-- 3Q09 Gross Margin Increased 420 Basis Points YoY to 18.6% --
-- 3Q09 Net Income Increased 200.3% to $1.9 million or $0.14 per diluted share
NANJING, China, Nov. 9 /PRNewswire-Asia-FirstCall/ -- Ever-Glory International Group, Inc. (the "Company," "Ever-Glory") (NYSE Amex: EVK), a leading apparel supply chain manager and retailer in China, today reported its financial results for the third quarter ended September 30, 2009.
During the third quarter 2009, net sales decreased 21.8% to $24.9 million from $31.9 million in the third quarter of 2008. This decrease was primarily attributable to decreased sales orders in the Company's wholesale business because of the global economic slowdown.
Retail sales from LA GO GO, the Company's branded retail division, increased to $2.6 million, or 152.8%, compared to $1.0 million in the third quarter of 2008.
"The third quarter of 2009 proved to be a challenging quarter in our wholesale business," commented Mr. Edward Yihua Kang, Chairman of the Board and Chief Executive Officer of Ever-Glory. "Our wholesale business experienced decreased sales. The majority of this decrease was due to our decision in the second quarter to halt orders with several customers as we couldn't be certain of their ability to maintain timely payments thus affecting year over year comparisons for the remainder of 2009. Our top priority in this difficult economy is to protect Ever-Glory, its financial position and its cash flow. We believe we are taking the appropriate steps to protect our finances and provide Ever-Glory with a more stable customer base.
"Our retail business remains strong and we recorded over $2.6 million of retail sales in the quarter versus approximately $1.0 million in the third quarter of last year. In the third quarter of 2009, we opened 25 new LA GO GO stores, closed one store and as of September 30, 2009 we had 154 LA GO GO stores in operation in total. Also encouraging is that our retail sales per square foot per month increased approximately 15% compared to the same period of last year."
In the third quarter of 2009, gross profit increased 0.9% to $4.63 million from $4.59 million in the third quarter of 2008. Gross margin increased 420 basis points to 18.6% in the third quarter of 2009, compared to 14.4% in the third quarter of 2008 largely because we decreased lower margin orders as a continued effort to pursue higher added value operations in our wholesale business and same store sales increased during the quarter ended September 30, 2009 in our retail business.
Selling expenses increased 94.7% to $1.1 million in the third quarter of 2009 from $564 thousand in the third quarter of 2008. This increase was primarily due to increased retail staff, renovation and retail marketing expenses to promote LA GO GO. General and administrative expenses decreased 7.2% to $1.6 million from $1.7 million in the third quarter of 2008. Although we increased payroll for additional management, design and marketing staff as a result of our business expansion, total G&A expenses decreased because non-occurrence of the expenses related to our AMEX listing which occurred in the third quarter of 2008.
Income from operations for the third quarter of 2009 decreased 15.8% to $2.0 million, or 7.9% of total sales, compared to $2.3 million, or 7.3% of sales, in the third quarter of 2008.
Net income for the third quarter of 2009 increased 200.3% to $1.9 million or $0.14 per diluted share from $643 thousand, or $0.05 per diluted share in the third quarter of 2008.
Balance Sheet and Cash Flow
As of September 30, 2009, the Company had $3.6 million of cash and cash equivalents, compared to $1.4 million as of December 31, 2008; Ever-Glory had working capital of approximately $18.5 million as of September 30, 2009. The Company had bank loans of $5.4 million as of September 30, 2009.
Business Outlook
For full year 2009, the Company anticipates total net sales of $103 million to $118 million and net income of $5.8 million to $6.5 million. The full year revenue forecast is comprised of $90 million to $100 million in expected wholesale revenue and $13 million to $18 million in expected revenue from retail.
Conference Call
The Company will hold a conference call today at 8:30 a.m. Eastern Time which will be hosted by Edward Yihua Kang, Chairman of the Board, President, and CEO, Yan Guo, Chief Financial Officer. Listeners can access the conference call by dialing #1-913-981-4900. The conference call will also be broadcast live over the Internet and can be accessed at the Company's web site at the following URL: http://www.everglorygroup.com .
