ZHEJIANG, China, April 7, 2011 /PRNewswire-Asia/ -- Lizhan
Environmental Corporation ("Lizhan" or the "Company") (Nasdaq:
LZEN), one of China's leading
manufacturers of eco-friendly fabrics whose products are developed
using patented technology that regenerates collagen fiber from
genuine leather scraps, announced today its first quarter of fiscal
year 2011 unaudited results.
2011 First Quarter Financial Highlights
- Sales of recycled leather flocked fabric increased $42.5% to
$7.9 million in the first quarter of
fiscal 2011 from $5.5 million in the
first quarter of fiscal 2010
- Gross profit increased by 14.7% to $3.1
million in the first quarter of fiscal 2011 from
$2.7 million in the first quarter of
fiscal 2010
- Gross profit percentage increased by 16.3% from 24.4% in the
first quarter of fiscal 2010 to 28.3% in the first quarter of
fiscal 2011
- Operating Expenses increased by 100% to $0.95 million in the first quarter of fiscal 2011
compared to $0.47 million in the
first quarter of fiscal 2010
- Sales to international customers increased by 15.8% in the
first quarter of fiscal 2011 compared to the first quarter of
fiscal 2010
- Basic and fully diluted earnings per share were $0.18 in the first quarter of fiscal 2011
First Quarter Ended December 31,
2010 Financial Results (Unaudited)
Net Sales
Net sales for the quarter ended December 31,
2010 was $10.8 million, a
decrease of approximately 1.4% from $11.0
million in 2009. Sales of our lower margin ultrasuede
leather products decreased by 55.7% to $2.2
million, offset by the 42.5% increase of recycled leather
flocked fabric sales, to $7.9
million, and 99.7% increase of tufted fabric sales, to
$0.6 million. The Company
strategically shifted its sales during the quarter from lower
margin ultrasuede leather products to higher margin recycled
leather flocked fabric and tufted fabric products, which have
experienced increased demand from customers. The following table
sets forth the breakdown of the Company's net revenue by
product.
Three Months
Ended December 31, 2010
|
|
|
|
|
2010
|
|
2009
|
Percentage
Change
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Products:
|
|
|
|
|
|
|
|
|
|
Ultrasuede leather
|
|
$
|
2,215,485
|
|
$
|
4,998,808
|
|
(55.7)%
|
|
Recycled leather flocked
fabric
|
|
|
7,851,874
|
|
|
5,511,221
|
|
42.5 %
|
|
Microfiber
towel
|
|
|
77,991
|
|
|
78,676
|
|
(0.87)%
|
|
Tufted fabric
|
|
|
595,361
|
|
|
298,144
|
|
99.7%
|
|
Others
|
|
|
67,840
|
|
|
71,654
|
|
(5.32)%
|
|
Total
|
|
|
$
10,808,551
|
|
|
$
10,958,503
|
|
(1.4)%
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit and Gross Profit Margin
Gross profit for the quarter ended December
31, 2010 increased 14.7% to $3.1
million, from $2.7 million for
the quarter ended December 31, 2009.
For the quarters ended December 31,
2010 and 2009, the Company's gross profit margin was 28.3%
and 24.4%, respectively. The rise of gross profit margin in 2010
was due to higher volume and improved operational efficiency for
our recycled leather flocked fabric products. In addition,
the increase of sales price of the recycled leather flocked
material was partially offset by the increased cost of raw
materials.
General and Administrative Expenses
The general and administrative expenses totaled $0.7 million for the quarter ended December 31, 2010 from $0.4 million for the quarter ended December 31, 2009, an increase of 75%. The
increase was attributable to the increasing cost for additional
staff and professional services after the closing of our recent
IPO.
Research and Development Expenses
Research and development expenses totaled $11,706 for the quarter ended December 31, 2010, as compared to $19,089 for the quarter ended December 31, 2009, a decrease of 38.7%. This
decrease reflected our decreased research and development effort on
our existing products. We focused our research and
development efforts on testing our equipment and our production
line for the Evergreen products.
Selling and Marketing Expenses
Selling and marketing expenses totaled $218,839 for the quarter ended December 31, 2010, as compared to $58,385 for the quarter ended December 31, 2009, an increase of 274.8%.
This increase was primarily due to increased advertising and
promotion activities, staffing costs and other costs relating to
selling and marketing activities.
