Exceed Company Ltd. 2013 second quarter financial Results

          Exceed Company Ltd. 2013 second quarter financial Results

PR Newswire

FUJIAN, China, Aug. 14, 2013

FUJIAN, China, Aug. 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 second quarter ended
June 30, 2013.

Financial Highlights – Second quarter ended June 30, 2013 ^(1)

  oRevenue was RMB350.8 million (US$57.2 million), representing a 37.6%
    year-over-year decrease.
  oGross profit was RMB95.9 million (US$15.6 million), representing a 40.8%
    year-over-year decrease. Gross margin was 27.3%, representing a 1.5
    percentage point decrease as compared to 28.8% for the second quarter of
    2012.
  oOperating profit was RMB22.6 million (US$3.7 million), representing a
    36.3% year-over-year decrease.
  oNet profit was RMB15.6 million (US$2.5 million), representing a 48.0%
    year-over-year decrease.

Shuipan Lin, Exceed's founder, Chairman and CEO, commented, "as anticipated,
our results in the second quarter continued to be impacted by weakening
consumer demand in China, which was largely attributable to the economic
slowdown in China. As a result, overall sales volume across our main footwear
and apparel product lines decreased, resulting in a decline in revenue. 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 maximize the efficiency of our distribution network by closing or
relocating the inefficient retail selling locations. We believe that these
initiatives will help to digest inventory in 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 there is room for growth in the sportswear market, and we intend
to achieve a year on year single-digit percentage increase in sales in the
long run."

(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 = RMB6.1374 , the exchange rate refers to the exchange rate as set
forth in the H.10 statistical release of the Federal Reserve Board, on June
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 June 30, 2013.

Second Quarter 2013 Financial Results
Revenue breakdown

            Three Months Ended
            Jun 30, 2013 % of    Jun 30, 2012 % of    Second Quarter

            RMB'000      Revenue RMB'000      Revenue YoY Growth
Footwear    158,855      45.3%   273,340      48.7%   (41.9)%
Apparel     184,540      52.6%   277,219      49.3%   (33.4)%
Accessories 7,432        2.1%    11,408       2.0%    (34.8)%
Total       350,827      100.0%  561,967      100.0%  (37.6)%
            Six Months Ended
            Jun 30, 2013 % of    Jun 30, 2012 % of    YTD

            RMB'000      Revenue RMB'000      Revenue YoY Growth
Footwear    302,431      46.4%   704,885      48.4%   (57.1)%
Apparel     337,130      51.7%   731,133      50.2%   (53.9)%
Accessories 12,386       1.9%    20,506       1.4%    (39.6)%
Total       651,947      100.0%  1,456,524    100.0%  (55.2)%

Revenue. The global macroeconomic environment remained uncertain throughout
the second quarter of 2013, which had an adverse impact on the Chinese economy
and sportswear industry. In addition, initial forecasts for sports product
demand in preceding years have proved to be overly optimistic, leading to a
build-up of inventory levels industry-wide. In response, most sportswear
brands have aggressively cleared their excess inventory during the period. In
anticipation of the impact that market headwinds would have on the Chinese
sportswear industry for the second quarter of 2013, we continued to carry out
a number of strategic initiatives throughout the second 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 second quarter of 2013 was RMB350.8 million (US$57.2 million),
a 16.5% increase from RMB301.1 million for the preceding quarter due to the
improvement of stock channeling. Such revenue, however, reflected a 37.6%
decrease from RMB562.0 million for the second quarter ended June 30, 2012. The
year-over-year decrease in revenue was primarily due to a decrease in the
sales of products to our distributors.

  oFootwear. Footwear accounted for 45.3% of revenue for the second quarter
    ended June 30, 2013. Footwear principally includes running footwear,
    leisure footwear, basketball footwear, skateboarding footwear, outdoor
    footwear, vintage footwear and cross-training footwear. A portion of our
    footwear production is outsourced.

  Revenue from footwear was RMB158.9 million (US$25.9 million) for the second
  quarter ended June 30, 2013, representing a decrease of 41.9% from RMB273.3
  million for the second quarter ended June 30, 2012. The year-over-year
  decrease in revenue was primarily due to a decrease in sales volume and
  decrease in our footwear Average Selling Price ("ASP"). The sales volume and
  ASP in the second quarter of 2013 decreased by 35.4% and 10.0%,
  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 represented an increase of 10.7% from RMB143.6 million for
  the preceding quarter.

  oApparel. Sports apparel accounted for 52.6% of revenue for the second
    quarter ended June 30, 2013. Sports apparel principally includes sports
    tops, sports pants, jackets and track suits. Our apparel production is
    entirely outsourced.

