Ever-Glory Reports Third Quarter 2022 Financial Results

News provided by

EVER-GLORY INTERNATIONAL GROUP INC

Nov 14, 2022, 04:30 ET

NANJING, China, Nov. 14, 2022 /PRNewswire/ -- Ever-Glory International Group, Inc. (the "Company" or "Ever-Glory") (NASDAQ: EVK), a retailer of branded fashion apparel and a leading global apparel supply chain solution provider, reported its financial results today for the third quarter ended September 30, 2022.

Mr. Yihua Kang, Chairman, President and Chief Executive Officer of Ever-Glory, said, "During the third quarter, we maintained our focus on developing the retail business through our multi-brand strategy and store network optimization initiative, while improving our wholesale business by upgrading customer portfolio and enhancing our account receivables."

"During the third quarter of 2022, our retail brands continue to attract new customers and retain existing customers by focusing on design, quality and value," Mr. Kang continued. "Following the remodeling or relocation of 29 stores during 2022, we operated a nationwide network of 774 stores as of September 30, 2022."

"Looking at our wholesale business, we maintained focus on upgrading customer portfolio to reduce credit risk and improve margin in light of weak micro-environment and enhancing our account receivables. Going forward, we'll implement a stricter client evaluation system and remain diligent in our account receivables collection. We believe the enduring strength of our wholesale business will support its long-term profitability," Mr. Kang concluded.

Mr. Jason Jiansong Wang, Chief Financial Officer of Ever-Glory, added, "The third quarter results are coupled with our ability to increase operating leverage. Going forward, we remain confidence in the long-term prospects of our business and we will continue implementing our margin enhancement and cost control measures to further strengthen the profitability of our business."

Third Quarter 2022 Financial Results 

Total sales for the third quarter of 2022 were $106.4 million, an increase of 12.7% from $94.4 million in the third quarter of 2021. This increase was primarily driven by a 33.0% increase in our wholesale business, partially offset by a 26.4% decrease in retail business.

Sales for the Company's wholesale division increased by 33.0% to $82.7 million for the third quarter of 2022, compared with $62.2 million for the third quarter of 2021. This increase was primarily attributable to increased sales in Mainland China, Hong Kong, the United Kingdom, and other European markets partially offset for decreased sales in Japan and the United States.

Sales for the Company's branded fashion apparel retail division decreased by 26.4% to $23.7 million for the third quarter of 2022, compared with $32.2 million for the third quarter of 2021. This decrease was primarily due to a decrease in same-store sales. The Company operated 774 retail stores as of September 30, 2022, compared with 893 retail stores as of September 30, 2021,.

Total gross profit for the third quarter of 2022 decreased by 30.9% to $16.0 million, compared with $23.2 million for the third quarter of 2021. Total gross margin for the third quarter of 2022 decreased to 15.1% from 24.6% for the third quarter of 2021.

Gross profit for the wholesale business increased by 2.4% to $10.5 million for the third quarter of 2022, compared with $10.2 million for the third quarter of 2021. Gross margin for the third quarter of 2022 decreased to 12.6% from 16.4% for the third quarter of 2021.

Gross profit for the retail business decreased by 57.0% to $6.0 million for the third quarter of 2022, compared with $13.0 million for the third quarter of 2021. Gross margin for the third quarter of 2022 was 23.6% compared to 40.3% for the third quarter of 2021.

Selling expenses for the third quarter of 2022 decreased by 11.4% to $12.8 million, or 12.0% of total sales, compared with $14.4 million, or 15.3% of total sales for the third quarter of 2020. The decrease was attributable to the decreased average salaries and decreased business trips.

General and administrative expenses for the third quarter of 2022 decreased by 1.7% to $9.3 million, or 8.7% of total sales, compared with $9.5 million, or 10.0% of total sales for the third quarter of 2021. The decrease was attributable to the decreased publicity expense and the depreciation of RMB.

Loss from operations was $6.1 million for the third quarter of 2022, compared to $0.7 million for the third quarter of 2021.