Net Income
Net income attributable to stockholders slightly decreased 2.7% to
$2.2 million for the quarter ended
December 31, 2010 as compared to
approximate $2.3 million for the
quarter ended December 31, 2009.
The decrease was primarily due to the higher general and
administrative expenses, higher selling and market expenses as well
as $0.3 million income tax expense
for the quarter ended December 31,
2010. The Company was granted a preferential tax treatment—a
tax holiday of full exemption from Enterprise Income Tax ("EIT")
for the two year ended December 31,
2009 and 50% reduction on its EIT rate for the three
calendar years ending December 31,
2012.
Balance Sheet and Cash Flow Statement
As of December 31, 2010, the Company
had $6.8 million in cash and cash
equivalents. The Company used $2.9
million of cash from operating activities in the quarter
ended December 31, 2010, compared to
$0.9 million cash provided by
operating activities in the quarter ended December 31, 2009, primarily due to a security
deposit and prepaid rent of $2.1
million for the Evergreen plant site. Cash used in
investing activities was $4.1 million
and increased from $0.4 million in
the quarter ended December 31, 2009,
reflecting our commitment and continued investment in our new
Evergreen Products. Cash provided by financing activities was
$11.2 million for the quarter ended
December 31, 2010.
CEO Comments
In commenting on the results for the Company's first quarter of
fiscal year 2011, Mr. Jianfeng Liu,
Chief Executive Officer of Lizhan commented, "During the quarter we
increased the sales of our higher margin recycled leather flocked
fabric by 42.5%. As a result, we increased our gross margin by
16.0% while improving the operational efficiency of existing
products. In addition, during the quarter, we successfully
tested and produced our new Evergreen Products and have
subsequently begun to produce these products for commercial sale.
We intend to gradually continue to invest and expand our
production capacity for both recycled leather flocked fabric and
our new Evergreen Products to gradually meet our customer's growing
demand.
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 genuine leather scraps. The
Company's products are mainly used in furniture, garments and other
consumer applications.
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
Form 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 Evergreen 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 the date
hereof. 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.
For more information, please
contact:
|
|
|
Corporate
Contact:
|
Investor Relations
Contact:
|
|
Lizhan Environmental
Corporation
|
Cooper Global
Communications
|
|
Silvia Liu
|
Richard Cooper
|
|
Investor Relation
Manager
|
Email:
rcooper@cooperglobalcommunications.com
|
|
Email:
ir@lezncorp.com
|
Sabrina Zhang
|
|
Web:
|
Email:
szhang@cooperglobalcommunications.com
|
|
Phone: +86 573 8862
268
|
Phone: (212) 317-1400
|
|
|
|
-TABLES FOLLOW-
LIZHAN
ENVIRONMENTAL COrPORATION
CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
(In
u.s. dOLLARS)
|
|
|
For the
Three Months
Ended
December 31,
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES
|
$
|
10,808,551
|
|
$
|
10,958,503
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
(7,746,693)
|
|
|
(8,288,326)
|
|
|
|
|
|
|
|
|
Gross profit
|
|
3,061,858
|
|
|
2,670,177
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
General and administrative
expenses
|
|
(718,629)
|
|
|
(397,155)
|
|
Research and development
expenses
|
|
(11,706)
|
|
|
(19,089)
|
|
Selling and marketing
expenses
|
|
(218,839)
|
|
|
(58,385)
|
|
Total operating
expenses
|
|
(949,174)
|
|
|
(474,629)
|
|
|
|
|
|
|
|
|
Operating income
|
|
2,112,684
|
|
|
2,195,548
|
|
|
|
|
|
|
|
|
Other income
(expenses):
|
|
|
|
|
|
|
Other income
|
|
567,275
|
|
|
163,917
|
|
Exchange loss
|
|
(51,344)
|
|
|
(6,074)
|
|
Interest income
|
|
2,409
|
|
|
11,836
|
|
Interest expense
|
|
(11,901)
|
|
|
(37,478)
|
|
Other expenses, net
|
|
(88,378)
|
|
|
(26,276)
|
|
Total other income,
net
|
|
418,061
|
|
|
105,925
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
2,530,745
|
|
|
2,301,473
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
(313,786)
|
|
|
-
|
|
|
|
|
|
|
|
|
Net income before allocation of
non-controlling interest
|
|
2,216,959
|
|
|
2,301,473
|
|
Net loss attributable to
non-controlling interest
|
|
21,327
|
|
|
-
|
|
Net income attributable to the
stockholders
|
|
2,238,286
|
|
|
2,301,473
|
|
Other comprehensive
income
|
|
|
|
|
|
|
Foreign currency translation
adjustment
|
|
301,836
|
|
|
2,617
|
|
|
|
2,540,122
|
|
|
2,304,090
|
|
Less: Foreign
currency translation adjustments attributable to non-controlling
interest
|
|
(7,445)
|
|
|
-
|
|
Comprehensive income
|
$
|
2,532,677
|
|
$
|
2,304,090
|
|
|
|
|
|
|
|
|
Earnings per common
share
|
|
|
|
|
|
|
- Basic and fully
diluted
|
$
|
0.18
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding
|
|
|
|
|
|
|
- Basic and fully
diluted
|
|
12,325,069
|
|
|
10,937,500
|
|
|
|
|
|
|
|
|
|
LIZHAN
ENVIRONMENTAL CORPORATION
CONSOLIDATED
BALANCE SHEETS
(In u.s.
