ZHEJIANG, China, April 2, 2012 /PRNewswire-Asia/ -- Lizhan
Environmental Corporation ("Lizhan" or the "Company") (Nasdaq:
LZEN), one of China's leading
manufacturers of eco-friendly fabrics made from patented
technologies, announced today its three- and twelve-month unaudited
results for the fiscal year ended September
30, 2011.
Financial Summary
|
|
$mill
USD
|
Q4*
2011
|
Q4*
2010
|
%
Chg.
|
FY*
2011
|
FY
2010
|
%
Chg.
|
|
Net Sales
|
$8.5
|
$11.7
|
-27%
|
$36.3
|
$46.3
|
-22%
|
|
Gross Profit
|
$1.2
|
$2.7
|
-56%
|
$6.7
|
$11.3
|
-41%
|
|
Operating (loss)/
Income
|
-$0.5
|
$1.7
|
-129%
|
$1.3
|
$8.4
|
-85%
|
|
Net (loss)/ Income
|
-$0.3
|
$1.8
|
-117%
|
$1.6
|
$8.2
|
-80%
|
|
EPS
|
-$0.02
|
$0.17
|
-112%
|
$0.12
|
$0.74
|
-84%
|
|
*Unaudited
|
|
|
|
|
|
|
|
|
The Company produced and sold approximately 12 million meters of
fabric in the twelve months ended September
30, 2011, down 2 million meters from 14 million meters in
the corresponding period in 2010. Domestic sales fell by
approximately 33% and sales to international customers increased by
16%.
"We faced several challenges in the past year, which we are
actively working to address," explained Chairman and Chief
Executive Officer Jiangfeng Liu.
"The most encouraging development has been an improvement in our
Colgre Products daily production from 1,000 meters per day in the
fourth quarter of 2011 to 3,000 meters per day currently. Demand is
building gradually and we are in active discussions with new
customers in China and
overseas."
Mr. Liu continued, "We do not expect to experience the
production disruptions caused by the lack of steam supply that
occurred from January to March of year 2011. We are also working on
diversifying our raw materials suppliers, which should help improve
our production stability and enhance our profitability."
Three months Ended September 30,
2011 Financial Results (Unaudited)
Net Sales
Net Sales for the three months ended September 30, 2011 were $8.5 million, a 27% decline from $11.7 million in the same period of fiscal 2010.
Sales of recycled leather flocked fabrics decreased 35% to
$6.4 million due to lower orders from
domestic and international customers. The Company sold $1.2 million of ultra suede leather products, up
35% from the same period last year.
Lizhan continued to increase production of its Colgre Products –
previously known as Evergreen Products - in the fourth quarter of
2011, with approximately 25,000 meters produced. The Company
shipped and sold approximately 15,000 meters of Colgre Products
during the fourth quarter of year 2011, resulting in sales of
approximately $0.2 million.
Gross Profit
Gross profit was $1.2 million
compared to $2.7 million for the same
quarter in 2010. The 56% decline was a result of rising raw
materials and labor costs. Gross margins were 14% and 23% in the
three months ended September 30, 2011
and 2010, respectively.
Operating Expenses
Operating expenses increased from $1.0
million to $1.7 million,
representing approximately 20% of revenues. The increase was
primarily due to higher salaries and expenses related to the
addition of Colgre Products.
Net Income
Lizhan generated a $0.3 million
loss attributable to common shareholders compared to a $1.8 million net income in the three months ended
September 30, 2010 due mainly to
lower sales and higher expenses. Net loss was $0.02 per share based on 13.6 million weighted
average shares outstanding in the fourth quarter of 2011 compared
to $0.17 net income and 11.1 million
shares in the same period last year, respectively.
Twelve months Ended September 30,
2011 Financial Results (Unaudited)
Net Sales
Net sales for the twelve months ended September 30, 2011 were $36.3 million, a 22% decline from $46.3 million in fiscal year 2010. Sales in
fiscal year 2011 were negatively impacted by a shutdown of
production mandated by the local government to review and repair
the steam supply systems during the second quarter. Sales of the
lower margin ultrasuede leather products decreased by 28% to
$6.6 million due to management's
ongoing efforts to reallocate capital to its higher margin
businesses such as recycled leather flocked fabric and Colgre
Products. Recycled leather flocked fabric sales dropped 20% to
$27.2 million.
Gross Profit
Gross profit for the twelve months ended September 30, 2011 fell 41% to $6.7 million, from $11.3
million for the twelve months ended September 30, 2010. Gross margin was 19%,
down from 24% in fiscal 2010.