Balance Sheet 

As of September 30, 2022, Ever-Glory had approximately $32.2 million of cash and cash equivalents, compared with approximately $56.6 million as of December 31, 2021. Ever-Glory had working capital of approximately $41.6 million as of September 30, 2022, and outstanding bank loans of approximately $63.4 million as of September 30, 2022.

Conference Call

The Company will hold a conference call at 6:00 a.m. Eastern Time on November 14, 2022(7:00 p.m. Beijing Time on November 14, 2022). Listeners can access the conference call by dialing +1-877-704-4453 or +1-201-389-0920 and using the access code 13734457. The conference call will also be webcast live over the Internet and can be accessed at the Company's website at http://www.everglorygroup.com.

A replay of the call will be available from 9:00 a.m. Eastern Time on November 14 through 11:59 p.m. Eastern Time on November 21 by calling +1-844-512-2921 or +1-412-317-6671 with pin number 13734457.

About Ever-Glory International Group, Inc.

Based in Nanjing, China, Ever-Glory International Group, Inc. is a retailer of branded fashion apparel and a leading global apparel supply chain solution provider. Ever-Glory is the first Chinese apparel Company listed on the American Stock Exchange (now named as NYSE MKT) in July 2008 and then transferred to The NASDAQ Global Market on December 31, 2015. Ever-Glory offers apparel to woman in China under its own brands "La go go", "Velwin" and "idole". Ever-Glory is also a leading global apparel supply chain solution provider with a focus on middle-to-high end casual wear, outerwear, and sportswear brands. Ever-Glory services a number of well-known brands and retail stores by providing a complete set of supply chain management services, including: fabric development and design, sampling, sourcing, quality control, manufacturing, logistics, customs clearance and distribution.

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 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.

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands of U.S. Dollars, except share and per share data or otherwise stated)




September 30,
2022



December 31,
2021


ASSETS














CURRENT ASSETS







    Cash and cash equivalents


$

32,177



$

56,573


    Restricted cash



39,706




40,768


    Trading securities



2,189




3,251


    Accounts receivable, net



79,875




69,859


    Inventories



49,038




63,841


    Advances on inventory purchases



4,260




8,179


    Value added tax receivable



2,144




1,693


    Other receivables and prepaid expenses



6,049




6,345


    Amounts due from related parties



-




220


Total Current Assets



215,438




250,729











NON-CURRENT ASSETS









    Equity security investment



4,566




5,682


    Intangible assets, net



4,211




4,794


    Property and equipment, net



31,148




36,340


    Operating lease right-of-use assets



38,905




50,077


    Deferred tax assets



768




899


    Other non-current assets



3,520




784


Total Non-Current Assets



83,118




98,576


TOTAL ASSETS


$

298,556



$

349,305











LIABILITIES AND STOCKHOLDERS' EQUITY


















CURRENT LIABILITIES









    Bank loans


$

63,360



$

68,992


    Accounts payable



59,894




67,930


    Accounts payable and other payables – related parties



2,907




1,332


    Other payables and accrued liabilities



14,166




18,531


    Value added and other taxes payable



842




999


    Income tax payable



1,107




334


    Current operating lease liabilities



31,538




41,633


Total Current Liabilities



173,814




199,751





Non-current operating lease liabilities



7,538




8,596


TOTAL LIABILITIES



181,352




208,347





COMMITMENTS AND CONTINGENCIES (Note 9)

















STOCKHOLDERS' EQUITY









    Common stock ($0.001 par value, authorized 50,000,000 shares, 14,818,006
      and 14,655,926 issued and outstanding as of September 30, 2022,
      respectively, 14,812,312 and 14,664,978 issued and outstanding as of
      December 31, 2021, respectively)



15




15


    Additional paid-in capital



3,670




3,660


    Retained earnings



99,398




108,210


    Statutory reserve



21,245




21,245


    Treasury stock (at cost,162,080 and 147,334 shares at September 30, 2022
      and December 31, 2021, respectively)



(400)




(363)


    Accumulated other comprehensive (loss) income



(6,724)




8,191











Total Equity



117,204




140,958


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

298,556



$

349,305


EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 


(Unaudited)


