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Expands New Customer Sales; Increased Outlook for Fiscal Second Quarter
FAIRFIELD, NJ / ACCESSWIRE / August 13, 2020 / Jerash Holdings (US), Inc. (NASDAQ:JRSH) (the "Company" or "Jerash"), a producer of high-quality textile goods for leading global brands, today reported results for its first quarter of fiscal year 2021, ended June 30, 2020.
First Quarter of Fiscal 2021 and Recent Highlights
Increased sales to new global brand customers won in fiscal 2020 in both dollar value and as a percentage of sales;
Entered the personal protective equipment (PPE) market, including shipments of initial orders to customers and a rapidly growing pipeline of orders and prospective orders;
Received approvals to export various PPE products to Europe, the Middle East and the United States;
Reported $18.7 million in revenue, a decrease of 17.0% from the prior-year first quarter, reflecting higher than anticipated reinstatement of customer orders during the COVID-19 pandemic;
Reported GAAP net income of $0.8 million, or $0.07 per diluted share, compared with net income of $1.5 million, or $0.14 per diluted share in the prior-year first quarter; and
Ended the quarter with cash of $18.5 million and working capital of $48.7 million.
Sam Choi, Chairman and Chief Executive Officer, stated: "Jerash posted stronger than anticipated first quarter revenue as customers reinstated orders and prioritized production in Jordan to maximize the benefit of our duty-free status. We also shipped increased order volumes to new customers won in the past year, further diversifying our customer base and positioning Jerash for additional growth.
"We also made important progress on strategic initiatives, including entry into the high-quality face mask and PPE markets. Our new PPE subsidiary has now shipped initial orders to multiple customers and has a rapidly growing book of new orders and prospective orders from a variety of customers for export to Europe, the Middle East and North America. We are also in the process of securing clearances from the US Food and Drug Administration to further expand the products we can ship to the US and other markets. We are actively seeking acquisition candidates to bring additional scale, customer relationships and technical capabilities to Jerash, including both traditional garments and the PPE sectors. With $18.5 million of cash on our balance sheet, no debt and $48.7 million in working capital deployed to fuel our business, we are well positioned to pursue these opportunities ahead.
"For our September quarter, we expect to report sequential revenue growth and further expansion of new customer order activity. We also expect to report sequential improvement in gross margins through increased utilization of our factory capacity. We also remain vigilant in protecting our workers, with additional safety measures in place and no COVID-19 cases reported to date at our facilities."
PPE Production Update
Jerash has commenced shipments of both branded (washable) and disposable face masks to customers and is currently launching sales in additional PPE categories, including medical scrubs and surgical gowns. The Company is using both internal and partnership initiatives, including subcontract manufacturing capabilities, in order to produce PPE for certain markets, including Europe, the Middle East, and the United States.
In order to advance its PPE market development efforts, Jerash incorporated a new entity, Jerash The First Medical Supplies Manufacturing Company Limited, which has received temporary permission from Jordan's Food and Drug Administration to manufacture and export non-surgical PPE. This subsidiary has already accepted subcontracting orders of surgical masks and medical gowns for customers in Jordan, the Middle East and Europe beginning in July 2020. Jerash intends to pursue additional certifications and partnerships, including US FDA approvals, for this subsidiary and is presently engaged in these efforts.
First Quarter of Fiscal 2021 Financial Results and Second Quarter Outlook
"First quarter revenue demonstrated rapid reinstatement of orders initially suspended during the COVID-19 pandemic by our existing customers plus the addition of new orders from customers won over the past year," said Gilbert Lee, Chief Financial Officer. "Building on this momentum, we expect fiscal second quarter sales and margins to improve sequentially as factory utilization and bookings continue to increase.For the quarter ending September 30, we anticipate revenue of about $25 million, or 34% sequential growth over the first quarter, subject to potential adjustments in delivery schedules. This estimate does not include certain orders that may ship in the last week of September or sales from additional PPE activity."
For the first quarter of fiscal 2021, Jerash reported revenue of $18.7 million, a decrease of 17.0% from $22.5 million in fiscal 2020. The decrease in sales reflected the impact of the global COVID-19 pandemic on Jerash's customers. A number of Jerash's customers initially cancelled or deferred orders originally scheduled for the June quarter. Subsequently, most of these orders were reinstated for delivery in the second or third quarter as customers prioritized their supply chains, resulting in increased revenue activity as the quarter progressed. A portion of the revenue decline was offset by a 15.5% increase in sales to new customers won in fiscal 2020, advancing Jerash's goal to further diversify its customer base.
