Jerash Holdings(JRSH) - 2021 Q2 - Quarterly Report

Part I - Financial Information Financial Statements The financial statements present the company's financial position as of September 30, 2020, and performance for the three and six months then ended, detailing assets, liabilities, equity, and cash flows Condensed Consolidated Balance Sheets The balance sheets show total assets increased to $70.2 million as of September 30, 2020, driven by higher accounts receivable, with total equity reaching $57.0 million Condensed Consolidated Balance Sheets (as of Sep 30, 2020 vs Mar 31, 2020) | Account | September 30, 2020 (Unaudited) | March 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $62,401,201 | $58,978,175 | | Accounts receivable, net | $19,924,392 | $5,335,748 | | Inventories | $10,304,880 | $22,633,772 | | Cash | $27,334,093 | $26,130,411 | | Total Assets | $70,187,180 | $67,479,036 | | Total Current Liabilities | $11,503,082 | $10,850,318 | | Total Liabilities | $13,152,274 | $12,727,885 | | Total Equity | $57,034,906 | $54,751,151 | Condensed Consolidated Statements of Income and Comprehensive Income The statements show a decline in revenue and net income for both the three and six months ended September 30, 2020, with diluted EPS also decreasing Financial Performance (Three Months Ended Sep 30) | Metric | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Revenue, net | $27,086,318 | $30,611,119 | -11.5% | | Gross Profit | $5,882,750 | $7,302,357 | -19.4% | | Income from Operations | $3,029,071 | $4,188,482 | -27.7% | | Net Income | $2,560,092 | $3,588,736 | -28.7% | | Diluted EPS | $0.23 | $0.31 | -25.8% | Financial Performance (Six Months Ended Sep 30) | Metric | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Revenue, net | $45,793,073 | $53,138,444 | -13.8% | | Gross Profit | $8,934,320 | $11,815,060 | -24.4% | | Income from Operations | $4,187,663 | $6,077,503 | -31.1% | | Net Income | $3,373,945 | $5,138,224 | -34.3% | | Diluted EPS | $0.30 | $0.45 | -33.3% | - The company declared and paid a dividend of $0.05 per share for the quarter and $0.10 for the six-month period, consistent with the prior year[10] Condensed Consolidated Statements of Changes in Equity Total equity increased to $57.0 million by September 30, 2020, primarily driven by net income, partially offset by dividend distributions Changes in Equity (Six Months Ended Sep 30, 2020) | Description | Amount | | :--- | :--- | | Balance at March 31, 2020 | $54,751,151 | | Net income | $3,373,945 | | Dividend distribution | ($1,132,500) | | Stock-based compensation | $42,151 | | Foreign currency translation gain | $159 | | Balance at September 30, 2020 | $57,034,906 | Condensed Consolidated Statements of Cash Flows For the six months ended September 30, 2020, operating cash flow increased to $1.7 million, investing cash outflow significantly decreased, and financing cash outflow was $0.2 million Cash Flow Summary (Six Months Ended Sep 30) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,712,888 | $1,366,006 | | Net cash used in investing activities | ($308,593) | ($3,053,472) | | Net cash used in financing activities | ($200,583) | ($1,765,117) | | Net Increase (Decrease) in Cash | $1,203,682 | ($3,439,688) | Notes to Condensed Consolidated Financial Statements The notes detail the company's structure, accounting policies, and financial items, including its manufacturing operations, customer concentration risk, and credit facilities - The company manufactures and exports customized ready-made sport and outerwear from its facilities in Jordan, primarily for sale in the United States[26] - The company has significant customer concentration risk, with one end-customer (VF Corporation) accounting for 76% of total revenue for the six months ended September 30, 2020[67][161] - The company's Jordanian subsidiaries are subject to a corporate income tax rate of 14% plus a 1% social contribution, effective January 1, 2020[50][126] - The Board of Directors declared quarterly cash dividends of $0.05 per share on May 15, 2020, and August 5, 2020[89] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 14% revenue decline due to decreased U.S. shipments, the impact of COVID-19, maintained strong liquidity, and plans for capital expenditures Impact of COVID-19 The COVID-19 pandemic impacted sales, but the company diversified into PPE and maintained strong liquidity with $28.1 million in cash and equivalents - Sales for the quarter ended Sep 30, 2020, were $27.1 million, representing over 88% of the prior fiscal year's same period[136] - The company started shipping personal protective equipment (PPE) during the quarter, aiding product and customer diversification[136] - As of Sep 30, 2020, the company had approximately $28.1 million in cash and equivalents and a strong current ratio of 5.4 to 1, indicating sufficient liquidity[137] - Construction of a dormitory, previously paused due to COVID-19, is set to resume as customer orders have recovered[135] Results of Operations For the six months ended September 30, 2020, revenue decreased 14% to $45.8 million and net income fell 34% to $3.4 million, primarily due to a drop in U.S. sales Six-Month Operational Results (Ended Sep 30, 2020 vs 2019) | Metric | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Revenue | $45.8M | $53.1M | -14% | | Gross Profit | $8.9M | $11.8M | -24% | | Gross Margin | 20% | 22% | -2 p.p. | | Net Income | $3.4M | $5.1M | -34% | Six-Month Revenue by Geographic Area (Ended Sep 30) | Region | 2020 Sales | 2019 Sales | Change | | :--- | :--- | :--- | :--- | | United States | $41.0M | $51.4M | -20% | | Jordan | $3.4M | $1.6M | +117% | | Others | $1.4M | $0.2M | +742% | - The decrease in gross profit margin was primarily driven by the higher proportion of lower-margin local orders[166] - Selling, general, and administrative expenses decreased by 15% for the six-month period, mainly due to lower repair, maintenance, and recruitment expenses[167] Liquidity and Capital Resources The company maintained strong liquidity with $27.3 million in cash and $50.9 million in working capital, supported by $26 million in available credit facilities - As of September 30, 2020, the company had cash of approximately $27.3 million and net working capital of $50.9 million[174][177] - The company has an $11 million credit facility and a $12 million factoring facility with HSBC, plus a $3 million import facility with SCBHK[179][183][184] - Capital expenditures for the six months ended September 30, 2020, were approximately $428,000, a significant decrease from $3.1 million in the prior-year period[195] - The company projects aggregate capital expenditures of approximately $3 million for the fiscal year ending March 31, 2021, to enhance business and production capacity[201] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Jerash Holdings (US), Inc. is not required to provide this information - The company is a smaller reporting company and is not required to provide information for this item[207] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2020[209] - No changes in internal control over financial reporting occurred during the quarter that materially affected these controls[210] Part II - Other Information Legal Proceedings The company is not currently involved in any material legal proceedings and does not expect material adverse effects from ordinary course litigation - The company is not currently involved in any material legal proceedings[213] Risk Factors As a smaller reporting company, the registrant is not required to provide this information - As a smaller reporting company, the registrant is not required to provide this information[214] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[215] Defaults Upon Senior Securities This item is not applicable - Not applicable[216] Mine Safety Disclosures This item is not applicable - Not applicable[217] Other Information There is no other information to report for this item - None[218] Exhibits The report includes various exhibits, notably CEO and CFO certifications, a new banking facilities agreement with HSBC, and XBRL data files - Exhibits filed with the report include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2), a Letter Agreement for Banking Facilities with HSBC (10.2), and XBRL data files[222]