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Ever-Glory Reports Third Fiscal Quarter 2008 Financial Results

Add: 2008   Update: 2009/03/21

3Q08 Total Net Sales Increased 63.7% to $31.9 Million

3Q08 Gross Profit Increased 49.4% to $4.6 Million

Company Reiterates Comfort with FY08 Financial Forecast

PR Newswire

NANJING, China, Nov. 7

NANJING, China, Nov. 7 /Xinhua-PRNewswire-FirstCall/ -- Ever-Glory

International Group, Inc. (the "Company," "Ever-Glory") (Amex: EVK), a

leading apparel manufacturer and supplier in the China, today reported its

financial results for the third quarter ending September 30, 2008.

Third Quarter 2008 Results

Third quarter total net sales increased 63.7% to $31.9 million compared to

$19.5 million in the third quarter of 2007. This increase was primarily

driven by a rise in sales to customers in Europe, the U.S, Japan, and

China.

The Company experienced increased orders from customers in Hong Kong,

higher demand from several of its largest customers in Europe, improving

success with its premium brands in Japan, and the ramp up of orders from a

new customer in the U.S. Among the Company's key geographic regions, in

the third quarter of 2008 European sales increased 38.0% to $14.9 million

from $10.8 million, sales from Japan increased 133.8% to $6.9 million from

$3.0 million, U.S. sales increased 50.2% to $6.1 million from $4.0 million

and sales from China increased 73.6% to $2.9 million from $1.7 million, as

compared to the third quarter of 2007. Retail sales from LA GO GO, the

Company's branded retail division that launched in early 2008, contributed

$1.0 million, or 3.3% of total net sales, up from 1% in the second quarter

of 2008.

Mr. Edward Yihua Kang, Chairman and Chief Executive Officer, said "Our

third quarter performance reflected the notable progress we are making in

both our wholesale and retail apparel operations. In our wholesale

business, we remain focused on mid-to-high end apparel casual wear, outer

wear and sportswear production. Sales for the third quarter increased in

all of our key geographic areas as we enjoyed new orders from both new and

existing customers. Our wholesale business remains dedicated to delivering

quality products while remaining ahead of the competition in product

development and overall innovation. We are also very pleased with our

retail strategy and the roll out of our LA GO GO stores. We opened 11 new

stores during the quarter for a total of 55 stores as of September 30,

2008. We believe that LA GO GO will become more meaningful to our revenue

and margin performance in the coming quarters."

In the third quarter of 2008, gross profits increased 49.4% to $4.6

million from $3.1 million for the third quarter of 2007. Gross margin

declined 140 basis points to 14.4% for the quarter, compared to 15.8% in

the same period last year. Gross margin declined in the third quarter

primarily due to higher labor costs attributable to the change in China's

labor laws. These higher costs offset gains from cost reduction

initiatives, including a consolidation of the company's purchasing

operations aimed at controlling raw material costs.

Income from operations increased 16.9% to $2.4 million from $2.1 million

in the third quarter of 2007. Third quarter 2008 selling and general and

administrative expenses increased to $2.2 million, or 6.9% of sales,

compared to $1.0 million, or 5.2% of sales in the prior year period. This

increase was primarily due to higher export expenses, elevated marketing

expenses associated with both the international sales force and the

promotion of LA GO GO, and increased payroll expense as Ever-Glory hired

additional management related to the overall plans to grow the business.

Interest expense increased to $1.5 million in the third quarter of 2008

from $680,644 in the third quarter of 2007. The increase in interest

expense is related to a $1.35 million amortization expense recorded in the

2008 third quarter, due to the one-time conversion of convertible notes

issued in August 2007.

Net income for the quarter was $647 thousand compared to $1.3 million in

the same period of 2007. For the third quarter 2008, the Company reported

GAAP earnings per diluted share of $0.05 compared to $0.16 in the third

quarter 2007. GAAP results for the third quarter of 2008 include

approximately $1.4 million, or $0.11 per diluted share, of non-cash

expense related to the unamortized issuance costs and discounts on

convertible notes. Excluding this non-cash expense in the third quarter of

2008, diluted earnings per share was $0.16, compared to $0.16 per diluted

share in the third quarter 2007 (see "About Non-GAAP Financial Measures"

toward the end of this release).

The following table summarizes our results of operations for the three

months ended September 30, 2008 and 2007. The table and the discussion

below should be read in conjunction with the unaudited financial

statements and the notes thereto in the Company's quarterly report on Form

10-Q filed in conjunction with the third quarter of 2008.

Three Months Ended

September 30, 2008

Sales $31,885,576 100.0%

Cost of Sales $27,295,205 85.6%

Gross Profit $4,590,371 14.4%

Operating Expense $2,190,346 6.9%

Income From Operations $2,400,025 7.5%

Other Expenses -$1,484,307 -4.7%

Income before income tax expenses $915,718 2.9%

Income tax expenses $273,203 0.9%

Minority interest -$4,666 0.0%

Net Income $647,181 2.0%

Three Months Ended

September 30, 2007

Sales $19,477,793 100.0%

Cost of Sales $16,404,695 84.2%

Gross Profit $3,073,098 15.8%

Operating Expense $1,020,400 5.2%

Income From Operations $2,052,698 10.5%

Other Expenses -$658,753 -3.4%

Income before income tax expenses $1,393,945 7.2%

Income tax expenses $72,880 0.4%

Minority interest -- --

Net Income $1,321,065 6.8%

Increase % Increase

Sales $12,407,783 63.7%

Cost of Sales $10,890,510 66.4%

Gross Profit $1,517,273 49.4%

Operating Expense $1,169,946 114.7%

Income From Operations $347,327 16.9%

Other Expenses -$825,554 125.3%

Income before income tax expenses -$478,227 -34.3%

Income tax expenses $200,323 274.9%

Minority interest -$4,666 --

Net Income -$673,884 -51.0%

Balance Sheet and Cash Flow

As of September 30, 2008, the Company had $882,548 of cash, compared to

$1.6 million at June 30, 2008. Ever-Glory had working capital of

approximately $13.1 million at September 30, 2008. The Company had

outstanding bank loans of $5.8 million as of September 30, 2008.

