PR Newswire | Aug 14, 2020 05:30AM EDT

08/14 04:30 CDT

Ever-Glory Reports Second Quarter 2020 Financial Results NANJING, China, Aug. 14, 2020

NANJING, China, Aug. 14, 2020 /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 second quarter ended June 30, 2020.

Mr. Yihua Kang, Chairman, President and Chief Executive Officer of Ever-Glory, said, "During the second 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 second quarter of 2020, 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 9 stores during 2020, we operated a nationwide network of 935 stores as of June 30, 2020."

"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." concluded Mr. Kang.

Mr. Jason Jiansong Wang, Chief Financial Officer of Ever-Glory, added, "The second quarter results, are coupled with our ability to increase operating leverage. Going forward, we remain confident 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."

SecondQuarter 2020Financial Results

Total sales for the second quarter of 2020 were $50.1 million, a decrease of 35.2% from $77.3 million in the second quarter of 2019. This decrease was primarily driven by a 30.0% decrease in our retail business and a 40.8% decrease in wholesale business.

Sales for the Company's branded fashion apparel retail divisiondecreased by 30.0% to $28.1 million for the second quarter of 2020, compared with $40.1 million for the second quarter of 2019. This decrease was primarily due to a decrease in the amounts of stores and same-store sales. The Company had 935 retail stores as of June 30, 2020, compared with 1,235 retail stores as of June 30, 2019.

Sales for the Company's wholesale division decreased by 40.8% to $22.0 million for the second quarter of 2020, compared with $37.3 million for the second quarter of 2019. This decrease was primarily attributable to a decrease in sales in Hong Kong, Germany, Europe-Other, Mainland China, United Kingdom and United States, partially offset by an increase in sales in Japan.

Total gross profitfor the second quarter of 2020 decreased by 50.2% to $14.4 million, compared with $29.0 million for the second quarter of 2019. Total gross margin decreased to 28.8% from 37.5% for the second quarter of 2019.

Gross profit for the retail business decreased by 56.1% to $10.1 million for the second quarter of 2020, compared with $23.0 million for the second quarter of 2019. Gross margin was 36.2%, compared to 57.3% for the second quarter of 2019.

Gross profit for the wholesale business decreased by 27.5% to $4.4 million for the second quarter of 2020, compared with $6.0 million for the second quarter of 2019. Gross margin increased to 19.7% from 16.1% for the second quarter of 2019.

Selling expenses for the second quarter of 2020 decreased by 35.9% to $12.6 million, or 25.2% of total sales, compared with $19.7 million, or 25.5% of total sales for the second quarter of 2019. The decrease was attributable to the marketing expenses associated with the promotion of the retail brand.

General and administrative expenses for the second quarter of 2020 decreased by 18.6% to $6.0 million, or 11.9% of total sales, compared with $7.3 million, or 9.5% of total sales for the second quarter of 2019. The decrease was attributable to the decline in number of stores.

(Loss)Income from operations for the second quarter of 2020 decreased by 312.8% to ($4.2 million) compared with $2.0 million for the second quarter of 2019.

Net(loss)income attributable to the Companyfor the second quarter of 2020 was ($3.8 million) compared with $1.9 million for the second quarter of 2019. Basic and diluted (loss) earnings per share were ($0.26) for the second quarter of 2020 compared with $0.13 for the second quarter of 2019.

Balance Sheet

As of June 30, 2020, Ever-Glory had approximately $59.2 million of cash and cash equivalents, compared with approximately $48.6 million as of December 31, 2019. Ever-Glory had working capital of approximately $54.4 million as of June 30, 2020, and outstanding bank loans of approximately $40.3 million as of June 30, 2020.

Conference Call

The Company will hold a conference call at 8:00 a.m. Eastern Time on August 14, 2020 (8:00 p.m. Beijing Time on August 14, 2020). Listeners can access the conference call by dialing +1-800-263-0877 or + 1-646-828-8143 and using the access code 4455706. 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 conference call will be available from 11:00 a.m. Eastern Time on August 14 through 11:59 p.m. Eastern Time on August 21, by dialing +1-844-512-2921 or +1-412-317-6671 and using the access code 4455706.

