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Ever-Glory International Group, Inc. News

Ever-Glory Reports First Quarter 2008 Financial Results

NANJING, China, May 6 Xinhua-PRNewswire-FirstCall — Ever-Glory International Group, Inc. (OTC Bulletin Board: EVGY) ("Ever-Glory", the "Company"), a leading apparel manufacturer in the People's Republic of China ("PRC"), announced its financial results for the first quarter ended March 31, 2008.

First Quarter 2008 Highlights — Total net sales increased 20.2% year-over-year to $19.7 million — Gross profit increased 55.5% year-over-year to $3.7 million — Gross margin improved to 18.8% from 14.6% a year ago — Operating income increased 53.9% to $2.2 million — Operating margin improved to 11.3% from 8.8% a year ago — Net income was $1.2 million, or $0.10 per fully diluted share — Non-GAAP net income increased 30.9% year-over-year to $1.6 million, or $0.13 per fully diluted share — Launched the private label La Go Go line of women's apparel and opened retail counters — Received production orders valued at about $2.5 million from CAbi, Carol Anderson, by invitation — Appointed three independent directors to strengthen the Company's corporate governance — Applied for a listing on the American Stock Exchange

First Quarter 2008 Results

During the first quarter of 2008, total net sales were $19.7 million, up 20.2% from $16.4 million in the same quarter of 2007. The increase in sales was primarily attributable to overall increases in sales to customers in Europe, Japan and China, where sales grew 22%, 28% and 95%, respectively, from a year ago. Sales to the U.S. declined 20%, due to a decrease in order volume from one customer in the U.S. However, the Company expects this decline to be offset by increased orders from new U.S. customers during the remainder of the year. The newly established La Go Go private label began contributing to revenues during the quarter.

"We are very pleased with this strong beginning to the 2008 fiscal year, as we worked strategically to allocate our labor and capital resources in order to increase order volume and launch our new La Go Go retail business," said Mr. Yihua Kang, Chairman and Chief Executive Officer of Ever-Glory. "We will continue to strengthen our relationships with existing business customers, which provide us a solid base for new business development. As manufacturing costs in China continue to rise and the Chinese renminbi appreciates, we look forward to providing more value-added services and efficient management to improve our margins and further distinguish ourselves from competitors."

Gross profit during the quarter increased 55.5% to $3.7 million, or 18.8% of total sales, from $2.4 million, or 14.6% of total sales, a year ago. The increase in gross margin was due to increased sales of higher-margin, brand-name women's casual clothing to customers in Europe and Japan.

Operating expenses increased 58.0% to $1.5 million. This increase was primarily due to higher general and administrative expenses, including higher payroll expenses related to the expansion of the business, higher depreciation expense on office facilities and expenditures on new office equipment, and increased public company expenses.

Operating income was $2.2 million, or 11.3% of sales, an increase of 53.9% from $1.4 million, or 8.8% of sales, in the same quarter of 2007.

Interest expenses for the first quarter were $0.6 million, compared to $0.1 million a year ago. The increase resulted from the conversion of a portion of the Company's convertible notes into common shares. To date, $0.8 million of the $2.0 million in notes have been converted into shares of the Company's common stock.

For the first quarter of 2008, net income was $1.2 million, or $0.10 per fully diluted share, compared with net income of $1.2 million, or $0.11 per fully diluted share, in the same quarter of 2007. Diluted earnings per share for the first quarter of 2008 include shares that may be issued upon conversion of the $2 million in convertible notes issued in August 2007.

Adjusting net income to exclude non-cash expenses related to the convertible notes, non-GAAP net income was $1.6 million, or $0.13 per fully diluted share, in the first quarter of 2008, up 30.9% from the same period in the prior year.

Financial Condition

As of March 31, 2008, the Company had $2.1 million in cash and cash equivalents. Working capital stood at $11.1 million, bank loans totaled $2.9 million and convertible notes payable, including unamortized discount, totaled $1.7 million at quarter end. As of March 31, 2008, stockholders' equity stood at $23.3 million. The Company generated operating cash flow of $4.3 million during the quarter.

Recent Events

The Company filed an application to be listed on the American Stock Exchange at the end of March 2008.

On April 3, 2008, La Go Go obtained a new registration certificate for retail business. By April 30, 2008, La Go Go had opened 40 retail locations in 18 cities in China. La Go Go has also established a retail presence in second-tier cities such as Changchun in Jilin Province, Jinan in Shandong Province and Kunming in Yunnan Province.

Business Outlook

For the 2008 fiscal year, the Company expects to generate revenues of $90 to $100 million and net income of $8.0 million to $8.6 million, excluding the impact of non-cash charges related to the Company's convertible notes and warrants.

"We continue to make great progress in our strategy of strong, profitable growth, and we look forward to further progress throughout 2008," Mr. Kang said. "The launch of our La Go Go fashion line further supports our mission to become a leader in the Chinese apparel and design industry, while our strong reputation is enabling us to increase sales of high-margin women's products in Europe and Japan and add new customers in the U.S.

