SHENZHEN, China, Nov. 6, 2007 (PRIME NEWSWIRE) -- New Dragon Asia Corp. (AMEX:NWD), one of China's leading producers of instant noodles, flour-related products and soybean-derived products, today announced its financial results for the third quarter and nine months ended September 25, 2007.
Li Xia Wang, Chief Executive Officer of New Dragon Asia Corp. said, "We are pleased with our results for the third quarter of 2007. We saw strong growth in our soybean business, as well as our global export sales of noodles. Domestically, we have maintained our strong relationships with our distributors by holding annual meetings and regular distributor conferences. We also continue to penetrate the rural markets in China, delivering our high-quality products through over 200 points of distribution."
Peter Mak, Chief Financial Officer of New Dragon Asia Corp. stated, "We continued to see an increase in our revenues, with year-on-year increases recorded for both the third quarter and nine month period ended September 25, 2007. We recorded a strong increase in operating income for the nine months ended September 25, 2007 because we were able to reduce expenses as compared to the same period in 2006. Our efforts remain focused on moving toward a higher margin product mix, while concurrently increasing sales of our traditional flour and noodle products and carefully controlling expenses."
Third Quarter 2007 financial highlights
Net revenue for the three months ended September 25, 2007 was $14.0 million, an 8% increase as compared to approximately $13.0 million for the same period last year. The increase in revenues was driven primarily by the contribution from New Dragon Asia's soybean business.
Gross profit rose to approximately $2.8 million for the third quarter of 2007 compared to $2.5 million for the third quarter of 2006, an increase of 12%. Gross margin increased to 20% in the third quarter of 2007 as compared to 19% for the same period in 2006. This increase was the result of the growth of export sales, which generate higher margins.
New Dragon Asia Corp. reported income from operations for the third quarter of 2007 of approximately $1.8 million as compared to $1.5 million for the third quarter of 2006. This increase was primarily due to the growth in higher-margin export sales.
Net income for the third quarter of 2007 was approximately $3.2 million as compared to net income of approximately $4.8 million for the same period in 2006. This decrease was primarily due to a smaller gain derived from the changes in the fair value of derivative instruments and the absence of a VAT refund for the third quarter of 2007.
EBITDA was approximately $2.3 million for the third quarter of 2007 as compared to approximately $3.1 million for the third quarter of 2006. EBITDA margin was 17% for the 2007 third quarter. The decrease was primarily due to the fact that no tax refund was received during the third quarter of 2007.
Earnings per common share were $0.05 basic and fully diluted for the third quarter of 2007, as compared to $0.08 basic and fully diluted for the same period in 2006.
Nine Months 2007 financial highlights
Net revenue for the nine months ended September 25, 2007 was approximately $38.2 million, a 7% increase as compared to approximately $35.6 million for the corresponding period in 2006. This increase was driven primarily by the introduction of soybean products, which accounted for approximately $2.4 million of the increase.
Gross profit rose to approximately $7.3 million for the nine months ended September 25, 2007 as compared to approximately $6.5 million for the corresponding period in 2006, an increase of over 12%. Gross margin increased to 19% for the nine months ended September 25, 2007 as compared to 18% for the corresponding period in 2006, primarily as a result of an increase in export sales, which generate higher margins.
New Dragon Asia Corp. reported income from operations for the nine months ended September 25, 2007 of approximately $4.4 million as compared to approximately $1.8 million for the nine months September 25, 2006. This increase was primarily due to the growth of higher margin exports and the fact that no stock-based compensation expenses were incurred during the 2007 period.
Net income for the nine months ended September 25, 2007 was approximately $11.5 million as compared to a net loss of approximately $6.0 million for the same period in 2006. The significant increase was primarily due to the fact that there were no stock-based compensation charges during the period and the gain derived from a change in the fair value of derivative instruments.
EBITDA decreased to $6.3 million for the nine months ended September 25, 2007 as compared to $7.8 million for the nine months ended September 25, 2006. EBITDA margin for the nine months ended September 25, 2007 was 17%. The decrease was primarily due to the lower tax refund received during the 2007 period.
Earnings per common share were $0.18 basic and fully diluted for the nine months ended September 25, 2007, as compared to earnings of $0.08 basic and $0.07 fully diluted for the corresponding period in 2006.
Balance Sheet Information
New Dragon Asia Corp.'s cash and cash equivalents as of September 25, 2007 were $3.7 million compared to $10.3 million at December 25, 2006.
New Dragon Asia Corp.'s working capital increased to $31.5 million at September 25, 2007 from $17.6 million at December 25, 2006. This increase was primarily due to an increase in inventories of $8,343,000 related to the growth of business and a change in the fair value of derivative instruments.
Net cash used for operating activities for the nine months ended September 25, 2007 was $7.5 million, which was primarily due to additional deposits and prepayments to suppliers for wheat and soybeans in order to secure additional supplies in anticipation of prices increase.
About New Dragon Asia Corp.
New Dragon Asia Corp., a Florida corporation (AMEX:NWD), is headquartered in Shandong Province, China and is engaged in the milling, sale and distribution of flour and related products, including instant noodles and soybean-derived products, to retail and commercial customers. As the fourth largest instant noodle manufacturer in China, New Dragon Asia Corp. markets its well-established Long Feng brand through a network of more than 200 key distributors and 16 regional offices in 27 Chinese provinces with an aggregate production capacity of approximately 195,000 tons of flour and more than 1.1 billion packages of instant noodles per year. Instant noodles are also exported to a growing number of countries. For more information, visit the Company's website at www.newdragonasia.com.
