1Bln Quietly Disappears Off Ninestar/Apex's Accounting Books ($149Mln)
1Bln Quietly Disappears Off Ninestar/Apex's Accounting Books ($149Mln)
2018-07-12 at 11:59:34 am #50409
Are Ninestar/Apex's Days Numbered
As 1Bln ($149 Mln) Quietly Disappears Off The Books.
Ninestar In Financial Suspicion: More Than 1 Billion Quietly Disappears Off The Books.
Some Interesting Article From China and the U.S. Show's The Company Is Struggling To Survive Financially In A Turbulent Industry And The Lack Of Transparency Is Obviously Not Helping.
By [email protected].
We came upon this recent article below from China's main Government website Sina.com.cn, questioning the recent bookkeeping of The Ninestar Empire, let's not forget that last April Ninestar's had to bail out U.S. firm Lexmark to the tune of $341M after their stocks turned to junk (LINK). All this does not paint a Rosie picture. One must ask, how do they survive? As we researched this news the info on these links started to disappear?, below at the bottom of this article are the many links about Apex and Lexmark on on China's Sina.com.cn, please feel free to do your own research and do let us know what you can figure out?.
Ninestar Financial Suspicion:
More Than 1 Billion Quietly Disappeared On The Books.
(Original Link)http://finance.sina.com.cn/stock/s/2018-03-12/doc-ifyserwv7345913.shtml(Original Link)
(Google Translated From Chinese To English)
Ninestar financial suspicion: more than 1 billion quietly disappeared on the books.
goodwill quietly disappeared on the books, but did not leave a trace on the income statement.
Today, we will analyze a listed company that has just been inquired by the Shenzhen Stock Exchange – Ninestar( 29.350 , 1.35 , 4.82% ) (002180.SZ). Two times changed name, backdoor listing, multiple increments, several suspensions… At first glance, it is a company with stories. Just now, it also recently announced the 2017 performance report: 2017 net profit of the mother is 1.03 billion, up 15 times year-on-year. This is at least 150 million more than the one-month performance forecast correction data, which is at least 1.1 billion more than the first-time forecast data four months ago.
With such a large adjustment, it is hard not to attract attention. The Shenzhen Stock Exchange issued an inquiry letter after the announcement of its performance notice amendment, which also pointed us to a clear road. The two-year increase in performance forecast has attracted the Shenzhen Stock Exchange
Look directly at the table: From the first full-year performance forecast released at the end of October 2017, and two revisions to the results, Ninestar's net profit at home fell from a loss of at least 157 million yuan to a profit of 1.03 billion yuan, an increase of 1.18 billion.
First look at the main reasons for the company's three performance forecasts:
1. The reason for the first forecast loss was: the adjustment of the assets and liabilities of the US Lexmark merger and acquisition, correspondingly increased the depreciation, amortization, etc. during the reporting period, resulting in Lexmark's adjusted net profit loss, as well as the acquisition of the US Lexmark Interest expense arising from financing.
2. In the next revision of the first performance forecast, Nashida’s main reason for the transfer from loss to profit is that the tax reform plan adopted by the United States brings a one-time net income to the company’s US-based Lexmark company. Deductions in the income tax expense account.
3. The final performance report explains the increase in earnings: the adjustment of the original preliminary estimate of the impact of tax reform, and further reduction of income tax expenses. Based on three times of performance disclosure, we found a keyword: Lexmark.
Combined with the treatment of deferred income tax liabilities and goodwill mentioned in the letter of inquiry of Shenzhen Stock Exchange, the whole context begins to be clear. Foreword summary: costing 17 billion leveraged acquisitions of US loss-making companies.
One of the crux of the reason for the soaring profit of Ninestar is Lexmark International, a US listed company acquired in 2016 for about 17 billion yuan, which is the US Lexmark. Lexmark is a world-renowned printer company. Its share in the global laser printer market was about 5% in 2016, ranking fourth, behind HP (22%), Canon (19%) and Xerox (9%). .Before the acquisition of Lexmark, Ninestar (still called "Aikeke"), the main business is general printing supplies, chips and other components. Therefore, through the acquisition of Lexmark, it is open to the upstream and downstream of the printer industry chain.
According to the announcement, Ninestar invested US$777 million in a joint venture with two other investment institutions to set up a company in the Cayman Islands to acquire Lexmark. The three companies contributed US$1.518 billion, of which Ninestar holds 51.18%. The amount of the acquisition to Lexmark was US$2.7 billion, equivalent to RMB17 billion, and the remaining amount was obtained from loans from overseas subsidiaries. To put it simply, Ninestar has completed the acquisition by holding 51.18% of Lexmark through leveraged buyouts.