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", "Sea To Sky" 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

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

AS OF JUNE 30, 2020 AND DECEMBER 31, 2019 (UNAUDITED)

2020 2019

ASSETS

CURRENT ASSETS

Cash and cash equivalents $ 59,238 $ 48,551

Restrict cash 17,716 2,204

Trading securities 825 -

Accounts receivable, net 45,766 78,053

Inventories 51,254 67,355

Advances on inventory purchases 5,726 9,681

Value added tax receivable 1,340 2,495

Other receivables and prepaid expenses 4,328 5,293

Amounts due from related parties 329 123

Total Current Assets 186,522 213,755

NONCURRENT ASSETS

Intangible assets, net 4,499 4,729

Property and equipment, net 25,964 28,812

Operating lease right-of-use assets 34,496 53,379

Deferred tax assets 807 996

Total Non-Current Assets 65,766 87,916

TOTAL ASSETS $ 252,288 $ 301,671

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Bank loans $ 40,271 $ 29,931

Accounts payable 51,169 72,418

Accounts payable and other payables - related parties 4,050 4,811

Other payables and accrued liabilities 10,118 19,137

Value added and other taxes payable - 1,657

Income tax payable 222 1,142

Current operating lease liabilities 26,309 44,888

Total Current Liabilities 132,139 173,984

NONCURRENT LIABILITIES

Non-current operating lease liabilities 8,256 8,537

TOTAL LIABILITIES 140,395 182,521

COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS' EQUITY

Stockholders' equity:

Preferred stock ($0.001 par value, authorized 5,000,000shares, no shares issued - -and outstanding)

Common stock ($0.001 par value, authorized 50,000,000shares, 14,804,832 and14,801,770 shares issued and outstanding as of June 30, 15 152020 and December 31,2019, respectively)

Additional paid-in capital 3,645 3,640

Retained earnings 99,833 106,328

Statutory reserve 19,939 19,939

Accumulated other comprehensive (loss) (6,031) (4,330)

Amounts due from related party (3,996) (4,932)

Total equity attributable to stockholders of the Company 113,405 120,660

Noncontrolling interest (1,512) (1,510)

Total Equity 111,893 119,150

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 252,288 $ 301,671

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)(In thousands of U.S. Dollars, except share and per share data or otherwisestated)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)

Three months ended Six months ended

June 30, June 30,

2020 2019 2020 2019

NET SALES $ 50,086 $ 77,316 $ 108,441 $ 165,272

COST OF SALES 35,641 48,330 77,958 106,928

GROSS PROFIT 14,445 28,986 30,483 58,344

OPERATING EXPENSES

Selling expenses 12,626 19,699 26,105 40,706

General andadministrative 5,971 7,337 11,755 14,867expenses

Total Operating 18,597 27,036 37,860 55,573Expenses

(LOSS) INCOME FROM (4,152) 1,950 (7,377) 2,771OPERATIONS

OTHER INCOME(EXPENSES)

Interest income 339 277 616 484

Interest expense (566) (408) (907) (771)

Other income 845 1,409 1,663 1,114

Total Other Income, 618 1,278 1,372 827Net

(LOSS) INCOMEBEFORE INCOME TAX (3,534) 3,228 (6,005) 3,598EXPENSE

Income tax expense (266) (1,455) (493) (2,280)

NET (LOSS) INCOME (3,800) 1,773 (6,498) 1,318

Non-controlling 6 83 3 17interest

NET (LOSS) INCOMEATTRIBUTABLE TO THE (3,794) 1,856 (6,495) 1,335COMPANY

NET (LOSS) INCOME $ (3,800) $ 1,773 $ (6,498) $ 1,318

Foreign currencytranslation (loss) (263) (2,453) (1,700) 1,553gain

COMPREHENSIVE (4,063) (680) (8,198) 2,871(LOSS) INCOME

Comprehensive loss(income)attributable to the 8 49 2 (51)non-controllinginterest

COMPREHENSIVE(LOSS)INCOME ATTRIBUTABLE $ (4,055) $ (631) $ (8,196) $ 2,820TO THECOMPANY

(LOSS) EARNINGS PERSHAREATTRIBUTABLE TO THECOMPANY'SSTOCKHOLDERS

Basic and diluted $ (0.26) $ 0.13 $ (0.44) $ 0.09

Weighted averagenumber of shares 14,804,832 14,800,140 14,804,595 14,800,140outstandingBasic and diluted

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

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

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)

Total

equity

attributable

Accumulated Amounts to Additional Retained Earnings stockholders Non- other due from