dollars)
|
|
|
|
December
31,
2010
|
|
September
30,
2010
|
|
Assets
|
|
|
(Unaudited)
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
6,846,492
|
|
$
|
2,597,366
|
|
|
Restricted cash
|
|
|
1,897,729
|
|
|
1,072,416
|
|
|
Accounts receivable,
net
|
|
|
10,505,366
|
|
|
7,310,194
|
|
|
Inventories
|
|
|
6,116,316
|
|
|
4,666,496
|
|
|
Amounts due from
directors
|
|
|
9,091
|
|
|
1,497
|
|
|
Value added tax
receivable
|
|
|
485,505
|
|
|
37,586
|
|
|
Prepaid expenses and other
current assets
|
|
|
1,809,276
|
|
|
2,442,120
|
|
Total current assets
|
|
|
27,669,775
|
|
|
18,127,675
|
|
Other assets
|
|
|
|
|
|
|
|
|
Property, plant and equipment,
net
|
|
|
27,210,934
|
|
|
12,906,655
|
|
|
Land use rights
|
|
|
1,651,487
|
|
|
1,638,248
|
|
|
Intangible assets,
net
|
|
|
620,208
|
|
|
628,333
|
|
|
Deposits for plant and
equipment
|
|
|
599,896
|
|
|
11,385,603
|
|
|
Security deposit and prepaid
rent
|
|
1,521,692
|
|
|
-
|
|
Total other assets
|
|
31,604,217
|
|
|
26,558,839
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
$
59,273,992
|
|
$
|
44,686,514
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders'
equity
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
8,930,991
|
|
$
|
8,158,461
|
|
|
Bank acceptance notes
payable
|
|
|
3,795,455
|
|
|
2,144,832
|
|
|
Short-term loans
|
|
|
6,515,152
|
|
|
13,676,108
|
|
|
Accrued expenses and other
payables
|
|
|
848,055
|
|
|
1,251,849
|
|
|
Payable for construction of
building and machinery
|
|
|
71,596
|
|
|
297,153
|
|
|
Income taxes payable
|
|
|
1,009,400
|
|
|
702,713
|
|
|
Deferred income
|
|
|
-
|
|
|
110,106
|
|
Total current
liabilities
|
|
|
21,170,649
|
|
|
26,341,222
|
|
|
Long-term loans
|
|
|
9,621,212
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
30,791,861
|
|
|
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
December
31, 2010
and September 30,
2010,
respectively
|
|
|
4,366,000
|
|
|
3,566,000
|
|
|
Additional paid-in
capital
|
|
|
7,734,599
|
|
|
924,000
|
|
|
Statutory reserves
|
|
|
1,503,977
|
|
|
1,289,475
|
|
|
Retained earnings
|
|
|
13,077,290
|
|
|
11,053,506
|
|
|
Accumulated other comprehensive
income
|
|
|
1,190,368
|
|
|
888,532
|
|
Total Lizhan stockholders'
equity
|
|
27,872,234
|
|
|
17,721,513
|
|
Less: Non-controlling
interest
|
|
(609,897)
|
|
|
(623,779)
|
|
Total equity
|
|
28,482,131
|
|
|
18,345,292
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
|
59,273,992
|
|
$
|
44,686,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIZHAN
ENVIRONMENTAL CORPORATION
CONSOLIDATED
STATEMENTS OF CASH
FLOWS
(UNAUDITED)
(In u.s. dollars)
|
|
|
For the
Three months
Ended
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
Net income
|
$
|
2,216,959
|
|
$
|
2,301,473
|
|
Add net
loss attributable
to non-controlling
interest
|
|
21,327
|
|
|
-
|
|
Net income attributable to
the Stockholders
|
|
2,238,286
|
|
|
2,301,473
|
|
Adjustments to reconcile net
