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Ever-Glory (EVK) Reports Second Quarter 2011 Financial Results

NANJING, China, Aug. 10, 2011 /PRNewswire-Asia-FirstCall/ — Ever-Glory International Group, Inc. (the “Company” or “Ever-Glory”) (NYSE Amex: EVK), a leading apparel supply chain manager and retailer based in China, today reported its financial results for the second quarter ended June 30, 2011.

During the second quarter of 2011, net sales increased 85.8% to $42.9 million compared to $23.1 million in the second quarter of 2010. The increase was attributable to increased sales in Ever-Glory’s retail business as well as its wholesale business.

Retail sales from LA GO GO, the Company’s branded retail division, increased 91.8% to $9.3 million, compared to $4.8 million in the second quarter of 2010. This increase was primarily due to the increase in same store sales and new stores opened. Ever-Glory had 368 LA GO GO stores as of June 30, 2011, compared to 210 LA GO GO stores at June 30, 2010. LA GO GO stores are located in more than 20 provinces in China.

Sales generated from the Company’s wholesale business increased 84.2% to $33.7 million, compared to $18.3 million in the second quarter of 2010. This increase was primarily attributable to increased sales in Japan, the United States, the United Kingdom, the PRC and Germany. The increased sales in the wholesale segment was primarily due to the following factors: (i) the progressive adjustment of our wholesale client and product portfolio in 2009 and 2010 which resulted in an increase of orders in the wholesale segment; (ii) in response to the global economic uncertainty, in mid 2010 we adjusted our sales strategy to develop more wholesale customers in China. (iii) enlargement of our outsourcing base to Vietnam and Cambodia starting from the third quarter of 2010, which significantly increased our production capacity to process more orders;

In the second quarter of 2011, gross profit was $10.4 million, an increase of 129.7% compared to the same period in 2010. Gross margin increased 4.6% to 24.1% in the second quarter of 2011, compared to 19.5% in the second quarter of 2010. The increase was mainly due to lower outsourced manufacturing costs.

“In the second quarter of 2011, sales increased significantly in both our wholesale and retail segments,” commented Mr. Edward Yihua Kang, Chairman of the Board and Chief Executive Officer of Ever-Glory. “We are especially encouraged by our strong performance. The total number of LA GO GO stores in China increased from 293 at the end of 2010 to 368 stores as of June 30, 2011, we expect to open an additional 80-100 new stores in 2011 based on the 293 stores we had at the end of 2010.

“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.”

Selling expenses increased 82.9% to $3.8 million in the second quarter of 2011 from $2.1 million in the second quarter of 2010. The increase was attributable to the enlarged number of retail employees and increased average salaries, as well as increased store decoration and marketing expenses associated with the promotion of the LA GO GO brand.

General and administrative expenses increased 135.6% to $4.1 million in the second quarter of 2011 from $1.7 million in the second quarter of 2010. This 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 second quarter of 2011 increased 253.0% to $2.5 million, compared to $0.7 million in the second quarter of 2010.

For the second quarter of 2011, GAAP net income attributable to the Company was $2.3 million, or $0.15 per diluted share, an increase of 182.1% from $0.8 million, or $0.05 per diluted share in the second quarter of 2010. GAAP net income attributable to the Company results for in the second quarter of 2011 include 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. The change in fair value of a derivative liability in the second quarter of 2010 was not significant. Excluding these non-cash items for the second quarter 2011 and 2010, non-GAAP diluted earnings per share were $0.14 in the second quarter of 2011 compared to $0.06 in the second quarter of 2010. (see “About Non-GAAP Financial Measures” below).

Balance Sheet and Cash Flow

As of June 30, 2011, the Company had approximately $10.7 million of cash and cash equivalents, compared to approximately $3.7 million as of December 31, 2010. Ever-Glory had working capital of approximately $29.6 million as of June 30, 2011, and outstanding bank loans of approximately $21.0 million as of June 30, 2011.

