Lizhan Environmental (PINK:LZEN)

Three months Ended March 31, 2012 Financial Results

• Net Sales for the three months ended March 31, 2012 were $5.3 million, a 10% decline from $5.9 million in the same period of fiscal 2011.
• Gross Profit was $0.6 million compared to $1.2 million for the same quarter in 2011. The 50% decline was a result of lower production volumes, rising raw materials, manufacturing and labor costs.
• Net Income attributable to common shareholders declined from $1.9 million of net income to a $2.5 million net loss for the six months ended March 31, 2012. The fully diluted earnings per share were -$0.18 and $0.15 in the first six months of 2012 and 2011, respectively.

The Company produced and sold approximately 3.4 million meters of fabric in the six months ended March 31, 2012, down 2.3 million meters from 5.7 million meters in the corresponding period in 2011. Domestic sales fell by approximately 27%, representing 60% of total sales, and sales to international customers decreased by 17%, representing 40% of sales.

Fourth Quarter 2011 Results

• 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
• 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.

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."

ZHEJIANG, China, August 19, 2011 /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 nine-month results for the fiscal third quarter of 2011 ended June 30, 2011.

Financial Summary

"We experienced a challenging quarter, as pricing adjustments and higher sales of recycled leather flocked fabric were more than offset by significant increases in the cost of raw materials and labor," explained Chairman and Chief Executive Officer Jiangfeng Liu. "While we have recently seen stabilization in prices for base fabrics, we anticipate a lag between our recent price increases and margin stability."

Mr. Liu continued, "We met an important milestone in June as we commenced production at our first Evergreen line. We also signed two important customers by securing $12.4 million in Evergreen orders while making consistent volume improvements. We will continue to take additional steps to optimize both output and profitability."

The Company had 30 customers for its ultra suede products and 45 customers for its flocked leather fabric products at June 30, 2011. Total backlog was approximately 1.8 million meters at the end of the third quarter, equal to approximately $6.9 million based on current market prices.

"To minimize production impacted by future government imposed power restrictions we completed the installation of three backup power generators."

ZHEJIANG, China, June 3, 2011, /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, today announced two separate orders totaling $12.4 million from two new international furniture customers. Lizhan expects to deliver approximately 915,000 meters of Evergreen Products over the next twelve months.

Chairman and Chief Executive Officer Jianfeng Liu said, "We are delighted to have secured orders from two leading international customers, who provide penetration in new important markets and will generate revenue starting in the 3rd quarter. Novatex and Beijing Hengxin Kaibo Textile Co. Ltd. placed orders after conducting extensive quality testing, validating the high quality and compelling value that our Evergreen Products offer."

Second Quarter Results:

• Net Sales for the three months ended March 31, 2011 decreased 48% to $5.9 million
• Gross profit declined 60% to $1.2 million with gross margins of 20% compared to 26% in the year ago period due to lower plant utilization and higher raw materials costs.
• The average capacity utilization was approximately 40% in the second quarter of 2011 compared to 70% in the same period last year.
• Net loss was $0.3 million or $0.03 per share, compared to a net profit of$2.2 million and $0.19 in earnings per share for the second quarter of fiscal 2010.  

Mr. Liu continued, "We have already started producing Evergreen Products on a limited basis and expect to book revenues from our first Evergreen Product line in the upcoming quarter.  In addition, once we complete testing of the new equipment, we believe we can ramp production of our Evergreen Products in subsequent quarters. We have several orders in hand and expect to begin shipping products to select clients in June."

First Quarter 2011 Results:

• 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

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."

2010 Financial Highlights

• 2010 net income increased 199.7% to $8.2 million from $2.7 million
• in 2009 and revenue increased 114.3% to $46.3 million from $21.6 million
• 2010 gross profit increased 201.2% to $11.3 million
• 2010 operating income increased 264.6% to $8.4 million
• 2010 basic and fully diluted earnings per share increased to $0.74

The Company has experienced substantial growth since it launched commercial production in November 2007. In 2009, the Company launched the production and sales of recycled leather flocked fabric products, which are higher margin and environmentally friendly products that are consist of fabrics that are flocked with recycled leather powder to improve the texture of the fabric. This product accounted for 54.3% and 73.9% of our overall revenue in fiscal years 2009 and 2010, respectively, and the gross margin of this product has increased to 28% from 19%. The Company recently completed the construction of its Evergreen Product facility, which has the design capacity to produce 6.4 million meters of fabrics annually. As of September 30, 2010, the original facility had the design capacity to produce 15 million meters of fabrics annually.

In commenting on the 2010 results, Mr. Jianfeng Liu, Chief Executive Officer of Lizhan commented, "The momentum that we have achieved in driving our business model is clearly a reflection of the exceptional year experienced operationally and financially by the Company in 2010. Major initiatives were also taken during the year that will lay the foundation for significant expected growth in 2011 and beyond."

"Our record revenues in 2010, outstanding margins and profit, all are reflections of our success in addressing our customers' needs, making the necessary investment in our research and development, increasing market penetration both domestically and internationally, and most importantly, enhancing the quality of our products."

Mr. Liu added, "We are gratified to see the continued sales growth of our recycled leather flocked fabric products. Our present efforts to complete the preparation of the production process for our new Evergreen product line expands our commitment to provide 'cutting-edge,' environmentally-friendly product innovations that provide value and quality to our customers. In order to ensure the necessary resources for our growth, the Company proudly became a publicly listed Company on Nasdaq in November of 2010, subsequent to our 2010 year end. This listing enabled the Company to raise funds in the U.S. capital markets which we intend to use for a portion of the financing of our second Evergreen Product production line by May 2011, and to establish a diverse base of investors in the Company. We have initiated an investor relations program in order to make the Company more known in the U.S. market in the coming months."

"I want to personally wish our employees, their families, and our shareholders much health and prosperity in the coming New Year and thank you all for your support."

GeoTeam® Note: Fourth quarter 2010 vs. 2009 EPS was $0.10 vs. $0.03.