Jerash Holdings (US), Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended March 31, 2023. Although the request metadata says “2022 Q4,” this filing reports the full fiscal year, not a standalone quarter.
Business context
Jerash manufactures and exports customized sportswear and outerwear, primarily from facilities in Jordan. It reported approximately 5,500 employees and annual capacity of about 14 million pieces. VF Corporation remained its largest customer; PPE generated no revenue in FY2023.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $138.1 million | $143.4 million |
| Gross profit / margin | $21.8 million / 15.8% | $27.3 million / 19.1% |
| Operating income | $4.4 million | $10.5 million |
| Net income / net margin | $2.4 million / 1.8% | $7.9 million / 5.5% |
| Basic and diluted EPS | $0.19 | $0.67 |
| Operating cash flow | $10.8 million | $9.0 million |
| Cash and restricted cash at year-end | $19.4 million | $26.6 million |
| Current assets / current liabilities | $57.3 million / $14.4 million | $69.9 million / $14.1 million |
Cash and cash equivalents were $17.8 million, with $1.6 million of non-current restricted cash. The current ratio was 4.0:1, down from 4.9:1; working capital was $42.8 million. No balance was outstanding under the DBS facility or other bank credit facilities at year-end. Total liabilities were $15.5 million, including $0.8 million of operating lease liabilities and $3.6 million of income taxes payable.
Investing cash outflow was $13.8 million, mainly reflecting construction, equipment, and acquisitions of Ever Winland and Kawkab Venus. Financing cash outflow was $4.0 million, including $2.5 million in dividends and $1.2 million in share repurchases. The annual dividend was $0.20 per share.
Material changes versus FY2022
- Revenue declined 4%, principally because shipments to two major U.S. customers decreased. U.S. sales fell 10%; sales to Hong Kong, Jordan, and other markets increased.
- Gross margin contracted by about 3 percentage points. Management attributed this chiefly to a lower mix of higher-margin orders from major U.S. customers; cost of goods sold rose slightly despite lower revenue.
- Net income fell 69%, while interest expense increased to $0.8 million from $0.2 million. The effective tax rate rose to 40.7% from 24.2%.
- Operating cash flow increased, supported in part by lower receivables; investing outflows rose, and cash and restricted cash declined by $7.2 million.
- VF Corporation represented 59.9% of revenue, down from 67.3%; New Balance represented 17.5%, down from 24.1%. The two largest customers together accounted for 77.4% of FY2023 revenue.
Outlook, risks, and unusual items
- Management said existing cash and expected operating cash generation should support working-capital needs for the next 12 months. It projected capital expenditures of approximately $2.6 million in FY2024 and $8.5 million in FY2025. No revenue or earnings guidance was provided.
- The company expects a workforce dormitory to be completed in FY2024. A proposed $10 million Capital Bank of Jordan facility had board approval but was not effective as of the report date. The $5 million DBS facility had no year-end borrowings.
- Operations are concentrated in Jordan, and the company depends on purchase orders rather than long-term customer contracts or minimum purchase commitments. Customer concentration, retail cyclicality, product mix, inflation, labor and input costs, currency exposure, political/security conditions, and trade-agreement terms are key risks.
- Management concluded internal control over financial reporting and disclosure controls were ineffective at March 31, 2023 because of material weaknesses in period-end reporting, including income taxes and account reconciliations, and in IT access controls. Management outlined remediation plans. The auditor issued an unqualified opinion on the financial statements, but did not attest to internal-control effectiveness.
- After year-end, Treasure Success acquired a 51% interest in J&B International Limited, and the board approved a $10 million Jordanian credit facility that remained subject to execution. A $0.05-per-share dividend was approved in May 2023.
Important facts for investors to verify
- Whether customer orders and margins recover, and whether the company can reduce reliance on VF Corporation and other major customers.
- Progress in remediating the disclosed material weaknesses and whether controls are operating effectively in subsequent reporting periods.
- Actual timing, funding, and returns from dormitory and factory construction, plus the status and terms of the proposed Jordanian credit facility.
- Whether inventory levels, supply-chain financing costs, and receivables collections remain manageable as demand and product mix change.
- Execution and financial impact of the J&B joint venture and the company’s continuing dividend policy.