To supplement New Dragon Asia Corp.'s consolidated financial statements presented in accordance with GAAP, New Dragon Asia Corp. discusses its results in terms of financial measures that may be deemed to be "Non-GAAP Financial Measures" under the rules and regulations of the Securities and Exchange Commission. New Dragon Asia Corp.'s management believes that these measures provide meaningful information regarding the Company's performance and liquidity by excluding certain expenses that may not be indicative of its core operating results and facilitate comparisons to its historical operations and competitors' operating results. To the extent such measures are not readily reconcilable to comparable GAAP financial measures contained in the Company's consolidated financial statements, New Dragon Asia Corp. provides detailed reconciliations that permit investors to determine how such non-GAAP financial measures used have been derived.
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs, including, but not limited to, its success with acquisitions, anticipated synergies, and overseas expansion. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products and pricing; changes in consumer preferences and tastes or perceptions; effectiveness of advertising or market-spending programs; changes in laws and regulations; fluctuations in costs of production, foreign exchange and interest rates; and other factors as may be discussed in the Company's reports as periodically filed with the Securities and Exchange Commission.
NEW DRAGON ASIA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data; unaudited)
Three months ended Nine months ended
September 25, September 25,
------------------ ------------------
2007 2006 2007 2006
Net revenue $13,955 $12,964 $38,150 $35,604
Cost of goods sold (11,148) (10,442) (30,865) (29,056)
------- ------- ------- -------
Gross profit 2,807 2,522 7,285 6,548
Selling and distribution
expenses (302) (263) (825) (709)
General and administrative
expenses (731) (711) (2,025) (4,020)
------- ------- ------- -------
Income from operations 1,774 1,548 4,435 1,819
Other income (expense):
Interest income 3 26 18 49
Other income (expense) 15 14 143 18
Gain on fair value
adjustments to
embedded derivatives 1,903 2,593 7,541 3,198
VAT refund -- 1,036 540 2,135
------- ------- ------- -------
Income (loss) before
income taxes and
minority interests 3,695 5,217 12,677 7,219
Provision for income taxes (491) (427) (1,211) (1,061)
------- ------- ------- -------
Income (loss) before
minority interests 3,204 4,790 11,466 6,158
Minority interests -- -- -- (133)
------- ------- ------- -------
Net income (loss) $ 3,204 $ 4,790 $11,466 $ 6,025
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Accretion of Redeemable
Preferred Stock (377) (470) (1,133) (1,456)
Preferred Stock Dividends (178) (214) (534) (679)
------- ------- ------- -------
Income available to
common stockholders $ 2,649 $ 4,106 $ 9,799 $ 3,890
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Earnings per common share
Basic $ 0.05 $ 0.08 $ 0.18 $ 0.08
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Diluted $ 0.05 $ 0.08 $ 0.18 $ 0.07
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Weighted average number
of common shares
outstanding
Basic 54,073 51,936 53,858 51,101
======= ======= ======= =======
Diluted 54,950 61,618 54,735 52,450
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Reconciliation from Net Income to EBITDA
Three months ended Nine months ended
September 25, September 25,
------------------ ------------------
2007 2006 2007 2006
------- ------- ------- -------
Net income $ 3,204 $ 4,790 $11,466 $ 6,025
Income tax 491 427 1,211 1,061
Interest income (3) (26) (18) (49)
Depreciation and
amortization 557 495 1,213 1,639
Loss (gain) on fair
value adjustments to
embedded derivatives (1,903) (2,593) (7,541) (3,198)
Non-cash stock-based
compensation -- -- -- 2,320
------- ------- ------- -------
EBITDA $ 2,346 $ 3,093 $ 6,331 $ 7,798
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NEW DRAGON ASIA CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
Sept. 25, Dec. 25,
2007 2006
------- -------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,740 $10,276
Accounts receivable, net 8,634 8,835
Deposits and prepayments, net 11,665 6,586
Inventories, net 19,937 11,598
Due from related companies 893 857
------- -------
Total current assets 44,869 38,152
Property, machinery and equipment, net 25,496 24,248
Land use rights, net 7,143 6,983
Goodwill 125 125
------- -------
Total assets $77,633 $69,508
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,063 $ 2,723
Other payables and accruals 3,055 3,255
Taxes payable 2,638 3,453
Embedded derivatives, at fair value 3,596 11,138
Due to related companies -- 28
------- -------
Total current liabilities 13,352 20,597
Due to New Dragon Asia Food Limited 1,069 317
Due to joint venture partners 162 102
------- -------
Total liabilities 14,583 21,016
------- -------
Minority interests 287 276
------- -------
Series A and B Redeemable Convertible
Preferred Stock, $0.0001 par value:
Authorized shares - 50,000,000
Issued and outstanding - 10,162,000 shares
at September 25, 2007 and December 25, 2006 5,337 4,204
------- -------
Commitments
Stockholders' equity:
Class A Common Stock, $0.0001 par value:
Authorized shares - 102,000,000
Issued and outstanding - 54,248,830 at
September 25, 2007 and 53,614,723 at
December 25, 2006 5 5
Class B Common Stock, $0.0001 par value:
Authorized shares - 2,000,000
Issued and outstanding - none -- --
Additional paid-in capital 29,180 28,411
Retained earnings 22,467 12,668
Accumulated other comprehensive income 5,774 2,928
------- -------
Total stockholders' equity 57,426 44,012
------- -------
Total liabilities and stockholders' equity $77,633 $69,508
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