"Because of slower sales related to the Chinese New Year holiday, the majority of our revenues and profits are generated in the latter part of the year. We plan to open between 80 and 100 La Go Go retail stores in China in 2008, with expected average monthly revenue of $4,000-7,000 (30,000-50,000 RMB) per store by the end of the year," Mr. Kang added. "We are very confident in the growth of this retail business, which we continue to expect will be a significant new profit driver in our long-term development."

Conference Call

The company will host a conference call at 9:00 a.m. EDT on, Tuesday, May 6, 2008, to discuss its financial results for the first quarter ended March 31, 2008. To participate in the event by telephone, please dial (888) 482-0024 five to 10 minutes prior to the start time (to allow time for registration) and reference passcode 67156466. International callers should dial (617) 801-9702. A digital replay of the call will also be available on Tuesday, May 6 at approximately 11:00 a.m. EDT, through Tuesday, May 13 at midnight EDT. Dial 888-286-8010 and enter the conference ID number 90269281. International callers should dial (617) 801-6888 and enter the same conference ID number.

An audio replay of the event will be archived on Ever-Glory's Web site at http://www.everglorygroup.com .

Use of Non-GAAP Financial Information

GAAP results for the first quarter ended March 31, 2008, include certain non-cash charges and expenses related to the Company's convertible notes and warrants. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of these items in this release. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of adjustments to GAAP results appears in the tables accompanying this press release. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.

Restatement of Financial Results

The financial statements for the three-month period ended March 31, 2007, have been restated to reflect the acquisitions of Nanjing New-Tailun Garments Co., Ltd. ("New-Tailun"), on December 11, 2006, and Nanjing Catch-Luck Garments Co., Ltd. ("Catch-Luck"), on August 27, 2007, to record the assets and liabilities of New-Tailun and Catch-Luck at their carrying values rather than their fair-market values at the time of the acquisitions.

About Ever-Glory International Group, Inc.

Ever-Glory International Group (OTC Bulletin Board: EVGY) is a U.S. publicly-traded company engaged in international garment manufacturing for well-known middle- to high-grade casual, outerwear and sportswear brands. The company's U.S. headquarters is based in Los Angeles, California, although Ever-Glory also has three subsidiaries, Goldenway Nanjing Garments Co. Ltd., Nanjing New-Tailun Garments Co, Ltd. and Nanjing Catch-Luck Garments Co., Ltd. Ever-Glory has strategic business partners in countries including China, Japan, Europe and the U.S. The company conducts business with well-known garment retail chains. In 2007, 57% of the company's total sales revenue came from customers in Europe, 16% from Japan, 21% from the United States and 6% from within China. For more information about Ever-Glory International Group, please visit: http://www.everglorygroup.com .

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This press release contains certain "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations Such factors include, but are not limited to, the company's ability to accurately complete product orders, coordinate product design with its customers, ability to expand and grow its distribution channels, political and economic factors in the People's Republic of China, the company's ability to find attractive acquisition candidate and/or joint venture partners, the performance of third parties with whom the company does business, dependence on a limited number of larger customers and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