  Revenue from apparel was RMB184.5 million (US$30.1 million) for the second
  quarter ended June 30, 2013, representing a decrease of 33.4% from RMB277.2
  million for the second quarter ended June 30, 2012. This decrease was
  primarily due to a 30.4% decrease in sales volume and a 4.3% decrease in the
  ASP year-over-year for the second quarter ended June 30, 2013. The decrease
  in ASP was mainly due to the increase in the sales volume of lower priced
  spring/summer collection apparel as a percentage of total apparel sales
  volume. For the second quarter ended June 30, 2013, lower priced
  spring/summer collection apparel accounted for 89.0% of the total apparel
  sales volume, compared with 64.9% for the second quarter ended June 30,
  2012. In contrast to the year-over-year trend, revenue from apparel for this
  quarter represented an increase of 20.9% from RMB152.6 million for the
  preceding quarter.

  oAccessories. Revenue from accessories was RMB7.4 million (US$1.2 million)
    for the second quarter ended June 30, 2013, representing a decrease of
    34.8%, from RMB11.4 million for the second quarter ended June 30, 2012.
    This decrease was primarily driven by the decline in the sales of most
    sportswear accessories. Sport accessories principally include sports caps,
    sports socks, bags and backpacks. Our accessories production is entirely
    outsourced. In contrast with the year-over-year trend, revenue from
    accessories for this quarter represented an increase of 48.0% from RMB5.0
    million for the preceding quarter.

Gross profit and Gross profit margin. Gross profit for the second quarter
ended June 30, 2013 was RMB95.9 million (US$15.6 million), representing a
decrease of 40.8% from RMB162.0 million for the second quarter ended June 30,
2012. Gross margin was 27.3% for the second quarter ended June 30, 2013,
compared to 28.8% for the second quarter ended June 30, 2012. Since we
manufactured and sold a larger portion of lower priced footwear and apparel
products in this quarter to target the mass market and to better align with
customer preferences, ASP and production cost decreased accordingly. However,
the rate of decrease in ASP exceeded the rate of decrease in production cost
in the quarter ended June 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
21.7% from RMB78.8 million for the preceding quarter, and the gross profit
margin of 27.3% for this quarter represented an increase from 26.2% for the
preceding quarter. The increase in gross profit margin was primarily due to
the increased proportion of footwear produced in-house relative to the overall
footwear production.

Other income and gains. Other income and gains decreased by 33.3% from RMB5.1
million for the second quarter ended June 30, 2012 to RMB3.4 million (US$0.6
million) for the second quarter ended June 30, 2013. The decrease in other
income and gains for the second quarter ended June 30, 2013 was mainly
attributable to a decrease in interest income derived from short-term time
deposits, with an average outstanding balance of RMB400.0 million (US$65.2
million) in the second quarter of 2013, bearing interest of 2.85% per annum.
The decrease in interest income was primarily due to a decrease in the average
interest rate for our short-term time deposits.

Operating expenses. Total operating expenses for the second quarter ended June
30, 2013 were RMB76.7 million (US$12.5 million), a decrease of approximately
41.7% from RMB131.6 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 selling activities.

Selling and distribution costs. Selling and distribution costs decreased by
46.7%, from RMB101.1 million for the second quarter ended June 30, 2012 to
RMB53.9 million (US$8.8 million) for the second quarter ended June 30, 2013.
The decrease was mainly due to the decrease in advertising and promotional
expenses, which decreased from RMB95.9 million for the second quarter ended
June 30, 2012 to RMB50.6 million (US$8.2 million) for the second quarter ended
June 30, 2013. Such decrease primarily reflected the fact that fewer new
Xidelong retail selling locations were opened and fewer existing Xidelong
retail selling locations were renovated during the second quarter of 2013.
During the second quarter of 2013, only 188 existing Xidelong retail selling
locations were renovated, certain of which received renovation subsidies from
us in the form of standardized promotional materials and display equipment. In
contrast, 60 new Xidelong retail selling locations were opened and 333
existing Xidelong retail selling locations were renovated in the second
quarter of 2012. In 2013, our advertising and promotional activities will
continue to focus on events relating to the Nationwide "Fitness for All"
Sports Campaign organized by General Administration of Sport of China, the
government agency responsible for sports in China.

Administrative expenses. Administrative expenses decreased by 30.2%, from
RMB17.2 million for the second quarter ended June 30, 2012 to RMB12.0 million
(US$2.0 million) for the second quarter ended June 30, 2013. The decrease was
primarily due to decreases in miscellaneous taxes, including UMC Tax,
Educational Surcharge, Local Educational Surcharge, etc., from RMB2.5 million
for the second quarter ended June 30, 2012 to RMB1.5 million (US$0.2 million)
for the second quarter ended June 30, 2013, mainly attributable to the decline
in revenue. Professional and consultancy fees decreased from RMB3.9 million
for the second quarter ended June 30, 2012 to RMB1.0 million (US$0.2 million)
for the second quarter ended June 30, 2013. The Company continued its efforts
to control costs and thus requested less professional and consulting service
from its service providers.

