Ever-Glory Intl Group (NYSE AMEX:EVK)

Full Year 2011 Results

• Total net sales increased 60.9% year-over-year to $215.8 million 
• Gross profit increased 70.3% year-over-year to $44.5 million 
• Income from operations increased 82.2% year-over-year to $12.1 million 
• Net Income increased 43.8% year-over-year to $9.6 million 

"We're very pleased with the significant progress we made in 2011, as sales in both our retail and wholesale segments continued to increase," commented by Mr. Edward Yihua Kang, Chairman of the Board and Chief Executive Officer of Ever-Glory. "We are especially encouraged by achieving the objectives of LA GO GO store expansion. As of December 31, 2011, we had 467 LA GO GO stores in China, we surpassed our goal of opening an additional 80 to 100 new stores in 2011! We had 293 stores at the end of 2010."

"For 2012 , we see our basic strategies of retail business as unchanged, we will 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, continuing to pursue these measures, we can enhance same-store sales, expand LA GO GO's market penetration and increase its brand position in China."

Business Outlook

For the first 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.

Third Quarter 2011 Results

• Net sales increased 68.1% to $53.7 million compared to $31.9 million in the third quarter of 2010.
• Excluding this non-cash items for the third quarter 2011 and 2010, non-GAAP diluted earnings per share were $0.18 in the third quarter of 2011 compared to $0.08 in the third quarter of 2010.

Second Quarter 2011 Results

• 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.
• 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.
• 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.

"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."

Business Outlook

For the third quarter of 2011, the Company anticipates

• total net sales of $42.0 to $52.0 million 
• net income of $2.0 to $2.5 million.

For full year 2011, Ever-Glory anticipates

• total net sales between $180 and $215 million 
• 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.

• During the first quarter of 2011, net sales increased 103.6% to $53.2 million compared to $26.1 million in the first quarter of 2010
• In the first quarter of 2011, gross profit was $9.1 million, an increase of 67.8% compared to the same period in 2010

"In the first 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 305 stores as of March 31, 2011, we expect to open additional 80-100 new stores in 2011 based on the 293 stores we had at the end of 2010.

• non-GAAP diluted earnings per share were $0.17 in the first quarter of 2011 compared to $0.10 in the first quarter of 2010

For the second quarter of 2011, the Company anticipates total net sales of $32 to $42 million and net income of $1.3 to $1.8 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.

We have a continuing program for the purpose of improving our manufacturing facilities and extending our LA GO GO stores. We anticipate that cash flows from operations and borrowings from banks will be used to pay for these capital commitments.

As part of our business strategy, we expect to continue to review opportunities to buy or invest in other businesses or technologies that we believe would enhance our manufacturing capabilities, or that may otherwise offer growth opportunities. If we buy or invest in other businesses in the future, this may require the use of cash, or we may incur debt or assume contingent liabilities.

2010 Year End Results:

• During the fiscal year ended December 31, 2010, net sales increased 49.3% to $134.1 million from $89.9 million in 2009

"In 2010, we were very pleased to see sales increase significantly in both our wholesale and retail segments," commented Mr. Edward Yihua Kang, Chairman of the Board and Chief Executive Officer of Ever-Glory. "On behalf of our board and management, I extend my warmest thanks to our customers for their trust in us, and to our staff for their tireless efforts and devotion to our customers."

• Total gross profit in 2010 increased 42.9% to $26.2 million from $18.3 million a year ago
• Non GAAP Net Income: $5,629,038 vs. $5,398,155
• non-GAAP diluted earnings per share were $0.38 in 2010 compared to $0.37 in 2009.

For the first quarter of 2011, Every-Glory anticipates total net sales of $45 to $55 million and net income of $1.8 to $2.2 million. For full year 2011, Every-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.

GeoTeam Note:

• Fourth quarter 2010 vs 2009 adjusted EPS was 0.12 vs. $0.02
• 2011 first quarter implied EPS guidance: $0.14
• 2011 full year implied EPS guidance: $0.55

• The Agreement allows the Company to borrow RMB40 million (approximately USD$5.8 million), which amount was funded in full on December 10, 2010 pending final documentation.
• The loan bears a fixed interest rate of 5.56% per annum.  The loan proceeds shall be used by the Company for working capital purposes.  The loan is secured by certain properties and land use rights of the Company.  The principal amount of the loan matures and is payable on December 10, 2011 and the interest is due and payable on the 20th of the last month of each quarter.

Third quarter of 2010

• During the third quarter of 2010, net sales increased 28.1% to $31.9 million compared to $24.9 million in the third quarter of 2009.

• Income from operations for the third quarter of 2010 decreased 20.6% to $1.6 million, or 4.9% of total sales, compared to $2.0 million, or 7.9% of total sales, in the third quarter of 2009. The decrease was mainly due to the increased selling, general and administrative expenses.

• For the third quarter of 2010, net income attributable to the Company was $1.83 million or $0.12 per diluted share, an increase of 1.8% from $1.79 million, or $0.13 per diluted share for the same period of 2009.

• Net income attributable to the Company for the third quarter of 2010 includes $621,600 of non-cash gains related to the change in fair value of derivative liabilities, compared to approximately $143,000 of non-cash expenses related to the change in fair value of derivative liabilities in the third quarter of 2009.

Business Outlook

For the fourth quarter of 2010, the Company anticipates

• total net sales of $40 to $60 million 
• net income of $1.9 to $2.9 million.

For full year 2010, the Company anticipates

• total net sales between $121 and $141 million 
• net income between $5.5 and $6.5 million.
• The full year revenue forecast is comprised of $95 to $110 million in expected wholesale revenue and $26 to $31 million in expected revenue from retail.

Ever-Glory International Group, Inc. announced the resignation of its Chief Financial Officer and Corporate Secretary Ms. Yan Guo, effective on September 2, 2010. Ms. Yan Guo's resignation was due to personal reasons and was not the result of any disagreement with the Company on any matter relating to the Company's operations, policies or practices.

The Company further announced the appointment of Mr. Jiansong Wang as the Chief Financial Officer and Corporate Secretary, effective from September 2, 2010.

 "The second quarter of 2010 proved to be a challenging quarter for us on wholesale business due to the increased labor and raw material prices," commented Mr. Edward Yihua Kang, Chairman of the Board and Chief Executive Officer of Ever-Glory. "But we are also very encouraged by our retail business's performance. Sales generated from our retail business increased considerably in the second quarter of 2010, which demonstrates the strong momentum we have with our retail strategy. We opened 26 new LA GO GO stores in the second quarter of 2010 and now have a total of 210 LA GO GO stores in China as of June 30, 2010."

For the third quarter of 2010, the Company anticipates total net sales of $31 to $34 million and net income of $1.2 to $1.5 million. For full year 2010, the Company anticipates total net sales between $121 and $141 million and net income between $6 and $7 million. The full year revenue forecast is comprised of $95 to $110 million in expected wholesale revenue and $26 to $31 million in expected revenue from retail.