Common Stock paid-in Statutory Comprehensive related of the controlling Total

Shares Amount capital Unrestricted reserve loss party Company Interest equity

Balance at January 14,801,770 $ 15 $ 3,640 $ 106,328 $ 19,939 $ (4,330) $ (4,932) $ 120,660 (1,510) $ 119,1501, 2020

Stock issued 3,062 0.003 5 - - - - 5 5for compensation

Net income (loss) - - - (2,701) - - - (2,701) 3 (2,698)

Net cash receivedfrom related partyunder counter - - - - - - 785 785 - 785guaranteeagreement

Foreign currencytranslation gain (1,440) - (1,440) 3 (1,437)(loss)

Balance at March 14,804,832 15 3,645 103,627 19,939 (5,770) (4,147) 117,309 (1,504) 115,80531, 2020

Net (loss) (3,794) (3,794) (6) (3,800)

Net cash receivedfrom related partyunder counter 151 151 151guaranteeagreement

Foreign currency (261) (261) (2) (263)translation loss

Balance at June 30, 14,804,832 $ 15 $ 3,645 $ 99,833 $ 19,939 $ (6,031) $ (3,996) $ 113,405 (1,512) $ 111,8932020

Total

equity

attributable

Retained Earnings Accumulated Amounts to

Additional other due from stockholders Non- Common Stock Statutory Total paid-in Comprehensive related of the controlling

Shares Amount capital Unrestricted reserve (loss) income party Company Interest equity

Balance at January 1, 2019 14,798,198 $ 15 $ 3,627 $ 105,914 $ 19,083 $ (3,578) $ (10,354) $ 114,707 (1,551) $ 113,156

Stock issued 1,942 0.004 8 - - - - 8 8for compensation

Net income (loss) - - - (521) - - - (521) 66 (455)

Net cash received fromrelated party under - - - - - - 1,101 1,101 - 1,101counter guaranteeagreement

Foreign currency 3,972 - 3,972 34 4,006translation gain

Balance at March 31, 2019 14,800,140 15 3,635 105,393 19,083 394 (9,253) 119,267 (1,451) 117,816

Net income (loss) 1,856 1,856 (83) 1,773

Net cash received fromrelated party under 1,390 1,390 1,390counter guaranteeagreement

Foreign currency (2,487) (2,487) 34 (2,453)translation loss

Balance at June 30, 2019 14,800,140 $ 15 $ 3,635 $ 107,249 $ 19,083 $ (2,093) $ (7,863) $ 120,026 (1,500) $ 118,526

EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands of U.S. Dollars, except share and per share data or otherwisestated)

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (UNAUDITED)

2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income $ (6,498) $ 1,318

Adjustments to reconcile net income to cash providedby operating activities:

Depreciation and amortization 3,597 4,491

Loss from sale of property and equipment 189 53

Provision of bad debt allowance 969 682

Provision for obsolete inventories 3,681 1,824

Deferred income tax 71 (1,461)

Stock-based compensation 3 8

Changes in operating assets and liabilities

Accounts receivable 30,444 21,793

Inventories 11,659 1,145

Value added tax receivable 1,076 504

Other receivables and prepaid expenses 737 3,502

Advances on inventory purchases 3,845 (2,353)

Amounts due from related parties (214) (129)

Accounts payable (22,522) (25,954)

Accounts payable and other payables- related parties (466) 58

Other payables and accrued liabilities (7,027) (10,789)

Value added and other taxes payable (1,593) (4,684)

Income tax payable (910) 207

Net cash provided (used in) operating activities 17,041 (9,785)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment (1,018) (4,082)

Purchases of trading securities (825) -

Net cash used in investing activities (1,843) (4,082)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from bank loans 31,995 16,320

Repayment of bank loans (21,173) (19,904)

Repayment of loans from related party 4,027 8,149

Advances to related party (3,129) (5,454)

Net cash provided (used in) financing activities 11,720 (889)

EFFECT OF EXCHANGE RATE CHANGES ON CASH (721) 2,270

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND 26,197 (12,486)RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH ATBEGINNING 50,755 47,012OF PERIOD

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF $ 76,952 $ 34,526PERIOD

Reconciliation of cash, cash equivalents andrestricted cash reported within theirconsolidated balance sheets:

Cash and Cash Equivalents 59,236 47,012

Restricted cash 17,716 -

$ 76,952 $ 47,012

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest $ 907 $ 771

Income taxes $ 493 $ 2,436

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SOURCE Ever-Glory International Group, Inc.