Business Outlook

For the third quarter of 2011, the Company anticipates total net sales of $42.0 to $52.0 million and net income of $2.0 to $2.5 million. For full year 2011, Ever-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 for the three months ended June 30, 2011 and 2010:

Adjusted Net Income

Three Months Ended June 30,

2011

2010

GAAP Net Income attributable to the Company

$2,258,869

$800,773

GAAP Diluted EPS

$0.15

$0.05

Addition:

Non-Cash Income(Expense) for

Convertible Notes:

$(134,500)

$13,317

Non GAAP Net Income:

$2,124,369

$814,090

Non GAAP Diluted EPS:

$0.14

$0.06

Diluted Shares used in computation

14,755,494

14,729,807

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 and CEO, and Jason Jiansong Wang, Chief Financial Officer. Listeners can access the conference call by dialing # 1-719-325-2234 and referring to the confirmation code 5385448. 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 am August 10, 2011 through August 17, 2011 Eastern Time by calling # 1-858-384-5517; pin number: 5385448.

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 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 SUBSDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010 (UNAUDITED)

Three months ended

Six months ended

June 30,

June 30,

2011

2010

2011

2010

NET SALES

$

42,923,640

$

23,102,498

$

96,131,877

$

49,242,044

COST OF SALES

32,566,893

18,594,515

76,663,118

39,305,039

GROSS PROFIT

10,356,747

4,507,983

19,468,759

9,937,005

OPERATING EXPENSES

Selling expenses

3,766,770

2,059,712

7,355,875

3,748,885

General and administrative expenses

4,117,313

1,747,882

6,329,155

3,659,300

Total Operating Expenses

7,884,083

3,807,594

13,685,030

7,408,185

INCOME FROM OPERATIONS

2,472,664

700,389

5,783,729

2,528,820

OTHER INCOME (EXPENSES)

Interest income

124,401

25,639

146,874

93,747

Interest expense

(258,924)

(113,781)

(521,175)

(232,820)

Change in fair value of derivative liability

134,500

(13,317)

330,300

71,202

Other income

204

29,583

24,134

32,792

Gain on sale of investment

346,188

346,188

Total Other Income (Expenses)

181

274,312

(19,867)

311,109

INCOME BEFORE INCOME TAX EXPENSE

2,472,845

974,701

5,763,862

2,839,929

INCOME TAX EXPENSE

(213,976)

(173,928)

(892,997)

(404,780)

NET INCOME

2,258,869

800,773

4,870,865

2,435,149

ADD(LESS): NET LOSS (INCOME) ATTRIBUTABLE TO THE NONCONTROLING INTEREST

NONCONTROLING INTEREST

(58,701)

NET INCOME ATTRIBUTABLE TO THE COMPANY

$

2,258,869

$

800,773

$

4,870,865

$

2,376,448

NET INCOME

$

2,258,869

$

800,773

$

4,870,865

$

2,435,149

Foreign currency translation gain

479,660

138,315

716,495

172,448

COMPREHENSIVE INCOME

2,738,529

939,088

5,587,360

2,607,597

COMPREHENSIVE INCOME ATTRIBUTABLE TO

THE NONCONTROLING INTEREST

(58,721)

COMPREHENSIVE INCOME ATTRIBUTABLE TO

THE COMPANY

$

2,738,529

$

939,088

$

5,587,360

$

2,548,876

EARNINGS PER SHARE

Attributable to the Companys common stockholders

Basic

$

0.15

$

0.05

$

0.33

$

0.16

Diluted

$

0.15

$

0.05

$

0.33

$

0.16

Weighted average number of shares outstanding

Basic

14,755,494

14,729,807

14,754,687

14,725,142

Diluted

14,755,494

14,729,807

14,754,687

14,852,791

Contact Information

Investor and Media Inquiries:

Yanhua Huang

Tel: +86-25-5209-6875

SOURCE Ever-Glory International Group, Inc.

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Wednesday, August 10th, 2011 Uncategorized
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