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Ever-Glory Reports Second Quarter 2007 Financial Results

Add: 2007   Update: 2009/03/21

NANJING, China, Aug. 15 /Xinhua-PRNewswire-FirstCall/ -- International Group, Inc. (OTC Bulletin Board: EGLY) (',' 'the Company'), a leading apparel manufacturer in the People's Republic of China ('PRC'), announced its financial results for the second quarter ended June 30, 2007.

Second Quarter 2007 Highlights

 

-- Net sales increased 3.8% year-over-year to $9.6 million

-- Net income totaled $0.5 million, compared to $0.7 million a year ago

-- Began shipping on new $2.8 million annual production order to Walls

Industries

-- Received $1.0 million in annual production orders from Levi Strauss

(Hong Kong) Limited

-- Filed Definitive 14C Information Statement related to acquisition of

Catch-Luck Garments Limited in August 2007

-- Closed private placement financing, generating $2.0 million in gross

proceeds in August 2007

Second Quarter 2007 Results

For the second quarter of 2007, net sales were $9.6 million, up 3.8% from $9.2 million in the same quarter of 2006. The increase in sales was mainly attributed to a slight increase in sales to customers in the U.S. market.

'During the second quarter, we continued to make inroads into the U.S. market, as we began shipping under our new production order with Walls Industries and increased our production for QVC,' said Mr. Edward Kang, Chairman and Chief Executive Officer of . 'Appreciation in the RMB put some pressure on gross margin, and we were not able to pass all of this on to our customers in the form of higher prices. However, we should be able to gradually absorb this cost and achieve a higher margin later in the year.'

Gross profit for the second quarter was $1.4 million, a decline of 3.3% from $1.5 million a year ago. Gross margin was 14.9% in the second quarter of 2007, compared to 15.9% in the second quarter of 2006. This decline was caused by an increase in raw materials costs because of appreciation in the Chinese RMB relative to the U.S. dollar.

Operating expenses in the second quarter were $0.8 million, an increase of 32.2% from $0.6 million in the same quarter of 2006. This increase was primarily caused by an increase of 73.1% in general and administrative expenses due to higher management salaries and other expenses related to expansion of the business. Depreciation expenses were also higher due to the company's new corporate headquarters, plant and testing facilities and the new Goldenway factory, which was completed in December 2006. Selling expenses and professional fees declined 27.6% and 19.7%, respectively, from the second quarter of 2007. Operating expenses totaled 8.6% of revenues in the second quarter of 2007, compared to 6.7% in the same period the prior year.

Operating income in the second quarter was $0.6 million, a decline of 29.2% from $0.9 million in the same quarter the prior year. Operating margin was 6.3%, compared to 9.2% a year ago.

Net income for the second quarter of 2007 was $0.5 million, or $0.005 per diluted share, a decrease of 35.3% from $0.7 million, or $0.01 per diluted share, in the same quarter of 2006.

At quarter-end, total annual production capacity increased to 5.6 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.

Six Month Results

Net revenues for the first six months of 2007 were $21.0 million, up 45.3% from revenues of $14.5 million during the same period a year ago. Gross profit was $3.1 million, or 14.9% of sales, up 31.4% from $2.4 million, or 16.5% of sales, in the first half of 2006. Operating income was $1.5 million, or 7.0% of sales, up 12.7% from $1.3 million, or 9.1% of sales, in the first half of 2006. Net income for the first six months of 2007 was $1.1 million, or $0.01 per diluted share, compared to net income of $1.1 million, or $0.01 per diluted share, in the same period a year ago.

Financial Condition

As of June 30, 2007, the company had $0.4 million in cash and cash equivalents and $0.1 million in working capital. At June 30, 2007, the Company had $4.4 million available under its credit facility and shareholders' equity stood of $9.2 million. During the first six months of 2007, the Company generated $4.2 million in cash from operations, compared to $0.8 million used in operating activities in the first half of 2006.

Business Outlook

For the 2007 fiscal year, the Company expects to generate revenues of $68 million to $70 million and net income of $5.8 million to $6.0 million. Full year guidance includes the consolidated financial results of the Company's Goldenway and New-Tailun subsidiaries, as well as the pending acquisition of and Catch-Luck, which is expected to close in the third quarter of 2007.

With the acquisition of Catch Luck, will add annual production capacity of 800,000 garment pieces to its existing capacity. When combined with greater outsourced capacity, this will increase the Company's entire production capacity to more than 7.0 million garment pieces per year by the end of 2007.