Operating Expenses
General and administrative expenses totaled $4.5 million and selling and marketing expenses
were $0.8 million compared to
$2.1 million and $0.6 million in the twelve months ended
September 30, 2010, respectively. The
increase was primarily attributable to expenses incurred in
connection with operating as a public company and expenses in
connection with the cost of establishing our operating subsidiary,
Hongzhan. In addition to the increased employee salaries and
related expenses, the Company also incurred higher marketing and
promotion costs.
Net Income
Net income attributable to common shareholders declined from
$8.2 million to $1.6 million for the
twelve months ended September 30,
2011. The fully diluted earnings per share were $0.12 and $0.74 in
the first twelve months of 2011 and 2010, respectively.
Balance Sheet and Cash Flow Statement
The Company had $1.2 million in
cash and $1.3 million in restricted
cash at September 30, 2011 compared
to $2.6 million and $1.1 million, respectively, at September 30, 2010. Total loans outstanding were
$24.7 million and $13.7 million in 2011 and 2010, respectively.
Accounts receivable was $6.3
million at September 30, 2011,
representing days sales outstanding of 68 days. Inventories
increased from $4.7 million at the
end of fiscal 2010 to $13.0 million
at September 30, 2011 due to changes
in the product mix, increasing complexity of the manufacturing
process, and higher quality requirements from the Company's
customers, and advance raw materials purchases to reduce the impact
of cost inflation. Shareholder equity was $28.1 million, up from $17.7 million at September
30, 2010, as a result of its IPO in November 2010.
Cash from operations was a net outflow of $8.6 million in the twelve months ended
September 30, 2011 as a result of
increases in inventories and prepayments. The Company spent
approximately $9.4 million on capital
expenditures, the majority of which were related to the
construction of its Colgre Products manufacturing facility,
compared to total capital expenditures of $16.6 million in fiscal year 2010.
Business Updates
Colgre Products
Colgre Products are manufactured by using a new leather
processing technology which utilizes genuine leather and its scraps
to generate a new class of fabrics derived from natural fiber. The
technology enables dissembling collagen fibers and recomposing or
weaving the collagen fiber bundles according to the natural leather
structure. These products are expected to be suitable for
applications in furniture, shoes, eco-fashion apparel, radiation
proof clothing and luggage and bags. We sell and expect to continue
to sell these products to furniture manufacturers.
Lizhan completed the construction of the Colgre Products
manufacturing facility in January
2011 and launched the first production line in June 2011. Due to technical adjustments that
needed to be made to the equipment purchased from a U.S. vendor,
the costs to launch the initial production line significantly
exceeded the original projections. As of September 30, 2011, the Company spent
$20.1 million on land, equipment and
manufacturing of the first production line and part of the second
production line. The cost for increasing the capacity of the first
production line to full capacity is expected to be approximately
$500,000. Lizhan intends to use cash
generated from operations and additional financing to meet this
capital requirement.
From June to September 2011, the
Company produced 25,000 meters and shipped 15,000 meters of Colgre
Products, representing a daily production rate of approximately
1,000 meters per day. Currently the daily production rate is
approximately 3,000 meters. Lizhan is making modifications to the
equipment in order to achieve maximum production capacity of 5,000
meters per day.
Lizhan has signed contracts with multiple customers since
launching the Colgre Products in June
2011. The Company has initially focused on distributors and
wholesalers in the furniture and upholstery fabric industries.
Because of its superior quality and environmental benefits, Colgre
Products can be used in other consumer applications such as shoes,
luggage and apparel.
About Lizhan Environmental Corporation
Lizhan Environmental Corporation is one of China's leading manufacturers of eco-friendly
fabrics whose products are developed with patented technology that
regenerates collagen fiber from leftover cuttings, pieces and
trimmings of genuine leather. The Company's products are mainly
used in furniture, garments and other consumer applications. For
more information about Lizhan Environmental Corporation, please
visit www.lzencorp.com.
Safe Harbor Statements
This press release may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements involve
inherent risks and uncertainties that could cause actual results to
differ materially from those projected or anticipated, including
risks outlined in the Company's public filings with the Securities
and Exchange Commission, including the Company's annual
report on 20F, as amended. Some of risks
inherent in an investment in our company include, but are not
limited to, our limited operation history, our need to maintain
sufficient levels of liquidity and working capitals, the potential
need to reduce our expansion plans, price inflation in the PRC,
difficulties in developing and selling our new Colgre Products,
seasonal patterns in our business, protection of our intellectual
property and the risk of infringing the intellectual property of
others, customer decisions to discontinue purchasing our products,
and restrictions imposed by Chinese regulations, including every
policies. All information provided in this press release is
as of April 2, 2012. Except as
required by law, the Company undertakes no obligation to update or
revise publicly any forward-looking statements, whether as a result
of new information, future events or otherwise, after the date on
which the statements are made or to reflect the occurrence of
unanticipated events.
