NANJING, China, May 11, 2012 /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 the first quarter ended March 31, 2012.
Total sales for the quarter were $53.2 million, same as the first quarter of last year.
Retail sales from LA GO GO, the Company's branded retail division, increased 79.1% to $22.6 million, compared to $12.6 million last year. This increase was primarily due to the increase in new stores opened and same store sales. Ever-Glory had 484 LA GO GO stores as of March 31, 2012, compared to 305 LA GO GO stores at March 31, 2011. Currently, there are LA GO GO stores in more than 20 provinces in China.
Wholesale sales generated from the Company's wholesale business decreased 24.5% to $30.7 million, compared to $40.6 million last year. This decrease was primarily attributable to decreased sales in the PRC, Germany, and the United States. The reduced sales in the wholesale segment was primarily due to the following factors:(i) due to the worsening European debt crisis, high unemployment rates in the United States, and global economic uncertainty and instability, the advanced economies represented by Europe and the US are recovering slowly, which seriously impacted China's apparel exports, so, our overseas wholesale business also faced declining orders; (ii) domestic apparel market demand was hurt by the warmer than expected weather in the typical peak season in the fourth quarter of 2011 and the first quarter of 2012, which caused purchases by retailers to drop significantly in the first quarter of 2012. Therefore, our wholesale business declined in the first quarter of 2012.
Gross profit in Every-Glory's retail business increased 79.1% to $6.0 million, compared to $3.3 million last year. Gross margin was unchanged from last year at 26.4%.
Gross profit in Every-Glory's wholesale business decreased 2.4% to $5.6 million compared to $5.8 million last year. Gross margin for the wholesale business increased to 18.4% compared to 14.2% last year. The increase was mainly due to decreased raw materials prices and outsourced manufacturing costs.
Total gross profit was $11.6 million, or 21.8% of total sales, compared to $9.1 million, or 17.1% of total sales, last year.
Selling expenses increased 62.6% to $5.8 million compared to $3.6 million last year. As a percentage of sales, selling expenses increased 440 basis point to 11.1% compared to 6.7% last year. The increase was attributable to the increased number of retail employees and higher average salaries, as well as the increased store decoration and marketing expenses associated with the promotion of LA GO GO.
General and administrative expenses increased 35.9% to $3.0 million compared to $2.2 million last year. As a percentage of sales, General and administrative expenses increased 140 basis point to 5.6% compared to 4.2% last year. The increase was attributable to an increase in payroll for additional management and design and marketing staff as a result of our business expansion.
Income from operations for the quarter decreased 16.5% to $2.8 million compared to $3.3 million last year.
In the first quarter of 2012, net income was $2.1 million, or $0.14 per diluted share, a decrease of 18.8% from $2.6 million, or $0.18 per diluted share in the first quarter of 2011. Net income in the first quarter of 2012 includes approximately $0.1 million, or $0.01 per diluted share, of non-cash income related to the change in fair value of a derivative liability compared to 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 in the first quarter of 2011. Excluding this non-cash item for the first quarter 2012 and 2011, non-GAAP diluted earnings per share were were $0.13 in the first quarter of 2012 compared to $0.17 in the first quarter of 2011. (see "About Non-GAAP Financial Measures" below).
Balance Sheet and Cash Flow
As of March 31, 2012, the Company had approximately $12.8 million of cash and cash equivalents, compared to approximately $8.8 million as of December 31, 2011. Ever-Glory had working capital of approximately $37.4 million as of March 31, 2012, and outstanding bank loans of approximately $25.0 million as of March 31, 2012.
For the second quarter of 2012, Every-Glory anticipates total net sales of $50 to $60 million and net income of $1.8 to $2.2 million. For full year 2012, Every-Glory anticipates total net sales between $225 and $260 million and net income between $9.5 and $12 million. The full year revenue forecast is comprised of $140 to $160 million in expected wholesale revenue and $85 to $100 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 for the three months ended March 31, 2012 and 2011:
Adjusted Net Income
Three Months Ended March 31,
GAAP Net Income attributable to the Company
GAAP Diluted EPS
Non-Cash Income for
Change in fair value of derivative liability:
Non GAAP Net Income:
Non GAAP Diluted EPS:
Diluted Shares used in computation
The Company will hold a conference call today at 8:00 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 # 1-719-325-4824 and referring to the confirmation code 1549943. 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. May 11, 2012 through May 18, 2012 Eastern Time by calling # 1-858-384-5517; pin number: 1549943.
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. 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".
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 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 STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (UNAUDITED)
COST OF SALES
General and administrative expenses
Total Operating Expenses
INCOME FROM OPERATIONS
OTHER (EXPENSES) INCOME
Change in fair value of derivative liability
Total Other Expenses
INCOME BEFORE INCOME TAX EXPENSE
INCOME TAX EXPENSE
OTHER COMPREHENSIVE INCOME:
Foreign currency translation gain
OTHER COMPREHENSIVE INCOME
NET INCOME PER SHARE
Basic and diluted
Weighted average number of shares outstanding
Basic and diluted
SOURCE Ever-Glory International Group, Inc.