Research and development expenses. Research and development expenses decreased
by 18.8%, from RMB13.3 million for the second quarter ended June 30, 2012 to
RMB10.8 million (US$1.8 million) for the second quarter ended June 30, 2013,
primarily due to our improved efforts to increase the efficiency of our
research and development activities and the effect of our cost-cutting
initiatives.

Finance costs. Finance costs increased by 200.0%, from RMB0.2 million for the
second quarter ended June 30, 2012 to RMB0.6 million (US$90,000) for the
second quarter ended June 30, 2013, primarily due to a loan, with an interest
bearing at 7% per annum and repayable on May 31, 2015, of HKD60.0 million
(RMB47.5 million), which we obtained from a shareholder of the Company in June
2013. The Hong Kong dollar loan was necessary as most of our cash was
denominated in RMB, and we needed HKD funding to pay up the registered capital
of our new subsidiary in Jiangxi, China.

Profit before tax. As a result of the foregoing, profit before tax decreased
by 37.7%, from RMB35.3 million for the second quarter ended June 30, 2012 to
RMB22.0 million (US$3.6 million) for the second quarter ended June 30, 2013.

Tax. Tax expenses increased from RMB5.3 million for the second quarter ended
June 30, 2012 to RMB6.4 million (US$1.0 million) for the second quarter ended
June 30, 2013 due to the increase in the applicable PRC income tax rate.
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
second quarters ended June 30, 2012 and 2013 was 15.1% and 29.2%,
respectively.

Profit. As a result of the above factors, profit for the second quarter ended
June 30, 2013 was RMB15.6 million (US$2.5 million), representing a decrease of
48.0% from RMB30.0 million for the second quarter ended June 30, 2012.

Balance Sheet

Inventory. The average inventory turnover days for the second quarters ended
June 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 second
quarters ended June 30, 2013 and 2012 were 211 days and 157 days,
respectively. The unfavourable 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 second
quarters ended June 30, 2013 and 2012 were 17 days and 32 days, respectively.
Average trade payables turnover days decreased as a result of our decision to
take advantage of the bulk purchase discounts offered by suppliers and
manufacturers in exchange for a quicker payment for raw materials and finished
products.

Cash and cash equivalents. Cash and cash equivalents increased to RMB874.9
million (US$142.6 million) as of June 30, 2013 from RMB637.2 million as of
December 31, 2012, primarily as a result of cash inflow from operating
activities of RMB308.2 million (US$50.2 million) during the six months ended
June 30, 2013.

Cash Flow

Cash outflow from operating activities was RMB43.4 million (US$7.1 million)
for the second quarter ended June 30, 2013, which was primarily caused by an
increase in trade receivables of RMB46.0 million (US$7.5 million) during the
second quarter ended June 30, 2013.

Cash outflow from investing activities was RMB108.3 million (US$17.6 million)
for the second quarter ended June 30, 2013, which was primarily caused by an
increase in construction-in-progress in Jiangxi and Fujian Province of
RMB111.7 million (US$18.2 million) during the second quarter ended June 30,
2013.

Cash inflow from financing activities was RMB47.5 million (US$7.7 million) for
the second quarter ended June 30, 2013, which was primarily due to a loan,
with an interest bearing at 7% per annum and repayable on May 31, 2015, of
HKD60.0 million (RMB47.5 million), which we obtained from a shareholder of the
Company during the second quarter ended June 30, 2013.

Business Highlights and Outlook

  oThere were 4,202 Xidelong retail selling locations as of June 30, 2013.
    During the second quarter of 2013, there was a net decrease of 494
    locations as compared with the number of locations as of March 31, 2013.
    During the six months ended as of June 30, 2013, there was a net decrease
    of 707 locations as compared with the number of locations as of December
    31, 2012. The net decrease of retail selling locations was caused by the
    closure of the relatively small and inefficient retail selling locations.
    Our retail selling locations are operated either by our distributors or by
    authorized third party retailers.
  oThe Company will continue to sponsor the "Fitness for All" program in
    2013. On June 8, 2013, the launching ceremony was held in Beijing with the
    support by the General Administration of Sport of China and China Sports
    Publications Corporations. The theme of the event is "Fitness moves, Happy
    Chinese joins". It brings the message of actively promoting scientific
    fitness and happy life philosophy through a variety of fitness activities.
  oOn June 28, 2013, "Fitness for All" program was launched in Xiamen where
    the "Zumba cum Carnival Night" event was held. Olympic weightlifting
    champion, Zhang Xiangxiang, together with professional fitness coaches,
    led thousands of people in a lively fitness carnival night.
  oIn July 2013, Fujian Business Association announced that Xidelong (China)
    Co. Ltd., our principal PRC subsidiary, was one of the 2012 top 50
    enterprises in Fujian Province.

