Ever-Glory Reports 2010 Full Year Financial Results

Net sales and income from operations show strong increases as the Company consolidates and grows retail operations in 2010 and continues expansion of its wholesale apparel business in China.

Mar 30, 2011, 06:30 ET from Ever-Glory International Group, Inc.

NANJING, China, March 30, 2011 /PRNewswire-Asia-FirstCall/ -- Ever-Glory International Group, Inc. (the "Company," "Ever-Glory") (NYSE Amex: EVK), a leading apparel supply chain manager and retailer based in China, today reported its financial results for its fiscal year ended December 31, 2010.

Full Year 2010 Highlights

  • Total net sales increased 49.3% to $134.1 million
  • Gross profit increased 42.9% to $26.2 million
  • Income from operations increased 8.2% to $6.6 million
  • Acquired the 40% non-controlling interest in LA GO GO, bringing the Company's ownership of its retail segment to 100%

During the fiscal year ended December 31, 2010, net sales increased 49.3% to $134.1 million from $89.9 million in 2009. The increase in sales was primarily attributable to increased sales in Ever-Glory's retail business as well as its wholesale business in China.

In 2010, retail sales from LA GO GO, the Company's branded retail division, increased 122.1% to $29.3 million, compared to $13.2 million in 2009. This increase was primarily due to the increase of same store sales and new stores opened. Ever-Glory increased the number of LA GO GO stores from 185 at the end of last year to 293 stores as of December 31, 2010,

In 2010, sales generated from the Company's wholesale business increased 36.7% to $104.8 million, compared to $76.7 million in 2009. The increase was mainly attributable to the increased sales in China. In response to the global economic uncertainty and political instability in fiscal year 2010, Ever-Glory shifted its wholesale marketing effort to develop its wholesale business in the Chinese market. Management believes that Ever-Glory's expertise in supply chain management and years of experience in the wholesale business enabled the Company to quickly obtain significant orders in the Chinese wholesale market.

"In 2010, we were very pleased to see sales increase significantly in both our wholesale and retail segments," commented Mr. Edward Yihua Kang, Chairman of the Board and Chief Executive Officer of Ever-Glory. "On behalf of our board and management, I extend my warmest thanks to our customers for their trust in us, and to our staff for their tireless efforts and devotion to our customers."

In April 2010, Ever-Glory acquired the 40% non-controlling interest in LA GO GO from its joint venture partner, Shanghai La Chapelle, bringing the Company's ownership stake in its retail business to 100%. In connection with such acquisition, and in order to focus on the Company's core businesses, Ever-Glory sold the 10% equity interest in Shanghai La Chapelle which it acquired when Every-Glory and Shanghai La Chapelle originally formed the LA GO GO joint venture in 2008.  

Following this acquisition, in 2010, Ever-Glory focused on the full integration of the LA GO GO business and management into the Company and continued to implement the Company's brand strategy. Through these efforts, the retail business achieved strong performance, and management believes that going into 2011 and beyond, Ever-Glory has strong momentum with its retail strategy. The total number of LA GO GO stores in China increased from 185 at the end of 2009 to 293 stores as of December 31, 2010, and Ever-Glory expects to open additional 80-100 stores in 2011.

"In 2011, we plan to continue to develop LA GO GO through perfecting design styles, improving store management efficiency and opening more stores in desired locations," continued Mr. Kang. "We are confident that, through these measures, we can enhance same-store sales, expand LA GO GO's market penetration and increase its brand influence in China."

Gross profit in Every-Glory's wholesale business increased 19.6% to $16.1 million from $13.5 million a year ago. Gross margin for the wholesale business decreased to 15.4% in 2010 compared to 17.6% in 2009. The decrease was primarily due to an increase in raw material prices, outsourced production costs, and consequently decreased average margin on overseas orders. In response, the Company adjusted its wholesale strategy and started to vigorously develop the Chinese wholesale market in 2010.

Gross profit in Every-Glory's retail business increased 107.6% to $10.1 million from $4.8 million a year ago. Gross margin for the retail business decreased to 34.3% in 2010 compared to 36.7% in 2009. The decrease in gross margin was primarily due to the lowered retail tag price that was implemented in an effort to increase sales volume.

Total gross profit in 2010 increased 42.9% to $26.2 million from $18.3 million a year ago. Gross margin decreased to 19.5% in 2010, compared to 20.4% in 2009.  

Selling expenses increased 109.5% to $9.8 million in 2010, an increase of $5.1 million compared to 2009. As a percent of sales, selling expense accounted for 7.3% of our total sales in 2010, an increase of 2.1% compared to 2009. The increase was attributable to the enlarged number of retail employees and increased average salary, as well as the increased decoration and marketing expenses associated with the promotion of LA GO GO brand.