On November 29, 2016, the merger was completed and the Lexmark was delisted on the NYSE. In the 2016 annual report, Ninestar consolidated the US Lexmark. After the merger, the problem came out – a huge amount of goodwill. The value of goodwill on Ninestar's account soared from $38 million at the end of 2015 to $18.8 billion at the end of 2016. The goodwill from Lexmark was 18.772 billion. Lexmark has such a high reputation, on the one hand because of the difference between the transaction price and the net assets, and on the other hand because of the long-term frequent mergers and acquisitions by Lexmark. The audit report issued by Lixin shows: Lexmark's total assets at the end of 2015 totaled 25.82 billion yuan, net assets were 7.126 billion yuan, goodwill totaled 8.605 billion yuan, and goodwill accounted for 33.3% of total assets, of which ES has been losing money. The goodwill of the business (ie software business) asset group was as high as 8.227 billion yuan.
Due to the drag of ES business, Lexmark's first loss in 2015 was equivalent to approximately RMB 245 million, and the loss in the first 11 months of 2016 was approximately RMB 6.885 billion. Investors familiar with goodwill should already know that Ninestar has to face a fatal problem after this merger: huge goodwill impairment. Before knowing the merger, Ninestar’s net profit is less than 300 million yuan. If the US Lexmark is still unable to make a profit, what is the goodwill of more than 18 billion?
Avoid huge losses and move one: 4.8 billion goodwill impairment before the merger As an important business of Lexmark, ES business bears most of the goodwill of Lexmark before it was acquired. However, due to the long-term loss of the ES business and the fact that the business involved US national security, in fact, at the time of the acquisition, Ninestar decided to spin off the Lexmark ES business after the completion of the acquisition.
If you sell the ES business with long-term losses and great reputation after the consolidation, the biggest problem is that once the price is not sold well, it is easy to form a huge investment loss when selling the ES business. As a result, Lexmark made a goodwill impairment on the ES business prior to the merger: In 2016, the ES Assets Group accrued a goodwill impairment of $729 million (approximately RMB 4.8 billion).
Since Ninestar has consolidated Lexmark after November 29, 2016, Lexmark's goodwill impairment loss from January to November 2016 is not reflected in Ninestar's financial statements. In fact, similar routines are more commonly used in mergers and acquisitions cases, that is, ways to make the company before the merger take up as much loss as possible, so that the acquired company can release profits after the merger, thus boosting the performance of the listed company. This practice is not a problem as long as the process is legal and compliant.
According to the 2017 third quarterly report, Ninestar's investment income in the third quarter was 1.54 billion yuan, mainly due to the sale of ES business. Although we still can't know the specific investment income from the ES business sales, the result is not bad compared to the ES business's continued loss. As a result, the impairment of goodwill has been left to the past, and investment income has been included in the list of listed companies.
Avoid huge losses move two: push down accounting law to let the 1.8 billion goodwill disappear quietly. On February 23, 2018, Ninestar issued a reply to the inquiry letter, answering the issue of the adjustment of the Shenzhen Stock Exchange regarding deferred income tax liabilities and goodwill.
According to the report, according to the pushdown accounting method, the US Lexmark reduced the deferred income tax liabilities and goodwill on the merger purchase date in November 2017, both of which decreased by about 297 million US dollars (equivalent to about 1.8 billion yuan). ), this adjustment does not affect the current profit and loss of 2017, that is to say, goodwill is reduced, but net profit is not reduced.
WTF? Do we all look at fake goodwill before?. In fact, the reduction in goodwill here is not the usual impairment of goodwill, but directly adjusts the value of goodwill. This is to mention the downward accounting that appears in the announcement.
Undergraduate accounting refers to: In the case of a business combination, an accounting entity re-establishes the accounting and reporting basis in its individual financial statements based on the purchase of shares in which the entity has voting rights. That is, the fair value of the net assets obtained by the acquiring company at the time of the merger is adjusted and pushed down to the accounting statements of the acquired subsidiary.
Most people can't understand the above sentence. Under the simple translation, it means that the company being acquired hopes to do the accounting and financial reporting standards of the company in the future, and then simply say that it is to marry the chicken with the chicken, marry the dog with the dog – into the 咱The home door is booked according to the method of the family. As a result, many subjects related to estimating fair value may need to be adjusted. As long as they are legally compliant, how to adjust the tone.
The down-calculation accounting method is relatively rare in China, but it is more common in the United States. Since Lexmark is an American company, it quotes the commercial merger and acquisition guidelines of US Standard 805-50-25-4, and it is reasonable to use the downward accounting method.
As a result, another goodwill quietly disappeared on the books, but did not leave a trace on the income statement. After reading the two big moves to reduce huge losses, is it a tribute to the accounting operation?
http://finance.sina.com.cn/roll/2018-04-01/doc-ifysutxx0481641.shtml, http://finance.sina.com.cn/stock/hyyj/2018-04-27/doc-ifztkpin9452526.shtml, http://finance.sina.com.cn/roll/2018-02-24/doc-ifyrvnsw7838067.shtml, http://www.sina.com.cn/mid/search.shtml?range=all&c=news&q=lexmark&from=home&ie=utf-8, http://tech.sina.com.cn/https://tech.sina.com.cn/it/2018-07-05/doc-ihexfcvi8999801.shtml
(PS: Beware Of The Chinese Goverment Tracking You.)