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
               Three months ended June 30               Six months ended June 30
               (in thousands except for share and per share data)
               2013          2013         2012          2013          2012
               US$'000       RMB'000      RMB'000       RMB'000       RMB'000
               (Unaudited)   (Unaudited)  (Unaudited)   (Unaudited)   (Unaudited)
Revenue        57,162        350,827      561,967       651,947       1,456,524
Cost of sales  (41,536)      (254,926)    (399,950)     (477,233)     (1,034,691)
Gross profit   15,626        95,901       162,017       174,714       421,833
Other income   551           3,383        5,051         6,587         8,888
and gains
Selling and
distribution   (8,779)       (53,880)     (101,066)     (98,370)      (186,776)
costs
Administrative (1,954)       (11,995)     (17,202)      (25,065)      (36,953)
expenses
Research and
development    (1,762)       (10,814)     (13,347)      (20,219)      (24,245)
expenses
OPERATING      3,682         22,595       35,453        37,647        182,747
PROFIT
Finance costs  (90)          (550)        (168)         (882)         (219)
PROFIT BEFORE  3,592         22,045       35,285        36,765        182,528
TAX
Tax            (1,048)       (6,434)      (5,315)       (11,266)      (24,574)
PROFIT FOR THE
PERIOD
ATTRIBUTABLE   2,544         15,611       29,970        25,499        157,954
TO EQUITY
HOLDERS OF THE
COMPANY
EARNING PER
SHARE
Net profit per
share
Basic          0.08          0.47         0.91          0.77          4.79
Diluted        0.08          0.47         0.91          0.77          4.79
Weighted
average number
of shares
outstanding
Basic          33,051,704    33,051,704   32,963,562    33,045,506    32,989,249
Diluted        33,051,885    33,051,885   32,963,570    33,045,909    32,991,144



EXCEED COMPANY LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                                                   As of
                                         As of June 30             December 31
                                         2013         2013         2012
                                         US$'000      RMB'000      RMB'000
                                         (Unaudited)  (Unaudited)
NON-CURRENT ASSETS
Property, plant and equipment            72,072       442,336      330,914
Prepaid land lease payments              4,355        26,729       27,103
Deposit paid for acquisition of land     24,438       149,986      149,986
use rights
Total non-current assets                 100,865      619,051      508,003
CURRENT ASSETS
Inventories                              2,323        14,260       11,655
Trade receivables                        136,146      835,580      1,084,535
Prepayments, deposits and other          5,966        36,609       24,396
receivables
Cash and cash equivalents                142,556      874,922      637,184
Total current assets                     286,991      1,761,371    1,757,770
CURRENT LIABILITIES
Trade and bills payables                 8,180        50,205       8,831
Deposits received, other payables and    10,874       66,736       61,681
accruals
Interest-bearing bank borrowings         3,259        20,000       30,000
Tax payable                              1,046        6,421        2,357
Total current liabilities                23,359       143,362      102,869
NET CURRENT ASSETS                       263,632      1,618,009    1,654,901
TOTAL ASSETS LESS CURRENT LIABILITIES    364,497      2,237,060    2,162,904
NON-CURRENT LIABILITIES
Loan from a shareholder                  7,733        47,461       -
Total non-current liabilities            7,733        47,461       -
Net assets                               356,764      2,189,599    2,162,904
STOCKHOLDER'S EQUITY
Issued share capital                     4            23           23
Treasury shares                          (2,590)      (15,898)     (15,898)
Retained profits                         277,160      1,701,039    1,678,920
Reserves                                 82,190       504,435      499,859
Total equity                             356,764      2,189,599    2,162,904



EXCEED COMPANY LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                         Three months ended June 30              Six months
                                                                 endedJune30
                         2013         2013          2012         2013
                         US$'000      RMB'000       RMB'000      RMB'000
                         (Unaudited)  (Unaudited)   (Unaudited)  (Unaudited)
Net cash
inflow/(outflow) from    (7,075)      (43,433)      (243,265)    308,211
operating activities
Net cash outflow from    (17,647)     (108,309)     (5,977)      (107,566)
investing activities
Net cash
inflow/(outflow) from    7,733        47,461        (211)        37,461
financing activities
Effect of exchange rate  (56)         (330)         421          (368)
changes
Net increase/(decrease)
in cash and cash         (17,045)     (104,611)     (249,032)    237,738
equivalents
Cash and cash
equivalents at           159,601      979,533       1,050,062    637,184
beginning of the period
Cash and cash
equivalents at end of    142,556      874,922       801,030      874,922
the period

SOURCE Exceed Company Ltd.

Website: http://www.ir.xdlong.cn
 
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