Ever-Glory Reports Second Quarter 2013 Financial Results

NANJING, China, Aug. 19, 2013 /PRNewswire/ -- Ever-Glory International Group, Inc. (Ever-Glory) (NYSE MKT: EVK), a leading apparel supply chain manager and retailer based in China, today reported its financial results for the second quarter ended June 30, 2013.

Total sales for the quarter were $59.1 million, an increase of 25.3% compared to $47.2 million in the second quarter of last year. This increase was primarily attributable to increased sales in Ever-Glory's retail business, which was partially offset by decreased sales in our wholesales business.

Retail sales for the quarter from LA GO GO, Ever-Glory's branded retail division, increased 74.5% to $32.1 million, compared to $18.4 million for the same period last year. This increase was primarily due to the increase in new stores opened and increase in same store sales. Ever-Glory had 831 LA GO GO stores as of June 30, 2013, compared to 562 LA GO GO stores as of June 30, 2012.

Wholesale sales generated from Ever-Glory's wholesale business for the quarter decreased 6.1% to $27.1 million, compared to $28.8 million for the same period last year. This decrease was primarily attributable to decreased sales in China, the United States, Germany and France. The reduced sales in the oversea segment due to global economic uncertainty and instability, the developed economies represented by Europe and the U.S. are recovering slowly, which seriously impacted China's apparel exports; as a result, Ever-Glory's overseas wholesale business also faced declining orders. Furthermore, domestic fashion consumption in China was weak due to the slow microeconomic development in China. Retailers in China who buy from Ever-Glory's domestic wholesale business reduced their inventories, resulting in a 21.2% decrease in our domestic wholesale sales compared to the same period last year.

Total gross profit for the quarter was $19.5 million, or 32.9% of total sales, compared to $13.6 million, or 28.8% of total sales for the same period last year.

Selling expenses for the quarter increased 42.1% to $9.9 million compared to $7.0 million for the same period last year. As a percentage of sales, selling expenses increased to 16.7% compared to 14.8% for the same period last year. The increase was attributable to the increased number of LA GO GO stores, leading to increased numbers of retail employees and increased average salaries, as well as the increased store decoration and marketing expenses associated with the promotion of the LA GO GO brand.

General and administrative expenses for the quarter increased 31.3% to $5.5 million compared to $4.2 million for the same period last year. As a percentage of sales, general, and administrative expenses increased to 9.3% compared to 8.9% for the same period last year. The increase was attributable to an increase in payroll for additional management and design and marketing staff as a result of Ever-Glory's business expansion.

Income from operations for the quarter increased 67.9% to $4.1 million compared to $2.4 million for the same period last year as a result of increased gross revenue. As a percentage of sales, income from operations accounted for 6.9% of Ever-Glory's total sales for the quarter, an increase of 1.8% compared to 5.1% last year.

For the second quarter, net income was $2.7 million, or $0.18 per diluted share, an increase of 16.0% from $2.4 million, or $0.16 per diluted share in the second quarter of 2012. Net income in the second quarter of 2012 includes approximately $0.2 million, or $0.01 per diluted share, of non-cash income related to the change in fair value of a derivative liability. The change in fair value of a derivative liability in the second quarter of 2013 was not significant. Excluding this non-cash item for the second quarter 2013 and 2012, non-GAAP diluted earnings per share were $0.18 in the second quarter of 2013 compared to $0.15 in the second quarter of 2012. See "About Non-GAAP Financial Measures" below.

Balance Sheet and Cash Flow

As of June 30, 2013, Ever-Glory had approximately $16.1 million of cash and cash equivalents, compared to approximately $9.4 million as of December 31, 2012. Ever-Glory had working capital of approximately $27.2 million as of June 30, 2013, and outstanding bank loans of approximately $44.8 million as of June 30, 2013.