Gross margin for the first quarter was 16.3%, compared with 20.0% in the first quarter of fiscal 2020. Gross margin was primarily impacted by reduced factory utilization and workforce disruptions due to the shelter in place orders as part of Jordan's response to the COVID-19 pandemic. Production volumes have risen since May, and the full workforce is now allowed by the Jordanian government to return to work.
Operating expenses for the first quarter of fiscal 2021 were $1.9 million, a decline of 27.9% compared with $2.6 million in the first quarter of fiscal 2020. Operating expenses included lower selling costs as well as general and administrative cost reductions implemented by the company in response to the COVID-19 pandemic.
Operating income for the first quarter was $1.2 million, compared with $1.9 million in the first quarter of fiscal 2020.
GAAP net income for the first fiscal quarter was $0.8 million, or $0.07 per diluted share, a decrease from net income of $1.5 million, or $0.14 per diluted share in the first quarter of the prior year.
Jerash was impacted in both the March and June quarters by business closure mandates across the country of Jordan beginning March 18. As a result of the shutdown, shipments were delayed and production at the factories halted until the government approved re-opening. Jerash's dormitory workforce was allowed to resume production within the industrial zone on April 4, but local employees were not allowed to return until June 1. Jerash enacted a number of additional screening, cleaning and monitoring programs designed to protect the health and well-being of its workforce. Jerash has been recognized as a model employer by the country of Jordan for its efforts, and no cases of COVID-19 were reported among its Jordanian employees.
Balance Sheet, Cash Flow and Dividends
Working capital increased by $0.6 million sequentially, to $48.7 million at June 30, compared with $48.1 million as of March 31, 2020. Cash and restricted cash at June 30, 2020 was $18.5 million, compared with $16.9 million at June 30. 2019. Inventory was $18.1 million, primarily comprised of fabric, work in progress and finished garments, and accounts receivable were $15.9 million.
Said Lee: "Cash flows improved by approximately $800,000 year-over-year in the first quarter, which is traditionally a seasonal high quarter for inventory and accounts receivable due to customer order patterns. As of August 12, the Company had collected more than 80% of our June 30 receivables balance, consistent with prior years."
Jerash approved payment of a regular quarterly dividend of 5 cents per share on the Company's common stock on or about August 24, 2020, to stockholders of record on August 17, 2020.
The Company will conduct a conference call and webcast to review its fiscal first quarter 2021 results on Thursday, August 13, 2020, at 10:00 a.m. ET. Interested parties can access the call by dialing +1-862-298-0970. Callers should dial in at least 5 minutes prior to the call start time. A live and archived webcast will be available online in the investor relations section of Jerash's website at www.jerashholdings.com.
About Jerash Holdings (US), Inc.
Jerash Holdings (US), Inc. (NASDAQ:JRSH) is a manufacturer utilized by many well-known brands and retailers, such as Walmart, Costco, Hanes, New Balance, G-III, VF Corporation (which owns brands such as The North Face, Timberland, JanSport, etc.), and PVH Corp. (which owns brands such as Calvin Klein, Tommy Hilfiger, IZOD, etc.). Its production facilities comprise four factory units, one workshop, and three warehouses and it currently employs approximately 4,100 people. The total annual capacity at its facilities was approximately 8.0 million pieces as of June 30, 2020. Additional information is available at www.jerashholdings.com.
Forward Looking Statements
This news release contains forward-looking statements that involve risks and uncertainties, which may cause actual results to differ materially from the statements made. When used in this document, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "seek", "potential," "outlook" and similar expressions are intended to identify forward-looking statements. Such statements reflect Jerash's current views with respect to future events and are subject to such risks and uncertainties. Many factors could cause actual results to differ materially from the statements made, including those risks described from time to time in filings made by Jerash with the Securities and Exchange Commission. In addition, there is uncertainty about the further spread of the COVID-19 virus or the occurrence of a second wave of cases and the impact it may have on the Company's operations, the demand for the Company's products, global supply chains and economic activity in general. These and other risks and uncertainties are detailed in the Company's filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated or expected. Statements contained in this news release regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Jerash does not intend and does not assume any obligation to update these forward-looking statements, other than as required by law.
Darrow Associates Investor Relations
JERASH HOLDINGS (US), INC.,
SUBSIDIARIES AND AFFILIATE
CONDENSED CONSOLIDATED BALANCE SHEETS
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Commitments and Contingencies (See Note 15)
Preferred stock, $0.001 par value; 500,000 shares authorized; none issued and outstanding
Common stock, $0.001 par value; 30,000,000 shares authorized; 11,325,000 shares issued and outstanding
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JERASH HOLDINGS (US), INC.,
SUBSIDIARIES AND AFFILIATE
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SOURCE: Jerash Holdings
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