FUJIAN, China, November 14, 2013 /PRNewswire-FirstCall/ -- Exceed Company Ltd. (NASDAQ: EDS) ("Exceed" or "the Company"), the owner and operator of the "Xidelong" brand - one of the leading domestic sportswear brands in China, today released its unaudited financial results for the third quarter ended September 30, 2013.
Financial Highlights -Third quarter ended September 30, 2013(1)
(1) | The Company's reporting currency is Renminbi ("RMB"). RMB numbers included in this press release have been translated into U.S. dollars at the rate of USD1.00 = RMB6.120, the exchange rate refers to the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board, on September 30, 2013. The translation of amounts from RMB to United States dollars is solely for the convenience of the reader. No representation is made that RMB amounts could have been, or could be, converted into U.S. dollars at that rate or at any other rate on September 30, 2013. |
Shuipan Lin, Exceed's founder, Chairman and CEO, commented, "As anticipated, our results in the third quarter continued to be impacted by weakening consumer demand in China, which was largely attributable to the economic slowdown in China. It is expected that de-stocking, or a reduction of inventory in the market in response to a weak demand outlook, will continue in the near future. As a result, overall sales volume across our main footwear and apparel product lines decreased, resulting in a decline in revenue, compared to the same period in 2012. In response to the prevailing market conditions, we took a prudent approach to control the amount of orders placed by our distributors. In addition, we continue to enhance the efficiency of our distribution network by closing or relocating inefficient retail selling locations. We believe that these initiatives will help to reduce overall inventory of finished products in the retail selling locations.
"While we expect to continue to operate under unfavorable economic conditions for the remainder of this year, we believe that we have the right strategy in place to effectively manage our production and inventory levels, maintain a lean operating structure and continue to strengthen our brand awareness. We believe that the worst time for the sportswear industry may have had passed and a rebound or recovery should occur after most of the finished products are absorbed in the market."
Third Quarter 2013 Financial Results
Revenue breakdown | ||||||
Three Months Ended | ||||||
Sep 30, 2013 RMB'000 | % of Revenue | Sep 30, 2012 RMB'000 | % of Revenue | Third Quarter YoY Decrease | ||
Footwear | 221,691 | 46.0% | 246,227 | 44.5% | (10.0)% | |
Apparel | 252,686 | 52.5% | 293,978 | 53.1% | (14.0)% | |
Accessories | 7,423 | 1.5% | 13,049 | 2.4% | (43.1)% | |
Total | 481,800 | 100.0% | 553,254 | 100.0% | (12.9)% | |
Nine Months Ended | ||||||
Sep 30, 2013 RMB'000 | % of Revenue | Sep 30, 2012 RMB'000 | % of Revenue | YTD YoY Decrease | ||
Footwear | 524,122 | 46.2% | 951,112 | 47.3% | (44.9)% | |
Apparel | 589,816 | 52.0% | 1,025,111 | 51.0% | (42.5)% | |
Accessories | 19,809 | 1.8% | 33,555 | 1.7% | (41.0)% | |
Total | 1,133,747 | 100.0% | 2,009,778 | 100.0% | (43.6)% | |
Revenue. The global macroeconomic environment remained uncertain throughout the third quarter of 2013, which had an adverse impact on the Chinese economy and the sportswear industry. In addition, initial forecasts for sports product demand in the preceding years have proved to be overly optimistic, leading to a build-up of inventory levels industry-wide. In response, most sportswear brands aggressively cleared their excess inventory during the period. In anticipation of the impact that market headwinds would have on the Chinese sportswear industry, we continued to carry out a number of strategic initiatives throughout the third quarter of 2013 to maintain our competitive position and pricing power, and to manage inventory levels and the efficiency of our distribution network. Among others, we continued to engage our distributors and authorized third party retailers to manage the level of wholesale orders placed with us to prevent an inventory build-up at our distributors due to weaker consumer demand. As a result, revenue for the third quarter of 2013 was RMB481.8 million (US$78.7 million), reflecting a 12.9% decrease from RMB553.3 million for the third quarter ended September 30, 2012. However, such revenue increased 37.3% from RMB350.8 million for the preceding quarter is primarily attributable to the seasonal nature of our footwear and apparel products and the fact that our autumn and winter collections generally command higher selling prices than our spring and summer collections.
