Ever-Glory Reports Third Quarter 2022 Financial Results

2022-11-14 17:30 2159

NANJING, China, Nov. 14, 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 third quarter ended September 30, 2022.

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 2022, 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 29 stores during 2022, we operated a nationwide network of 774 stores as of September 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'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 2022 Financial Results

Total sales for the third quarter of 2022 were $106.4 million, an increase of 12.7% from $94.4 million in the third quarter of 2021. This increase was primarily driven by a 33.0% increase in our wholesale business, partially offset by a 26.4% decrease in retail business.

Sales for the Company's wholesale division increased by 33.0% to $82.7 million for the third quarter of 2022, compared with $62.2 million for the third quarter of 2021. This increase was primarily attributable to increased sales in Mainland China, Hong Kong, the United Kingdom, and other European markets partially offset for decreased sales in Japan and the United States.

Sales for the Company's branded fashion apparel retail division decreased by 26.4% to $23.7 million for the third quarter of 2022, compared with $32.2 million for the third quarter of 2021. This decrease was primarily due to a decrease in same-store sales. The Company operated 774 retail stores as of September 30, 2022, compared with 893 retail stores as of September 30, 2021,.

Total gross profit for the third quarter of 2022 decreased by 30.9% to $16.0 million, compared with $23.2 million for the third quarter of 2021. Total gross margin for the third quarter of 2022 decreased to 15.1% from 24.6% for the third quarter of 2021.

Gross profit for the wholesale business increased by 2.4% to $10.5 million for the third quarter of 2022, compared with $10.2 million for the third quarter of 2021. Gross margin for the third quarter of 2022 decreased to 12.6% from 16.4% for the third quarter of 2021.

Gross profit for the retail business decreased by 57.0% to $6.0 million for the third quarter of 2022, compared with $13.0 million for the third quarter of 2021. Gross margin for the third quarter of 2022 was 23.6% compared to 40.3% for the third quarter of 2021.

Selling expenses for the third quarter of 2022 decreased by 11.4% to $12.8 million, or 12.0% of total sales, compared with $14.4 million, or 15.3% of total sales for the third quarter of 2020. The decrease was attributable to the decreased average salaries and decreased business trips.

General and administrative expenses for the third quarter of 2022 decreased by 1.7% to $9.3 million, or 8.7% of total sales, compared with $9.5 million, or 10.0% of total sales for the third quarter of 2021. The decrease was attributable to the decreased publicity expense and the depreciation of RMB.

Loss from operations was $6.1 million for the third quarter of 2022, compared to $0.7 million for the third quarter of 2021.

Balance Sheet

As of September 30, 2022, Ever-Glory had approximately $32.2 million of cash and cash equivalents, compared with approximately $56.6 million as of December 31, 2021. Ever-Glory had working capital of approximately $41.6 million as of September 30, 2022, and outstanding bank loans of approximately $63.4 million as of September 30, 2022.

Conference Call

The Company will hold a conference call at 6:00 a.m. Eastern Time on November 14, 2022(7:00 p.m. Beijing Time on November 14, 2022). Listeners can access the conference call by dialing +1-877-704-4453 or +1-201-389-0920 and using the access code 13734457. 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 9:00 a.m. Eastern Time on November 14 through 11:59 p.m. Eastern Time on November 21 by calling +1-844-512-2921 or +1-412-317-6671 with pin number 13734457.

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, 2022		December 31, 2021
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	32,177	$	56,573
Restricted cash		39,706		40,768
Trading securities		2,189		3,251
Accounts receivable, net		79,875		69,859
Inventories		49,038		63,841
Advances on inventory purchases		4,260		8,179
Value added tax receivable		2,144		1,693
Other receivables and prepaid expenses		6,049		6,345
Amounts due from related parties		-		220
Total Current Assets		215,438		250,729

NON-CURRENT ASSETS
Equity security investment		4,566		5,682
Intangible assets, net		4,211		4,794
Property and equipment, net		31,148		36,340
Operating lease right-of-use assets		38,905		50,077
Deferred tax assets		768		899
Other non-current assets		3,520		784
Total Non-Current Assets		83,118		98,576
TOTAL ASSETS	$	298,556	$	349,305

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Bank loans	$	63,360	$	68,992
Accounts payable		59,894		67,930
Accounts payable and other payables – related parties		2,907		1,332
Other payables and accrued liabilities		14,166		18,531
Value added and other taxes payable		842		999
Income tax payable		1,107		334
Current operating lease liabilities		31,538		41,633
Total Current Liabilities		173,814		199,751

Non-current operating lease liabilities		7,538		8,596
TOTAL LIABILITIES		181,352		208,347

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY
Common stock ($0.001 par value, authorized 50,000,000 shares, 14,818,006 and 14,655,926 issued and outstanding as of September 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		3,670		3,660
Retained earnings		99,398		108,210
Statutory reserve		21,245		21,245
Treasury stock (at cost,162,080 and 147,334 shares at September 30, 2022 and December 31, 2021, respectively)		(400)		(363)
Accumulated other comprehensive (loss) income		(6,724)		8,191

