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Aug. 4, 2011 /PRNewswire-Asia-FirstCall/ -- Exceed Company Ltd. (NASDAQ: EDS) ("Exceed" or "the Company"), one of the leading domestic sportswear brands in
China, announces that its Chairman and Chief Executive Officer, Mr. Shuipan Lin, has issued a letter to shareholders in response to investor inquiries regarding the Company's financial and operational disclosure. The full text of the letter is provided below and can also be accessed on the company's website at
August 4, 2011
In response to investor inquiries regarding recent negative reports issued by short sellers targeting Exceed, our management team, legal counsel and advisors have worked diligently to provide a detailed, fact-based response. We believe the accusations leveled by these short sellers, who stand to benefit financially by a decline in our share price, are wholly without merit. As a U.S. reporting Company, we have and continue to maintain a high level of transparency and disclosure, and our financial position and operations remain strong.
Our Capital Management and Cash Balances
It is common for sportswear companies in
China have a large cash balance due to their cash-rich business model.
Hong Kong listed Chinese sportswear companies generally have a cash balance ranging between
US$230 million to US$780 million as at
31 December 2010, which is much higher than the cash balance of
US$115.6 million for EDS as at
31 December 2010. Our accounts receivable turnover days and inventory turnover days are 96 days and 10 days, respectively, for the fiscal year 2010, which are comparable to 19-181 days and 13-60 days for other
Hong Kong-listed competitors.
Despite our healthy cash balance, we have discussed in detail in recent announcements and on our first quarter 2011 results conference call our reasoning for not having yet issued a dividend. As we discussed, the sportswear industry in
China is evolving, due to the consolidation of outsourced manufacturers and a shortage of labor. Due to the highly competitive environment, we have noticed a decrease in the number of small outsourced manufacturers and the formation of large outsourced manufacturers. This trend is weakening the bargaining power of brand owners like us and has impacted the stability of our long-term product supply and gross profit margin. We are exploring solutions, including the construction of new production facilities at a faster pace and acquisition of other production facilities. To facilitate the operation of a new production network, we are considering building new regional sales and logistic centers. As such, we believe it is necessary to continue investing in our future growth, and therefore must maintain sufficient flexibility in terms of our cash balances, especially as our cash position is lower than most of our
Hong Kong-listed competitors.
Questions Relating to Our SAIC Filings
Questions on the comparability of our Chinese State Administration of Industry and Commerce (SAIC) filings versus SEC filings have also been raised by investors. As many investors are now aware, SAIC filings are essentially a formality, primarily for the purposes of business license renewal with the government. As such, SAIC filings are not reviewed or audited with the same rigor as SEC filings. We have continued to report SAIC figures which are in-line with our audited SEC filings, and this includes our 2008, 2009 and 2010 SAIC filings. We most recently filed a 2010 financial report for our subsidiaries, Xidelong China and Fujian Xidelong, with the SAIC and the report will be made available on our website at:
Nevertheless, we strongly urge investors to focus on our audited SEC filings, which are the ultimate measure of our financial performance. Our SEC filings are audited by Crowe Horwath LLP, a top 10 and well-regarded accounting firm, and they fully stand by our audited financials.