General and administrative expenses increased 29.8% to $9.8 million in 2010, an increase of $2.2 million compared to 2009. As a percentage of sales, general and administrative expenses accounted for 7.3% of our total sales in 2010, a decrease of 1.1% compared to 2009. The total general and administrative expenses increase was attributable to an increase in payroll for additional management and design and marketing staff as a result of our business expansion. The decrease in general and administrative expenses as a percentage of total sales was due to an increase in our sales.

As a result, income from operations in 2010 increased 8.2% to $6.6 million compared to $6.1 million in 2009.  

For 2010, GAAP net income attributable to the Company was $6.7 million, or $0.45 per diluted share, an increase of 56.4% from $4.3 million, or $0.29 per diluted share in 2009. GAAP net income attributable to the Company results for 2010 include approximately $1.0 million, or $0.07 per diluted share, of non-cash income related to the change in fair value of a derivative liability compared to approximately $1.1 million, or $0.08 per diluted share, of non-cash expense related to the change in fair value of a derivative liability in 2009. Excluding these non-cash items for 2010 and 2009, non-GAAP diluted earnings per share were $0.38 in 2010 compared to $0.37 in 2009 (see "About Non-GAAP Financial Measures" below).

Balance Sheet and Cash Flow

As of December 31, 2010, the Company had approximately $3.7 million of cash and cash equivalents, compared to approximately $3.6 million as of December 31, 2009. Ever-Glory had working capital of approximately $24.5 million as of December 31, 2010, and outstanding bank loans of approximately $18.1 million as of December 31, 2010.

Business Outlook

For the first quarter of 2011, Every-Glory anticipates total net sales of $45 to $55 million and net income of $1.8 to $2.2 million. For full year 2011, Every-Glory anticipates total net sales between $180 and $215 million and net income between $7.3 and $9.0 million. The full year revenue forecast is comprised of $120 to $150 million in expected wholesale revenue and $60 to $65 million in expected revenue from retail operations.

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.

Adjusted Net Income

2010

2009

GAAP Net Income attributable to the Company                    

$6,650,077

$4,252,096

GAAP Diluted EPS

$0.45

$0.29

Addition:

Non-Cash (Income)/Expense for

Convertible Notes:

($1,021,039)

$1,146,059

Diluted EPS:

($0.07)

$0.08

Non GAAP Net Income:

$5,629,038

$5,398,155

Non GAAP Diluted EPS:

$0.38

$0.37

Diluted Shares used in computation

14,737,945

14,703,522

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, and Jason Jiansong Wang, Chief Financial Officer. Listeners can access the conference call by dialing #1-719-325-4802 and referring to the confirmation code 7957991. 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 11:30 a.m. March 30, 2011 through April 6, 2011 Eastern Time by calling # 1-858-384-5517; pin number: 7957991.

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. Every-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."

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 revenue, net income and new retail store 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.

Contact Information

Company Contact

Yanhua Huang

Tel:  +86-25-5209-6875

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

2010

2009

NET SALES

Related parties

$

$

73,207

Third parties

134,145,710

89,797,784

Total net sales

134,145,710

89,870,991

COST OF SALES

Related parties

54,965

Third parties

107,987,342

71,510,802

Total cost of sales

107,987,342

71,565,767

GROSS PROFIT

26,158,368

18,305,224

OPERATING EXPENSES

Selling expenses

9,760,424

4,659,103

General and administrative expenses

9,782,025

7,533,411

Total operating expenses

19,542,449

12,192,514

INCOME FROM OPERATIONS

6,615,919

6,112,710

OTHER INCOME (EXPENSE)

Interest income

125,492

620,731

Interest expense

(490,001)

(443,106)

Change in fair value of derivative liability

1,021,039

(1,146,059)

Other income

221,404

52,490

Gain on sale of investment

349,139

Total other income(expense)

1,227,073

(915,944)

INCOME BEFORE INCOME TAX EXPENSE

7,842,992

5,196,766

INCOME TAX EXPENSE

(1,134,214)

(814,686)

NET INCOME

6,708,778

4,382,080

LESS:NET (INCOME) ATTRIBUTABLE TO THE NONCONTROLLING INTEREST

(58,701)

(129,984)

NET INCOME ATTRIBUTABLE TO THE COMPANY

$

6,650,077

$

4,252,096

NET INCOME

$

6,708,778

$

4,382,080

Foreign currency translation gain (loss)

1,216,623

(35,838)

COMPREHENSIVE INCOME

7,925,401

4,346,242

COMPREHENSIVE (INCOME) ATTRIBUTABLE TO

THE NONCONTROLLING INTEREST

(58,721)

(116,569)

COMPREHENSIVE INCOME ATTRIBUTABLE TO

THE COMPANY

$

7,866,680

$

4,229,673

EARNINGS PER SHARE

Attributable to the Company's common stockholders

Basic

$

0.45

$

0.31

Diluted

$

0.45

$

0.29

Weighted average number of shares outstanding

Basic

14,737,945

13,552,837

Diluted

14,737,945

14,703,522

SOURCE Ever-Glory International Group, Inc.