'We look forward to delivering on our strategy of strong, profitable growth during the second half of 2007. Our recent private placement financing provides us the additional working capital requirements and provides a solid foundation for continued growth through the remainder of the year. We are hopeful that our new state-of-the-art testing center will receive accreditation during the third quarter, allowing us to provide fabric testing services to our international customers,' Mr. Kang said. 'We look forward to closing the Catch-Luck transaction which will increase capacity as we seek to become a leader in the Chinese apparel and design industry.'

Recent Events

On August 1, the Company filed a Definitive 14C Information Statement related to the acquisition of apparel manufacturer Nanjing Catch-Luck Garments Co, Ltd. Founded in 1995, Catch-Luck has 500 non-union employees with annual production capacity of 800,000 garment pieces. Catch-Luck currently operates one factory covering 6,000 square meters in the Nanjing Jiangning Economic and Technological Development Zone. During the 2006 fiscal year, approximately 52% of the Company's revenues came from customers in Europe, 18% from customers in Japan, 18% from customers in the U.S. and 11% from customers in China. In the first half of 2007, Catch-Luck generated revenues of $9.7 million and net income of $1.2 million. The transaction is valued at $10.0 million, with a cash payment of $0.6 million and $9.4 million in stock, and is expected to close in August 2007.

On August 9, announced the completion of a $2.0 million private placement of its secured convertible notes. The proceeds will be used to

satisfy the Company's working capital needs and for other administrative expenses.

Restatement of Financial Results

The financial statements for the three and six month periods ended June 30, 2006, and the three months ended March 31, 2007, have been restated to reflect the acquisition of Nanjing New-Tailun Garments Co., Ltd, a Chinese limited liability company ('New-Tailun'), on December 11, 2006, to record the assets and liabilities of New-Tailun at their carrying values rather than their fair- market values at the time of the acquisition.

About International Group, Inc.

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 also owns two full subsidiary companies, Nanjing Goldenway Garments Co. Ltd., and New-Tailun Garment Co, Ltd. 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. employs more than 1,500 people. At present, the market distribution is segmented as 15% in Japan, 54% in Europe, 27% in United States and 3% in China. For more information about 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

CONDENSED CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2007 AND DECEMBER 31, 2006

 

ASSETS

As of

As of June 30, December 31,

2007 2006

CURRENT ASSETS

Cash and cash equivalents 430,217 660,096

Accounts receivable, net 5,907,370 6,225,936

Accounts receivable - related companies 153,721 2,516,767

Inventories, net 973,777 746,817

Other receivables and prepaid expenses 185,219 83,923

Total Current Assets 7,650,304 10,233,539

 

PROPERTY AND EQUIPMENT, NET 10,906,513 12,158,912

 

LAND USE RIGHTS, NET 2,555,790 2,521,109

TOTAL ASSETS 21,112,607 24,913,560

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

CURRENT LIABILITIES

Accounts payable 1,495,840 897,609

Accounts payable - related companies 1,272,674 1,408,504

Other payables and accrued liabilities 409,194 3,305,778

Due to related parties 2,215,048 2,621,130

Notes payable 1,967,265 4,482,180

Value added tax 176,445 202,243

Other tax payables 20,831 61,536

Total Current Liabilities 7,557,297 12,978,980

 

LONG-TERM LIABILITIES

Due to a related company 4,356,755 4,238,526

TOTAL LIABILITIES 11,914,052 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 161,666 161,666

Retained earnings

Unappropriated 5,635,829 4,495,408

Appropriated 2,425,711 2,425,711

Accumulated other comprehensive income 971,268 609,188

Total Stockholders' Equity 9,198,555 7,696,054

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 21,112,607 24,913,560

 

 

 

EVER-GLORY INTERNATIONAL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(unaudited)

 

For the three For the three For the six For the six

months ended months ended months ended months ended

June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006

NET SALES (Restated) (Restated)

To related parties $119,844 $13,019 $146,860 $13,019

To third parties 9,457,270 9,213,532 20,859,971 14,443,052

Total net sales 9,577,114 9,226,551 21,006,831 14,456,071

 

COST OF SALES

From related parties (243,975) (1,500,385) (899,785) (2,310,559)

From third parties (7,911,144) (6,255,847) (16,980,266) (9,766,313)

