Q1 2009 Revenue Increases 15.6% and Net Income Climbs 26.1% Year-over-Year
BEIJING, Nov. 15 /Xinhua-PRNewswire/ -- Asian Financial, Inc. ("Asian Financial", or the "Company"), a leading offset printing equipment provider in China, through its wholly-owned operating subsidiary, Duoyuan Digital Printing Technology Industry (China) Co., Ltd. ("Duoyuan"), today announced its financial results for the three months ended September 30, 2008.
First Quarter 2009 Highlights
-- Revenue was $26.2 million, an increase of 15.6% from $22.6 million for
the same period last year
-- Gross profit was $13.8 million, an increase of 21.1% from $11.4 million
for the same period last year
-- Gross margin was 52.9%, compared to 50.5% for the same period last year
-- Operating income was $9.7 million, an increase of 16.6% from $8.3
million for the same period last year
-- Net income was $8.5 million, or $0.34 per basic and diluted share, an
increase of 26.1% from $6.8 million, or $0.27 per basic and diluted
share for the same period last year
-- Appointed Mr. William D. Suh as Chief Financial Officer
"After closing a successful fiscal year 2008, we started the first quarter of fiscal 2009 with revenue and net income growth due to the continued increase in sales of our small and large-format multi-color presses," said Mr. Wenhua Guo, Chairman and Chief Executive Officer of Asian Financial. "More and more of our customers are demanding sophisticated printing equipment, such as our multi-color presses, to produce high quality printing materials more efficiently. During the past quarter we continued to develop new products in the multi-color press category, which we believe will further strengthen our profit margin as the year progresses."
First Quarter 2009 Results
For the first quarter ended September 30, 2008, revenue was $26.2 million, a 15.6% increase from $22.6 million for the same period last year. The sales of large-format multi-color presses contributed to 58.8% of the Company’s total revenue for the three months ended September 30, 2008, compared to 57.3% for the same period last year. The sales of our small and large-format multi-color presses constituted 84.1% of our revenue for the period, compared to 78.9% for the same period last year.
Gross profit was $13.8 million, an increase of 21.1% from $11.4 million for the same period last year. Gross profit margin was 52.9%, an increase of 50.5% from the same period last year. The increase in gross profit margin was mainly due to the growth in the sales of high-margin small and large-format multi-color presses. The gross profit margin of multi-color presses is higher compared to single-color presses.
Selling, general and administrative expenses amounted to $3.5 million, an increase of 17.0% from $3.0 million for the same period last year, due to salary increases for sales personnel, shipping and handling, and advertising expenses. Research and development expenses amounted to $0.7 million for the quarter, an increase of 324.9% from $0.2 million for the same period last year. Research and development expenses increased significantly as the Company produced prototypes of new models of single and multi-color presses during the quarter. These new products are scheduled for commercial production and sale by the fourth quarter of the fiscal year ending June 30, 2009.
Income from operations in the three months ended September 30, 2008 was $9.7 million, an increase of 16.6% from $8.3 million for the same period last year.
Net income increased 26.1% to $8.5 million, or $0.34 per basic and diluted share for the quarter, as compared to $6.8 million, or $0.27 per basic and diluted share, for the three months ended September 30, 2007.
Financial Condition
As of September 30, 2008, the Company had cash and cash equivalents of $19.0 million and working capital of approximately $55.9 million. Total shareholders’ equity as of September 30, 2008 was $102.6 million, an increase of $8.8 million compared to $93.8 million as of June 30, 2008. For the three months ended September 30, 2008, the Company generated $11.0 million in cash flow from operating activities, primarily due to net income and the collection of accounts receivable. Capital expenditures totaled $9.1 million for the quarter, primarily due to upgrades at the Company’s Hunan facility and production equipment purchases for the planned manufacturing of cold-set corrugated printing presses at the Langfang facility. Investments included a prepayment of $4.5 million to purchase surface treatment equipment for press and post-press products. The Company anticipates these projects to require additional investments of $6.0 million during fiscal 2009.
