts payable		5,930		(7,842)
Accounts payable and other payables- related parties		(3,204)		(1,112)
Other payables and accrued liabilities		(3,332)		(6,093)
Value added and other taxes payable		(360)		467
Income tax payable		831		(64)
Net cash (used in) provided by operating activities		(27,119)		24,598

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(5,109)		(2,769)
Net (purchase) sale of trading securities		(1,077)		(901)
Investment payment		(773)		(2,860)
Net cash (used in) investing activities		(6,959)		(6,530)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		56,110		66,599
Repayment of bank loans		(54,565)		(49,278)
Net collection (advance) of amounts due from related party (equity)		1,630		1,618
Net cash used in (provided by) financing activities		3,175		18,939

EFFECT OF EXCHANGE RATE CHANGES ON CASH		693		2,740

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(30,211)		39,747

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		121,723		50,755

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	91,512	$	90,502

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

Cash and Cash Equivalents		48,336		69,950
Restricted cash		43,176		20,552
	$	91,512	$	90,502

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	1,909	$	1,607
Income taxes	$	2,272	$	1,455