Contacts:
Company:
Lizhan Environmental Corporation
Eileen Liu, Investor Relations
Manager
Email: ir@lezncorp.com
Phone: +011-86-573-8862-268
Investor Relations:
MZ North America
Ted Haberfield, President
Email: thaberfield@mzgroup.us
Phone: +1-760-755-2716
Financial Tables to Follow:
|
|
LIZHAN
ENVIRONMENTAL CORPORATION
|
|
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
|
|
( IN US
DOLLARS)
|
|
|
As of
September 30,
|
|
|
|
|
2011
|
|
2010
|
|
Assets
|
|
|
(Unaudited)
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash
|
|
|
$
1,231,233
|
|
$
2,597,366
|
|
Restricted
cash
|
|
|
1,285,671
|
|
1,072,416
|
|
Accounts receivable,
net
|
|
|
6,303,572
|
|
7,310,194
|
|
Inventories
|
|
|
13,008,891
|
|
4,666,496
|
|
Amounts due from
directors
|
|
|
-
|
|
1,497
|
|
Value added tax
receivable
|
|
|
1,185,057
|
|
37,586
|
|
Prepaid expenses and
other current assets
|
|
|
3,038,835
|
|
2,442,120
|
|
Total current assets
|
|
|
26,053,259
|
|
18,127,675
|
|
Other assets
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
34,094,191
|
|
12,906,655
|
|
Land use
rights
|
|
|
1,680,335
|
|
1,638,248
|
|
Intangible assets,
net
|
|
|
595,833
|
|
628,333
|
|
Deposits for plant and
equipment
|
|
|
188,883
|
|
11,385,603
|
|
Security deposit and
prepaid rent
|
|
|
1,941,447
|
|
-
|
|
Total other assets
|
|
|
38,500,689
|
|
26,558,839
|
|
Total assets
|
|
|
$
64,553,948
|
|
$
44,686,514
|
|
Liabilities and stockholders'
equity
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Accounts
payable
|
|
|
$
7,696,159
|
|
$
8,158,461
|
|
Bank acceptance notes
payable
|
|
|
2,571,338
|
|
2,144,832
|
|
Short-term
loans
|
|
|
20,978,363
|
|
13,676,108
|
|
Accrued expenses and
other payables
|
|
|
531,717
|
|
1,251,849
|
|
Payable for construction
of building and machinery
|
|
|
399,961
|
|
297,153
|
|
Income taxes
payable
|
|
|
183,782
|
|
702,713
|
|
Deferred
income
|
|
|
-
|
|
110,106
|
|
Total current
liabilities
|
|
|
32,361,320
|
|
26,341,222
|
|
Long-term
loans
|
|
|
3,684,541
|
|
-
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
36,045,861
|
|
26,341,222
|
|
Stockholders' equity
|
|
|
|
|
|
|
Common stock, $0.32 par;
31,250,000 shares authorized,
13,643,750 shares and
11,143,750 shares issued and
|
|
|
|
|
|
outstanding
as at September 30, 2011 and 2010, respectively
|
|
|
4,366,000
|
|
3,566,000
|
|
Additional paid-in
capital
|
|
|
7,665,752
|
|
924,000
|
|
Statutory
reserves
|
|
|
1,558,079
|
|
1,289,475
|
|
Retained
earnings
|
|
|
12,418,347
|
|
11,053,506
|
|
Accumulated other
comprehensive income
|
|
|
2,053,437
|
|
888,532
|
|
Total Lizhan stockholders'
equity
|
|
|
28,061,615
|
|
17,721,513
|
|
|
|
|
|
|
|
|
Less: Non-controlling
interest
|
|
|
446,472
|
|
623,779
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
28,508,087
|
|
18,345,292
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
|
|
$
64,553,948
|
|
$
44,686,514
|
|
|
|
|
|
|
|
|
|
LIZHAN
ENVIRONMENTAL CORPORATION
CONSOLIDATED
STATEMENTS OF INCOME
(IN US
DOLLARS)
|
|
|
|
|
|
|
|
|
|
For the Year
Ended September 30,
|
|
|
2011
|
|
2010
|
|
2009
|
|
|
(Unaudited)
|
|
|
|
|
|
NET
SALES
|
$
36,342,348
|
|
$
46,321,225
|
|
$
21,612,541
|
|
|
|
|
|
|
|
|
Cost of sales
|