Recent Events
Effective October 1, 2008, the Company appointed Mr. William D. Suh to serve as the new Chief Financial Officer of the Company. Prior to joining the Company and since 1990, Mr. Suh was an accountant with Ganze & Company, the largest CPA firm in Napa, California, where he was elected to the partnership in 1997.
Mr. Suh has extensive experience in public accounting, including auditing, tax planning and financial and accounting consulting services, and has worked in various industries, including manufacturing, distribution, wineries and vineyards. He is a CPA in the State of California, and a member of both the American Institute of Certified Public Accountants and the California Society of CPAs. He obtained a Bachelor of Arts in Accounting from Pacific Union College in California.
Business Outlook
While the Chinese economy is experiencing an export-driven slowdown, the Company believes that domestic demand for competitively priced high-quality printing equipment will continue in China, as the country continues to be one of the fastest growing markets in the world for publishing, packaging, and commercial printing. Duoyuan continues to target the domestic market, with exports accounting for no more than 1% of the Company’s total sales during the first quarter of fiscal 2009.
The Company considers the long-term potential of the Chinese logistics industry and the continued demand for packaging to be substantial, and the plans for entering the corrugated printing press manufacturing market have progressed according to plan. The Company has already expended $1.5 million and made a prepayment of $3.1 million to purchase new production equipment for this planned product category.
"Even though the macro-economic environment is challenging, we believe in the long-term potential of the printing industry and will continue developing our high-margin multi-color presses to enhance our competitive advantage. We plan to introduce our newly developed models, the 474II and the 4660-AL, to the market by the fourth quarter of fiscal 2009. Our current investments in the cold-set corrugated printing press production line are timely, as we expect the Chinese economy to start recovering when we begin our production of this product in 2010," said Mr. Wenhua Guo.
About Asian Financial, Inc.
Asian Financial, Inc., through its wholly-owned subsidiaries, is engaged in the business of manufacturing commercial offset printing presses in the People’s Republic of China ("PRC"). The Company combines technical innovation and international quality standards to offer a broad range of printing equipment and solutions. Asian Financial, Inc. has manufacturing and research and development facilities in Langfang, Hebei Province and Shaoyang, Hunan Province in addition to a distribution and service network in approximately 60 cities in China. Headquartered in Beijing, the Company is one of the largest non-government owned major offset printing equipment and solutions providers in China.
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. Generally, the words "believe," "anticipate," "may," "will," "should," "expect," "intend," "estimate," "predict," "continue," and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements which include, but are not limited to, statements concerning the expectations of the Company and its directors and officers regarding its working capital requirements, financing requirements, business prospects, and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such statements are subject to certain risks and uncertainties, including the matters set forth in its Annual Report or other periodic reports or documents the Company files with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. The Company does not ordinarily make projections of its future operating results and undertakes no obligation (and expressly disclaims any obligation) to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, the forward-looking statements in this press release involve known and unknown risks, uncertainties and other factors that could cause the actual results, performance or achievements of the Company to differ materially from those expressed in or implied by the forward-looking statements contained herein. Please refer to risk factors that are mentioned in the Company’s quarterly report on Form 10-Q of November 14, 2008.