(In thousands of U.S. Dollars, except share and per share data or otherwise stated)






Three months ended



Nine months ended




September 30,



September 30,




2022



2021



2022



2021


NET SALES


$

106,437



$

94,406



$

235,022



$

225,776


COST OF SALES



90,390




71,196




181,194




161,738



















GROSS PROFIT



16,047




23,210




53,828




64,038



















OPERATING EXPENSES

















    Selling expenses



12,792




14,443




38,153




44,495


    General and administrative expenses



9,306




9,467




21,821




24,980


       Total Operating Expenses



22,098




23,910




59,974




69,475



















LOSS FROM OPERATIONS



(6,051)




(700)




(6,146)




(5,437)



















OTHER (EXPENSES) INCOME

















    Interest income



22




176




299




928


    Interest expense



(524)




(1,218)




(1,458)




(1,909)


    Government subsidy



192




340




397




842


    (Loss) gain from changes in fair values of investments



(915)




(123)




(1,587)




2,151


    Other income



317




253




885




1,027


Total Other (Expenses) Income, Net



(908)




(572)




(1,464)




3,039



















LOSS BEFORE INCOME TAX EXPENSE



(6,959)




(1,272)




(7,610)




(2,398)




Income tax benefit (expense)



835




(1,945)




(1,203)




(3,759)




NET LOSS


$

(6,124)



$

(3,217)



$

(8,813)



$

(6,157)




    Foreign currency translation (loss) gain



(6,336)




(1,061)




(14,915)




1,020




COMPREHENSIVE LOSS


$

(12,460)




(4,278)



$

(23,728)



$

(5,137)




































LOSS PER SHARE

















    Basic and diluted


$

(0.41)



$

(0.22)



$

(0.59)



$

(0.42)


    Weighted average number of shares outstanding,
      basic and diluted



14,817,053




14,811,073




14,815,077




14,810,585


EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

(In thousands of U.S. Dollars, except share and per share data or otherwise stated)

























































Common Stock


Additional




Retained Earnings


Accumulated


Amounts




other

due from



Shares


Amount


paid-in


Treasury


Unrestricted


Statutory


comprehensive


related


Total equity


capital

stock

reserve

income (loss)

party

Balance at
    January 1, 2022


14,812,312


$

15


$

3,660


$

(363)


$

108,210


$

21,245


$

8,191


$

-


$

140,958

Stock issued
    for compensation


2,042



-



5



-



-



-



-



-



5

Net loss


-



-



-



-



(5,089)



-



-



-



(5,089)

Repurchase of
    14,746 shares of
    common stock


-



-



-



(37)






-



-



-



(37)

Foreign currency
    translation loss




















(836)






(836)

Balance at
    March 31, 2022


14,814,354


$

15


$

3,665


$

(400)


$

103,121


$

21,245


$

7,355


$

-


$

135,001

Net income


-



-



-



-



2,400



-



-



-



2,400

Foreign currency
    translation loss




















(7,743)






(7,743)

Balance at
    June 30, 2022


14,814,354


$

15


$

3,665


$

(400)


$

105,521


$

21,245


$

(388)



-


$

129,658

Stock issued
    for compensation


3,652



-



5



-



-



-



-



-



5

Net  loss


-



-



-



-



(6,123)



-



-



-



(6,123)

Foreign currency
    translation loss




















(6,336)






(6,336)

Balance at
    September 30, 2022


14,818,006


$

15


$

3,670


$

(400)


$

99,398


$

21,245


$

(6,724)


$

-


$

117,204






























Common Stock


Additional




Retained Earnings


Accumulated


Amounts



other

due from



Shares


Amount


paid-in


Treasury


Unrestricted


Statutory


comprehensive


related


Total equity

capital

stock

reserve

income 

party

Balance at
    January 1, 2021


14,809,160


$

15


$

3,650


$

-


$

109,171


$

20,376


$

4,590


$

(3,353)


$

134,449

Stock issued
    for compensation


1,500



-



5



-



-



-



-



-



5

Net  loss


-



-



-



-



(1,170)