29,614,533
|
|
35,042,898
|
|
17,868,408
|
|
|
|
|
|
|
|
|
Gross profit
|
6,727,815
|
|
11,278,327
|
|
3,744,133
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
General and administrative
expenses
|
4,486,643
|
|
2,110,506
|
|
1,053,752
|
|
Research and development
expenses
|
92,522
|
|
136,398
|
|
64,991
|
|
Selling and marketing
expenses
|
845,221
|
|
634,544
|
|
322,133
|
|
Total operating
expenses
|
5,424,386
|
|
2,881,448
|
|
1,440,876
|
|
|
|
|
|
|
|
|
Operating
income
|
1,303,429
|
|
8,396,879
|
|
2,303,257
|
|
|
|
|
|
|
|
|
Other income
(expenses):
|
|
|
|
|
|
|
Other income
|
1,261,409
|
|
1,139,445
|
|
610,548
|
|
Exchange loss
|
(156,543)
|
|
(49,788)
|
|
(24,963)
|
|
Interest income
|
14,572
|
|
26,721
|
|
19,972
|
|
Interest
expense
|
(411,920)
|
|
(300,609)
|
|
(166,186)
|
|
Other expenses,
net
|
(174,007)
|
|
(142,419)
|
|
(11,330)
|
|
Total other income,
net
|
533,511
|
|
673,350
|
|
428,041
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
1,836,940
|
|
9,070,229
|
|
2,731,298
|
|
Income tax
expense
|
(405,755)
|
|
(912,249)
|
|
-
|
|
|
|
|
|
|
|
|
Net income before
allocation of
non-controlling
interest
|
1,431,185
|
|
8,157,980
|
|
2,731,298
|
|
|
|
|
|
|
|
|
Net loss attributable to
non-controlling
interest
|
202,260
|
|
28,127
|
|
-
|
|
|
|
|
|
|
|
|
Net income
attributable to the
stockholders
|
1,633,445
|
|
8,186,107
|
|
2,731,298
|
|
|
|
|
|
|
|
|
Earnings per
common share
|
|
|
|
|
|
|
- Basic and fully
diluted
|
$
0.12
|
|
$
0.74
|
|
$
0.25
|
|
|
|
|
|
|
|
|
Weighted average number of
common
shares
outstanding
|
|
|
|
|
|
|
- Basic and fully
diluted
|
13,314,080
|
|
11,084,983
|
|
10,937,500
|
|
|
|
|
|
|
|
LIZHAN
ENVIRONMENTAL CORPORATION
CONSOLIDATED
STATEMENT OF CASH FLOWS
(IN US
DOLLARS)
|
|
|
|
|
|
|
|
|
For the Year
Ended September 30,
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating
activities:
|
|
|
(Unaudited)
|
|
|
|
|
|
Net income
|
|
|
|
|
$
1,431,185
|
|
$
8,157,980
|
|
$
2,731,298
|
|
Add net loss attributable
to non-controlling interest
|
|
202,260
|
|
28,127
|
|
-
|
|
Net income attributable to the
Stockholders
|
|
1,633,445
|
|
8,186,107
|
|
2,731,298
|
|
Adjustments to reconcile net
income to net cash
|
|
|
|
|
|
|
|
provided by (used in)
operating activities:
|
|
|
|
|
|
|
|
Depreciation of property,
plant and equipment
|
|
750,197
|
|
693,653
|
|
505,340
|
|
Amortization of
intangible assets
|
|
|
32,500
|
|
21,667
|
|
-
|
|
Amortization of land use
rights
|
|
|
37,331
|
|
34,343
|
|
22,694
|
|
Loss on disposal of motor
vehicle
|
|
|
14,670
|
|
-
|
|
-
|
|
Recognition of noncash
deferred income
|
|
|
|
|
|
from exclusive
distribution right granted by the
Company to a
customer
|
|
(112,923)
|
|
(649,484)
|
|
(539,244)
|
|
Non-controlling
interest
|
|
|
|
(202,260)
|
|
(28,127)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
|
1,334,334
|
|
(2,844,533)
|
|
(1,365,887)
|
|
Inventories
|
|
|
|
|
(7,932,188)
|
|
(1,103,391)
|
|
(1,923,183)
|
|
Prepaid expenses and
other current assets
|
|
920,243
|
|
(1,900,657)
|
|
(287,496)
|
|
Accounts
payable
|
|
|
|
(842,798)
|
|
3,238,413
|
|
1,423,890
|
|
Accrued expenses and
other payables
|
|
|
(300,768)
|
|
487,940
|
|
39,959
