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Ever-Glory Reports First Quarter 2007 Financial Results

Add: 2007   Update: 2009/03/21

NANJING, China, May 14 /Xinhua-PRNewswire-FirstCall/ -- Ever-Glory International Group, Inc. (OTC Bulletin Board: EGLY - News; ''Ever-Glory," "the Company''), a leading apparel manufacturer in the People's Republic of China (''PRC''), announced its financial results for the first quarter ended March 31, 2007.

First Quarter 2007 Highlights

-- Revenue increased 118.6% year-over-year to $11.4 million

-- Gross profit increased 87.6% to $1.7 million

-- Net income increased 70.8% to $0.7 million

First Quarter 2007 Results

For the first quarter 2007, net revenues were $11.4 million, up 118.6% from $5.2 million in the same quarter of 2006. The increase in revenues was primarily attributable to two factors. The acquisition of New-Tailun in the fourth quarter of 2006 contributed an increase of $4.1 million, or 78%, to the revenues. Besides, an organic growth of Ever-Glory increased its sales to customers in Europe, the U.S. and Japan by 38%, 55% and 95%, respectively compared to 2006.

Gross profit for the first quarter was $1.7 million, an increase of 87.6% from $0.9 million a year ago. Gross margin was 14.9% in the first quarter of 2007, compared to 17.4% in the first quarter of 2006. This decline was primarily caused by increases in the cost of raw materials that could not be passed on to customers.

Operating expenses in the first quarter were $0.8 million, an increase of 84.9% from $0.5 million in the same quarter of 2006. This increase was due to higher selling expenses in support of new business, higher general and administrative expenses related to the acquisition of New-Tailun and higher depreciation and amortization expenses associated with the company's new headquarters. As a percentage of revenues, operating expenses totaled 7.3% in the first quarter of 2007, compared to 8.6% in the same quarter last year.

Operating income in the first quarter was $0.9 million, an increase of 90.2% from $0.5 million in the same quarter the prior year. Operating margin was 7.6%, compared to 8.8% a year ago.

Net income for the first quarter of 2007 was $0.7 million, or $0.01 per diluted share, an increase of 70.8% from $0.4 million, or $0.00 per diluted share, in the same quarter of 2006.

''The first quarter demonstrated Ever-Glory's capacity for rapid growth based on the strength of our customer relationships and top-level product quality,'' said Mr. Edward Kang, Chairman and Chief Executive Officer of Ever- Glory. ''The acquisition of New-Tailun increased our market share in Japan, while the added production capacity improved our ability to fill larger orders from our major customers in Europe and the United States.''

At quarter-end, total annual production capacity increased to 5.5 million garment pieces, up from 2.85 million garment pieces at the end of 2006. This increase was related to the Company's new factory and corporate headquarters in the Nanjing Jiangning Economic and Technological Development Zone in Nanjing, higher levels of outsourced production and the acquisition of New- Tailun.

Financial Condition

During the first quarter of 2007, the Company generated $1.6 million in cash from operations, up from $0.3 million in the same period a year ago. As of March 31, 2007, the company had $1.3 million in cash and cash equivalents and $1.9 million available under its credit facility. At the end of the quarter, shareholders' equity stood at $18.6 million, up from $17.8 million on December 31, 2006.

Outlook for 2007

Ever-Glory continues to explore opportunities to expand its production capacity. The Company hopes to increase its entire production capacity to more than 7.0 million garment pieces per year by the end of 2007.

We are very pleased with the progress we have made to date and are excited about the opportunities going forward,'' Mr. Kang said. ''In the near term, we are focusing on strategic acquisitions to expand capacity and to meet strong demand and increase our market share. Combined with our existing capacity, we expect to achieve another year of healthy top-line and net profit growth."

Recent Events

In late March 2007, Ever-Glory requested national accreditation of its state-of-the-art fabric and accessories inspection and testing center. The Company submitted a laboratory accreditation application form to CNAS (China National Accreditation Service for Conformity Assessment). Ever-Glory management expects to receive the accreditation during the third quarter of 2007. After receiving the honor, Ever-glory hopes to expand its international market on the strength of China's highest fabric testing standard.

On April 20, 2007, Ever-Glory received a new, $2.8 million production order from Dallas-based Walls Industries, Inc. The new production order marks the third year of the two companies' strategic partnership.

About Ever-Glory International Group, Inc.

Ever-Glory International Group is a U.S. publicly traded company engaged in international garment manufacturing for well-known middle- to high-grade casual, outer, and sportswear brands. The company's U.S. headquarters is based in Los Angeles, CA, although Ever-Glory also owns two full subsidiary companies, Nanjing Goldenway Garments Co. Ltd., and New-Tailun Garment Co, Ltd. Ever-Glory has strategic business partners in countries including China, Europe and the U.S. The Company cooperates with well-respected garment retailer chains such as Itochu, Shinko, Debenhams, Next, C&A, Itoyokado and others in handling high- and middle-grade casual wear and sportswear. The company entered into production and sales cooperation agreements with a number of internationally famous brands such as Matalan, Eddie Bauer, Best-Seller, BB Dakota and others. Ever-Glory employs more than 1,300 people. At present, the market distribution is segmented as 15 % in Japan, 59 % in Europe, 23 % in United States and 3% in China. For more information about Ever-Glory International Group, please visit: http://www.everglorygroup.com .

