EVK - Ever-Glory Reports Third Quarter 2022 Financial Results

November, 14 2022 04:30 AM Ever-Glory International Group Inc.

PR Newswire

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 20 22 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

Company Name:	Ever-Glory International Group Inc.
Stock Symbol:	EVK
Market:	NASDAQ
Website:	everglorygroup.com

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