Revenue from footwear was RMB221.7 million (US$36.2 million) for the third quarter ended September 30, 2013, representing a decrease of 10.0% from RMB246.2 million for the third quarter ended September 30, 2012. The year-over-year decrease in revenue was due to a decrease in sales volume and decrease in our footwear Average Selling Price ("ASP"). The sales volume and ASP in the third quarter of 2013 decreased by 5.7% and 4.6%, respectively, compared with the same period in 2012. The decrease in ASP was attributable to the introduction of a range of lower priced footwear products to target the mass market and to better align with customer preferences. In contrast to the year-over-year trend, revenue from footwear for this quarter increased 39.5% from RMB158.9 million for the preceding quarter.
Revenue from apparel was RMB252.7 million (US$41.3 million) for the third quarter ended September 30, 2013, representing a decrease of 14.0%, from RMB294.0 million for the third quarter ended September 30, 2012. This decrease was primarily due to a 18.2% decrease in sales volume, the effects of which were partially offset by the increase in the ASP. The ASP of apparel increased by 5.0% year-over-year for the third quarter ended September 30, 2013, primarily caused by the improvement of the design and quality of certain of our autumn/winter apparel products to better align with consumer demand. In contrast to the year-over-year trend, revenue from apparel for this quarter increased 37.0% from RMB184.5 million for the preceding quarter.
Gross profit and Gross profit margin. Gross profit for the third quarter ended September 30, 2013 was RMB131.0 million (US$21.4 million), representing a decrease of 13.8% from RMB151.9 million for the third quarter ended September 30, 2012. Gross margin was 27.2% for the third quarter ended September 30, 2013, compared to 27.5% for the third quarter ended September 30, 2012. Since we manufactured and sold a larger portion of lower priced products in this quarter to target the mass market and to better align with customer preferences, ASP of footwear products and production cost of footwear products decreased accordingly. However, the rate of decrease in ASP exceeded the rate of decrease in production cost in the quarter ended September 30, 2013, leading to a decrease in gross profit margin. We will continue our efforts to maintain our gross profit margin by balancing product pricing and material cost moving forward. In contrast to the year-over-year trend, gross profit for this quarter represented an increase of 36.6% from RMB95.9 million for the preceding quarter, and the gross profit margin of 27.2% for this quarter was similar to 27.3% for the preceding quarter.
Other income and gains. Other income and gains were substantially the same at RMB3.2 million (US$0.5 million) for the third quarter ended September 30, 2013, when compared with those for the third quarter ended September 30, 2012. Other income and gains for the third quarter ended September 30, 2013 mainly consisted of interest income derived from short-term time deposits, with an average outstanding balance of RMB384.0 million (US$62.7 million) for the third quarter of 2013, bearing interest of 2.85% per annum.
Operating expenses. Total operating expenses for the third quarter ended September 30, 2013 were RMB108.9 million (US$17.8 million), representing a decrease of approximately 8.7% from RMB119.3 million for the same period in 2012. The decrease was primarily attributable to the decrease in selling and distribution costs resulting from a decrease in sales activities.
Finance costs. Finance costs decreased by 100.0%, from RMB0.2 million for the third quarter ended September 30, 2012 to nil for the third quarter ended September 30, 2013. Finance costs for the third quarter ended September 30, 2013 consisted of bank loan interest of RMB0.3 million (US$50,000) and interest on a shareholder loan of RMB0.8 million (US$0.1 million), which were offset by the capitalization of the interest accrued on the shareholder loan of RMB1.1 million (US$0.2 million). As the shareholder loan was used for the construction project in Jiangxi Province, the loan interest was capitalized as part of the construction cost included in property, plant and equipment.
Profit before tax. As a result of the foregoing, profit before tax decreased by 29.2%, from RMB35.6 million for the third quarter ended September 30, 2012 to RMB25.2 million (US$4.1 million) for the third quarter ended September 30, 2013.
Tax. Tax expenses increased from RMB5.3 million for the third quarter ended September 30, 2012 to RMB6.9 million (US$1.1 million) for the third quarter ended September 30, 2013. The increase was mainly due to the increase in the applicable PRC income tax rate, the effects of which were partially offset by a decrease in the profit before tax. Xidelong (China) Co. Ltd., our principal PRC subsidiary, was entitled to a 50% reduction in the PRC corporate income tax until December 31, 2012, after which it is subject to the standard tax rate of 25%. The effective tax rate for the third quarter ended September 30, 2012 and 2013 was 14.8% and 27.2%, respectively.
Profit. As a result of the above factors, profit for the third quarter ended September 30, 2013 was RMB18.4 million (US$3.0 million), representing a decrease of 39.5% from RMB30.4 million for the third quarter ended September 30, 2012.