Total Equity		117,204		140,958
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	298,556	$	349,305

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE 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,
	2022		2021		2022		2021
NET SALES	$	106,437	$	94,406	$	235,022	$	225,776
COST OF SALES		90,390		71,196		181,194		161,738

GROSS PROFIT		16,047		23,210		53,828		64,038

OPERATING EXPENSES
Selling expenses		12,792		14,443		38,153		44,495
General and administrative expenses		9,306		9,467		21,821		24,980
Total Operating Expenses		22,098		23,910		59,974		69,475

LOSS FROM OPERATIONS		(6,051)		(700)		(6,146)		(5,437)

OTHER (EXPENSES) INCOME
Interest income		22		176		299		928
Interest expense		(524)		(1,218)		(1,458)		(1,909)
Government subsidy		192		340		397		842
(Loss) gain from changes in fair values of investments		(915)		(123)		(1,587)		2,151
Other income		317		253		885		1,027
Total Other (Expenses) Income, Net		(908)		(572)		(1,464)		3,039

LOSS BEFORE INCOME TAX EXPENSE		(6,959)		(1,272)		(7,610)		(2,398)

Income tax benefit (expense)		835		(1,945)		(1,203)		(3,759)

NET LOSS	$	(6,124)	$	(3,217)	$	(8,813)	$	(6,157)

Foreign currency translation (loss) gain		(6,336)		(1,061)		(14,915)		1,020

COMPREHENSIVE LOSS	$	(12,460)		(4,278)	$	(23,728)	$	(5,137)


LOSS PER SHARE
Basic and diluted	$	(0.41)	$	(0.22)	$	(0.59)	$	(0.42)
Weighted average number of shares outstanding, basic and diluted		14,817,053		14,811,073		14,815,077		14,810,585

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		Amounts
	Common Stock			Additional				Retained Earnings				other		due from
	Shares	Amount		paid-in		Treasury		Unrestricted		Statutory		comprehensive		related		Total equity
	Shares	Amount		capital		stock		Unrestricted		reserve		income (loss)		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
Stock issued for compensation	3,652		-		5		-		-		-		-		-		5
Net loss	-		-		-		-		(6,123)		-		-		-		(6,123)
Foreign currency translation loss													(6,336)				(6,336)
Balance at September 30, 2022	14,818,006	$	15	$	3,670	$	(400)	$	99,398	$	21,245	$	(6,724)	$	-	$	117,204

	Common Stock			Additional				Retained Earnings				Accumulated		Amounts
	Common Stock			Additional				Retained Earnings				other		due from
	Shares	Amount		paid-in		Treasury		Unrestricted		Statutory		comprehensive		related		Total equity
	Shares	Amount		capital		stock		Unrestricted		reserve		income		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
Stock issued for compensation	1,652		-		5		-		-		-		-		-		5
Net loss	-		-		-		-		(3,217)		-		-		-		(3,217)
Net cash received from related party under counter guarantee agreement	-		-		-		-		-		-		-		313		313
Foreign currency translation adjustment													(1,062)				(1,062)
Balance at September 30, 2021	14,812,312	$	15	$	3,660	$	-	$	103,013	$	20,376	$	5,610	$	(2,275)	$	130,399

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, 2022		September 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(8,813)		(6,157)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		5,256		4,384
Loss from sale of property and equipment		141		590
Provision of bad debt allowance		3,943		676
Provision for obsolete inventories		5,296		842
Changes in fair value of trading securities		1,010		(200)
Changes in fair value of investments		577		(1,951)
Deferred income tax		42		644
Stock-based compensation		10		10
Changes in operating assets and liabilities
Accounts receivable		(20,334)		(8,614)
Inventories		4,353		(13,949)
Value added tax receivable		(671)		(1,235)
Other receivables and prepaid expenses		(434)		(1,096)
Advances on inventory purchases		3,317		586
Amounts due from related parties		211		(1,514)
Accounts payable		229		5,930
Accounts payable and other payables- related parties		1,779		(3,204)
Other payables and accrued liabilities		(5,124)		(3,332)
Value added and other taxes payable		891		(360)
Income tax payable		(81)		831
Net cash used in operating activities		(8,402)		(27,119)


CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment and intangible asset		(3,645)		(5,109)
Net proceeds from sale (purchase) of trading securities		52		(1,077)
Investment payment of other non-current assets		(3,028)		(773)
Net cash used in investing activities		(6,621)		(6,959)


CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans		56,018		56,110
Repayment of bank loans		(54,504)		(54,565)
Repurchase of common stock		(37)		-
Net collection of amounts due from related party (equity)		-		1,630
Net cash provided by financing activities		1,477		3,175

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(11,912)		693

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(25,458)		(30,211)

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

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	71,883	$	91,512

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

Cash and Cash Equivalents		32,177		48,336
Restricted cash		39,706		43,176
	$	71,883	$	91,512
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	1,458	$	1,909
Income taxes	$	1,175	$	2,272
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
Common stock issued for compensation	$	10	$	10