Ever-Glory Reports First Quarter 2020 Financial Results

|May 15|magazine34 min read

NANJING, China, May 15, 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 first quarter ended March 31, 2020.

Mr. Yihua Kang, Chairman, President and Chief Executive Officer of Ever-Glory, said, "During the first 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 first 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 2 stores during 2020, we operated a nationwide network of 1,038 stores as of March 31, 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 first 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."

First Quarter 2020 Financial Results 

Total sales for the first quarter of 2020 were $58.4 million, a decrease of 33.7% from $88.0 million in the first quarter of 2019. This decrease was primarily driven by a 20.7% decrease in our wholesale business and a 39.7% decrease in our retail business.

Sales for the Company's wholesale division decreased by 20.7% to $22.3 million for the first quarter of 2020, compared with $28.1 million for the first quarter of 2019. This decrease was primarily attributable to decreased sales in Mainland China, Germany, other European markets and Japan partially offset for increased sales in Hong Kong, the United States and the United Kingdom.

Sales for the Company's branded fashion apparel retail division decreased by 39.7% to $36.1 million for the first quarter of 2020, compared with $59.9 million for the first quarter of 2019. This decrease was primarily due to a decrease in same-store sales. The Company had 1,038 retail stores as of March 31, 2020, compared with 1,315 retail stores as of March 31, 2019.

Total gross profit for the first quarter of 2020 decreased by 45.4% to $16.0 million, compared with $29.4 million for the first quarter of 2019. Total gross margin decreased to 27.5% from 33.4% for the first quarter of 2019.

Gross profit for the wholesale business increased by 46.7% to $3.5 million for the first quarter of 2020, compared with $6.6 million for the first quarter of 2019. Gross margin decreased to 15.7% from 23.3% for the first quarter of 2019. 

Gross profit for the retail business decreased by 45.0% to $12.5 million for the first quarter of 2020, compared with $22.8 million for the first quarter of 2019. Gross margin was 34.8%, compared to 38.1% for the first quarter of 2019.

Selling expenses for the first quarter of 2020 decreased by 35.8% to $13.5 million, or 23.1% of total sales, compared with $21.0 million, or 23.9% of total sales for the first quarter of 2019. The decrease was attributable to the decreased sales.

General and administrative expenses for the first quarter of 2020 decreased by 23.2% to $5.8 million, or 9.9% of total sales, compared with $7.5 million, or 8.6% of total sales for the first quarter of 2019. The decrease was mainly attributable to the decreased office expenses.

(Loss) Income from operations for the first quarter of 2020 decreased by 493.0% to ($3.2) million compared with $0.8 million for the first quarter of 2019.

Net loss attributable to the Company for the first quarter of 2020 was $2.7 million compared with $0.5 million for the first quarter of 2019. Basic and diluted loss per share were $0.18 for the first quarter of 2020 compared with basic and diluted earnings per share of  $0.04 for the first quarter of 2019.

Balance Sheet

As of March 31, 2020, Ever-Glory had approximately $70.0 million of cash and cash equivalents, compared with approximately $48.6 million as of December 31, 2019. Ever-Glory had working capital of approximately $49.3 million as of March 31, 2020, and outstanding bank loans of approximately $26.1 million as of March 31, 2020.

Conference Call

The Company will hold a conference call at 8:00 a.m. Eastern Time on May 15, 2020 (8:00 p.m. Beijing Time on May 15, 2020). Listeners can access the conference call by dialing +1-800-263-0877 or + 1-646-828-8143 and using the access code 2134878. 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 May 15 through 11:59 p.m. Eastern Time on May 22, by dialing +1-844-512-2921 or +1-412-317-6671 and using the access code 2134878.

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 MARCH 31, 2020 AND DECEMBER 31, 2019 (UNAUDITED)




2020



2019


ASSETS







CURRENT ASSETS







Cash and cash equivalents


$

70,036



$

48,551


Accounts receivable, net



42,265




78,053


Inventories



52,152




67,355


Advances on inventory purchases



1,248




2,495


Value added tax receivable



6,961




7,497


Other receivables and prepaid expenses



6,723




9,681


Amounts due from related parties



102




123


Total Current Assets



179,487




213,755











NONCURRENT ASSETS









Intangible assets, net



4,529




4,729


Property and equipment, net



26,886




28,812


Operating lease right-of-use assets



42,583




53,379


Deferred tax assets



878




996


Total Non-Current Assets



74,876




87,916


TOTAL ASSETS


$

254,363



$

301,671











LIABILITIES AND STOCKHOLDERS' EQUITY


















CURRENT LIABILITIES









Bank loans


$

26,104



$

29,931


Accounts payable



52,173




72,418


Accounts payable and other payables – related parties



3,889




4,811


Other payables and accrued liabilities



13,033




19,137


Value added and other taxes payable



598




1,657


Income tax payable



121




1,142


Current operating lease liabilities



34,315




44,888


Total Current Liabilities



130,233




173,984











NONCURRENT LIABILITIES









Non-current operating lease liabilities



8,325




8,537


TOTAL LIABILITIES



138,558




182,521











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, 14,804,832 and
    14,801,770 shares issued and outstanding As of March 31, 2020 and December
    31, 2019, respectively)