Balance Sheet
Inventory. The average inventory turnover days for the third quarters ended September 30, 2013 and 2012 were 4 days and 7 days, respectively. Such decrease was mainly due to improvements on our production planning, procurement control and logistics management.
Trade receivables. The average trade receivables turnover days for the third quarters ended September 30, 2013 and 2012 were 182 days and 178 days, respectively. Unfavorable market conditions have lengthened the time required for our distributors to settle their invoices. We have been closely monitoring trade receivables balances that are overdue by 30 days or more by taking into account, among others, the ability and intent of the distributor to settle the balance. We, however, will not make any provision for the overdue balance if (1) we have ongoing trading with the distributor; (2) we receive payments on other invoices from the distributor; and (3) we have no dispute on the amount overdue with the distributor.
Trade payables. The average trade payables turnover days for the third quarters ended September 30, 2013 and 2012 were 16 days and 14 days, respectively. Average trade payables turnover days were within the Company's payment policy.
Cash and cash equivalents. Cash and cash equivalents decreased to RMB587.7 million (US$96.0 million) as of September 30, 2013 from RMB637.2 million as of December 31, 2012. Such decrease was mainly caused by cash outflow in investment activities of RMB229.3 million (US$37.5 million), reflecting the ongoing construction projects in Jiangxi and Fujian Provinces, the results of which were partially offset by the cash inflow from operating activities of RMB142.7 million (US$23.3 million) during the nine months ended September 30, 2013.
Cash Flow
Cash outflow from operating activities was RMB165.5 million (US$27.0 million) for the third quarter ended September 30, 2013, compared to an outflow of RMB109.4 million for the same period in 2012. The cash outflow during the third quarter ended September 30, 2013 was primarily caused by an increase in trade receivables of RMB233.2 million (US$38.1 million), which was partially offset by a decrease in trade and bills payables of RMB25.3 million (US$4.1 million) and a decrease in prepayments, deposits and other receivables of RMB18.8 million (US$3.1 million).
Cash outflow from investing activities was RMB121.8 million (US$19.9 million) for the third quarter ended September 30, 2013, which was primarily caused by an increase in construction-in-progress in the Jiangxi and Fujian Provinces of RMB124.9 million (US$20.4 million) during the third quarter ended September 30, 2013.
Business Highlights and Outlook
About Exceed Company Ltd.
Exceed Company Ltd. designs, develops and engages in wholesale of footwear, apparel and accessories under its own brand, XIDELONG, in China. Since it began operations in 2002, Exceed has targeted its growth on the consumer markets in second and third-tier cities in China. Exceed has three principal categories of products: (i) footwear, which comprises running, leisure, basketball, skateboarding and canvas footwear, (ii) apparel, which mainly comprises sports tops, pants, jackets, track suits and coats, and (iii) accessories, which mainly comprise bags, socks, hats and caps. Exceed Company Ltd. currently trades on Nasdaq under the symbol "EDS".
Safe Harbor Statement
This announcement contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about us and our industry. All statements other than statements of historical fact in this form are forward-looking statements. These forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "anticipate", "estimate", "plan", "believe", "is/are likely to" or other similar expressions.
These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, we cannot assure you that our expectations will turn out to be correct. Our actual results could be materially different from and worse than our expectations. A number of factors could cause actual results to differ materially from those contained in these forward-looking statements, including but not limited to changes in our goals and strategies, our ability to control costs and expenses, success of our products, competition in the sportswear industry in China, and changes in PRC government preferential tax treatment and financial incentives. The forward-looking statements made in this announcement relate only to events or information as of the date on which this announcement is published. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date this announcement is published or to reflect the occurrence of unanticipated events.
Contacts:
Investor Relations
Exceed Company Ltd.