A replay of the call will be available from November 9, 2009 through November 16, 2009 by calling #1-719-457-0820; pin number: 3006456.
About Ever-Glory International Group, Inc.
Based in Nanjing, China, Ever-Glory International Group, Inc. is a leading apparel supply chain manager and retailer in China. Ever-Glory is the first Chinese apparel company listed on the American Stock Exchange (now called NYSE Amex), and has a focus on middle-to-high grade casual wear, outerwear, and sportswear brands. The Company maintains global strategic partnerships in Europe, the United States, Japan and China, conducting business with several well-known brands and retail chain stores. In addition, Ever-Glory operates its own domestic chain of retail stores known as "LA GO GO."
Safe Harbor Statement
Certain statements in this release and other written or oral statements made by or on behalf of the Company are "forward looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and our 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 market acceptance of the Company's products and projects, the Company's continued access to capital, currency exchange rate fluctuation and other risks and uncertainties. The actual results the Company achieves may differ materially from those contemplated by any forward-looking statements due to such risks and uncertainties. These statements are based on our 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.
EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
NET SALES
Related parties $66,221 $17,582 $75,572 $510,145
Third parties 24,870,500 31,867,994 66,494,465 75,191,036
Total net sales 24,936,721 31,885,576 66,570,037 75,701,181
COST OF SALES
Related parties 38,281 10,989 47,294 472,373
Third parties 20,264,735 27,284,216 52,667,322 62,563,564
Total cost of
sales 20,303,016 27,295,205 52,714,616 63,035,937
GROSS PROFIT 4,633,705 4,590,371 13,855,421 12,665,244
OPERATING EXPENSES
Selling expenses 1,097,840 563,971 2,903,655 1,210,063
General and
administrative
expenses 1,562,382 1,683,713 5,707,786 4,918,696
Total Operating
Expenses 2,660,222 2,247,684 8,611,441 6,128,759
INCOME FROM OPERATIONS 1,973,483 2,342,687 5,243,980 6,536,485
OTHER INCOME (EXPENSES)
Interest income 180,089 41,052 445,117 121,616
Interest expense (94,016) (1,468,592) (332,900) (2,677,546)
Other income 269 571 45,252 53,656
Total Other Income
(Expenses) 86,342 (1,426,969) 157,469 (2,502,274)
INCOME BEFORE INCOME
TAX EXPENSE 2,059,825 915,718 5,401,449 4,034,211
INCOME TAX EXPENSE (130,479) (273,203) (692,206) (841,850)
NET INCOME 1,929,346 642,515 4,709,243 3,192,361
ADD: NET LOSS
ATTRIBUTABLE TO THE
NONCONTROLLING INTEREST 7,552 4,666 25,011 1,417
NET INCOME ATTRIBUTABLE
TO THE COMPANY $1,936,898 $647,181 $4,734,254 $3,193,778
NET INCOME $1,929,346 $642,515 $4,709,243 $3,192,361
Foreign currency
translation gain
(loss) 46,364 107,468 (36,947) 1,818,706
COMPREHENSIVE INCOME 1,975,710 749,983 4,672,296 5,011,067
COMPREHENSIVE (INCOME)
LOSS ATTRIBUTABLE TO
THE NONCONTROLLING
INTEREST (6,752) 34,441 8,749 11,419
COMPREHENSIVE INCOME
ATTRIBUTABLE TO
THE COMPANY $1,968,958 $784,424 $4,681,045 $5,022,486
NET INCOME PER SHARE
Attributable to the
Company's common
stockholders
Basic $0.14 $0.05 $0.35 $0.27
Diluted $0.14 $0.05 $0.35 $0.27
Weighted average number
of shares outstanding
Basic 13,558,326 11,914,825 13,546,116 11,692,604
Diluted 13,558,326 12,002,908 13,546,116 11,715,332
EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008
ASSETS
September 30, December 31,
2009 2008
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $3,561,116 $1,445,363
Accounts receivable 14,590,133 9,485,338
Inventories 7,232,455 3,735,227
Value added tax receivable 802,120 --
Other receivables and prepaid
expenses 480,667 945,191