income to net cash (used in) / provided by
operating activities:
|
|
|
|
|
|
|
Depreciation of property, plant
and equipment
|
|
169,563
|
|
|
157,905
|
|
Amortization of intangible
assets
|
|
8,200
|
|
|
-
|
|
Amortization of land use
right
|
|
9,161
|
|
|
5,240
|
|
Recognition of noncash deferred
income from exclusive distribution right granted by the Company to
a customer
|
|
(110,845)
|
|
|
(161,874)
|
|
Non-controlling
interest
|
|
(21,327)
|
|
|
-
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
(3,073,560)
|
|
|
(3,511,943)
|
|
Inventories
|
|
(1,376,262)
|
|
|
(2,068,654)
|
|
Prepaid expenses and other
current assets
|
|
1,130,183
|
|
|
(781,963)
|
|
Accounts payable
|
|
656,097
|
|
|
4,605,057
|
|
Accrued expenses and other
payables
|
|
(273,689)
|
|
|
33,298
|
|
(Increase) in security
deposit and prepaid
rent
|
|
(2,075,625)
|
|
|
-
|
|
Income tax payable
|
|
295,000
|
|
|
-
|
|
Value added tax
receivable
|
|
(444,314)
|
|
|
-
|
|
Value added tax
payable
|
|
(47,853)
|
|
|
284,288
|
|
Net cash
(used in) /
provided by operating
activities
|
|
(2,916,985)
|
|
|
862,827
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
(Increase) decrease
in restricted cash
|
|
(805,009)
|
|
|
762,492
|
|
Payment for purchase of plant
and equipment
|
|
(3,333,539)
|
|
|
(353,919)
|
|
Net cash
(used
in) / provided by
investing
activities
|
|
(4,138,548)
|
|
|
408,573
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
Proceeds from short term bank
loans
|
|
6,470,155
|
|
|
3,222,829
|
|
Repayment of short term bank
loans
|
|
(13,767,887)
|
|
|
(2,343,876)
|
|
Proceeds from long term bank
loans
|
|
9,554,763
|
|
|
-
|
|
Proceeds from bank acceptance
notes payable
|
|
3,769,241
|
|
|
908,252
|
|
Repayment to acceptance notes
payable
|
|
(2,159,226)
|
|
|
(2,251,586)
|
|
Payment of amounts due to
contractors for building and machinery
|
|
(250,481)
|
|
|
86,221
|
|
Sales of Common Stock for cash,
net of offering stocks
|
|
7,604,815
|
|
|
-
|
|
(Repayment to) advances from a
stockholder and director
|
|
(7,523)
|
|
|
(70,316)
|
|
Net cash provided by/
(used in)
financing
activities
|
|
11,213,857
|
|
|
(448,476)
|
|
Effect of exchange rate changes
on cash
|
|
90,802
|
|
|
4,511
|
|
|
|
|
|
|
|
|
Net increase
in cash
|
|
4,249,126
|
|
|
827,435
|
|
Cash at the
beginning of period
|
|
2,597,366
|
|
|
864,161
|
|
Cash ending
|
$
|
6,846,492
|
|
$
|
1,691,596
|
|
Non-cash investing and financing
transactions:
|
|
|
|
|
|
|
Payable due to contractors for
construction of building and machinery
|
$
|
22,591
|
|
$
|
193,477
|
|
Transfer of deposit for plant
and machinery to property, plant
and
equipment
|
$
|
10,923,403
|
|
$
|
-
|
|
Supplemental
information:
|
|
|
|
|
|
|
Cash paid for
interest
|
$
|
217,452
|
|
$
|
37,478
|
|
Cash paid for profits
tax
|
$
|
18,785
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
SOURCE Lizhan Environmental Corporation