-



-



-



(1,170)

Net cash received
    from related
    party under
    counter guarantee agreement

-



-



-



-



-



-



-



379



379

Foreign currency
    translation adjustment




















(1,352)






(1,352)

Balance at
    March 31, 2021


14,810,660


$

15


$

3,655


$

-


$

108,001


$

20,376


$

3,238


$

(2,974)


$

132,311

Net loss


-



-



-



-



(1,771)



-



-



-



(1,771)

Transfer to
    reserve


-



-



-



-



-



-



-



-



-

Net cash
    received from
    related party under
    counter guarantee
    agreement

-



-



-



-



-



-



-



386



386

Foreign currency
    translation adjustment




















3,434






3,434

Balance at
    June 30, 2021


14,810,660


$

15


$

3,655


$

-


$

106,230


$

20,376


$

6,672


$

(2,588)


$

134,360

Stock issued for
    compensation


1,652



-



5



-



-



-



-



-



5

Net  loss


-



-



-



-



(3,217)



-



-



-



(3,217)

Net cash received
    from related party under
    counter guarantee agreement

-



-



-



-



-



-



-



313



313

Foreign currency
    translation adjustment




















(1,062)






(1,062)

Balance at
    September 30, 2021


14,812,312


$

15


$

3,660


$

-


$

103,013


$

20,376


$

5,610


$

(2,275)


$

130,399

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


(In thousands of U.S. Dollars, except share and per share data or otherwise stated)








Nine Months Ended




September 30,
2022



September 30,
2021


CASH FLOWS FROM OPERATING ACTIVITIES







    Net loss


$

(8,813)




(6,157)


Adjustments to reconcile net loss to cash used in operating activities:









    Depreciation and amortization



5,256




4,384


    Loss from sale of property and equipment



141




590


    Provision of bad debt allowance



3,943




676


    Provision for obsolete inventories



5,296




842


    Changes in fair value of trading securities



1,010




(200)


    Changes in fair value of investments



577




(1,951)


    Deferred income tax



42




644


    Stock-based compensation



10




10


    Changes in operating assets and liabilities









    Accounts receivable



(20,334)




(8,614)


    Inventories



4,353




(13,949)


    Value added tax receivable



(671)




(1,235)


    Other receivables and prepaid expenses



(434)




(1,096)


    Advances on inventory purchases



3,317




586


    Amounts due from related parties



211




(1,514)


    Accounts payable



229




5,930


    Accounts payable and other payables- related parties



1,779




(3,204)


    Other payables and accrued liabilities



(5,124)




(3,332)


    Value added and other taxes payable



891




(360)


    Income tax payable



(81)




831


Net cash used in operating activities



(8,402)




(27,119)




















CASH FLOWS FROM INVESTING ACTIVITIES









    Purchases of property and equipment and intangible asset



(3,645)




(5,109)


    Net proceeds from sale (purchase) of trading securities



52




(1,077)


    Investment payment of other non-current assets



(3,028)




(773)


Net cash used in investing activities



(6,621)




(6,959)




















CASH FLOWS FROM FINANCING ACTIVITIES









    Proceeds from bank loans



56,018




56,110


    Repayment of bank loans



(54,504)




(54,565)


    Repurchase of common stock



(37)




-


    Net collection of amounts due from related party (equity)



-




1,630


Net cash provided by financing activities



1,477




3,175











EFFECT OF EXCHANGE RATE CHANGES ON CASH



(11,912)




693











NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH



(25,458)




(30,211)











CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD



97,341




121,723











CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD


$

71,883



$

91,512











Reconciliation of cash, cash equivalents and restricted cash reported within their
    consolidated balance sheets:


















Cash and Cash Equivalents



32,177




48,336


Restricted cash



39,706




43,176




$

71,883



$

91,512


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:









    Cash paid during the period for:









    Interest


$

1,458



$

1,909


    Income taxes


$

1,175



$

2,272


    SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:









    Common stock issued for compensation


$

10



$

10


SOURCE EVER-GLORY INTERNATIONAL GROUP INC