15




15


Additional paid-in capital



3,645




3,640


Retained earnings



103,627




106,328


Statutory reserve



19,939




19,939


Accumulated other comprehensive loss



(5,770)




(4,330)


Amounts due from related party



(4,147)




(4,932)


Total equity attributable to stockholders of the Company



117,309




120,660


Noncontrolling interest



(1,504)




(1,510)


Total Equity



115,805




119,150


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

254,363



$

301,671


 

 

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE LOSS (INCOME)

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

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)




2020



2019









SALES


$

58,355



$

87,956











COST OF SALES



42,317




58,598











GROSS PROFIT



16,038




29,358











OPERATING EXPENSES









Selling expenses



13,478




21,008


General and administrative expenses



5,785




7,529


Total operating expenses



19,263




28,537











(LOSS) INCOME FROM OPERATIONS



(3,225)




821











OTHER INCOME (EXPENSE)









Interest income



277




207


Interest expense



(341)




(363)


Other income (expense), net



818




(295)


Total other income (expense), net



754




(451)











(LOSS) INCOME BEFORE INCOME TAX



(2,471)




370











INCOME TAX EXPENSE



(227)




(825)











NET LOSS



(2,698)




(455)


Net (income) loss attributable to the non-controlling interest



(3)




(66)


NET LOSS ATTRIBUTABLE TO THE COMPANY


$

(2,701)



$

(521)











NET LOSS


$

(2,698)



$

(455)


Foreign currency translation gain (loss)



(1,437)




4,006


COMPREHENSIVE (LOSS) INCOME


$

(4,135)



$

3,551











Comprehensive loss attributable to the noncontrolling interest



6




100











COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY


$

(4,129)



$

3,651


EARNINGS (LOSS) PER SHARE:









Basic and diluted


$

(0.18)



$

(0.04)


Weighted average number of shares outstanding Basic and diluted



14,804,832




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 MONTHS ENDED March 31, 2020 AND 2019 (Unaudited)







Additional



Retained
Earnings



Accumulated
other



Amounts
due from



Total
equity
attributable
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-based
  compensation



3,062




0.003




5




-




-




-




-




5








5


Net income (loss)



-




-




-




(2,701)








-




-




(2,701)




3




(2,698)


Net cash received
  (paid) to related
  party under
  counter guarantee
  agreement



-




-




-




-




-




-




785




785




-




785


Foreign currency
  translation income 
  (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












Additional



Retained
Earnings



Accumulated
other



Amounts
due from



Total
equity
attributable
to
stockholders



Non-







Common Stock



paid-in






Statutory



Comprehensive



related



of the



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-based
  compensation



1,942




0.004




8




-




-




-




-




8








8


Net (loss) income



-




-




-




(521)




-




-




-




(521)




66




(455)


Net cash received
  (paid) to related
  party under
  counter guarantee
  agreement



-




-




-




-




-




-




1,101




1,101




-




1,101


Foreign currency
  translation income
  (loss)























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


 

 

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 THREE MONTHS ENDED MARCH 31, 2020 AND 2019 (UNAUDITED)





2020


2019

CASH FLOWS FROM OPERATING ACTIVITIES





Net loss


$

(2,698)


$

(455)

Adjustments to reconcile net loss to cash provided by operating activities:







Depreciation and amortization



1,587



2,225

Gain on disposal of intangible assets



(268)



-

Loss from sale of property and equipment



102



52

Provision of bad debt allowance



278



-

Provision for obsolete inventories



4,204



1,824

Deferred income tax



104



(145)

Stock-based compensation



5



8

Changes in operating assets and liabilities







Accounts receivable



34,906



31,027

Inventories



10,303



10,557

Value added tax receivable



210



1,406

Other receivables and prepaid expenses



364



3,975

Advances on inventory purchases



2,855



490

Amounts due from related parties



142



103

Accounts payable



(19,864)



(26,505)

Accounts payable and other payables- related parties



(1,038)



(741)

Other payables and accrued liabilities



(5,587)



(9,565)

Value added and other taxes payable



(31)



(2,788)

Income tax payable



(1,019)



(327)

Net cash provided by operating activities



24,555



11,141








CASH FLOWS FROM INVESTING ACTIVITIES







Purchase of property and equipment



(78)



(2,131)

Disposal of intangible assets



353



-

Net cash provided by (used in) investing activities



275



(2,131)








CASH FLOWS FROM FINANCING ACTIVITIES







Proceeds from bank loans



11,464



6,029

Repayment of bank loans



(14,884)



(7,408)

Repayment of counter guarantee from related party



748



3,488

Advances to related party



-



(2,163)

Net cash provided by (used in) financing activities



(2,672)



(54)








EFFECT OF EXCHANGE RATE CHANGES ON CASH



1,497



1,908








NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED
CASH



23,655



10,864








CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING
OF PERIOD



48,551



47,012








CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF
PERIOD


$

72,206


$

57,876








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














Cash and Cash Equivalents



70,036



47,012

Restricted cash (booked in other receivables and prepaid expenses)



2,170



-



$

72,206


$

47,012








SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:














Cash paid during the period for:







Interest


$

341


$

363

Income taxes


$

1,218


$

126

 

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SOURCE Ever-Glory International Group, Inc.