— FINANCIAL TABLES FOLLOW — EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET ASSETS As of March 31, As of December 31, 2008 2007 (Audited) CURRENT ASSETS Cash and cash equivalents $2,144,669 $641,739 Accounts receivable 11,594,154 13,035,299 Accounts receivable - related parties — 158,235 Inventories 1,851,672 1,897,023 Other receivables and prepaid expenses 165,127 150,855 Advances on inventory purchase 9,255 — Advances on inventory purchase - related parties 2,872,189 2,568,040 Deferred financing costs 248,401 191,995 Total Current Assets 18,885,467 18,643,186 LAND USE RIGHT, NET 2,826,643 2,729,183 PROPERTY AND EQUIPMENT, NET 12,503,848 12,140,903 LONG TERM INVESTMENT 1,428,000 — TOTAL ASSETS $35,643,958 $33,513,272 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $2,177,368 $1,796,655 Accounts payable related parties — 245,589 Other payables - related party 980,392 650,000 Other payables and accrued liabilities 903,537 1,069,682 Value added tax payable 518,312 378,898 Income tax payable and other taxes payable 355,013 146,226 Bank loans 2,856,000 4,798,500 Convertible notes payable, (net of unamortized discount of $1,625,160) 35,140 25,503 Total Current Liabilities 7,825,762 9,111,053 COMMITMENTS AND CONTINGENCIES — — LONG-TERM LIABILITIES Loan from related party under common control 4,534,100 4,474,985 TOTAL LIABILITIES 12,359,862 13,586,038 MINORITY INTEREST 556,993 — STOCKHOLDERS' EQUITY Preferred stock ($.001 par value, authorized 5,000,000 shares, 10000 shares designated as Series A Preferred Stock) — — Series A Convertible Preferred Stock (0 shares issued and Outstanding as of March 31, 2008 and December 31, 2007, respectively) — — Common stock ($.001 par value, authorized 50,000,000 shares, 11,547,110 and 11,379,309 shares issued and outstanding as of March 31, 2008 and December 31, 2007, respectively) 11,547 11,379 Common stock to be issued for acquisition (0 shares as of March 31, 2008 and December 31, 2007, respectively) — — Additional paid-in capital 2,656,892 2,154,368 Retained earnings 13,445,041 12,247,748 Statutory reserve 3,437,379 3,437,379 Accumulated other comprehensive income 3,176,244 2,076,360 Total Stockholders' Equity 22,727,103 19,927,234 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $35,643,958 $33,513,272 EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) For the Three Months Ended March 31, 2008 2007 Restated NET SALES To related parties $425,102 46,828 To third parties 19,322,106 16,378,571 Total net sales 19,747,208 16,425,399 COST OF SALES From related parties 402,748 44,874 From third parties 15,623,424 13,987,839 Total cost of sales 16,026,172 14,032,713 GROSS PROFIT 3,721,036 2,392,686 OPERATING EXPENSES Selling expenses 277,528 175,898 General and administrative expenses 1,221,487 772,888 Total Operating Expenses 1,499,015 948,786 INCOME FROM OPERATIONS 2,222,021 1,443,900 OTHER INCOME (EXPENSES) Interest income 31,974 1,814 Interest expenses (577,828) (132,290) Other income — 96 Other expenses (191,167) (84) Total Other (Expenses) (737,021) (130,464) INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 1,485,000 1,313,436 INCOME TAX EXPENSE (283,838) (75,694) INCOME BEFORE MINORITY INTEREST 1,201,162 1,237,742 LESS MINORITY INTEREST 3,869 — NET INCOME 1,197,293 1,237,742 OTHER COMPREHENSIVE INCOME Foreign currency translation gain 1,099,884 159,133 COMPREHENSIVE INCOME $2,301,046 1,396,875 Net income per share - basic $0.10 0.24 Net income per share - diluted $0.10 0.11 Weighted average number of shares outstanding during the period - basic 11,449,682 5,080,609 Weighted average number of shares outstanding during the period - diluted 12,204,363 11,072,008 EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 (UNAUDITED) 2008 2007 Restated CASH FLOWS FROM OPERATING ACTIVITIES Net income $1,197,293 $1,237,742 Adjusted to reconcile net income to cash provided by operating activities: Minority interest 3,869 Depreciation 222,765 207,412 Amortization 15,667 14,424 Amortization of discount on convertible notes 349,337 — Amortization of deferred financing costs 73,676 — Stock issued for interest 2,006 — Changes in operating assets and liabilities Accounts receivable 1,941,016 1,579,037 Accounts receivable - related parties 161,317 (510,749) Inventories 121,586 238,961 Other receivables and prepaid expenses (8,636) (138,761) Advance on inventory purchase (9,058) — Advance on inventory purchase to related party (44,291) — Accounts payable 299,523 118,312 Accounts payable - related companies (68,882) (1,089,852) Other payables and accrued liabilities (204,734) (553,058) Payables to related parties — Value added tax payables 121,036 (24,551) Income tax and other tax payables 198,408 33,776 Long term deferred expense (56,406) — Net cash provided by operating activities 4,315,492 1,112,693 CASH FLOWS FROM INVESTING ACTIVITIES Investment in La Chapelle (1,397,700) — Purchase of property and equipment (84,333) (1,126,622) Proceeds from sale of equipment 377 — Net cash used in investing activities (1,481,656) (1,126,622) CASH FLOWS FROM FINANCING ACTIVITIES Due to related parties — — Contribution from minority shareholders 553,040 — Proceeds from bank loan — 1,292,959 Repayment of bank loan (2,096,550) (1,292,959) Proceeds from long term loan 59,116 115,694 Net proceeds from convertible notes — — Net cash (used in) provided by financing activities (1,484,394) 115,694 EFFECT OF EXCHANGE RATE ON CASH 153,487 382,142 NET DECREASE IN CASH AND CASH EQUIVALENTS 1,502,930 483,907 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 641,739 897,093 CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,144,669 $1,381,000 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest expense $68,859 $73,595 Income taxes $84,576 $41,827 EVER-GLORY INTERNATIONAL GROUP, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL DATA Non-GAAP Net income Q1 2008 Q1 2007(Restated) Net Income (Loss) and Diluted EPS Net Income Diluted EPS Net Income Diluted EPS Adjusted Amount $1,620,306 $0.13 $1,237,742 $0.11 Adjustments Non-cash expense for convertible notes (1) $423,013 $0.03 — — Amount per consolidated statement of operations $1,197,293 $0.10 $1,237,742 $0.11 Non-cash debt financing costs includes $349,337 of the amortization of the discount on convertible notes and $73,676 amortization of deferred financing costs from convertible notes and warrants. For more information, please contact: Ever-Glory International Group, Inc. Emily Guo, Chief Financial Officer Tel: +86-25-5209-6222 Email: emily@ever-glory.com CCG Elite Investor Relations Crocker Coulson, President Tel: +1-646-213-1915 (New York) Email: crocker.coulson@ccgir.com

SOURCE Ever-Glory International Group, Inc.

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