Business Outlook

For the third quarter of 2013, Every-Glory anticipates total net sales in the range of $70 to $80 million and net income in the range of $2 to $2.5 million. For full year 2013, Every-Glory anticipates total net sales in the range of $300 to $360 million and net income in the range of $11 to $17 million. The full year revenue forecast is comprised of $150 to $180 million in anticipated wholesale revenue and $150 to $180 million in anticipated revenue from retail operations.

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 MKT), and has a focus on middle-to-high grade casual wear, outerwear, and sportswear brands. Ever-Glory 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."

About Non-GAAP Financial Measures

This press release and presentations of management related to the subject matter of this press release contains financial measures for earnings that are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP") in that they exclude the items arising from the change in fair value of a derivative liability. Ever-Glory believes that these non-GAAP financial measures are useful to investors because they reflect the essential operating activities of Ever-Glory. Readers are cautioned, however, that non-GAAP measures are subject to inherent limitations because they involve the exercise of judgment about which items are excluded in the determination of the non-GAAP financial measure.

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 for the three months ended June 30, 2013 and 2012:

Adjusted Net Income



Three Months Ended June 30,


2013

2012

GAAP Net Income

$2,727,211

$2,351,149

GAAP Diluted EPS

$0.18

$0.16




Addition:



Non-Cash Income for



Change in fair value of derivative liability:

$2,000

$180,000




Non GAAP Net Income:

$2,725,211

$2,171,149

Non GAAP Diluted EPS:

$0.18

$0.15

Diluted Shares used in computation

14,777,610

14,765,942

Conference Call

Ever-Glory will hold a conference call today at 8:00 a.m. Eastern Time which will be hosted by Jason Jiansong Wang, Chief Financial Officer. Listeners can access the conference call by dialing # 1-913-312-0861 and referring to the confirmation code 6933226. 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 11:00 a.m. August 19, 2013 through August 26, 2013 Eastern Time by calling # 1-858-384-5517; pin number: 6933226.

Cautionary Note Regarding 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 other 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 SUBSDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012 (UNAUDITED)





Three months ended


Six months ended




June 30,


June 30,




2013



2012



2013



2012

NET SALES


$

59,129,485


$

47,195,031


$

137,440,975


$

100,421,204

COST OF SALES



39,650,917



33,608,450



97,669,484



75,231,635














GROSS PROFIT



19,478,568



13,586,581



39,771,491



25,189,569














OPERATING EXPENSES













Selling expenses



9,898,106



6,966,335



21,749,402



12,800,527

General and administrative expenses



5,513,105



4,198,130



9,985,552



7,203,406

  Total Operating Expenses



15,411,211



11,164,465



31,734,954



20,003,933














INCOME FROM OPERATIONS



4,067,357



2,422,116



8,036,537



5,185,636














OTHER INCOME (EXPENSES)













Interest income



342,188



328,736



637,790



610,220

Interest expense



(736,695)



(458,703)



(1,528,224)



(1,004,744)

Change in fair value of derivative liability



2,000



180,000



294,000



290,800

Other income (expenses)



(179,098)



200,010



(147,641)



236,313

  Total Other Income (Expenses)



(571,605)



250,043



(744,075)



(132,589)














INCOME BEFORE INCOME TAX EXPENSE



3,495,752



2,672,159



7,292,462



5,318,225

INCOME TAX EXPENSE



(768,541)



(321,010)



(1,478,172)



(845,866)














NET INCOME



2,727,211



2,351,149



5,814,290



4,472,359














OTHER COMPERHENSIVE (LOSS) INCOME













Foreign currency translation (loss) gain



850,550



(196,365)



1,158,392



200,001

COMPREHENSIVE INCOME


$

3,577,761


$

2,154,784


$

6,972,682


$

4,672,360














EARNINGS PER SHARE













Basic and diluted


$

0.18


$

0.16


$

0.39


$

0.30

Weighted average number of shares outstanding













Basic and diluted



14,777,610



14,765,942



14,775,869



14,763,815

SOURCE Ever-Glory International Group, Inc.



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