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This press release contains certain "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to the company's ability to accurately complete product orders, coordinate product design with its customers, ability to expand and grow its distribution channels, political and economic factors in the People's Republic of China, the company's ability to find attractive acquisition candidates, dependence on a limited number of larger customers and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

-- FINANCIAL TABLES FOLLOW --

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(unaudited)

For the three For the three

months ended months ended

March 31, 2007 March 31, 2006

NET SALES

To related parties $ 27,016 $ --

To third parties 11,402,701 5,229,520

Total Net Sales 11,429,717 5,229,520

COST OF SALES

From related parties (655,810) (810,174)

From third parties (9,069,122) (3,510,466)

Total Cost Of

Sales (9,724,932) (4,320,640)

GROSS PROFIT 1,704,785 908,880

OPERATING EXPENSES

Selling expenses 155,259 119,175

General and administrative

expenses 615,090 321,594

Depreciation and

amortization 60,739 8,709

Total Operating

Expenses 831,088 449,478

INCOME FROM OPERATIONS 873,697 459,402

OTHER INCOME (EXPENSES)

Interest income 1,378 741

Interest expenses (132,290) (9,936)

Other income 26 7,235

Other expenses (84) --

Total Other

Expenses, net (130,970) (1,960)

INCOME BEFORE INCOME TAX EXPENSE 742,727 457,442

INCOME TAX EXPENSE (75,694) (66,852)

NET INCOME 667,033 390,590

OTHER COMPREHENSIVE INCOME

Foreign currency

translation gain 130,336 87,061

COMPREHENSIVE INCOME 797,369 $ 477,651

Net income share-basic 0.02 $ 0.02

Net income share-diluted 0.01 $ 0.00

Weighted average number of shares

outstanding during the period-basic 40,805,091 19,971,758

Weighted average number of shares

outstanding during the period-diluted 100,720,079 79,886,746

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2007 AND December 31, 2006

As of March 31, As of December 31,

ASSETS 2007 2006

CURRENT ASSETS (unaudited)

Cash and cash equivalents $ 1,298,417 $ 660,096

Accounts receivable, net of

allowances 4,934,186 6,225,936

Accounts receivable - related

companies 2,266,184 2,516,767

Inventories, net 481,238 746,817

Other receivables and prepaid

expenses 226,140 83,923

Total Current Assets 9,206,165 10,233,539

GOODWILL, NET 10,079,156 10,079,156

LAND USE RIGHT, NET 2,530,324 2,521,109

PROPERTY AND EQUIPMENT, NET 13,220,710 12,158,912

TOTAL ASSETS 35,036,355 34,992,716

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable 1,123,106 $ 897,609

Accounts payable - a related

company 420,013 1,408,504

Due to related parties 2,678,129 2,621,130

Other payables and accrued

liabilities 3,154,476 3,305,778

Note payable 4,521,438 4,482,180

Value added tax 173,330 202,243

Income tax payable and other tax

payable 96,063 61,536

Total Current Liabilities 12,166,555 12,978,980

LONG-TERM LIABILITIES

Due to a related company 4,297,221 $4,238,526

TOTAL LIABILITIES 16,463,776 $17,217,506

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Preferred stock ($.0001 par value,

authorized 5,000,000 shares,

Nil shares issued and outstanding) -- --

Series A Convertible Preferred

Stock ($.0001 par value,

authorized 10,000 shares, 7,883

shares issued and outstanding) 1 1

Common stock ($.0001 par value,

authorized 100,000,000 shares,

issued and outstanding

19,971,758 shares) 1,997 1,997

Common stock to be issued for

acquisition (20,833,333 shares) 2,083 2,083

Additional paid-in capital 11,261,666 11,261,666

Retained earnings

Unappropriated 4,380,177 3,713,144

Appropriated 2,230,145 2,230,145

Accumulated other comprehensive

income 696,510 566,174

Total Stockholders' Equity 18,572,579 17,775,210

TOTAL LIABILITIES AND STOCKHOLDERS'

EQUITY 35,036,355 34,992,716

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31, 2007 AND 2006

(unaudited)

For the three For the three

months ended March months ended March

31, 2007 31, 2006

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 667,033 $ 390,590

Adjusted to reconcile net

income to cash provided

by (used in) operating

activities:

Depreciation and

amortization - cost of

sales 121,193 38,315

Depreciation and

amortization 60,739 8,709

Changes in operating assets

and liabilities

(increase)decrease in:

Accounts receivable 1,341,005 (1,898,058)

Accounts receivable -

related companies 271,549 --

Other receivable and

prepaid expenses (140,926) (44,922)

Inventories 271,053 (23,246)

Increase (decrease) in:

Accounts payable 216,782 2,178,068

Accounts payable -

related companies (996,903) (166,957)

Other payables and

accrued liabilities (179,372) (185,957)

Value add tax payables (30,564) 44,511

Income tax and other tax

payables 33,855 (38,239)

Net cash provided by

operating activities 1,635,444 302,814

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and

equipment (1,120,674) (569,881)

Net cash used in

investing activities (1,120,674) (569,881)

CASH FLOWS FROM FINANCING ACTIVITIES

Due to related parties 115,694 --

Repayment of note payable (1,292,959) --

Proceeds from notes payable 1,292,959 --

Net cash provided by

financing activities 115,694 --

EFFECT OF EXCHANGE RATE ON CASH 7,857 87,061

NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS 638,321 (180,006)

CASH AND CASH EQUIVALENTS AT

BEGINNING OF PERIOD 660,096 1,467,245

CASH AND CASH EQUIVALENTS AT END OF

PERIOD 1,298,417 $ 1,287,239

SUPPLEMENTAL DISCLOSURE OF CASH FLOW

INFORMATION

Cash paid during the period for:

Interest expenses 73,595 $9,936

Cash paid during the period for:

Income taxes 41,827 $104,577

Source: Ever-Glory International Group, Inc.