|
|
Increase in security
deposit and prepaid rent
|
|
(1,898,116)
|
|
-
|
|
-
|
|
Income tax
payable
|
|
|
|
(541,011)
|
|
690,848
|
|
-
|
|
Value added
tax
|
|
|
|
(1,532,691)
|
|
731,862
|
|
(133,793)
|
|
Net cash (used in) provided by operating activities
|
|
(8,640,035)
|
|
7,558,641
|
|
473,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
(Increase) decrease in
restricted cash
|
|
|
(157,123)
|
|
925,001
|
|
(1,031,346)
|
|
Acquisition of land use
rights
|
|
|
-
|
|
(628,106)
|
|
-
|
|
Proceeds from sale of
property, plant and equipment
|
|
6,132
|
|
-
|
|
-
|
|
Payment for purchase of
plant and equipment
|
|
(9,396,509)
|
|
(16,034,735)
|
|
(1,187,757)
|
|
Net cash used in by investing
activities
|
|
(9,547,500)
|
|
(15,737,840)
|
|
(2,219,103)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
Ended September 30,
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Cash flows from financing
activities:
|
|
|
(Unaudited)
|
|
|
|
|
|
Proceeds from short term
bank loans
|
|
|
28,435,220
|
|
15,208,511
|
|
2,342,418
|
|
Repayment of short term
bank loans
|
|
|
(21,951,070)
|
|
(4,114,380)
|
|
(2,708,420)
|
|
Proceeds from long term
bank loans
|
|
|
9,733,889
|
|
-
|
|
-
|
|
Repayment of long term
bank loans
|
|
|
(6,131,584)
|
|
-
|
|
-
|
|
Proceeds from bank
acceptance notes payable
|
|
2,513,950
|
|
5,297,264
|
|
2,733,308
|
|
Repayment to acceptance
notes payable
|
|
(2,199,706)
|
|
(7,401,475)
|
|
-
|
|
Payment of amount due to
contractors for building and
machinery
|
86,279
|
|
(5,158)
|
|
(802,797)
|
|
Issue of ordinary shares
for cash
|
|
|
-
|
|
990,439
|
|
690,552
|
|
Sale of Common Stock for
cash, net of offering stocks of
2.5
million
|
7,541,752
|
|
-
|
|
-
|
|
Advance from (Repayment
to) a stockholder and
director
|
|
1,533
|
|
(52,899)
|
|
51,240
|
|
Loan to third
party
|
|
|
(1,433,258)
|
|
-
|
|
-
|
|
Repayment to
related companies
|
|
|
-
|
|
-
|
|
(402,556)
|
|
Net cash provided by financing
activities
|
|
16,597,005
|
|
9,922,302
|
|
1,903,745
|
|
Effect on change of exchange
rates
|
|
|
224,397
|
|
(9,899)
|
|
(517)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in
cash
|
|
|
(1,366,133)
|
|
1,733,204
|
|
157,703
|
|
Cash at the beginning of
year
|
|
|
2,597,366
|
|
864,162
|
|
706,459
|
|
Cash at the ending of
year
|
|
|
|
$
1,231,233
|
|
$
2,597,366
|
|
$
864,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing
transactions:
|
|
|
|
|
|
|
|
Acquisition of machinery in
exchange for exclusive
distribution right
granted to a customer
|
$
-
|
|
$
-
|
|
$
1,294,186
|
|
Payable due to contractors for
construction of building and
machinery
|
$
23,378
|
|
$
226,331
|
|
$
296,267
|
|
Exclusive use of patents
contributed by a principal stocker
as capital
|
$
-
|
|
$
87,740
|
|
$
-
|
|
Acquisition of patent and
patents pending in exchange for
13% interest in a
subsidiary
|
$
-
|
|
$
650,000
|
|
$
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash
flow information:
|
|
|
|
|
|
|
|
Cash paid for
interest
|
|
|
|
$
1,175,059
|
|
$
300,609
|
|
$
166,186
|
|
Cash paid for profit
tax
|
|
|
|
$
932,874
|
|
$
221,400
|
|
$
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE Lizhan Environmental Corporation