Total cost of

sales (8,155,119) (7,756,232) (17,880,051) (12,076,872)

GROSS PROFIT 1,421,995 1,470,319 3,126,780 2,379,199

 

OPERATING EXPENSES

Selling expenses 108,936 150,509 264,195 269,684

Professional fees 139,607 173,759 318,097 346,520

General and

administrative

expenses 497,843 287,637 934,443 436,470

Depreciation and

amortization 73,534 8,151 134,273 16,860

Total Operating

Expenses 819,920 620,056 1,651,008 1,069,534

 

INCOME FROM OPERATIONS 602,075 850,263 1,475,772 1,309,665

 

OTHER INCOME (EXPENSES)

Interest income 2,159 629 3,537 1,370

Interest expenses (129,600) (48,194) (261,890) (58,130)

Other income 5,424 4,848 5,450 12,083

Other expenses (41) -- (125) --

Total Other

Expenses, net (122,058) (42,717) (253,028) (44,677)

 

INCOME BEFORE INCOME

TAX EXPENSE 480,017 807,546 1,222,744 1,264,988

INCOME TAX EXPENSE (6,629) (75,679) (82,323) (142,531)

 

NET INCOME 473,388 731,867 1,140,421 1,122,457

 

OTHER COMPREHENSIVE

INCOME

Foreign currency

translation gain 231,744 151,246 362,080 238,307

 

COMPREHENSIVE INCOME 705,132 883,113 1,502,501 1,360,764

 

Net income share-basic $0.01 $0.02 $0.03 $0.03

 

Net income share-diluted $0.00 $0.01 $0.01 $0.01

 

Weighted average

number of shares

outstanding during

the period-basic 40,805,091 40,805,091 40,805,091 40,805,091

 

Weighted average

number of shares

outstanding during

the period-diluted 100,720,079 100,720,079 100,720,079 100,720,079

 

 

 

EVER-GLORY INTERNATIONAL GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006 (UNAUDITED)

 

 

 

For the six For the six

months ended months ended

June 30, 2007 June 30, 2006

CASH FLOWS FROM OPERATING ACTIVITIES (Restated)

Net income $1,140,421 $1,122,457

Adjusted to reconcile net income to

cash (used in) provided by

operating activities:

Depreciation and amortization - cost

of sales 222,980 94,565

Depreciation and amortization 134,273 16,860

Loss on disposal of fixed assets -- 2,467

Changes in operating assets and liabilities

(Increase)decrease in:

Accounts receivable 462,349 (1,211,181)

Accounts receivable - related companies 3,996,241 (3,449,231)

Other receivable and prepaid expenses (98,158) (41,533)

Inventories (206,105) (88,570)

Increase (decrease) in:

Accounts payable 568,736 513,915

Accounts payable - related companies (1,774,575) 2,196,303

Other payables and accrued liabilities (161,697) (169,563)

Value added tax payables (30,258) 308,260

Income tax and other tax payables (41,615) (47,969)

Net cash provided by (used in)

operating activities 4,212,592 (753,220)

 

CASH FLOWS FROM INVESTING ACTIVITIES

Contribution by stockholder -- 900,000

Purchase of property and equipment (1,538,683) (2,143,764)

Net cash used in investing activities (1,538,683) (1,243,764)

 

CASH FLOWS FROM FINANCING ACTIVITIES

Due to a related company (286,263) 2,595,158

Repayment of notes payable (4,527,814) --

Proceeds from notes payable 1,940,492 --

Net cash (used in) provided by

financing activities (2,873,585) 2,595,158

 

EFFECT OF EXCHANGE RATE ON CASH (30,203) 105,189

 

NET (DECREASE) INCREASE IN CASH AND CASH

EQUIVALENTS (229,879) 703,363

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF

PERIOD 660,096 1,467,245

CASH AND CASH EQUIVALENTS AT END OF PERIOD 430,217 2,170,608

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW

INFORMATION

 

Cash paid during the

period for interest expenses 128,061 19,778

Cash paid during the period for income taxes 124,373 190,387

 

 

 

For more information, please contact:

 

International Group, Inc.

Mr. Devin Jean, Corporate Secretary

Phone: +86-25-52096899

Email: jinqiu@ever-glory.com

 

CCG Elite Investor Relations

Crocker Coulson, President

Phone: +1-646-213-1915 (New York)

Email: crocker.coulson@ccgir.com

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