Vivien Tai
+852 2153-2771
ir@xdlong.cn
- FINANCIAL TABLES TO FOLLOW -
EXCEED COMPANY LTD. AND SUBSIDIARIES | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||
(in thousands except for share and per share data) | |||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||
2013 | 2013 | 2012 | 2013 | 2012 | |||||
US$'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||
Revenue | 78,725 | 481,800 | 553,254 | 1,133,747 | 2,009,778 | ||||
Cost of sales | (57,327) | (350,846) | (401,309) | (828,079) | (1,436,000) | ||||
Gross profit | 21,398 | 130,954 | 151,945 | 305,668 | 573,778 | ||||
Other income and gains | 520 | 3,185 | 3,163 | 9,772 | 12,051 | ||||
Selling and distribution costs | (14,049) | (85,978) | (93,251) | (184,348) | (280,027) | ||||
Administrative expenses | (1,814) | (11,102) | (16,088) | (36,167) | (53,041) | ||||
Research and development expenses | (1,933) | (11,831) | (9,977) | (32,050) | (34,222) | ||||
OPERATING PROFIT | 4,122 | 25,228 | 35,792 | 62,875 | 218,539 | ||||
Finance costs | - | - | (167) | (882) | (386) | ||||
PROFIT BEFORE TAX | 4,122 | 25,228 | 35,625 | 61,993 | 218,153 | ||||
Tax | (1,122) | (6,870) | (5,271) | (18,136) | (29,845) | ||||
PROFIT FOR THE PERIOD ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY |
3,000 |
18,358 | 30,354 |
43,857 | 188,308 | ||||
EARNING PER SHARE | |||||||||
Net profit per share | |||||||||
Basic | 0.09 | 0.55 | 0.92 | 1.33 | 5.71 | ||||
Diluted | 0.09 | 0.55 | 0.92 | 1.33 | 5.71 | ||||
Weighted average number of shares outstanding | |||||||||
Basic | 33,110,084 | 33,110,084 | 32,963,562 | 33,067,269 | 32,988,972 | ||||
Diluted | 33,110,084 | 33,110,084 | 32,963,562 | 33,067,269 | 32,990,131 |
EXCEED COMPANY LTD. AND SUBSIDIARIES | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||
As of | As of | |||||
September 30, | December 31, | |||||
2013 | 2013 | 2012 | ||||
US$'000 | RMB'000 | RMB'000 | ||||
(Unaudited) | (Unaudited) | |||||
NON-CURRENT ASSETS | ||||||
Property, plant and equipment | 92,162 | 564,030 | 330,914 | |||
Prepaid land lease payments | 4,337 | 26,542 | 27,103 | |||
Deposit paid for acquisition of land use rights | 24,507 | 149,986 | 149,986 | |||
Total non-current assets | 121,006 | 740,558 | 508,003 | |||
CURRENT ASSETS | ||||||
Inventories | 2,160 | 13,219 | 11,655 | |||
Trade receivables | 174,637 | 1,068,781 | 1,084,535 | |||
Prepayments, deposits and other receivables | 2,904 | 17,773 | 24,396 | |||
Cash and cash equivalents | 96,022 | 587,655 | 637,184 | |||
Total current assets | 275,723 | 1,687,428 | 1,757,770 | |||
CURRENT LIABILITIES | ||||||
Trade and bills payables | 12,336 | 75,497 | 8,831 | |||
Deposits received, other payables and accruals | 11,259 | 68,902 | 61,681 | |||
Interest-bearing bank borrowings | 3,268 | 20,000 | 30,000 | |||
Tax payable | 1,121 | 6,858 | 2,357 | |||
Total current liabilities | 27,984 | 171,257 | 102,869 | |||
NET CURRENT ASSETS | 247,739 | 1,516,171 | 1,654,901 | |||
TOTAL ASSETS LESS CURRENT LIABILITIES | 368,745 | 2,256,729 | 2,162,904 | |||
NON-CURRENT LIABILITIES | ||||||
Loan from a shareholder | 7,914 | 48,432 | - | |||
Total non-current liabilities | 7,914 | 48,432 | - | |||
Net assets | 360,831 | 2,208,297 | 2,162,904 | |||
STOCKHOLDER'S EQUITY | ||||||
Issued share capital | 4 | 23 | 23 | |||
Treasury shares | (2,598) | (15,898) | (15,898) | |||
Retained profits | 280,610 | 1,717,336 | 1,678,920 | |||
Reserves | 82,815 | 506,836 | 499,859 | |||
Total equity | 360,831 | 2,208,297 | 2,162,904 |
EXCEED COMPANY LTD. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
Three months ended | Nine months ended | |||||||
2013 | 2013 | 2012 | 2013 | |||||
US$'000 | RMB'000 | RMB'000 | RMB'000 | |||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||
Net cash inflow/(outflow) from operating activities |
(27,037) |
(165,472) | (109,419) |
142,739 | ||||
Net cash inflow/(outflow) from investing activities | (19,895) | (121,755) | 3,047 | (229,321) | ||||
Net cash inflow/(outflow) from financing activities | - | - | (418) | 37,327 | ||||
Effect of exchange rate changes | (7) | (40) | (496) | (274) | ||||
Net decrease in cash and cash equivalents | (46,939) | (287,267) | (107,286) | (49,529) | ||||
Cash at beginning of the period | 142,961 | 874,922 | 801,030 | 637,184 | ||||
Cash at end of the period | 96,022 | 587,655 | 693,744 | 587,655 |