Advances on inventory purchases 381,850 288,256
Amounts due from related party 10,475,672 11,565,574
Total Current Assets 37,524,013 27,464,949
LAND USE RIGHT, NET 2,805,175 2,854,508
PROPERTY AND EQUIPMENT, NET 12,574,798 12,494,452
INVESTMENT AT COST 1,467,000 1,467,000
TOTAL ASSETS $54,370,986 $44,280,909
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Bank loans $5,398,560 $6,542,820
Loan from related party - short term 500,000 --
Accounts payable 9,682,539 3,620,543
Accounts payable and other
Payables - related parties 739,437 754,589
Other payables and accrued
liabilities 1,943,983 1,683,977
Value added and other taxes payable 371,655 368,807
Income tax payable 118,921 257,946
Deferred tax liabilities 304,670 80,009
Total Current Liabilities 19,059,765 13,308,691
LONG-TERM LIABILITIES
Loan from related party 2,247,879 2,660,085
TOTAL LIABILITIES 21,307,644 15,968,776
COMMITMENTS AND CONTINGENCIES
EQUITY
Stockholders' equity of the Company
Preferred stock ($.001 par value,
authorized 5,000,000 shares,
no shares issued and outstanding) -- --
Common stock ($.001 par value,
authorized 50,000,000 shares,
13,560,240 and 12,373,567 shares
issued and outstanding as of
September 30, 2009 and December 31,
2008, respectively) 13,560 12,374
Additional paid-in capital 4,592,971 4,549,004
Retained earnings 20,541,793 15,807,539
Statutory reserve 3,437,379 3,437,379
Accumulated other comprehensive
income 3,919,913 3,956,860
Total Stockholders' Equity of the
Company 32,505,616 27,763,156
Noncontrolling interest 557,726 548,977
Total Equity 33,063,342 28,312,133
TOTAL LIABILITIES AND EQUITY $54,370,986 $44,280,909
EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $4,709,243 $3,192,361
Adjustments to reconcile net
income to cash provided
by operating activities:
Depreciation and amortization 1,512,089 714,446
Deferred income tax 224,493 --
Amortization of discount on
convertible notes -- 1,934,026
Amortization of deferred
financing costs -- 318,196
Stock issued for interest -- 2,155
Stock-based compensation 22,181 12,855
Changes in operating assets and
liabilities
Accounts receivable (5,100,967) (3,306,125)
Accounts receivable - related
parties 153,420
Inventories (3,494,605) (597,330)
Value added tax receivable (801,519)
Other receivables and prepaid
expenses (123,094) (631,466)
Other receivable - related
parties -- (37,823)
Advances on inventory purchases (93,524) (332,988)
Amounts due from related party 1,088,634 (4,059,141)
Accounts payable 6,057,452 4,325,070
Accounts payable and other
payables - related parties 72,399 149,688
Other payables and accrued
liabilities 259,657 435,963
Value added and other taxes
payable 2,845 181,056
Income tax payable (138,920) 268,334
Net cash provided by operating
activities 4,196,364 2,722,697
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in La Chapelle -- (1,397,700)
Purchase of property and equipment (984,346) (800,669)
Proceeds from sale of equipment 28,537 37,019
Net cash used in investing
activities (955,809) (2,161,350)
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution from minority
shareholders -- 553,040
Proceeds from bank loans 11,991,062 11,354,904
Repayment of bank loans (13,134,464) (10,695,402)
Repayment of long term loan -- (1,844,164)
Exercise of warrants -- 219,635
Net cash used in financing
activities (1,143,402) (411,987)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH 18,600 91,449
NET INCREASE IN CASH AND CASH
EQUIVALENTS 2,115,753 240,809
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,445,363 641,739
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $3,561,116 $882,548
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest expense $245,105 $295,562
Income taxes $606,622 $573,557
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