FINANCIAL TABLES TO FOLLOW:
ASIAN FINANCIAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(Unaudited)
2008 2007
REVENUE $ 26,179,431 $ 22,645,571
COST OF REVENUE 12,330,752 11,210,255
GROSS PROFIT 13,848,679 11,435,316
RESEARCH AND DEVELOPMENT EXPENSES 694,517 163,457
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 3,478,613 2,973,267
INCOME FROM OPERATIONS 9,675,549 8,298,592
LIQUIDATED DAMAGES, net of settlement -- 706,476
CHANGE IN FAIR VALUE OF DERIVATIVE
INSTRUMENTS (55,407) --
OTHER EXPENSE, net 179,596 128,397
INCOME BEFORE MINORITY INTEREST AND
PROVISION FOR INCOME TAXES 9,551,360 7,463,719
MINORITY INTEREST 109,737 93,542
INCOME BEFORE PROVISION FOR INCOME
TAXES 9,441,623 7,370,177
PROVISION FOR INCOME TAXES 926,791 615,649
NET INCOME 8,514,832 6,754,528
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain 256,267 907,750
COMPREHENSIVE INCOME $ 8,771,099 $ 7,662,278
BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES 25,000,050 25,000,050
BASIC AND DILUTED EARNING PER SHARE $ 0.34 $ 0.27
ASIAN FINANCIAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2008 AND JUNE 30, 2008
ASSETS
September 30, June 30,
2008 2008
(Unaudited)
CURRENT ASSETS:
Cash $ 19,025,602 $ 14,199,700
Accounts receivable, net of
allowance for doubtful accounts of
$1,181,558 and $1,178,328
as of September 30, 2008 and
June 30, 2008, respectively 31,952,257 33,184,833
Inventories 23,453,768 23,950,551
Other receivables 21,448 20,834
Deferred expense 661,250 661,250
Total current assets 75,114,325 72,017,168
PLANT AND EQUIPMENT, net 35,050,870 34,130,651
OTHER ASSETS:
Intangible assets, net 3,994,103 4,003,128
Advances on equipment purchases 10,392,713 2,753,610
Total other assets 14,386,816 6,756,738
Total assets $ 124,552,011 $ 112,904,557
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Lines of credit $ 14,337,400 $ 11,380,200
Accounts payable 740,473 1,489,255
Accrued liabilities 1,814,474 1,749,129
Other payables 122,059 108,983
Taxes payable 2,234,695 1,702,986
Total current liabilities 19,249,101 16,430,553
DERIVATIVE INSTRUMENT LIABILITIES 1,319,417 1,374,824
MINORITY INTEREST 1,406,057 1,292,843
COMMITMENTS AND CONTINGENT LIABILITIES -- --
SHAREHOLDERS’ EQUITY:
Preferred stock; $0.001 par value;
1,000,000 shares authorized;
no shares issued and outstanding -- --
Common stock; $0.001 par value;
100,000,000 shares authorized;
25,000,050 shares issued and
outstanding 25,000 25,000
Additional paid-in capital 27,263,040 27,263,040
Statutory reserves 7,410,506 6,000,090
Retained earnings 57,162,592 50,058,176
Accumulated other comprehensive income 10,716,298 10,460,031
Total shareholders’ equity 102,577,436 93,806,337
Total liabilities and
shareholders’ equity $ 124,552,011 $ 112,904,557
ASIAN FINANCIAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(Unaudited)
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,514,832 $ 6,754,528
Adjustments to reconcile
net income to cash provided
by operating activities:
Minority interest 109,737 93,542
Depreciation 666,886 514,100
Amortization 20,014 20,153
Bad debt expense -- 27,975
Change in fair value of derivative
instruments (55,407) --
Liquidated damages penalty -- 706,476
Change in operating assets and liabilities
Accounts receivable 1,324,371 (373,963)
Inventories 563,474 (1,163,553)
Other receivables (556) 30,086
Advances on inventory purchases -- (5,139)
Other assets -- (90,058)
Accounts payable (753,328) 1,255,043
Other payables 92,235 27,956
Other payables - related parties -- (294,986)
Accrued liabilities (16,859) 32,952
Taxes payable 527,364 3,157
Net cash provided by operating
activities 10,992,763 7,538,269
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (1,494,042) (250,941)
Advances on equipment purchases (7,636,248) --
Net cash used in investing
activities (9,130,291) (250,941)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from lines of credit 12,882,320 8,999,200
Payments for lines of credit (9,954,520) (8,999,200)
Restricted cash -- 2,010,404
Net cash provided by financing
activities 2,927,800 2,010,404
EFFECT OF EXCHANGE RATE CHANGES ON CASH 35,630 165,205
INCREASE IN CASH 4,825,902 9,462,937
CASH, beginning of period 14,199,700 7,816,361
CASH, end of period $ 19,025,602 $ 17,279,298
