Exceed Company Ltd. 2013 Third Quarter Financial Results

           Exceed Company Ltd. 2013 Third Quarter Financial Results

PR Newswire

FUJIAN, China, Nov. 13, 2013

FUJIAN, China, Nov. 13, 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
September30, 2013.

Financial Highlights –Third quarter ended September30, 2013^(1)

  oRevenue was RMB481.8 million (US$78.7 million), representing a 12.9%
    year-over-year decrease.
  oGross profit was RMB131.0 million (US$21.4 million), representing a 13.8%
    year-over-year decrease. Gross margin was 27.2%, representing a 0.3
    percentage point decrease as compared to 27.5% for the third quarter of
    2012.
  oOperating profit was RMB25.2 million (US$4.1 million), representing a
    29.6% year-over-year decrease.
  oNet profit was RMB18.4 million (US$3.0 million), representing a 39.5%
    year-over-year decrease.

    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
(1) 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 % of    Sep 30, 2012 % of    Third Quarter

            RMB'000      Revenue RMB'000      Revenue 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 % of    Sep 30, 2012 % of    YTD

            RMB'000      Revenue RMB'000      Revenue 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.

  oFootwear. Footwear accounted for 46.0% of revenue for the third quarter
    ended September 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 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.

  oApparel. Sports apparel accounted for 52.5% of revenue for the third
    quarter ended September 30, 2013. Sports apparel principally includes
    sports tops, sports pants, jackets and track suits. Our apparel production
    is entirely outsourced.

  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.

  oAccessories. Revenue from accessories was RMB7.4 million (US$1.2 million)
    for the third quarter ended September 30, 2013, representing a decrease of
    43.1%, from RMB13.0 million for the third quarter ended September 30,
    2012. This decrease was primarily driven by the decline in the sales of
    most categories of sportswear accessories, which 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 was substantially similar to the results
    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.

  oSelling and distribution costs. Selling and distribution costs decreased
    by 7.8%, from RMB93.3 million for the third quarter ended September 30,
    2012 to RMB86.0 million (US$14.0 million) for the third quarter ended
    September 30, 2013. The decrease was mainly due to the decrease in
    advertising and promotional expenses, which decreased from RMB88.5 million
    for the third quarter ended September 30, 2012 to RMB82.7 million (US$13.5
    million) for the third quarter ended September 30, 2013. Such decrease was
    primarily caused by the decrease in advertisement in local TV channels,
    which was partially offset by the increase in the renovation subsidies of
    existing Xidelong retail selling locations during the third quarter of
    2013. During the third quarter of 2013, 298 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 comparison, 281 existing Xidelong retail selling
    locations were renovated in the third quarter of 2012. For the remainder
    of 2013, our advertising and promotional activities will continue to focus
    on events relating to the Nationwide "Fitness for All" Sports Campaign
    organized by the General Administration of Sport of China, the government
    agency responsible for sports in China.
  oAdministrative expenses. Administrative expenses decreased by 31.1%, from
    RMB16.1 million for the third quarter ended September 30, 2012 to RMB11.1
    million (US$1.8 million) for the third quarter ended September 30, 2013.
    The decrease was primarily due to decreases in professional and
    consultancy fees from RMB2.6 million for the third quarter ended September
    30, 2012 to RMB0.7 million (US$0.1 million) for the third quarter ended
    September 30, 2013. The Company continued its efforts to control costs and
    thus requested less professional and consulting service from its service
    providers. Employee share-based payment expenses decreased from RMB1.6
    million for the third quarter ended September 30, 2012 to RMB0.2 million
    (US$30,000) for the third quarter ended September 30, 2013, because the
    shares granted to most of the staff of the Company under the employee
    incentive plan have vested. Miscellaneous taxes, including but not limited
    to the UMC Tax, Educational Surcharge and Local Educational Surcharge,
    decreased from RMB2.2 million for the third quarter ended September 30,
    2012 to RMB2.0 million (US$0.3 million) for the third quarter ended
    September 30, 2013, and the decrease was mainly attributable to the
    decline in revenue.
  oResearch and development expenses. Research and development expenses
    increased by 18.0%, from RMB10.0 million for the third quarter ended
    September 30, 2012 to RMB11.8 million (US$1.9 million) for the third
    quarter ended September 30, 2013, as we continued to allocate resources
    towards research and development work as well as our research and
    development efforts in cooperation with the General Administration of
    Sport of China to increase the quality and sophistication of our products
    so as to enhance our brand recognition for quality.

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

  oThere were 3,301 Xidelong retail selling locations as of September 30,
    2013. This reflected a net decrease of 901 locations as compared with the
    number of locations as of June 30, 2013 and a net decrease of 1,608
    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. In July 2013, a series of cycling charity marathon activities were
    organized under "Xidelong Fitness for All cum Schwinn Charity Marathon
    Ride" in Shanghai, Guangzhou, Beijing, and Xian in China. Participants of
    the rides included national fitness coaches, numerous fitness and cycling
    enthusiasts, trendy followers, as well as foreigners.
  oOn September 3, 2013, Xidelong (China) Co., Ltd., our principal PRC
    subsidiary, was successfully nominated as one of the "Most Influential
    Brands" in China in the corporate activity organized by hc360.com, a B2B
    e-commerce platform in China.

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,       NinemonthsendedSeptember30,
               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   520          3,185        3,163        9,772             12,051
and gains
Selling and
distribution   (14,049)     (85,978)     (93,251)     (184,348)         (280,027)
costs
Administrative (1,814)      (11,102)     (16,088)     (36,167)          (53,041)
expenses
Research and
development    (1,933)      (11,831)     (9,977)      (32,050)          (34,222)
expenses
OPERATING      4,122        25,228       35,792       62,875            218,539
PROFIT
Finance costs  -            -            (167)        (882)             (386)
PROFIT BEFORE  4,122        25,228       35,625       61,993            218,153
TAX
Tax            (1,122)      (6,870)      (5,271)      (18,136)          (29,845)
PROFIT FOR THE
PERIOD                                              
ATTRIBUTABLE                             30,354                         188,308
TO EQUITY      3,000        18,358                    43,857
HOLDERS OF THE
COMPANY
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    24,507       149,986      149,986
use rights
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         2,904        17,773       24,396
receivables
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   11,259       68,902       61,681
accruals
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                     Ninemonthsended
                      September 30,                          September30,
                      2013         2013         2012         2013
                      US$'000      RMB'000      RMB'000      RMB'000
                      (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Net cash                                                   
inflow/(outflow)                                (109,419)
from operating        (27,037)     (165,472)                 142,739
activities
Net cash
inflow/(outflow)      (19,895)     (121,755)    3,047        (229,321)
from investing
activities
Net cash
inflow/(outflow)      -            -            (418)        37,327
from financing
activities
Effect of exchange    (7)          (40)         (496)        (274)
rate changes
Net decrease in cash  (46,939)     (287,267)    (107,286)    (49,529)
and cash equivalents
Cash at beginning of  142,961      874,922      801,030      637,184
the period
Cash at end of the    96,022       587,655      693,744      587,655
period

SOURCE Exceed Company Ltd.

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