LA GO GO Retail Store Development

As of September 30, Ever-Glory has opened 55 new retail LA GO GO stores in

2008, 11 of which opened in the third quarter of 2008. This was slightly

less than prior quarters due to interruptions in new store openings

associated with the summer Olympics. However, as of October 31st, the

Company has opened 68 stores throughout China, with a target of 80 to 100

LA GO GO retail stores by year-end 2008. During the third quarter, LA GO

GO sales grew to 3.3% of total sales, and are expected to grow to 4 to 5%

of total sales in the fourth quarter of 2008.

Business Outlook

For the 2008 fiscal year, the Company reiterates its total net sales

expectations of approximately $90 to $100 million and net income of

approximately $8 to $9 million, which excludes the impact of non-cash

charges related to the conversion of its convertible notes and warrants.

Mr. Kang continued, "We are dedicated to growing our revenues, maximizing

our profit and maintaining strict expense controls during these

challenging times. As we finish 2008 and enter 2009, our plan is to

maintain our advantage as a leading global sourcing suppler with a focus

on expert design, swift production cycles, and lower manufacturing costs;

expand our sourcing network and portfolio of leading sportswear, casual

wear and outwear brands; increase our product offering to the mid-to-upper

end market customer which can generate higher average selling prices for

our garments; continue our retail expansion strategy and build LA GO GO

into a major Chinese mid-end mass market ladies' wear brand.

In spite of the challenging economic market environment, we see steady

demand for our wholesale and retail garment products. We have a solid

understanding of apparel production as well as the financial ability to

continue to expand our business. We look forward to continued growth in

our business as we carry out our strategy of becoming a 'one-stop-service'

global supply chain manager for major apparel brands and continue our

expansion into China's retail apparel market." Concluded Mr. Kang.

About Non-GAAP Financial Measures

This press release contains non-GAAP financial measures for earnings that

exclude the unamortized issuance costs and discounts on convertible notes

issued by the Company. Ever-Glory believes that these non-GAAP financial

measures are useful to investors because they exclude non-cash charges

that Ever-Glory's management excludes when it internally evaluates the

performance of Ever-Glory's business and makes operating decisions,

including internal budgeting, and performance measurement, because these

measures provide a consistent method of comparison to historical periods.

Moreover, management believes these non-GAAP measures reflect the

essential operating activities of Ever-Glory. Accordingly, management

excludes the expense arising from the unamortized issuance costs and

discounts on convertible notes when making operational decisions.

Ever-Glory believes that providing the non-GAAP measures that management

uses to its investors is useful to investors for a number of reasons. The

non-GAAP measures provide a consistent basis for investors to understand

Ever-Glory's financial performance in comparison to historical periods. In

addition, it allows investors to evaluate Ever-Glory's performance using

the same methodology and information as that used by Ever- Glory's

management. Non-GAAP measures are subject to inherent limitations because

they do not include all of the expenses included under GAAP and because

they involve the exercise of judgment of which charges are excluded from

the non- GAAP financial measure. However, Ever-Glory's management

compensates for these limitations by providing the relevant disclosure of

the items excluded.

The following table provides the non-GAAP financial measure and the

related GAAP measure and provides a reconciliation of the non-GAAP measure

to the equivalent GAAP measure.

Adjusted Net Income

(Unaudited)

3Q08 3Q07

GAAP Net Income $647,181 $1,321,065

GAAP Diluted EPS $0.05 $0.16

Addition:

Non-Cash Expense for

Convertible Notes: $1,350,172

Diluted EPS: $0.11

Non GAAP Net Income: $1,997,353

Non GAAP Diluted EPS: $0.16

Shares used in computing

net income per diluted

share: 12.0 million 12.0 million

Conference Call

Ever-Glory will be holding a conference call today at 8:30 a.m. ET, which

will be hosted by Edward Kang, Chairman, President, and CEO, Yan Guo,

Chief Financial Officer, and Angel Zhang, Vice President of Finance. To

participate in the call, please dial +1-719-325-4902. The conference call

will also be broadcast live over the Internet and can be accessed at

http://www.viavid.net and at the Company's web site at:

http://www.everglorygroup.com .

A replay of the call will be available from November 7, 2008 through

November 14, 2008 by calling +1-719-457-0820; pin number: 4144283. A

webcast of the call will also be available at http://www.viavid.net and at

the Company's web site: http://www.everglorygroup.com .

About Ever-Glory International Group, Inc.

Based in Nanjing, China, Ever-Glory International Group, Inc. is a leading

apparel manufacturer and supplier in China. Ever-Glory is the first

Chinese apparel company listed on the American Stock Exchange, 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

services and projects and the Company's continued access to capital 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.

SOURCE Ever-Glory International Group, Inc.

Website: http://www.everglorygroup.com/

Website: http://www.viavid.net/

Contact: Company Contact - Ever-Glory International Group, Inc., In the

U.S.: Angel Zhang, +1-646-385-5222 and In Asia: Yan Guo, +86-25-5209-6222;

Investor Relations - ICR, Inc. In the U.S.: Abbie Gellman, +1-203-682-8200

and In Asia: Bill Zima & Annie Chen, +86-10-8523-3087 for Ever-Glory

International Group, Inc.